Energy & Mining

Power Rangers

Electricity Privatization/Co-generation

Mexico’s energy sector has been undergoing a series of reforms dating back to 1992, when the government first passed laws allowing privatization in the electricity sector. Since then, the private […]

Mexico’s energy sector has been undergoing a series of reforms dating back to 1992, when the government first passed laws allowing privatization in the electricity sector. Since then, the private management of generators has surged, now accounting for 21% of installed capacity. Additional constitutional changes in 2013 now allow private industry licenses for hydrocarbon production and introduces a new profit-oriented structure for Pemex. The 2013 reforms included additional privatization of the country’s electricity generation sector, with the goal of improving efficiency and lowering overall costs. It is important to note that Mexico’s Federal Electricity Commission (CFE) still owns and operates the majority of all transmission and generation. While the reforms ended its monopoly of the electricity sector, it still controls more than 75% of the country’s installed generating capacity. Though this well-established infrastructure is already in place, private industry is quickly moving to provide competition to the market by focusing on alternatives to the oil-fired electric generators that make up the base of CFE’s traditional generation core. Natural gas has been the main replacement to the traditional oil generators, with the country constructing several new natural gas power plants to meet rising demand. It’s a process that will take time as private industry catches up to fill the infrastructure gap. Renewables are another avenue where the private sector is moving to make inroads. Mexico has significant potential in hydro and solar generation. Combined heat and power, also known as CHP or co-generation, has been promoted as another renewable with great potential. These efforts are still in their early stages, and private industry is navigating how best to put this new energy onto the existing grid. Still, the high international interest in investing in this new sector suggests that it has a significant role to play as the Mexican electric industry moves toward maturity.

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