Developers fight president's offensive against renewables

Mexico's wind industry is taking to the courts to fight efforts by the government to slow investment in renewable energy.

AMLO… Pushing state-owned oil over clean energy (pic: Secretaría de Cultura de la Ciudad de México)
AMLO… Pushing state-owned oil over clean energy (pic: Secretaría de Cultura de la Ciudad de México)

In May, judges granted temporary injunctions to six renewables companies, including Italy’s Enel, against a decision by grid operator Cenace to suspend testing on new wind and solar plants, effectively preventing them from connecting to the grid.

According to Mexican wind energy association Amdee, the move leaves more than $6 billion of renewables investment in limbo, including 17 wind farms. Some had been due to connect to the grid within weeks when the decision to stop testing was made on 29 April.

The government argued the move is necessary to stabilise the electricity grid amid a huge drop in demand during the Covid-19 pandemic.

But the judges ruled the decision not only undermines Mexico’s commitments to reduce carbon emissions under the Paris Agreement on climate change, but could also harm the environment and people’s health, as well as hinder competition in the electricity market.

Judges are expected to approve dozens more injunctions as more companies fight the order.

Alarming trend

The decision to suspend testing represents the latest attempt by leftist president Andres Manuel Lopez Obrador, better known as AMLO, to reverse the liberalisation of Mexico’s energy sector, initiated by his predecessor, Enrique Peña Nieto.

Since opening up its energy sector to private investment in 2015, Mexico has received billions of dollars of investment in renewables, lifting wind capacity to more than 6GW by the end of last year.

But, even though the move towards more clean energy has brought down prices and reduced carbon emissions, AMLO views renewables as a threat to the Mexican state’s traditional hold over the energy sector through power utility CFE and oil giant Pemex.

Since taking office in 2018, the president has already suspended a major tender for renewables energy and pushed to grant green certificates to existing hydroelectric plants, which would weaken the economic grounds for renewables.

Last month, the government intensified efforts to slow the sector. Under a new energy-security policy issued on 15 May, the energy ministry ordered Cenace to dispatch power plants according to reliability rather than cost — allowing CFE’s older and dirtier oil-fired power plants to jump ahead of cheaper wind and solar farms — and placed stricter criteria on renewable projects.

As well as defending CFE’s declining market share, energy analysts noted the move will also ensure a market for millions of barrels of high-sulfide fuel oil struggling Pemex is unable to sell due to stricter emissions standards for international shipping that came into force last year.

Together with the suspension of testing, the new policy is expected to put investment in renewables into deep freeze.

Business leaders have been fiercely critical. In a joint statement, Mexican business association CCE and the American-Mexican Chamber of Commerce described the move as a "frontal attack on legal certainty for investment in Mexico, with grave consequences for the country in terms of lost jobs, investor confidence and setbacks for all kinds of energy projects." Diplomats from Canada and the EU have written to the government on the matter.

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