Mexico
With a cumulative score of 1.72, Mexico ranks number 23 among emerging markets and number 52 in the global ranking.
- Emerging markets
- Americas
1.86 / 5
Power score
1.39 / 5
Transport score
Buildings score
Only 56 markets (28 emerging markets) are scored on the Buildings sector. See the full list on the methodology page.
Low-carbon strategy
Net-zero goal and strategy
Mexico has not set a net-zero emissions goal nor a long-term carbon strategy. Though strong support for renewable energy is embedded in the reforms that have transformed Mexico’s energy sector, progress on market reform and support for renewable energy has stalled under President Andres Manuel Lopez Obrador, who is known as AMLO. AMLO has challenged energy reform and sought to block the growth of renewables with the aim of supporting the state-utility CFE.
In 2012, Mexico established a mandate to generate 35% of power from clean sources by 2024. It authorized a Clean Energy Certificates (CEL) market in 2014. It also introduced a renewables mandate for power consumption, applying to all large consumers in the market including CFE, that began at 5% in 2018 and rises to 13.9% in 2022.
Since taking office AMLO has canceled Mexico’s highly successful renewables auction program, sought to dilute the CEL market, sidelined clean-energy targets and eliminated legacy benefits that wind and solar plants received. Ominously, AMLO has advanced regulation aimed at blocking renewables from participating in the system and most recently, a bill that would amend the constitution to return control of the electricity market to the state utility.
Nationally Determined Contributions (NDC)
Mexico submitted an updated NDC on December 29, 2020, largely confirming its previous commitment to reduce emissions for GHG (-22%) and black carbon (-51%) by 2030, with respect to 2013 and a conditional goal of reducing GHG by up to 36% and black carbon by 70%, also by 2030; contingent on technology transfer mechanisms.
Fossil fuel phase-out policy
There is no fossil fuel phase-out policy in Mexico.
Power
Power policy
Mexico’s energy reform unbundled the state-owned, vertically integrated utility CFE, established the independent market operator and created a wholesale market. The CFE continues to hold the majority of generation assets and a monopoly on transmission and distribution. Deregulation of generation in 2016 created Mexico’s wholesale market, which has operated on a day-ahead basis since January 2016.
Mexico held two auctions in 2016 and one in 2017, contracting a total of 19.8TWh of clean power, 1.8GW of firm capacity and 20.6 million CELs. Mexico's fourth auction, expected to be held in November 2018, was repeatedly delayed and then canceled in January 2019. Auctions in Mexico featured an hourly tariff adjustment to reward or penalize intermittent generation based on system needs, as well as a nodal price adjustment that prioritized projects in areas where generation costs are higher in order to decrease overall system costs.
Power policies
Power prices and costs
Regulated power prices remained largely unchanged in 2020 and, historically, Mexican consumers have enjoyed among the lowest subsidized rates in the region. However, prices in Mexico’s wholesale market dropped to $27/MWh on average in the National Interconnected System (SIN) from $71/MWh in 2019 as demand slumped. Prices have recovered somewhat in 2021, averaging $39/MWh in the first half of the year on recovering electricity demand and higher gas prices.
Power market
The second-largest power market in Latin America, Mexico’s installed renewables capacity accounts for 15% of its 91 gigawatts total. This share is expected to grow with further investment, which continues despite the cancellation of the country’s auctions and other adverse policy measures. The country’s three auctions held over 2016-17 catalyzed investor interest in the country’s strong wind and solar resources, producing a step change in Mexico new clean-energy investment from 2017 on, which has averaged around $3.6 billion per year over the past five years.
Power in Mexico remains heavily weighted toward fossil fuels, with natural gas, oil and coal together accounting for 69% of capacity and 76% of generation in 2020. Large hydro accounted for 7% of generation, and renewables met 14%. At the end of 2020, Mexico had over 6 gigawatts of wind capacity and commissioned utility-scale PV capacity of over 5 gigawatts. Wind and solar, which are closely associated with market-opening energy reform and private investment, have only recently entered the CFE’s planning. Official plans for the CFE are more focused on revamping its large hydro fleet and expanding its fossil fuel portfolio, primarily with gas plants.
Installed Capacity (in MW)
Electricity Generation (in GWh)
Utility privatisation
Which segments of the power sector are open to private participation?
Wholesale power market
Does the country have a wholesale power market?
Doing business and barriers
While Mexico's energy reform has increased private participation in generation, the market remains highly concentrated in the hands of CFE, which controls approximately 54% of capacity. Efforts to strengthen state control under AMLO have raised questions around the durability of reform and undermined investor confidence in Mexico’s clean-energy market.
Policy changes introduced by the Ministry of Energy (Sener) in 2020, and since suspended, sought to reverse a core achievement of prior reforms: a competitive, cost-based power market. The new regulations would have given priority to CFE power plants by endowing market operator Cenace with permanent authority to prioritize dispatch based on reliability rather than cost. The step would have ensured that zero-marginal-cost renewables do not undercut and eventually displace CFE plants, many of which are aging thermal generators. Prioritizing these costly units would essentially mark a return to Mexico’s pre-reform power market. The ministry has said it will challenge the suspension of the policy in court.
A bill presented to congress in September 2021 would amend the constitution to return control of the electricity market to the state utility, including canceling most permits awarded to private companies, ensure state-owned CFE retains the majority of the market and end Mexico’s independent energy regulators.
Currency of PPAs
Are PPAs signed in or indexed to U.S. Dollars or Euro?
Bilateral power contracts
Can a C&I (Commercial and Industrial) customer sign a long-term contract (PPA) for clean energy?
Bilateral power contracts
Can a C&I (Commercial and Industrial) customer sign a long-term contract (PPA) for clean energy?
Bilateral power contracts
Can a C&I (Commercial and Industrial) customer sign a long-term contract (PPA) for clean energy?
Fossil fuel subsidies
Does the government influence the wholesale price of fossil fuel (used by thermal power plants) down through subsidies?
Fossil fuel taxes
Does the government influence the wholesale price of fossil fuel (used by thermal power plants) up through taxes?
Transport
EV market
Mexico’s EV market is small and the share of EVs in new vehicle sales is well under 1%. However, EV sales have grown in recent years, and Mexico may stand to benefit eventually from its status as a major automotive manufacturer. The country launched an electric mobility strategy in late 2018 under the previous administration, however, this has remained under review by the current government.
EV policy
Mexico has introduced a number of incentives that have supported EV market growth to date. Since 2019, EV owners are exempt from new vehicle sales tax, EV owners can deduct higher amounts for investments in EV and hybrid vehicles than for conventional vehicles and new EVs can be imported duty-free through 2024. Investments made in public charging are eligible for a 30% tax credit. The CFE will install a separate residential electric meter for EVs, in order to prevent consumers from being penalized with higher tariffs for greater electricity consumption (known as the DAC rate). Finally, EV owners are generally exempt from emissions tests, circulation restrictions and parking fees in many areas.
Transport policies
Fuel economy standards
Does the country have a fuel economy standard in place?
Buildings
Buildings market
Mexico has introduced energy efficiency plans and mandatory standards around building efficiency, but compliance remains inconsistent.
Energy performance standards
Are there minimum energy performance standards for buildings?
Energy efficiency plan
Does the country have a national energy efficiency plan?
Buildings policy
As of August 2021, the government has yet to implement substantial policy support in the sector. Sener announced a roadmap for building energy codes and standards in 2017, with the goal of achieving a 35% reduction in building sector final energy consumption. The National Commission for the Efficient Use of Energy (CONUEE), an independent agency of Sener, published in 2011 a mandatory federal standard governing walls and roofs of residential buildings meant to be included in the municipal codes. This was aimed at reducing energy consumption tied to air conditioning systems and mainly targeted new single-family housing and multi-unit residential buildings. CONUEE issued the first standard for commercial buildings in 2001, also aimed at reducing heat gains. Compliance with both standards is low due to weak local government enforcement. Mexico offers several finance programs to support the development of energy efficient homes for lower-income citizens. The low-carbon heat market is not significant, given Mexico’s generally warmer climate.