Can Mexico Run on Clean Energy?

Its new president can help his country and the world by tackling climate change through sustainable development.

Mexican voters elected Andrés Manuel López Obrador president on July 1 largely based on his promises to solve the country’s most devastating domestic problems: rampant violence, economic inequality, and widespread corruption. Mr. López Obrador, however, also has the chance to catapult his country into a leadership role on an issue that will benefit both Mexico and the rest of the globe: climate change.

Specifically, the president-elect can capitalize on Mexico’s huge potential for renewable energy. But while he has made promising proposals for expanding renewables, he will confront several obstacles.

Renewable energy accounts for less than a quarter of Mexico’s installed power capacity, well below the Latin American average of about 50 percent; most electricity is generated from oil, coal and natural gas. Expanding renewable energy would not only cut Mexico’s greenhouse gas emissions but also reduce air pollution and diversify fuel sources, strengthening energy security. Mexico’s wind potential is more than eight times its current level of installed wind capacity. It has among the largest solar resources in the world — 75 times the country’s current totalinstalled capacity.

Mr. López Obrador has announced ambitious plans to increase renewable power generation from both large-scale projects, such as hydroelectric dams, and small energy systems, like solar rooftops for residences and businesses, in a bid to cut natural gas imports from the United States. He’s vowed to encourage local industries to produce parts for renewable energy plants through tax incentives and access to credit. And by the end of his six-year term, he wants to see 100,000 electric cars on Mexican streets powered by solar energy. Over the course of his presidency, his proposals are estimated to reduce Mexico’s emissions by 6.8 percent per year.

These are the right areas of focus to accelerate the transition to low-carbon energy in Mexico, one of the planet’s top 15 emitters. With the right policies, Mr. López Obrador could make Mexico the Western Hemisphere’s leader in sustainable development, an opportunity declined by its northern neighbor when it withdrew from the Paris climate accord.

To do so, the new government should build on the energy reform that President Enrique Peña Nieto signed into law in 2013. That law created important incentives to increase renewable energy, including opening the power sector to private investment and creating clean energy certificates, which power distributors must acquire to meet quotas. Encouraged by this initiative, private companies bidding for contracts in Mexico’s post-reform renewable power auctions have offered some of the lowest electricity prices in the world. In 2015, Mexico was among the top 10 destinations in the world for new clean energy investment.

Renewable energy developers still face hurdles, though. Mexico’s electricity infrastructure is decrepit. Aging transmission lines mean more electricity is lost during transport and distribution than in high-income countries. Mexico’s new government should hold auctions to award transmission and distribution projects to private companies and improve energy-system planning to integrate more variable energy sources (wind and solar) alongside firm energy sources (like natural gas or hydropower).

While wind and solar prices in Mexico’s recent auctions have hit record lows, other promising renewable energy technologies, such as geothermal, still cannot compete with fossil fuel sources. As renewable energy markets expand, bottlenecks in the local production of equipment and services could hinder competitiveness. To ensure renewables are competitive, the government should provide more incentives for emerging technologies as well as support for local equipment and service providers.

Energy projects in Mexico also often face resistance from local communities. Much of the land is collectively owned, meaning developers must consult with dozens or even hundreds of people before beginning a project. This process often leads to long, expensive legal battles.

In January, Mexico’s Supreme Court ordered that a wind project in Oaxaca — a state that is home to most of the country’s wind projects and is 75 percent collectively owned — be halted because of insufficient consultation with indigenous Zapotecs. The government should clarify the consultation process, take a stronger role in mediation and encourage projects in which local communities share ownership, benefit from the energy produced and are incorporated into the supply chain.

On election night, Mr. López Obrador confessed his ambition to “go down in history as a good Mexican president.” On the world stage, he surely would be remembered for transforming Mexico’s energy matrix and setting an example for the transition to clean energy. While Mr. López Obrador has a full slate of problems to tackle when he takes office on Dec. 1, encouraging clean energy must be a priority. Both Mexicans and the international community will thank him.

By Lisa Viscidi and Nate Graham

Lisa Viscidi is the director of the energy, climate change, and extractive industries program at the Inter-American Dialogue, a Washington think tank, where Nate Graham is an assistant.

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