The Mexican government has cited the coronavirus pandemic as a justification for new rules that will reduce the role of renewable energy in the energy mix
The Mexican government has cited the coronavirus pandemic as a justification for new rules that will reduce the role of renewable energy like solar and wind power, granting a reprieve to the government’s own aging, fossil-fuel power plants. The decree over the weekend has sparked outrage among Mexican and foreign investors who had been allowed to sell their power into the government-operated grid.
Industry associations said it will affect 28 solar and wind projects that were ready to go online, and 16 more under construction, with a total of USD 6.4 billion in investments, much of it from foreign firms.
“This represents a frontal attack on legal security for investments in Mexico and causes serious consequences for the country, including the loss of jobs and investor confidence,” Mexico’s Business Coordinating Council said. The council cited USD 30 billion in affected investments, noting “this does not just discriminate against renewable energy, it also allows authorities to artificially inflate the price of electricity in the country and arbitrarily displace any private sector power generation project.”
The new rules published late Friday appear to accomplish several of President Andres Manuel Lopez Obrador’s goals: to guarantee income for the government’s electrical power provider; boost consumption of government stockpiles of fuel oil; lessen the role of private power generators; and avoid breakdowns in the aging, inadequate power-transmission system. What was striking was that his administration cited the coronavirus pandemic – and the economic shutdowns that accompanied it – to justify the measure.
The government defended the new rules, saying they “will allow the National Electrical System to ensure reliability in the face of a decrease in demand for electrical power due to the pandemic, and due to the fact that renewable energy projects are intermittent and produce oscillation in the electrical system and cause interruptions.
“Power feeds from these sources will have to be postponed during the pandemic,” it said.
The situation really hit crisis levels when the pandemic caused a huge drop in electricity demand as factories closed. The state-owned Federal Electricity Commission – which operates mainly natural-gas and fuel-oil fired plants – simultaneously saw its income drop, while fossil fuel stockpiles grew amid falling world demand and overproduction. There was literally nowhere for the fuel oil to go if the state-run plants didn’t burn it, and no money to subsidise the unused power plants.
The Mexican Federation of Industrial Chambers accused the government of ramming through Friday’s decree. “This last measure clearly marks a violation of the rule of law by giving extra-legal powers to the federal electricity commission,” the federation wrote in a statement.
And it will renew scrutiny of Lopez Obrador’s lack of green credentials, despite an ambitious program to plant fruit and timber trees. He has insisted on building a major refinery project at a time when oil prices collapsed and has focused on shoring up Mexico’s debt-laden state oil company as a centrepiece of economic policy.