Mexico´s Energy Reform : an analysis of the market, new policy and integration of renewable energy for economic and sustainable development

2016

In the framework of the approved Energy Reform in 2013, Mexico puts an end to seven

decades of centralized control of the energy and electricity markets within the government

through the State governed companies CFE (Federal Electricity Commission) and PEMEX

(Mexican Oil). During the largest part of last century and the beginning of the current, the

Mexican government relied heavily on the revenues generated by PEMEX through the sale of

oil to foreign countries and tax revenues from the sale of gasoline and diesel as a monopoly.

On the other side, CFE controlled the Mexican electricity market by being the sole owner of

the electricity grid and the only company allowed to distribute electricity. Electricity generated

by private companies for their operations was allowed but any excess of output had to be sold

to CFE solely.

The role of these two companies was fundamental for the economic development of the nation,

but in past years due to economic changes both companies lost competitiveness. Their impact

on the economy is such, that if they lose competitiveness, so does the country as a whole. The

Energy Reform addresses this problem through allowing foreign investment on the energy

market, but another key factor for the success of this reform is integrating renewable energy

into the Mexican electricity market. Mexico is currently the 7th largest contributor to emissions

of CO2 and pollutants to the environment. This research analyses the energy and the electricity

markets in Mexico and how a focus on renewable energy can become a strategy for sustained

growth of the economy of Mexico, as well as relieving the output of CO2 to the environment

to comply with the ever tightening climate policies to fight climate change.

This research explains the economics and key facts of the Mexican energy and electricity

markets, the new policies incorporated to the Mexican Law through the Energy Reform, and

evaluates the potential of renewable energy with focus on solar energy in order to assess the

potential growth of the economy and the relief on the country’s environment.