Mexico is not known for leading the world in terms of renewable energy. But a recent partnership announcement may be the signal that this is changing. While Mexico has been a major producer and consumer of fossil fuels, the industry is set for change in the coming years.
A new focus on sustainability and renewable energy may characterize the next decade for Mexico. But the country will need to clarify their priorities in light of real challenges and limitations. But for now, the country’s leading energy companies are looking toward helping Mexico realize a renewable energy strategy that has been years in the making.
In Mexico, the Federal Electricity Commission or CFE is a state-owned utility that operates as Mexico’s dominant electric company. They recently announced a potential partnership with Mexico’s state-owned oil-and-gas company, PEMEX, that may signal a focus on renewable energy over fossil fuels.
According to the announcement, CFE wants to create various green hydrogen “synergies” with the country’s largest user of hydrogen, PEMEX. They want to create new technologies to make green hydrogen more affordable and sustainable. And plans to produce it at Pemex’s Salina Cruz refinery represent a commitment to using this alternative component.
The potential partnership revolves around CFE providing green hydrogen to PEMEX to reduce their need for natural gas. Oil refineries like those owned by PEMEX produce low-sulfur fuel with the help of hydrogen, because the process helps reduce contamination. They get this hydrogen from natural gas, which is colorless, odorless, nontoxic, and very combustible.
But the process of creating hydrogen from natural gas generates carbon dioxide emissions. Making green hydrogen instead would eliminate these emissions, making the process more environmentally friendly.
And just what is green hydrogen?
Green hydrogen is hydrogen made through a process that relies not on natural gas, but on the electrolysis of water with renewable energy. So, in the more common scenario, natural gas is burned up to produce hydrogen in a process that generates carbon emissions. Or, in the alternative scenario, water is electrolyzed to produce green hydrogen in a process that generates no emissions.
However, the cost to produce green hydrogen is currently very high, which has mitigated a switch in industry. Furthermore, the regulatory framework for this shift is lacking, and the previous administration has done nothing to change that.
When President “AMLO” Obrador was first elected, he was expected to wean Mexico off of oil and gas. Mexico was to be converted to renewable energy. The new president’s progressive focus and disapproval of privatization in exploration was expected to shut down the country’s traditional energy industry.
Mexico is a country with vast energy potential in oil and gas. But most of it remains untapped. For many decades, the country’s energy industry has been held under the state’s control. In the past decade or so, public-private partnerships had attempted to crack open this energy potential, but AMLO’s election hurt these prospects. Mexico’s energy challenges were expected to worsen.
However, AMLO pivoted once in office. He no longer wanted to reverse the pace of privatization, though he certainly did nothing to accelerate it, either. Instead, AMLO set his sights on a new target, a new objective he was sure Mexico needed even more: energy independence. His administration pushed PEMEX to expand production capacity and acquire new refineries to assure energy independence in the near future.
Mexico is considered an oil and gas country. They pump a lot of it. But they import most of their natural gas from the US. And they rely on US refineries to process their crude. AMLO made independence more a Mexican priority than sustainability. As a result, renewable energy never became a viable priority for Mexico.
But AMLO is on the way out.
This past summer, Mexico elected a new president. Claudia Sheinbaum takes office on October 1. And her occupation is environmental engineering and chemistry. She has specifically been concerned with climate change. In fact, her work on the subject helped the IPCC win a Nobel Prize.
And not surprisingly, she has indicated that Mexico has a new focus, a new priority. According to her appointments and campaign promises, Sheinbaum intends to refocus Mexico on renewable energy. She has said the federal government of Mexico will boost renewable energy investment by $13.57 billion USD.
Already, a Danish fund is expected to invest approximately $10 billion USD in constructing a green hydrogen plant in Ixtepec, located near Salina Cruz. Perhaps Mexico’s renewable energy vision will become a reality in the coming years.
But skeptics are quick to point out that Sheinbaum has been closely aligned with AMLO and is likely to continue his policies, at least to an extent. She served in his cabinet and campaigned on continuing his legacy. Mexico is still heavily dependent upon fossil fuels. And this dependency will not simply change overnight.
However, the new partnership between CFE and PEMEX to use green hydrogen is a significant first step. And it potentially signals a shift in focus. The new president of Mexico has a sizeable legislative majority, and may be about to push through substantial changes to Mexico’s energy industry. But such change may be far more gradual than she’d like to say. For now, Mexico’s relationship with renewable energy is still in negotiations.
