POWER January 2020 - 13

GLOBAL MONITOR
generation capacity will be developed by
the CFE, and it is unclear if incentives will
be provided at all for renewable energy. "
The Peña-Nieto government specifically
sought private and foreign investment
in Mexico's power projects, but
Obrador's government has said it wants
state-run groups to lead the development
of energy policy. Obrador has said
the moves by the prior administration
disadvantaged CFE (the state-owned
utility) and its ability to obtain CELs for
old power plants, including renewable
projects such as hydro plants, because
the rules were not in place when CFE invested
in the projects.
" On energy reform, there were three
auctions undertaken in the [prior] administration,
for renewable energy, and in
the first two auctions, only CFE bid. In
the third auction other bidders emerged, "
Valera said. " Those auctions had several
purposes, including [supporting] renewable
energy for Mexico, including hydro,
but they also had a number of environmental
concerns attached to them. They
not only were about increasing the generation
capacity of the country, in order
to serve increased demand, and increase
capacity away from dirtier fuels, they also
were about the certificates of clean energy,
which producers of wholesale power
were required to purchase. That was how
the renewable energy was [financed],
through the auction of these certificates. "
Moves by the Obrador administration
have not only impacted power generation,
but the country's oil and gas industry
as well. The 2013 legislation ended
the monopoly of state-owned Petróleos
Mexicanos (PEMEX), and was designed
to attract new private and foreign investment.
A number of U.S. companies invested
in Mexico's energy sector with
the support of the Peña-Nieto administration;
Texas-based oil companies Talos
Energy and Exxon Mobil won auctions
for offshore exploration projects.
Obrador, though, almost immediately
after being sworn into office, canceled
two auctions that would have brought
large-scale drilling for crude oil and natural
gas to the border state of Tamaulipas.
It also would have introduced hydraulic
fracturing to the region, a drilling technique
that revolutionized U.S. oil and gas
production, but one that Obrador has vehemently
opposed.
About half of U.S. natural gas exports
go to Mexico, and with several new pipelines
completed in recent months and
more under construction, analysts have
said exports of natural gas from the U.S.
to Mexico could double over the next
few years. Mexico today generates more
than a quarter of its electricity with U.S.
natural gas, a percentage that has been
expected to rise as Mexico continues to
substitute gas for oil in power generation.
Critics of Obrador's policies argue
that the use of imported natural gas, as
opposed to gas produced in Mexico, raises
power prices for consumers.
Valera, who has counseled the governments
of Argentina, Bolivia, Honduras,
Peru, and Iraq on energy legislative
reform matters, said the CEL law adopted
by the Peña-Nieto administration
" envisioned that these certificates would
only be issued to solar, wind, or geothermal
[projects]. The new administration
includes natural gas and hydro [projects].
The prior administration [also understood]
the value of transmission projects,
to interconnect Baja California with
the rest of the country, and to connect
[Mexico's] south region with the rest of
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POWER January 2020

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