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Mexican Presidential Candidates Agree on Clean Energy Shift, 'Nearshoring'

May 29, 2024

The three main candidates running to succeed Mexican President Andrés Manuel López Obrador agree the country must speed its transition to cleaner forms of energy, boost electromobility and encourage more foreign companies to relocate manufacturing facilities to Mexico, a process known as "nearshoring."

But differences emerge on what role state-owned energy companies Pemex and CFE should play in the transition.

Mexicans will vote for the next president on Sunday.

Former Mexico City Mayor Claudia Sheinbaum, a member of Lopez Obrador's Morena party, is competing with Xochitl Gálvez, representing the Strength and Heart for Mexico party, and Jorge Álvarez Maynez with the Citizens Movement party. 

Most polls have Sheinbaum with a commanding lead. A recent survey by polling firm Parametria showed Sheinbaum with 50% support and Gálvez with 34%.    

While Sheinbaum said she would continue Lopez Obrador's policies designed to strengthen Pemex and CFE, Gálvez has called for a radical shift in Pemex's business strategy, while Álvarez supports gradually moving both companies away from fossil-based fuels.

While Gálvez and Álvarez have said they would be more open than the current government to private sector participation in Mexico's energy markets, Sheinbaum has said CFE will keep 54% of the market, limiting the private sector's role in the electricity market to transmission and distribution.

While it remains unclear how much involvement private companies would have in the hydrocarbon sector, Sheinbaum has backed "reasonable" participation by private companies in the country's power market, provided it does not weaken electricity provider CFE.

Here are the three candidates' proposals:

Sheinbaum's campaign said she would aim to "decarbonize the energy matrix as quickly as possible," adding that the candidate wants the energy transition to be one of the "hallmarks" of her administration.

She has said she would look to speed the transition to cleaner forms of energy, while ensuring that Mexico continues to have sufficient energy supply at affordable prices. She has promised to keep fuel price increases under the rate of inflation, continuing López Obrador's policy.

The candidate has also promised to develop a 30-year plan to cut greenhouse gases and meet Mexico's international climate change commitments.    

To do so, Sheinbaum has said she would maximize the use of renewable energy, increase energy efficiency and electrify transportation as much as possible.

In addition, she has called Pemex and CFE "strategic public companies" that must be strengthened to benefit consumers, support the relocation of investments and serve the national interest.

Sheinbaum said she understands that any push to have more companies relocate operations to the country will increase the demand for clean energy.

She announced a plan to invest more than $13 billion in new energy generation projects through 2030, including increasing wind and solar power generation, as well as modernizing hydroelectric plants.   

In addition, she said she wants to make greater use of natural gas and more combined-cycle plants in power generation, while increasing contributions from geothermal, hydroelectric, and bioenergy resources.

Sheinbaum said would seek to have more than half of Mexico's heavy-duty and passenger vehicle fleet move to cleaner energy forms and build out Mexico's electricity infrastructure to support a shift toward electromobility.

Sheinbaum said she wants Mexico to become self-sufficient in transportation fuel production by retaining Pemex's older refineries and the start of operations at the new 340,000 b/d Dos Bocas facility, leading to a sharp decline in fuel imports.

While crude oil and natural gas production will remain an "indispensable" part of Pemex's business, Sheinbaum said believes increasing the company's role in clean energy could make it easier to refinance its debt.   

Sheinbaum also had said Pemex could help boost Mexico's generating capacity by adding cogeneration plants at its refineries.

Sheinbaum also said her administration would depart from Lopez Obrador's push to prioritize Mexico's crude oil production and would seek to cap oil production at 1.8 million b/d, with renewables meeting the rest of the demand.

Gálvez seeks a radical restructuring in Pemex's business model to make the company profitable and return to the capital markets.

Her proposals include having Pemex focus on crude exploration and production and reducing its refining activities by shifting Pemex's Cadereyta refinery in Nuevo León state and the Madero facility in Tamaulipas to focus on producing hydrogen from renewable resources.

Gálvez has said she would rename Pemex as Energias Mexicanas to shift the company's focus away from just petroleum.

Gálvez has proposed to allow privately owned companies to take part in oil exploration and production, something that was authorized by Mexico's 2013 energy reforms.

She also said she would commit Mexico to achieving net-zero carbon emissions by 2050 and having the country source 50% of its energy from renewable sources by 2030. She believes that to achieve its decarbonization goals, Pemex and CFE must transition to new forms of clean energy production.   

In addition, Gálvez has said she would boost electromobility and electric public transportation to reduce gasoline and diesel consumption while promoting increased use of biofuels.

She has also promised to build 100 wind and solar projects and install 10,000 electric vehicle charging stations and said she would support the production of vehicles, equipment, and machinery that can run on green hydrogen.

In the fuels market, Gálvez's campaign said she would encourage private companies to participate with Pemex to meet the country's demand for gasoline and diesel. 

Álvarez, meanwhile, said he would impose a deadline for Mexico to phase out the use of fossil fuels, in part by reducing subsidies and transforming Pemex and CFE into renewable energy companies.

The candidate said he is committed to the energy transition and acknowledged the change will require the government to reduce the revenue it receives from fossil fuels. He has suggested that revenue from lithium, wind, and hydropower production will make up for the loss of fossil fuel monies.

Álvarez also has called for more clean energy projects, including solar and wind power and instituting a green tax for electromobility and public transport projects.

He campaign would seek to close the Cadereyta refinery as well as the natural gas-fired Tula power plant in central Mexico to improve air quality.

Álvarez has been more adamant than about building new infrastructure, boosting urban mobility and ending fuel subsidies. 

While Álvarez and Gálvez have said they would support policies to attract non-Mexican companies to enter the country, they have emphasized the need for the Mexican government to safeguard private investments and follow the rule of law.

--Reporting by Karla Omaña, komana@opisnet.com; Editing by Jeff Barber,
jbarber@opisnet.com

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