(Bloomberg) -- Mexico President Andres Manuel Lopez Obrador’s latest effort to nationalize the power sector threatens to undercut renewables production that has slashed electricity prices in recent years.
A proposed bill to prioritize power generation by the state utility CFE over privately-owned wind and solar projects could also raise Mexico’s emissions, BloombergNEF said in a report.
Wind and solar production more than doubled from 2018 through 2020, partly thanks to energy reforms undertaken by the previous government, said James Ellis, BloombergNEF head of research for Latin America. The growing share of renewables has helped cut wholesale electricity prices by 69% over that time frame.
Under the new proposal, hydropower plants would be dispatched first, followed by natural gas, oil and coal power plants owned or under contract to state-owned CFE. Wind and solar would come last. The president, known as AMLO, said on Tuesday said that the bill is essential to keeping power costs low for Mexican citizens and argued that private power generators will inflate costs.
But “such re-prioritization of dispatch not based on costs will distort wholesale power prices,” BNEF said in its report. “In an economically efficient system, wind and solar would always be dispatched first,” said Ellis. “CFE aren’t developing wind and solar and they have a very old fleet of plants. Even their thermal plants are less efficient then their private counterparts.”
Energy generated by CFE plants is, on average, costlier than that from renewables, said Julio Valle, spokesman for Mexico’s wind and solar associations Amdee and Asolmex. “It’s difficult to understand where the president’s getting his information,” he said.
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