Tuesday, October 19

Power outages: The blackouts in Mexico and the forced privilege of the utility company


Light poles without electricity during the blackout in Mexico's electricity grid, in Ciudad Juárez, on February 15, 2021.
Light poles without electricity during the blackout in Mexico’s electricity grid, in Ciudad Juárez, on February 15, 2021.JOSE LUIS GONZALEZ / Reuters

Low temperatures in the United States made it impossible for natural gas to flow to Mexico, and with it, the generation of electricity for 4.7 million Mexicans in the north of the country, who have suffered an intermittent blackout for two days. Estimated economic losses reach $ 2.7 billion. And the blackouts return to focus on the plan that Mexico had to prevent this from happening and against which the Government of Andrés Manuel López Obrador puts all kinds of obstacles: the 2013 energy reform, with which the Executive intended, to open the electricity sector to private investment, create support so that the country does not suffer massive blackouts.

This did not materialize. With the coming to power of López Obrador, the energy plan changed and private investment has been abolished. The tenders and auctions that the reform designed for companies to build more electricity transmission lines, fuel warehouses and generate more renewable energy, were canceled. The companies that, thanks to the reform, were founded with permits to compete directly with the state-owned Federal Electricity Commission (CFE) now see their operations hampered by the government and the result is a precarious electricity system. The recent blackout is the second of the year and, according to industry experts, it will not be the last.

“If Mexico had decided to continue with the energy reform, it is possible that this blackout would not have been so severe,” says Emily Medina, energy consultant and associate of the Energy Policy Research Foundation. “This is a multi-pronged issue, for example, if we focus on storage infrastructure in Mexico, that could have been expanded with private investment in several previously contemplated projects and it is possible that it would have helped mitigate the emergency.”

The Mexican government cannot do everything by itself, Medina points out, since it does not have the technology or sufficient capital to improve the electricity infrastructure of the entire country, which is why a five-year natural gas plan was made as part of the 2013 reform, which included tenders for storage projects that are now on hold. “Mexico could have sent natural gas to the United States in this case. If the countries had worked together to expand cross-border electric power networks ”and the country had sufficient storage capacity, adds the expert.

The López Obrador Executive does everything possible so that CFE has no competition. First, according to various Mexican media, he sent a memorandum to regulators and operators of the electricity system asking them that private companies not obtain the necessary permits to operate. Later, through the Ministry of Energy, his Government issued criteria to limit the generation of renewable energies, which did not proceed due to a ruling against by the Supreme Court of Justice. More recently, it sent Congress an initiative to reform the Electricity Industry Law so that the CFE preserves its monopoly position. The initiative received the approval of the Budget Committee of the Chamber of Deputies.

Marcela Roque is the energy director of Luxem Energía, a company that in 2016, since the energy reform, has a permit to supply electricity to industrialists using solar, wind and natural gas sources. Luxem is therefore one of several competitors of the parastatal. Before reaching the private sector and until 2019, Roque worked for CFE itself as Head of Unit of the subsidiary CFE Calificados. “There is a lot of interest on the part of companies in the country to change the electricity supply company, not only because they do not agree with the policies of the CFE and the current administration, but also because they have social responsibility mandates that oblige them to use renewable energy sources and the CFE does not offer them that ”, says Roque.

Electricity supplying companies have seen their operation hampered since the arrival of the government of President López Obrador, which may take up to 16 months to allow a user to migrate from CFE to the market. Even when the wait and the extra expenses for procedures increase the costs that companies must pay to change suppliers, many companies follow the process to avoid being CFE clients.

“Currently there is no redundancy in the transmission networks”, explains Roque, “this means that if an element fails, the electrical transmission of certain regions falls, affecting many users. Some of the most vulnerable places are the Yucatan peninsula, Baja California and the Bajío area ”.

The so-called “megapagón” this week in the north of the country is the second this year. In January, 10.3 million users in the country were left without power and the CFE blamed the intermittency of renewable energy, without providing evidence. López Obrador himself has attacked renewable energy, accusing companies in this sector of being corrupt. But Mexico has great potential to generate renewable energy, says Medina. If he took advantage of it, “Mexico could export electricity to the United States, now there are ways to do it. Before the energy reform this was not possible and the free trade agreement between the countries promotes it, it could do it even without tariffs ”.

From this, many companies that were founded to offer electricity to residences and businesses have been forced to close their doors or sell themselves to Chinese companies, Medina says. “What China wants right now is to expand its presence around the world, we have seen it with its initiative the New Silk Road and this Administration has been quite friendly with China.” In January 2020, China’s ambassador to Mexico said that his country would finance a portion of one of López Obrador’s flagship projects, a refinery in his home state, but the embassy later corrected and said it was a misunderstanding.

Zuma Energía, the electricity company that was born with the energy reform, was sold last year to the Chinese company State Power Investment Corporation (SPIC). In some cases, renewable energy companies such as Viva Energía and Exel Solar, carry out their renewable projects without criticism from the government by partnering with Chinese companies.

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