Introduction
Mexico currently faces a significant dependence on natural gas, with 60% of its national consumption used for electricity production. In the past year, natural gas accounted for 58% of total generation in the SEN (Sistema Energético Nacional), highlighting the critical role it plays in ensuring a stable electricity supply.
Dependence and Risks
The risk lies not only in the reliance on natural gas but also in its source. Approximately 70% of Mexico’s consumed natural gas comes from the United States, making it vulnerable to fluctuations caused by political changes such as those under the Trump administration. In 2023, Mexico paid the U.S. a substantial $5.6 billion for natural gas imports, and in the first three quarters of 2024, Mexico acquired 30% of all U.S. natural gas exports.
Lessons from the European Experience
The European Union’s dependence on Russian gas mirrored Mexico’s reliance on U.S. natural gas before the Ukraine-Russia conflict. The war severely impacted European countries, prompting Germany to declare a state of emergency with planned blackouts and causing electricity tariffs to surge tenfold. This example underscores the importance of diversifying energy sources and partners to avoid similar crises.
Mexico’s Path Forward
Considering the European experience, Mexico must prioritize strengthening its economic and energy independence. The current electrification plans emphasize investments in distribution and transmission, which are crucial for harnessing the productive potential of Mexico’s north and west regions.
Renewable Energy and Storage
Incorporating more renewable energy and storage solutions can mitigate risks associated with natural gas dependence. The government’s support for energy storage, a relatively unexplored sector, offers advantages such as modular design and the potential to reduce intermittency and system losses. The CFE (Comisión Federal de Electricidad) can maintain control of the system by generating at least 54% of the country’s electricity using stored energy during peak demand and emergencies.
Electrification and Economic Growth
Electrification is synonymous with prosperity. Advanced economies like Germany, France, Japan, and China have significantly higher electricity consumption per capita, reflecting their industrial and manufacturing-based growth. The global trend towards electrification signifies a digital-electric super-era, transforming the world as we know it.
Mexico’s Opportunities
Since 2020, Mexico has witnessed technological and digital innovation, driven by advancements like artificial intelligence. This trend necessitates a substantial increase in electricity demand, as evidenced by the U.S. announcement of $500 billion investments in AI hubs. Mexico’s ambitious plans for investment and modernization, including the development of new technological industries like microprocessors, present both challenges and opportunities.
Key Questions and Answers
- What is Mexico’s current energy dependence? Mexico relies heavily on natural gas for electricity production, with 60% of its national consumption dedicated to this purpose.
- What risks does Mexico face due to its natural gas dependence? Mexico’s reliance on U.S.-sourced natural gas exposes it to political and economic risks, such as fluctuating costs and supply disruptions.
- What lessons can Mexico learn from the European energy crisis? Diversifying energy sources and partners is essential to avoid crises similar to those experienced by European countries.
- How can renewable energy and storage help Mexico? Increasing investments in renewable energy and storage solutions, like those promoted by the Mexican government, can mitigate risks associated with natural gas dependence.
- Why is electrification important for Mexico’s economic growth? Electrification is linked to industrial and manufacturing-based growth, as seen in advanced economies with high electricity consumption per capita.
- What opportunities does technological innovation present for Mexico? Technological advancements, such as AI, drive increased electricity demand and present both challenges and opportunities for Mexico’s economic development.
