Mexico’s incoming government should “consider the reactivation of electricity auctions that could drive new energy generation projects that the country needs to get ahead of the demand that will accompany nearshoring in Mexico, such as intense consumption during times of high temperatures and the need to accelerate the energy transition,” Andrea Villanueva Villarreal, a senior advisor and energy consultant, who worked as senior legal counsel at Mexico’s Comisión Federal de Electricidad (CFE) from 2019-2023, told NGI’s Mexico GPI.
“The electricity auctions are a mechanism of cost-efficiency and, considering that they can offer an environmental, social and corporate governance (ESG) component, they are aligned with the incentives of the companies that are looking for those opportunities,” she said.
Villanueva has been an advisor and consultant since July 2023, following four years at CFE, where she worked in the company’s generation department. Last year, she was recognized as a Rising Star by The Legal 500 in the Power and Utilities category, based on her outstanding performance and contribution to the energy sector.
Prior to working at CFE, Villanueva worked at Wöss & Partners, CLG Abogados, the EY Mexico and New York Latam Desk, the Mexican Ministry of Foreign Affairs and the World Bank in Washington, DC. She has more than 20 years of experience, primarily in the energy industry, and is an expert in legal, regulatory, and government affairs, as well as consultancy services to public and private clients in the Mexican energy sector.
Villanueva has an LL.M in International Business Law from Georgetown University Law Center, a Postgraduate Degree in Energy Law from Escuela Libre de Derecho and an M.A. in International Affairs from the Vienna Diplomatic Academy.
Editor’s Note: NGI’s Mexico Gas Price Index, a leading tracker of Mexico’s natural gas market reform, offers the following Q&A column as part of a series of periodic interviews with market experts of natural gas in Mexico. Villanueva is the 119th expert to participate in the series.
NGI: This year, Mexico will have a new government and a new president. In your opinion, what should be the focus of the next president regarding the Mexican energy sector?
Villanueva: Mexico needs to review the country’s energy policy to achieve decarbonization, competition and efficiency. The regulation that exists currently could be improved and Mexico must continue to develop necessary, timely regulation. It is also necessary to apply the existing regulation in a way that is viable for the electricity market and the energy transition.
In terms of specific points, I think:
- Mexico must pass an energy policy focused on achieving the objectives of the worldwide push towards zero emissions in the year 2050, known as Net Zero 2050, and achieve the goal of generating 35% of the country’s electricity with clean energy sources as was outlined in the Energy Transition Law for 2024, which Mexico committed to as part of the Paris Agreement.
- In this regard, the energy mix must be diversified in an aggressive way in order to depend less on fossil fuels that emit greenhouse gasses, and promote the development of clean sources such as hydroelectric, geothermal and nuclear energy, as well as renewable sources such as solar, wind and distributed generation, as well as develop storage infrastructure for energy and fuels in all forms.
- As has been said by experts, to reach the goal of 35% of Mexico’s electricity to be generated by renewables by 2024, it has been estimated that it will be necessary to generate 26,000 GWh with clean sources, which would require a total of 8,000 MW in solar and wind plants installed by that date.
- The implementation of energy transition solutions such as the use of biomethane and green hydrogen also must be promoted, particularly in the medium and long term.
- As for natural gas, it must serve as a generation source that acts as a transition fuel, but at the same time its use, as well as our dependency on it, must continue to be reduced to create room for clean and renewable energies.
- It’s important as well to continue to develop and support growth in natural gas storage infrastructure to continue to take advantage of the competitive advantage that Mexico has in regard to natural gas imports, as well as to continue expanding the export opportunities it presents.
- Continue with the efforts to develop infrastructure in the southeast of the country, such as the works and projects to expand the National Transmission Network (RNT), General Distribution Networks (RGD), as well as the generation capacity, including — in addition to the conventional sources — the clean and renewable sources and distributed generation, particularly in the Yucatan and Baja California peninsulas.
- It’s also important to continue expanding and developing the natural gas pipeline network and its connections to the Sistrangas national transport system in all the regions of the country.
- At the same time, the administration that assumes power in 2024 should reconsider the current energy policies to be able to support the economic growth that is expected from the relocation of companies to Mexico, nearshoring, as well as the demands of the new investments, taking into account the needs to diversify the energy mix that includes clean and renewable sources, and the commitment to ESG that international investments require.
- Consider the reactivation of electricity auctions that could drive new energy generation projects that the country needs to get ahead of the demand that will accompany nearshoring in Mexico, such as intense consumption during times of high temperatures and the need to accelerate the energy transition. The electricity auctions are a mechanism of cost-efficiency and, considering that they can offer an ESG component, they are aligned with the incentives of the companies that are looking for those opportunities .
- As other experts have commented, Mexico could also review the mechanisms of the auctions to strengthen the Universal Electricity Service Fund, which is designed to amplify the electrification of rural communities and marginalized urban zones.
- At the same time, it would be important to resume the practice of doing an exhaustive review of the planning of new generation power plants that are seeking to generate electricity near the regions of high demand for electricity, under the methods that are allowed. This was carried out in previous years by the Program of Works and Investments of the Electricity Sector that conducted studies on the location of apt sites for generation plants, according to their type.
- Review the strategic plans of the state energy companies (Pemex and CFE) so that they include plans to incorporate the energy transition
- Implement the necessary investments to modernize the energy sector through joint participation with the companies of the state and the private sector. The collaboration of the private sector will be essential, given that the CFE and Pemex on their own can’t comply with the operative, logistical and financial requisites that are required by the industry.
- Guarantee the necessary legal certainty to attract new investments and to be able to multiply work opportunities that are well paid
NGI: You recently worked at CFE as the senior legal counsel for four years. What did you learn about CFE operations that you didn’t expect?
Villanueva: The complexity of the company’s operations and the difficult task of the mandate of public service under the current conditions while being a productive company of the state, which are essentially contradictory.
The CFE fundamentally has a mandate to provide electricity as a public service, which was modified when its role was modified to be a productive company of the state, which resulted in a very important change and responsibility for the company, which in addition to complying with its public mandate, it also must subsidize users of the basic supply and the distribution networks, which makes it increasingly difficult to generate profit in its operations.
NGI: In your opinion, what are the most important challenges for CFE currently?
Villanueva: To seek operative efficiencies and — in its role as a public company and a productive company of the state — to achieve a better cost efficiency, while improving its commitment to social responsibility and environmental protection and incorporating a policy as it progresses with the energy transition.
This would include:
- Achieving in a timely and cost-efficient way the expansion and modernization of the RNT and the General Distribution Networks (RGD) mandated in the PRODESEN that satisfy the current needs and the future of the national electricity system. Additionally, it should develop intelligent networks that offer electricity supply under conditions of quality, reliability, continuity, efficiency, sustainability and security at the lowest possible cost.
- Expand the transition generation capacity with combined cycle plants, as well as boost the capacity for clean and renewable generation and consider the inclusion of energy transition solutions such as biomethane and green hydrogen in the matrix.
NGI: Lately a dominant topic of conversation in the Mexican sector has been about the energy transition. How important is the role of natural gas in the country’s energy transition?
Villanueva: Natural gas is the primary energy source for the worldwide transition towards clean energy and in Mexico, there is a tremendous dependency on the imports from Texas. This requires a diversification to other clean energy sources, including nuclear, geothermal and hydroelectric energy, as well as the integration of sources such as biomethane and green hydrogen.
Mexico still depends so much on the imports of natural gas, and therefore its role in the energy transition will be fundamental.
