Foreign companies invest less in Mexico renewables energy due to AMLO policies

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Renewable energy and sustainable development in Mexico, concept. 3D rendering isolated on white background

The Spanish company increasingly reduces its bet in the country. In 2018 it represented up to 16% of its portfolio, now it is only 2.3%.

The commitment of the Spanish Iberdrola in Mexico to inject resources into the renewables business has been shrinking in recent years and for the first half of 2021 it already only represented 2.3% of its investments.

The above is equivalent to 10 million euros (around 238 million pesos). Meanwhile, in the first six months of 2020, it allocated 5.4% of its investments for renewables, 120.6 million euros (2.8 billion pesos). Comparing the amounts between both periods is 91.6% less.  

The Iberian company is one of those that has been singled out the most by the president, Andrés Manuel López Obrador, for alleged corruption and for benefiting from the “privatization” of the electricity industry. In a political context, the recrimination comes because the former president, Felipe Calderón in 2016 was an independent member of the board of directors of Iberdrola’s subsidiary, Avangrid in the United States.

The reduction in Mexico’s participation in Iberdrola’s investments has been observed since 2019, in the first half of that year, it represented 4% of the renewables portfolio. Something that compares unfavorably against the same period of 2018, as it represented 16.3%, according to information on its financial results.

Although the Spanish company has decreased the percentage of investment in our country, its revenues in renewables are on the rise, since in the first months of 2021 they amount to 86 million euros (just over 2 billion pesos), this is 59.7 % higher in relation to the same period of 2020, the operating flow also grew 93%.

Iberdrola has its own installed renewable capacity (wind and solar) in Mexico of 1,232 Megawatts (MW) and a capacity for third parties of 103 MW. There are three photovoltaic plants and nine wind farms.

In its integrated report for this year, Iberdrola acknowledges that since 2020 modifications have been promoted in Mexico in energy policy and regulations contrary to foreign private investment and the development of renewables.

In May 2020, the Energy Regulatory Commission approved an increase in the shipping rates for renewable technologies and efficient cogenerations (stamp), as well as in the shipping rates for conventional technologies.

In that same month, two reliability regulations were published. Due to the pandemic, the National Energy Control Center (CRE) published an Agreement to guarantee the Reliability of the National Electric System, establishing strategies and measures that prohibited pre-operational tests of wind and photovoltaic plants.

Then the Ministry of Energy published the Policy of Reliability, Safety, Continuity, and Quality in the National Electric System. The Policy provided for changes in coverage contracts, existing generation permits, and new applications, as well as new requirements for interconnection.

This year, the president, López Obrador sent an initiative to Congress that was approved to reform the LIE, which has caused controversy for benefiting the Federal Electricity Commission (CFE) in the dispatch of energy with polluting and more expensive plants. Given this, many companies took refuge, including Iberdrola.

Contrary to the environment in Mexico, Iberdrola sees favorable conditions in other countries where it has a stake in continuing to strongly promote its renewable projects, as is the case in the United States, where the Democratic victory in the presidential and House of Representatives elections augurs an environment more favorable for renewable development.

Between 2020 and 2025, the Iberian company foresees investments in renewables for 34,000 million euros, but most of the investment goes to the United States (31%), followed by Spain (20%) and the United Kingdom (15%), while Mexico is at the bottom with only 1%.

Source: forbes.com.mx

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