Mexico’s energy sector faces investment and infrastructure challenges

According to the statement, challenges include stimulating a regulatory environment that would encourage private investment in the electricity industry, which is critical to the development of new power plants.

There is also a need to create infrastructure to store and transport natural gas, given the North American country’s heavy dependence on imports and much of its energy produced from that source, the ratings agency said.

“The expansion and modernization of Mexico’s electricity grid is also necessary to improve the flexibility and stabilization of the electricity system, accommodate new power plants, increase the energy mix and enable renewable energy projects to enter the market while managing disruptions in their implementation. enter into the system,” it was written.

Electricity generated from natural gas accounted for 70% of Mexico’s energy mix in 2023, while hydro, wind and solar each accounted for 6% and the remaining 12% came from nuclear, coal and diesel sources, according to Fitch.

“The country’s dependence on natural gas for more than 60% of its installed energy capacity makes it vulnerable to shortages and fluctuations in natural gas prices and exchange rates,” Fitch said.

“Additionally, renewable energy variability, recent severe droughts, lack of solar performance at night, and maintenance activities have resulted in fluctuations in system generating capacity.”

The ratings agency said rising energy demand and insufficient investment were straining Mexico’s reserve margin and leaving it vulnerable.

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