(Pietro D. Pitts, Energy Analytics Institute, 29.Dec.2024) — While Mexico continues to face electricity problems derived from poor management of energy production and distribution to meet the needs of the entire country, the government of the Latin American country’s president Claudia Sheinbaum Pardo continues to offer support through discounts granted by the state-owned Federal Electricity Commission (CFE).
Said subsidies are based on an upper average consumption limit, a criterion that limits the help received by users who are most in need.
The CFE offers subsidies to an estimated 42mn-48mn users in Mexico, equivalent to 88% of all the entities’ contracts, Niko Energy founder Raffaele Sertorio said in a statement in Dec. 2024.
This support is aimed at users who spend less than the consumption limit of 250 kWh per month.
It is also common for users who have sufficient economic resources and who oftentimes live in premium areas of Mexico’s major cities to receive these electricity rate discounts.
It should be noted that in 2023, these subsidies represented a loss to CFE in the amount of around MXN103bn Mexican pesos, a cost that taxpayers absorb through their taxes, according to Niko Energy and other sources in Mexico City.
No surprise, Mexico continues to lack sufficient energy production to support continuously growing demand. Also, the country’s distribution network is unable to support the demand of entire cities.
Modernization of Mexico’s distribution networks will require significant capital investments. Energy sector pundits have calculated the necessary cost at around MXN40bn Mexican pesos, in addition to the long time needed to carry out such investments and necessary work.
Optimization of Mexico’s current electricity system is not very feasible in the short term, according to Sertorio.
As a result of a combination of the aforementioned problems, Mexico in the recent summer past saw frequent blackouts that affected entire cities. These blackouts could reoccur in the summer of 2025 if changes are not implemented in time.
RELATED: CFE Eyes Investments of $23.4bn between 2024-2030
____________________
By Pietro D. Pitts reporting from Houston. © Energy Analytics Institute (EAI). All Rights Reserved.
