Kerry calls for keeping power markets open in Mexico

MEXICO CITY — U.S. climate envoy John Kerry called Wednesday for more investment in clean energy and urged Mexico to keep its market “open and competitive” amid tensions over Mexico’s plan to favor its state-owned electricity company and limit private and foreign firms that have invested in renewable power.

“What we want to do is work with Mexico in a way that will strengthen … the ability of the marketplace to be able to be open and competitive,” Kerry said during opening remarks on his visit to Mexico City.

U.S. firms have complained bitterly about constitutional changes proposed by President Andrés Manuel López Obrador in October. Those changes are still held up in the Mexican Congress, where they need a two-thirds majority that López Obrador hasn’t yet been able to pull together.

Those changes would guarantee a majority market share for state-owned power plants that often burn dirty fuel oil or coal, while limiting private wind, natural gas and solar plants to a minority market share.

Many U.S. companies operating in Mexico either invested in cleaner power plants themselves or rely on cheaper energy produced by them.

Kerry offered U.S. financing and technology to boost renewable energy and said, “We respect completely the sovereignty of Mexico,” a nod to López Obrador’s push to favor energy self-sufficiency and state-owned companies.

Mexico has denied López Obrador’s proposed reforms would violate Mexico’s emissions-reduction pledges or the U.S.-Mexico Canada free trade pact, which prohibits favoring domestic industries over foreign investors.

But the effects of López Obrador’s affection for fossil fuels is also an underlying issue. He often waxes nostalgic about his youth in the oil-rich Gulf coast state of Tabasco and has boosted investment in oil refineries. Those refineries often produce dirty fuel oil as a byproduct, which has to be burned at government power plants because few other buyers want it anymore.

The U.S. Embassy in Mexico expressed concerns about that on the eve of Kerry’s visit.

“The government of the United States has repeatedly expressed concern over Mexico’s current proposal for the energy sector,” the embassy said in a statement. “Promoting the use of dirtier, antiquated and expensive technologies over efficient renewable alternatives would put consumers and the economy in general at a disadvantage.”

López Obrador sought to downplay the friction Tuesday, saying “there are opportunities for investment. The only thing we want to do at the same time is strengthen the CFE,” Mexico’s state-owned Federal Electricity Commission.

The commission runs plants that burn coal, fuel oil and natural gas, with some solar, nuclear and hydroelectric plants.

The Mexican president denied Mexico didn’t want clean energy and suggested the United States might offer funding for his plans to increase Mexico’s hydroelectric power capacity.

“The thing is to reach agreements with the U.S. government on investments … getting low-interest loans, at interest rates like they charge in the United States, that would be an investment in favor of the environment,” López Obrador said.

U.S. Secretary of Energy Jennifer M. Granholm visited Mexico in January and wrote that “In each meeting, we expressly conveyed the Biden-Harris Administration’s real concerns with the potential negative impact of Mexico’s proposed energy reforms on U.S. private investment in Mexico,” adding, “The proposed reform could also hinder U.S.-Mexico joint efforts on clean energy and climate.”

The bill submitted in October would cancel contracts under which 34 private plants sell power into the national grid. The plan would also declare “illegal” an additional 239 private plants that sell energy directly to corporate clients in Mexico. Almost all of those plants are run with renewable energy sources or natural gas.

The measure also would cancel many long-term energy supply contracts and clean-energy preferential buying programs, often affecting foreign companies.

It puts private natural gas plants almost last in line — ahead of only government coal-fired plants — for rights to sell electricity into the grid, despite the fact they produce power about 24% more cheaply.

The plan guarantees the government electrical utility a market share of “at least” 54%, even though the U.S.-Mexico-Canada free trade pact prohibits favoring local or government businesses.