The Challenges of the Electricity Sector

Recently, the CFE awarded 37 mixed projects totaling 7,411 MW, after receiving more than 200 proposals. The figure confirms private appetite, following the constitutional changes of 2024, but it does not resolve the structural challenges facing the sector and that could create logistical and operational obstacles.

On the positive side, the call exceeded the target of 6,500 MW and selected projects from 31 developers. The Yucatán Peninsula and the Northeast concentrated 20 awards, ten in each region. Around 6,710 MW are solar, compared with a requirement of 3,550 MW; wind remained close to 700 MW against a target of 2,850 MW, and solar thermal received no awards. The market responded as it could, mainly through photovoltaic developments with mature technology, known financing, and shorter execution times.

However, the first risk lies outside the contract and within the supply chain. The electricity demand associated with artificial intelligence, data centers, advanced manufacturing, and electrification at the global level puts pressure on the same equipment that Mexican projects will need. Releasing the bottleneck is complicated because it is not only the panels, but also power transformers, substations, control equipment, inverters, protections, microprocessors, circuits, specialized wiring, electrical steel, and copper wiring.

Given the shocks to supply chains, a bid awarded in the procedure using current market variables may reach the construction stage with prices and dates different from those that made the model viable, as a result of the increase in demand in other projects.

For example, in the United States, demand for transformers grew by more than 200% between 2019 and 2025, and demand for substation transformers by more than 100%. Additionally, prices have risen by around 80% in five years and some large equipment faces delivery times of up to four years. For Mexico, this may be an imported constraint. If a transformer or a substation arrives late, not only is the project delayed, but also the expected energy.

The second risk is more structural. So far, the visible push is concentrated on renewables and storage, but a sufficient portfolio of firm projects does not appear with the same clarity. Batteries help shift energy and support ramps, but they do not replace the continuous availability required by a system with growing peak demand. There, the problem is no longer only solar, transmission, or storage, but the schedule for thermal equipment.

Gas turbines and engines are also entering into scarcity. Global demand for flexible generation is growing alongside data centers and industry, and manufacturers and analysts report waits of three to seven years for gas turbines, with queues that may reach 2030 or beyond. Every year that Mexico takes to approve, contract, and execute firm projects shifts the real entry of capacity into the next decade.

Thus, yes, the call shows appetite, but the system needs execution. Renewable resources are not deliverable energy and installed capacity is not firm capacity. Additionally, awarded capacity is not operating capacity, and permits not granted today will not be able to materialize quickly. The longer Mexico takes to promote the development of private thermal projects, to turn mixed projects into actual construction, and to complement renewables with firm capacity, the more likely it is that the electricity problem of the next decade will not be the lack of private interest, but the lack of capacity that can be executed on time.

This article was originally published by La Prensa OEM.
Date: June 21, 2026
Link: https://oem.com.mx/la-prensa/analisis/opinion-de-paul-alejandro-sanchez-campos-los-retos-del-sector-electrico-30672915 [Online]

PEMEX: Energy Sovereignty or a Sovereign Risk?

PEMEX entered the first quarter of 2026 in a critical situation. The company reported losses of MXN 46 billion, financial debt approaching USD 79 billion, and liquid hydrocarbon production of just 1.65 million barrels per day, well below official targets. These challenges were compounded by accidents, fires, and spills at key facilities, reflecting not only financial fragility but also operational deterioration and shortcomings in industrial safety.

These results undermine the logic that dominated between 2018 and 2024: the idea that restoring PEMEX’s full control over production, allocations, and budgeting, while reducing its tax burden and transferring public resources to the company, would be sufficient to rescue it within six years.

The accumulated government support was enormous, including tax relief and foregone petroleum revenues. Nevertheless, production continued to decline, and the company became increasingly dependent on the state, with reduced operational capacity and no reversal of the structural decline of its producing fields.

The model promoted during the previous administration sought to recentralize the energy sector around PEMEX. Oil licensing rounds were suspended, open competition was curtailed, and the state oil company was positioned as the cornerstone of energy sovereignty. Although the Shared Profit Duty was reduced and government transfers increased to support debt payments, refining activities, and infrastructure projects, the productivity of that support remained low.

PEMEX failed to increase production or improve profitability and ultimately emerged with larger liabilities, growing debts to suppliers, and greater dependence on fiscal support.

The administration of Claudia Sheinbaum inherited a financially exhausted company and began pursuing a different approach. The 2024 constitutional reform transformed PEMEX into a State Public Enterprise and eliminated part of the regulatory architecture established in 2013.

The new strategy seeks to prioritize liquidity, refinancing, and financial restructuring through a new fiscal regime, mixed contracts, and extraordinary government support. However, the results have also proven insufficient. Production remains below target levels, and the company continues to post losses even in an international environment characterized by relatively high oil prices.

At this stage, the problem has ceased to be exclusively corporate and has begun to affect the sovereign itself. Growing transfers to PEMEX have reduced the state’s net oil income and increased pressure on Mexico’s public finances. Moody’s, Fitch, and S&P have explicitly linked the country’s fiscal deterioration to the government’s continuing support for the state oil company.

While major international oil companies took advantage of the recent period of higher oil prices to generate record profits, PEMEX continued to lose money due to its debt burden, low productivity, and operational challenges.

The central conclusion is that rescuing PEMEX only makes sense if the objective is to restore public value for Mexico rather than simply preserve the company as a political symbol. Achieving this would require establishing clear metrics for profitability, production, and safety; conditioning any fiscal support on measurable performance; separating profitable business segments from those that destroy value; restoring competition and credible technical regulation; and prioritizing maintenance and industrial safety.

The model that provided PEMEX with financial resources, tax relief, regulatory control, and unrestricted political support has already been tested. The result was not energy sovereignty, but rather growing pressure on the country’s sovereign credit profile.

This article was originally published by La Prensa OEM.
Date: June 5, 2026
Link: https://oem.com.mx/la-prensa/analisis/opinion-por-paul-alejandro-sanchez-30370677 [Online]

Pemex: Energy Sovereignty or Risk to the Sovereign

Pemex reached the first quarter of 2026 in a critical situation, reporting losses of 46 billion pesos, financial debt close to 79 billion dollars, and liquid hydrocarbon production of barely 1.65 million barrels per day, well below the official target. Added to this were accidents, fires, and spills at key facilities, reflecting not only financial fragility, but also operational deterioration and deterioration in industrial safety.

These results dismantle the logic that prevailed between 2018 and 2024, the idea that it was enough to return absolute control over production, assignments, and budget to Pemex; in addition to reducing its fiscal burden and transferring public resources to it, in order to rescue it in six years.

The accumulated government support was enormous, between fiscal benefits and foregone oil revenues. However, production continued to fall and the company ended up more dependent on the State, with less operational capacity and without reversing the structural decline of its fields.

Pemex Inherited Liabilities and Losses Despite Fiscal Support

The model promoted during the previous administration sought to recentralize the energy sector around Pemex. Oil rounds were suspended, open competition was halted, and the state-owned oil company was favored as the axis of energy sovereignty. Although the Profit-Sharing Duty was reduced and transfers for debt, refining, and infrastructure increased, the productivity of the support was low.

Pemex failed to increase production or improve profitability, and ended up with greater liabilities, debts to suppliers, and fiscal dependence.

The administration of Claudia Sheinbaum inherited a financially exhausted company and began a different shift. The 2024 constitutional reform transformed Pemex into a State Public Enterprise and eliminated part of the regulatory architecture created in 2013.

The new approach seeks to prioritize liquidity, refinancing, and financial restructuring through a new fiscal regime, mixed contracts, and extraordinary government support. However, the results have not been sufficient either, production remains below targets and the company continues to report losses even in an international environment of high oil prices.

At this point, the problem ceased to be exclusively a business problem and began to affect the sovereign. Growing transfers to Pemex have reduced the State’s net oil revenue and put pressure on Mexico’s public finances. Moody’s, Fitch, and S&P have explicitly linked the country’s fiscal deterioration to the permanent support for the oil company.

While major international oil companies took advantage of the recent upward cycle in crude oil prices to generate record profits, Pemex continued losing money because of its debt, low productivity, and operational problems.

Saving Pemex Requires Public Value, Not Political Symbolism

The central conclusion is that saving Pemex only makes sense if the objective is to restore public value for Mexico and not simply to preserve the company as a political symbol. That would imply establishing clear metrics for:

  • Profitability, production, and safety.
  • Conditioning any fiscal support.
  • Segmenting profitable businesses from those that destroy value.
  • Recovering competition and credible technical regulation.
  • Prioritizing maintenance and industrial safety.

The model that gave Pemex resources, fiscal relief, regulatory control, and unrestricted political support has already been tested, and the result was not energy sovereignty, but growing pressure on the country’s sovereign rating.

This article was originally published by La Prensa OEM.
Date: June 5, 2026
Link: https://oem.com.mx/la-prensa/analisis/opinion-por-paul-alejandro-sanchez-30370677 [Online]