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 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]

Economics 101: Controlling the Price of Gasoline Produces Scarcity

By Paul Alejandro Sánchez, Analyst in energy, technology, and sustainability with a background in economics, geopolitics, public policy, and regulation. He analyzes global energy markets and the energy transition in a changing environment. Visiting professor at UC San Diego

A lesson in basic economics: the price of gasoline and diesel cannot be sustained by decree, even more so when the cost of raw materials and finished products rises faster than the margin of those who sell them. The Mexican government has opted to keep regular gasoline below 24 pesos per liter and then reduce diesel to 27 pesos, just as the crisis in the Middle East and the risk over Hormuz pushed international energy prices upward.

The objective is understandable: to prevent fuel from adding further to inflation. The problem is that price is also a signal, and when that signal is erased, someone ends up paying the difference.

Cheap gasoline generates scarcity and a regressive subsidy

Economic theory is quite straightforward. If the permitted price remains below the real market cost, consumption increases, the incentive to sell falls, and scarcity appears. With fuels, this does not occur in the abstract. It occurs at service stations that are already beginning to show signs of scarcity due to a lack of inventories or supply problems, and among business owners who can no longer absorb the difference between the price at which they buy and the price at which they are asked to sell.

The government can say that the agreement is voluntary, but the market does not operate through voluntarism; even PEMEX has increased its logistics costs per liter. If the price of crude oil increases, producing and importing gasoline costs more, and if logistics becomes more expensive, the margin is compressed.

A service station cannot sell indefinitely below its economic cost. It can hold out for a few days, it can compensate with other products, it can reduce its margin, it can wait for government support through incentives. But it cannot turn a recurring loss into a business model.

In addition, the low price sends the wrong signal to the consumer. When fuel is made artificially cheaper, the incentive to save, change habits, optimize routes, or migrate toward more efficient options is reduced.

The policy seeks to contain inflation, but at the same time it protects the consumption of those who use the most gasoline. That point matters because the gasoline subsidy is not progressive. It does not mainly benefit the poorest households, but rather those who own a car, travel more kilometers, or consume more liters.

This article was originally published by La Prensa OEM.
Date: May 26, 2026
Link: https://oem.com.mx/la-prensa/analisis/economia-101-controlar-el-precio-de-la-gasolina-produce-escasez-30199808 [Online]