Mexico is becoming increasingly dependent on imported gas from the US
Since 2000, gas demand for electricity generation in Mexico has increased fivefold, rising from 1,017 million cubic feet per day (MMcfd) in 2000 to 5,387 MMcfd in 2024 – an increase of 4,370 MMcfd. With domestic gas production declining, gas imports from the United States (for all uses) increased more than twenty-twofold over the same period, from 287.9 million cubic feet per day (MMcfd) to 6,425 MMcfd in 2024, with the power and oil industries being the largest consumers of gas in the country. Of the total country’s domestically-produced gas, 15% reaches the market, and the remainder is used by PEMEX (Mexican state-owned petroleum corporation) in its own processes. Approximately 74% of Mexico’s total gas demand is covered by imports, with the US as the supplier of almost all this fuel, putting Mexico in a high level of vulnerability to possible restrictions in gas supply for geopolitical, climatic or market reasons. Mexico buys 70% of the pipeline gas (dry gas) exported by the United States, and accounts for 31% of the total volume of US gas exports, including dry gas and liquefied natural gas (LNG). This makes Mexico the largest US gas buyer worldwide. In 2023, Mexico was the sixth-largest global importer of dry gas, making it one of the most dependent countries on foreign suppliers to meet its domestic energy demand. From 2000 to 2024, Mexico paid the US nearly $89 billion for its gas imports.
Risks of dependence on imported gas
Importing fossil fuels to meet the needs of priority economic sectors can generate multiple risks and uncertainties. In the case of the electricity sector, apart from being exposed to gas supply risks, any sudden increase in the cost of gas imports is directly reflected in higher electricity generation costs – impacting user tariffs, or otherwise increasing public spending via subsidies. Likewise, exchange rate risk plays an important role for Mexico in its gas imports, because if the Mexican peso loses value against the dollar, this difference must be covered by the local buyer, since gas purchase transactions are made in dollars. Any technical, climatic or geopolitical event that causes a restriction in the gas supply in the country can cause unprecedented damage to the Mexican economy such as power outages, reduction in the production of energy-intensive companies, loss of competitiveness, industrial slowdown, and growth in inflation, among others. Current gas storage capacity is very limited; technical reserves only last three days without fuel supply. Therefore, it is vital that Mexico can move rapidly toward increasing the use of renewable energy for electricity generation.
Gas generation has increased to meet rising electricity demand
Since 2009, more than half of the electricity generated in Mexico has come from fossil gas. As domestic gas production has declined and demand from the electricity sector has increased, imported gas has become more important to meet the country’s electricity demand. Gas went from having a 19.8% share of total electricity generation in 2000 to 58% in 2024. During this period, total electricity demand grew by 148.2 TWh, while the increase in gas generation was greater, reaching 163.5 TWh. In 2024, 54% of the total electricity consumed in Mexico was generated with gas imported from the United States, providing 189.6 TWh of electricity to the national energy system. Total gas demand for electricity generation was 5,386 million cubic feet per day (MMcfd), of which 5,039 MMcfd (94%) was imported from the US at a cost of $3.3 billion dollars. By 2024, renewable generation reached a 21.6% share, with solar and wind energy accounting for 11.8%. Clean generation, which includes nuclear energy, supplied 25.1% of electricity demand. According to Mexico’s Electricity Industry Law, clean energy sources include solar, wind, nuclear, hydroelectric, geothermal, hydrogen, and efficient cogeneration
Mexico would benefit from accelerating its energy transition
Accelerating the use of solar and wind energy is beneficial for Mexico. Covering the expected increase in electricity demand in 2030 with gas would incur an additional expense of $2.17 billion dollars compared to 2024, due to higher gas imports. This would lead to gas reaching a 64% share of national electricity generation, further weakening the country’s energy security. The share of solar and wind power in electricity generation in 2024 was 11.9%, contributing 41.7 TWh to cover national demand. Generating this electricity with gas would have required the import of an additional 1,104 MMcfd, incurring a cost of$729 million USD. By 2024, Mexico had an installed capacity of approximately 11 GW of solar power and 8 GW of wind power. Mexico’s electricity demand in 2030 is estimated to reach 405 TWh, 15% more than in 2024. Increasing clean electricity generation is paramount for Mexico to move forward in strengthening its energy security and affordability by reducing the electricity sector’s high dependence on US gas.
The National Electricity Sector Strategy designed by the Mexican government for the current six-year term proposes three different scenarios for the energy transition: 36%, 38% (with cogeneration), and 45% clean generation by 2030. The most ambitious scenario is similar to the proposal set out by President Claudia Sheinbaum in her inaugural address, of reaching 45% renewable generation by 2030. This report estimates the costs that would be avoided by reducing gas imports if the country achieves 36% and 45% clean electricity generation by 2030. The savings are estimated only for 2030, but it is assumed that they would be extrapolated over the more than 20 years that renewable generation projects would be in operation.
In 2024, solar and wind energy combined generated 41.7 TWh, and clean energy totaled 89 TWh, approximately 25% of the electricity generated in Mexico. With gas, 203.79 TWh were generated. By 2030, a 36% clean energy scenario would bring solar and wind generation to 98 TWh, while gas generation would see a slight reduction compared with 2024, contributing 200 TWh. In contrast, achieving 45% clean energy would allow solar and wind generation to reach 134 TWh, significantly reducing gas-fired electricity to 163 TWh. 36% of clean energy generation would more than meet the projected increase in demand to 2030 with solar and wind power. In this scenario, solar and wind energy would contribute almost a quarter (24.2%) of the total electricity demand in Mexico in 2030, more than doubling the generation achieved in 2024 from 41.7 TWh to 98 TWh. To achieve this generation, it is estimated that the current installed capacity of solar (+23 GW) and wind (+5 GW) would need to be increased by 28.4 GW, 47% more than in 2024.
If Mexico wants to make decisive progress in reducing the electricity sector’s dependence on imported gas from the US, reaching 36% clean generation by 2030 may not be an ambitious enough goal, making it prudent to increase the share of renewables in electricity generation. Achieving 45% clean generation would require the installation of 46 GW of solar (+36 GW) and wind (+10 GW) energy and avoid the construction of new gas-fired power plants. In this scenario, the volume of gas required for electricity generation would be reduced by 384 Bcf, avoiding gas import costs of almost $1.6 billion dollars in 2030. Likewise, compared to 2024, the share of gas in the electricity mix would be reduced (-17.6%) to 40.3% and the emission of 17.7 million tonnes of CO2e would be avoided (-11.4%).
Tripling renewable generation in five years is possible
For clean energy to cover 45% of electricity demand in 2030, it is estimated that an additional installed capacity of solar (+35.7 GW) and wind (+10.3 GW) of 46 GW is required, which would result in the generation of 134 TWh in 2030 – more than triple the electricity produced by these sources in 2024. This would mean reaching a 33.2% share of solar and wind energy in electricity generation in 2030, multiplying the current installed capacity by four. Tripling renewable energy generation in five years is possible. There are clear examples in the region, and even in the country itself, which demonstrate that accelerated growth in the share of solar and wind energy in national electricity generation is possible. The growth of solar energy in some countries in the region has been remarkable. Chile almost tripled its solar generation over the last five years, increasing electricity generated from this renewable source by 64 TWh, which allowed it to reach a 22.3% share. Brazil, in the same period, went from having 1.71% solar generation to a 10.02% share, reaching 74.68 TWh – seven times more than what it generated in 2020. Mexico has already made a remarkable development between 2019 and 2023, almost tripling its solar power generation from 9.96 TWh to 27.14 TWh, allowing solar energy to cover 7.6% of the country’s total electricity demand.
As far as wind energy is concerned, Uruguay in 2013 generated 1.2% with this renewable source and went on to reach 26.2% in 2017, thus multiplying its share almost 22 times in only 5 years. Chile and Brazil doubled their wind power generation between 2020 and 2024, in both cases exceeding 11% of the total electricity generated with wind energy. These examples show that increasing Mexico’s combined share of solar and wind power generation by 21.3% is possible, allowing it to reach 45% of clean electricity supply by 2030, and strengthening the country’s energy security and independence. The accelerated construction of renewable energy plants requires agile systems for processing and obtaining permits and licenses for projects. In Mexico, this process can currently take between two and four years. In Brazil it takes between one and two years, while in Uruguay the procedures are more efficient and last between six months and one year on average. To achieve a 45% share of clean electricity generation by 2030, Mexico must create an enabling environment that makes the project licensing process more efficient in all its phases, significantly reducing the time to commission renewable energy plants.
Conclusion
Mexico’s energy security and affordability are at risk due to its high dependence on imported gas. 74% of domestic gas demand and 54% of the electricity generated in Mexico depend on gas purchased from the United States, making the country, its economy, and its citizens extremely vulnerable to potential geopolitical conflicts and price volatility. Achieving 45% clean energy by 2030 would reduce the country’s dependence on imported gas from the US for electricity generation by 20%. This growth in clean generation, based on the installation of 46 GW of solar and wind energy, would make it possible to avoid any investment in the construction of new combined-cycle power plants. Decisive progress toward achieving 45% clean energy, instead of 36%, would avoid gas import costs that are ten times higher, generate an additional 36 TWh of clean energy, and create almost double the number of direct jobs in the construction and operation phases of solar and wind energy projects. Political will is essential to create the enabling conditions for installing 46 GW of renewable energy by 2030 and thus strengthening Mexico’s energy security. Efficient and streamlined processing of licensing applications for renewable generation projects is one of the necessary conditions for accelerating the energy transition.
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