Can Mexico meet the renewable energy targets under the emission trading scheme? : An analysis of the Mexican electricity framework

Abstract: The Mexican power sector has started an ambitious transition since 2013 to open the sector to private investors. Constitutional amendments envisage a cleaner electricity sector, setting goals for renewable energy  share  in  the  electricity  mix  respectively  35%  by  2024,  40%  by  2035,  and  50%  by  2050.  Simultaneously, Mexico has set targets to reduce GHG emissions including among others, the electricity sector. To achieve these goals, the Mexican government has recently announced the implementation of a mandatory Emission Trading Scheme (ETS). The study investigated the impact of adopting the ETS from 2017 to 2050 in the Mexican electricity sector. The study used Open Source Energy Modeling System (OSeMOSYS) in order to build a model of the current Mexican electricity sector. Ten different scenarios were created to explore the evolution of the electricity industry in the country under an ETS (e.g. emissions limited and penalized). The conditional and  unconditional  Intended  Nationally  Determined  Contributions  (INDC)  adopted  by  Mexico  were  considered to replicate the cap on emissions. The unconditional INDC implied 22% less emissions, whereas the conditional INDC suggested 50% less emissions. Furthermore, five different penalties on emissions were applied (2.5 USD/tCO2eq, 7.5 USD/tCO2eq, 15 USD/tCO2eq, 30 USD/tCO2eq, and 50 USD/tCO2eq). The results suggest that when the ETS is not adopted the emissions continuously increase until 2050, and the renewable penetration targets are not achieved. Additionally, under a 22% less emissions cap  the  renewable  penetration  targets  are  not  achieved  in  any  scenario,  however the GHG reduction  target is attained in all the scenarios, both by 2031 and until 2050. Under a 50% less emissions cap, the GHG reduction targets are achieved; nonetheless, the renewable penetration targets are only achieved in 2024 and 2035, but not in 2050. Finally, according to the simulations, the Mexican electricity sector showed a high level of dependency on conventional technologies fueled by natural gas (i.e. combined cycle and gas turbine power plants) by 2050. Solar PV had the largest power generation share, followed by onshore wind power. Only under a 50% less emissions cap, offshore wind power penetrated the Mexican electricity sector.