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Natural Gas and Mexico’s Energy Transition

By Editorial Staff

Mexico City

October 25, 2024





The term "transition" refers to the journey from where you start to where you aim to go. For Naturgy, the goal of energy transition is to reduce carbon emissions, moving away from fossil fuels—which are the largest emitters—toward renewable energy sources as much as feasible in each region, while also considering other currently available solutions.

When we speak of energy transition, many elements fall under this term, as there is no single path to energy transition, explains Francisco Ripoll, Chief Operating Officer at Naturgy México.

It is impossible to discuss an energy transition without considering four essential variables:

Energy Production: How energy is generated is fundamental. Transitioning to renewable sources (solar, wind, hydroelectric) is essential. Thus, the questions arise: How is energy currently produced, and from what fuels?

Energy Use: The way energy is used is also critical. This includes transportation, climate control, and other industrial uses. Increasing efficiency in these sectors can significantly reduce energy demand.

Energy Efficiency: To effect real change in a country’s energy mix, energy efficiency is essential. This means achieving the same output using fewer energy resources, a key to a successful transition.

Infrastructure: Any fuel or energy source requires production and end use, so a robust and secure infrastructure is needed to support the generation and distribution of energy, including renewables.

Once these key factors for energy transition are clear, we must focus on the specific context of each country, as previously noted, no single approach to energy transition exists.

Analyzing Mexico’s current situation, we see a great availability of renewable resources and a high potential to shift the energy mix towards renewables. Despite this potential and Mexico’s commitment to Agenda 2030 to increase renewable energy use to 43%, progress in the energy transition remains slow due to heavy reliance on highly polluting fossil fuels like coal and fuel oil.

According to official data from the National Electricity System Development Program (PRODESEN), energy demand is expected to grow by 2.5% annually over the next 15 years. However, we have already seen years where this percentage was surpassed, such as in 2023, when demand increased by 3.5% compared to the previous year. If this trend continues, energy demand will rise approximately 40% by 2037 compared to 2022 levels, posing a significant challenge.

Furthermore, the demand for population and industrial development is expected to grow, driven by proximity to the United States and the phenomenon of nearshoring. This requires close attention to our energy needs, focusing on three key points: energy security, accessibility, and environmental sustainability.

Natural gas stands out as a critical resource to meet this energy demand and promote the transition to cleaner energy sources, for the following reasons:

Firstly, while renewables are the most affordable and environmentally responsible option long-term, they present a significant challenge: intermittency. This means that renewable production is not always constant as it depends on weather conditions like sun or wind availability, which can lead to fluctuations in the electrical supply. To ensure energy security, a backup source is crucial to maintain a steady electricity supply regardless of these variations.

This does not mean that we should abandon sustainable energy sources, as energy solutions like natural gas-based combined cycles are an effective solution to complement renewables. They can be quickly activated when renewable generation declines. Additionally, natural gas, being cleaner than other fossil fuels like coal or fuel oil and more efficient in combined cycles, allows for a more sustainable energy matrix. This is not unique to Mexico; countries worldwide use this combination as an effective model to approach energy transition without compromising supply reliability.

Natural gas is also a key economic driver. Over recent years, Naturgy has invested heavily in infrastructure to distribute this resource. With over 23,000 km of networks across Mexico, the company provides coverage in major industrial hubs like northern, central, and Bajío Mexico. While southern and southeastern regions still face infrastructure access challenges, significant progress has been made across much of the territory. This infrastructure is crucial to making natural gas accessible and competitive, facilitating its use in power generation and industrial processes.

For Mexican industry, natural gas represents a competitive advantage in terms of efficiency and costs, allowing up to 60% savings, which accelerates development in regions where its supply is strongest. This is particularly true for states with longer access to natural gas, showing higher economic growth compared to those still lacking adequate infrastructure.

In the residential and commercial sectors, consumers can also benefit from savings between 30% and 40% on their energy bills when comparing this energy source to other more costly, polluting fuels.

The Future of Natural Gas in Mexico

The reality is that natural gas will be a central component of Mexico’s energy matrix for many years, especially in the context of transitioning to renewables, asserts Rafael Mercado, Commercial Director at Naturgy Mexico.

Currently, new applications of natural gas are being explored not only in industry but also in sectors like real estate, to meet heating, cooling, and air conditioning needs, as well as in mobility, where it is used in logistics chains, light vehicles, and urban transport.

In terms of efficiency and environmental care, the future of natural gas is focused on migrating to new fuels like biomethane and green hydrogen, two energy sources that could transform our energy mix by reducing pollutant emissions and fulfilling environmental commitments.

In conclusion, Mexico has a unique opportunity to leverage its geographic location, nearshoring phenomenon, and abundant resources to drive the energy transition and meet current demand. However, it is crucial for public institutions, private actors, and consumers to coordinate in adapting strategies and policies that have proven successful in other regions, considering our energy reality.

In this context, natural gas presents itself as a key pillar, capable of providing the stability needed to move toward a cleaner, more efficient, and sustainable energy matrix.

Naturgy Drives Energy Transition

Naturgy recognizes that Mexico has specific energy needs and notes that while long-term goals focus on renewable sources like solar and wind, natural gas offers an immediate and accessible solution to advance environmental commitments outlined in Agenda 2030.

Moreover, Naturgy has a strong presence in over 50 industrial parks located in Mexico’s northern and Bajío zones, with more than 2,000 industrial clients who already utilize this resource, positioning Naturgy as a key partner in manufacturing and nearshoring. It offers cleaner energy solutions that support the energy transition, enabling industries to optimize operational costs and improve productivity.

For more information, contact: contratacionggcc@naturgy.com or visit naturgy.com.mx

Naturgy Mexico S.A. de C.V.
Av. Marina Nacional No. 60, Piso 6, Colonia Tacuba, Alcaldía Miguel Hidalgo, CDMX

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