Comision Federal de Electricidad (CFE)

CFE has no climate governance. While the company has made high-level statements to replace emissions-intensive fuels with lower emissions ones and to increase its clean energy generation capacity, it has failed to substantiate these statements with investment plans, quantified time-bound targets or fossil phase-out dates. As a state-owned utility, CFE will be required to comply with Mexico’s 2012 General Law on Climate Change, which requires a low-carbon generation share of 35% by 2024. The company does not appear to have the necessary strategic mechanisms in place to realise this regulatory goal. CFE can improve its low-carbon alignment by setting out the pathway it will take to achieve this alignment in a low-carbon transition plan. The company should also embed emissions reduction targets within this plan and instate an individual or committee at the board level with climate expertise to oversee its successful delivery.

CFE has some low-carbon business model areas. Its low-carbon electricity generation business, which includes nuclear and large hydro, accounted for 20% of total installed capacity in 2018. Low-carbon activities also include electricity generation from geothermal sources, a fuel source that is relatively prominent in Mexico. Through its subsidiary CFE Telecom, CFE has done some work on smart grids. The lack of available detail on the profitability and growth plans of both business models suggest that CFE is not currently committed to a strategic repositioning towards low-carbon business models.

CFE’s locked-in emissions – that is, all the emissions from the company’s installed and planned electric power plants up to 2033 – are expected to exceed its decarbonisation budget for absolute emissions by 10%. CFE has two large coal assets with lifetimes extending beyond 2033. The largest portion of the company’s fossil fuel capacity is gas, accounting for approximately 70% of total installed capacity in 2018. Estimates for average lifetime per fuel type suggest that many of CFE’s gas assets could reach retirement between now and 2033. However, the company’s vision of gas as a ‘clean’ fuel coupled with a lack of pipeline replacement capacity suggests that these assets will be extended beyond their estimated lifetime. The company’s fleet is therefore projected to be dominated by fossil fuels out to 2033 and beyond. CFE should commit to replace any retired fossil assets with renewable capacity and schedule the early closure of its two coal assets before 2033.

CFE has not made any public climate commitments. As a state utility, the company will be required to comply with Mexico’s General Law on Climate Change, which requires a low-carbon generation share of 35% by 2024.

CFE has made high-level strategic statements regarding the substitution of emissions-intensive fuels with less emissions-intensive fuels (the company includes natural gas in this group) and an intention to improve its clean generating capacity. However, it has not set out a road map demonstrating commitment towards low-carbon alignment.

CFE’s generating portfolio in 2018 was 80% thermal fuel and 20% low-carbon sources, including large hydro and nuclear. In 2020, CFE increased the transmission fees that renewables firms pay for baseload power, to 800% in some instances. These fees were originally set low to incentivise investment in low-carbon electricity sources, and the recent price hike could signify a negative shift in CFE’s commitment to renewable investment.

A growth in thermal capacity between 2013 and 2018 drove an increase of 5% in CFE’s emissions intensity. The company has had to halt several dam developments in recent years, because of the environmental and social impacts they would have created for indigenous communities.

CFE’s decarbonisation efforts have been weak in recent years. While the company’s intentions to reduce the use of emissions-intensive fuels and expand its low-carbon capacity are positive, the lack of a transition plan with fossil phase-out dates or a clear climate governance structure indicate that there is significant room for improvement. The company’s decision to increase its transmission fees suggests it is already feeling the pressure that the low-carbon transition will put on to its current business model.