Two days after Mexico’s first ever left-wing government was sworn into power on December 1, new president Andrés Manuel López Obrador (known widely as AMLO) unexpectedly suspended the country’s fourth clean-energy tender in order to revise its “objectives and reach”, just weeks before it was due to go ahead.

In his inauguration speech, AMLO said, rather confusingly, that renewables were the way to reduce energy prices, but that he would “rescue” state utility (and former monopoly) CFE and modernise its old thermal power plants and hydro dams. “Not one more CFE plant will be shut down,” he vowed.

AMLO has also been a vociferous critic of what he calls the “neoliberal” 2014 energy reform, which removed the monopolies of CFE and state-owned oil giant Pemex and opened up the power sector to independent players and generators.

“The energy reform, which they said will come to save us, has only meant a drop in oil production and rise in gasoline prices,” he said in his inauguration speech.

In light of these remarks and policies, renewables investors could be forgiven for being wary of ploughing their money into Mexico.

Yet within days of the tender suspension, Spain’s Acciona Energia said it would invest $1.2bn in Mexico through to 2020 to double its renewables capacity in the country; Italy’s Enel Green Power (EGP) reaffirmed its plans for Mexico and the region; and the InterAmerican Development Bank announced a $17.2m financing for Madrid-based PV developer X-Elio’s 80MW Conejos solar plant.

“The country has excellent natural resources and good regulatory structure,” EGP chief executive Antonio Cammisecra tells Recharge.

“And we are not seeing any capex reduction due to policy change.”

Although AMLO has a majority in both houses of Congress, overturning the energy reform seems unlikely, as it would require support from two-thirds of both senators and deputies.

“It would take considerable effort and support outside AMLO’s Morena party to approve a constitutional reform,” says Francesco Menonna, senior power and renewables analyst at Fitch Solutions.

The president told reporters in early December that he has decided not to repeal the energy reform, demonstrating his pragmatism.

EGP boss calm over Mexico tender suspension

There is also no indication that the so-far successful renewables tender programme will be scrapped. AMLO has said he supports the country’s target of 35% clean energy by 2024, and it would make little sense to change something that has been successful at creating green jobs and attracting around $8bn of much-needed foreign investment.

“I don’t believe there will be a change in policy if the government wants to reduce power prices,” says Ramón Fiestas, president of the Latin American committee at the Global Wind Energy Council. “What we expect is that the government strengthens renewable-energy policies.”

It is possible that the new administration will not only continue with the tenders, but actually improve them. Until now, bidders have not been required to own rights to use a project’s land or to have the correct environmental licences.

Add this to difficulties attracting financing, a carbon tax (albeit a low one of around $3.50 per tonne of CO₂ and the lack of a secondary market for clean-energy certificates, it is perhaps no surprise that around 30% of contracted projects are unlikely ever to be built.

“The government needs to revise some issues and we are offering our support to discuss what can be done,” says Fiestas.

Although renewables investors have remained calm, the clock is ticking — the longer the government takes to restart tenders, the more wary investors will be.

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“I would say the government has until the end of January to restart the tender and maintain investors’ confidence,” says Carlos Ochoa, an energy specialist and partner at law firm Holland & Knight’s Mexico City office.

AMLO’s priorities in the power sector seem to be reducing prices and reinstating state-owned CFE as a key player, believing that halting the utility’s “dismantling” will allow the government to regain control of energy policy and reduce the country’s dependence on imported natural gas.

But critics say that strengthening CFE would require the injection of scarce public funds. And with power demand rising at 2-3.5% a year, it may be faster and cheaper to install more wind and solar farms, rather than modernising CFE hydro and thermal plants that are so old that one analyst has described them as “museum pieces”.

“In the medium to long term, the only way to reduce tariffs is to use more efficient technologies and continue to increase the use of renewables and efficient co-generation [ie, natural-gas plants that produce both heat and electricity] to produce energy while at the same time shutting down inefficient facilities. So yes, the case is there for renewables,” says Oscar Silva, head of the global strategy group at KPMG in Mexico.

“We believe the risks are minor. The new government has focused much more on oil & gas and we believe they will keep the power sector as it is.”