U.S. electricity producers seeking a salve for low prices at home and growing competition from solar and wind power are exploring whether to make a bet on Mexico’s sputtering energy revolution.
This year, for the first time, Mexico will allow independent companies, including those from outside the country, to compete in selling wholesale power. In anticipation, at least three top U.S. producers have held talks on entering the new market, according to Alfredo Alvarez, Ernst & Young LLP’s energy sector leader in Mexico City. He declined to identify the companies, but said the talks were spurred by the tough conditions they face at home.
Electricity prices have plunged over the past year in the U.S. and demand has flattened as grid operators have turned increasingly to renewables for cheaper, cleaner power. In Mexico, meanwhile, less efficient plants fired by coal and fuel oil routinely carry higher operating costs, giving U.S. companies an edge in a country where the payoff can be twice as high, Alvarez said in an interview.