What is Mexico's pathway to limit global warming to 1.5°C?

Over half of Mexico’s gas is imported from the United States.²2 Near- and medium-term policy planning prioritises weaning Mexico off imported gas through increased domestic production. Aligning with 1.5°C under the Highest Possible Ambition (HPA) scenario addresses these energy security concerns through a heavy emphasis on domestic wind and solar production. However, it differs from current Mexican policy by fully diverting resources towards electrification and away from fossil fuels.

Mexico’s vast solar potential drives the energy transition, with the share of solar rising to 83% by 2035 (up from 6% in 2023). It essentially stabilises at this level, with wind gradually increasing its share. Decisive wind and solar rollout can effectively drive fossil fuels out of the system by 2035, with only a small amount of gas remaining, mostly for backup generation. While not directly captured in our modelling, increasing grid-scale storage is critical. Mexico can combine solar with battery storage to meet electricity demand around the clock with very little need for backup gas generation.³3

This accelerated rollout will be critical to aligning with the HPA scenario sustainably, as electricity demand would substantially increase by almost three-fold between 2023 and 2035 under the highest ambition 1.5°C scenario and almost six-fold out to 2050. This is due to end-use sectors meeting their energy needs via electricity. For instance, higher shares of electric vehicles (EVs) on Mexico’s roads mean that they are powered by electricity from the grid instead of oil from the pump. Given that EVs tend to be charged overnight, this underscores the importance of tapping into Mexico’s potential to provide uninterrupted 24/7 solar electricity through battery storage.

In the HPA scenario, green hydrogen would account for a small share of power generation (1-2% post-2035). Mexico is currently developing a national hydrogen strategy and is directing USD 21 bn towards developing a green hydrogen industry.⁴4^,55 Hydrogen’s small share in the power sector reflects its strategic use. Given the energy-intensive nature of hydrogen production, however, it is generally not cost-effective to use for electricity production. Hydrogen instead has higher potential in harder-to-abate sectors like industry.