Mexico Increases Reliance on Natural Gas to Support Electricity Demand

Mexico is ramping up its use of natural gas for power generation, with several plants coming online in recent years, and at least 10 more (Table 1) expected to come online this year, next year, or in 2026. The U.S. Energy Information Administration (EIA) in an analysis published in April of this year forecast an increase in U.S. natural gas pipeline exports to Mexico, noting that several pipelines in Mexico—Tula-Villa de Reyes, Tuxpan-Tula, and Cuxtal Phase II connecting to the Energía Mayakan pipeline on the Yucatán Peninsula—will become fully operational this year and next, after beginning partial service in 2022.

Table 1. This chart shows 10 new combined cycle natural gas–fired power plants that have been recently added or are planned in Mexico over the next couple of years. Source: FTI Consulting with public information from the Comisión Federal de Electricidad (CFE) Business Plan 2024–2028 de la CFE, CFE’s Annual Report 2022, and CFE press releases

The agency said flows via the Sur de Texas-Tuxpan underwater pipeline are likely to increase this year when that line begins delivering U.S.-produced natural gas to Fast LNG (liquefied natural gas) Altamira, Mexico’s first LNG export project. The Center on Global Energy Policy at Columbia University in October 2023 reported that Mexico meets most (nearly 70%) of its demand for natural gas from gas sent via pipeline from the U.S. The group said Mexico is receiving between 6 billion to 7 billion cubic feet per day (Bcf/d). The Columbia report said increased imports from the U.S. have come because Petróleos Mexicanos (Pemex), Mexico’s national oil company, cannot produce enough natural gas to keep pace with the country’s demand.

The demand for gas has primarily been from the power generation sector, as demand for electricity across Mexico has increased dramatically. The country’s national energy ministry, known as SENER, said more than 60% of Mexico’s electric capacity additions over the past several years have been natural gas–fired power plants, a trend expected to continue through this decade.

Veronica Irastorza, senior managing director for FTI Consulting, told POWER, “Mexico relies heavily on natural gas as its primary fuel source for electricity generation, accounting for nearly half of its total energy mix. It’s a vital component for numerous industrial operations [iron, steel, glass, and petrochemicals to name a few]. Despite a modest uptick in local production in 2022 following a period of decline, Mexico still imports mostly from the U.S. around 90% of its natural gas [or 70% if we include Pemex’s reinjections and flaring]. U.S. natural gas exports to Mexico will continue to grow over the coming decade.”

Irastorza said, “Thanks to the shale gas revolution and a robust market, the U.S. has enjoyed some of the most competitive natural gas prices in the world for years, benefiting the whole region, including Mexico. Over the past five years, pipeline infrastructure facilitating the transportation of U.S. gas to Mexico has doubled. In the next few years, the Mexican government expects to add about 6,000 MW of combined cycles that will use natural gas. In addition, several companies are developing [LNG] export projects in Mexico to export U.S. gas to Europe and Asia. Two of these plants are already under construction [New Fortress in Tamaulipas and Sempra’s Costa Azul in Baja]. A third one, Saguardo Energia, is also moving forward.”

1. The 766-MW Topolobampo III power plant entered service earlier this year. It features two 7HA.01 gas turbines from GE Vernova. The plant also is capable of burning hydrogen mixed with natural gas. Courtesy: GE Vernova

Among the largest gas-fired plants to come online recently is Iberdrola’s Topolobampo III plant (Figure 1), which uses GE Vernova’s 7HA.01 gas turbine technology, along with GE Vernova’s extended scope portfolio for greater efficiency. Topolobampo III, a 766-MW facility in the Choacahui municipality of Ahome in Sinaloa state, is the first in Mexico powered by the 7HA.01 turbine. It is supplied by the nearby Topolobampo natural gas pipeline.

Topolobampo III and other new gas-fired facilities in Mexico are being built even as the country increases its generation capacity from renewable energy. The International Energy Agency (IEA) recently said the country’s population is expected to grow from about 127 million today, to more than 150 million by 2050. The IEA said Mexico’s domestic production of natural gas has risen the past few years, as have its imports of U.S. gas. Government officials have said the gas plants and their baseload power production provide support for the country’s plan to more than double renewable energy generation capacity (solar and wind) from 15 GW to 40 GW by 2030.

Topolobampo III entered commercial operation in January of this year. Iberdrola was awarded the contract to build and operate the power plant in March 2017. “Iberdrola, as a global renewable energy leader, has always been working on more sustainable power generation with a focus on investing in a portfolio of renewable energy, supported by efficient gas power,” said Enrique Alba, CEO of Iberdrola Mexico. “Flexibility is essential for incorporating renewable energy sources into the grid like wind and solar power and GE Vernova’s H-Class equipment, at the heart of our Topolobampo III power plant, is crucial to support the growth of renewables power generation in Mexico. We are proud to celebrate this milestone project with GE Vernova. It further strengthens our longstanding relationship with a player which has always provided us with both the most reliable technology and excellent service across the past 23 years.”

The Topolobampo III power plant uses two of GE Vernova’s 7HA.01 gas turbines, a D650 steam turbine, three H53 generators, and advanced plant control systems with GE Vernova’s integrated Mark* VIe Distributed Control System (DCS), offering the possibility to use real-time data to deliver better outcomes supporting stable and efficient operations. The package is aimed to help Iberdrola improve asset visibility, reliability, and availability while reducing operating and maintenance costs.

The plant’s two heat recovery steam generators (HRSGs) were supplied by CERREY, GE Vernova’s local HRSG technology licensee. The plant also features a custom-designed soundproof genset with an integrated control cabinet, which helps meet the unique requirements of the power plant, as Topolobambo III contains special loads that necessitate continuous power to ensure optimal operations. For example, components such as lubrication pumps and cooling units must always remain functional, enabling the entire system to be shut down safely in the event of a power outage. The genset helps to facilitate this operation, and its automation allows for the integration of external automatic transfer switches, as well as other switches, to ensure adherence to the start-up and stop sequence.

“In Mexico, GE Vernova continues to support the progress of the country’s energy goals, working alongside our long-term customer Iberdrola. As the demand for electricity in Mexico continues to grow at a rapid pace, our HA technology, extended scope products, and advanced digital capabilities are helping to transform the way future demands are met by delivering more reliable, efficient, and flexible power to the country,” said Dave Ross, president and CEO for GE Vernova’s Gas Power business in the Americas. “We are proud to be part of this exciting project, which marks the first order for our 7HA.01 technology in Mexico. The 7HA gas turbine at its core was engineered from the ground up to be extremely efficient and flexible to help lower emissions and meet fluctuating demand. We expect continued efficiency gains in the years to come.”

GE Vernova officials said the company has invested almost $2 billion in HA technology development “to provide a combination of the highest efficiency and superior operational flexibility.” The company said the 7HA.01 can also start and provide full power in less than 10 minutes, giving added flexibility to support changing grid demand. In addition, it has the capability to burn hydrogen when blended with natural gas. Engineering support for the project was provided by GEIQ, GE Vernova’s advanced engineering center in Queretaro, Mexico, where local engineers supported the commissioning of the plant, its entrance into service, and will provide aftermarket operations.

Jose Alberro, senior managing director for FTI Consulting, said, “Mexico had an important energy reform in 2013 that opened generation and retail electricity markets to competition and set the stage for a wholesale electricity market, while keeping the transmission and distribution networks in the hands of the government-owned national utility, Comision Federal de Electricidad [CFE]. After his election in 2018, President Andres Manuel Lopez Obrador decided to increase CFE’s share of generating capacity. To that effect, CFE acquired privately owned generating plants and announced that it would invest in an additional 6,300 MW, further increasing the demand for natural gas by about 5%. The plants are already contracted and scheduled to come online in the next few years.”

Some energy analysts have been critical of Mexico’s increased reliance on natural gas. Rinaldo Brutoco, the founding president and CEO of World Business Academy, told POWER: “Mexico is making a critical miscalculation in its energy strategy by significantly increasing its reliance on imported natural gas from the U.S., which for electricity production has grown from 10% to about 45% of its energy mix since 2000. At the same time, tragically, there has been virtually no growth in renewable energy sources since 2014. This strategic direction, while seemingly beneficial in the short term, poses substantial medium- and long-term risks.” Brutoco said those risks include exacerbating climate change, and it “undermines Mexico’s potential to lead in climate resilience.” Brutoco said continuing to import natural gas will “divert crucial financial resources away from vital investments in green energy alternatives within Mexico, essential for sustainable economic development and energy independence.”

Brutoco added, “By continuing to expand its natural gas infrastructure, Mexico risks falling behind in the global transition toward green technologies. This could hinder the development of domestic markets for innovative green technologies and impair Mexico’s ability to compete internationally in the burgeoning sustainable technology sector.” Brutoco said, “The prudent path for Mexico would involve pioneering developments in fuel-assisted microgrids that utilize a majority of locally sourced renewable energy [such as solar, wind, and hydro].”

Brutoco told POWER, “These microgrids would be interconnected, supporting each other without the need for extensive high-power transmission lines. On days when renewable resources are insufficient, onsite fuel cells using green hydrogen could provide the necessary power, ensuring a reliable energy supply. Continuing to build dependence on natural gas is both short-sighted in the face of accelerating climate change and destined to leave Mexico at a disadvantage compared to nations transitioning to more sustainable, less-costly, and exportable green technologies. Ultimately, if Mexico does not redirect its focus toward more sustainable energy solutions such as China, the U.S., European, and Asian countries are doing, it will find itself increasingly struggling to compete on the world stage.”

Other analysts said Mexico needs to ensure that bringing more power generation online must be supported by flexible technologies, both for electricity transmission and distribution, and for market applications. Lisa Henneberry, a partner with Crowell & Moring, an international law firm headquartered in Washington, D.C., told POWER: “Mexico has long been a heavy importer of U.S. natural gas for power generation, in part due to Mexican constitutional restrictions [since liberalized] that made it challenging for them to fully commercialize their domestic natural gas resources. Market liberalization led to quite a bit of investment in additional cross-border pipeline capacity that was designed to enable the development of additional power generation, in tandem with the ability to secure gas supply on more competitive terms by contracting with U.S. suppliers, which creates opportunities for meaningful demand growth for U.S. gas in Mexico.”

Henneberry said, “One notable caveat here as it relates to gas for power generation [whether pipeline gas or LNG] is about the amount of flex [or swing rights] and specifically how to manage the variability of gas demand for power generation [which varies based on dispatch of the generator] versus a gas producer/supplier’s need to ensure that what they are committing to make available is actually consumed or paid for, so there are lots of timing considerations and, of course, a commercial balance to be struck there—especially once the gas enters the systems into a market that is yet sufficiently liquid to allow the types of resale options one might have in the U.S.”

Henneberry continued, “I would argue that, at this stage of Mexico’s energy market evolution, when taking into account myriad evolving technologies out there, maintaining optimum flexibility should be the focal point. To elaborate: Additional electricity supply is needed and, beyond development of generating facilities [be they conventional or renewable], requires transmission infrastructure to ensure electricity not only gets to where it needs to go, but also ensure grid stability, address potential transmission issues, and also be able to handle an influx of production that is not necessarily flat. [Case in point, solar generation peaks when the sun is shining, wind generation when the wind is blowing, neither of which is ‘flat’ or ‘baseload.’] Mexico enacted a storage policy a few years ago designed to address this issue in part, largely focused around LNG, but also relevant to pipeline gas, when/if fully implemented.”

Said Henneberry, “Electric transmission can be difficult and expensive pretty much anywhere, and the terrain in Mexico often makes it a complicated undertaking. There are all kinds of technologies out there, both established and emerging, designed to address some of these issues, be it hydrogen fuel cells that run on natural gas, electricity battery storage systems that discharge electricity or thermal energy for industrial use, turbines that can run on hydrogen [such as the Topolobampo III Plant, which has 50% hydrogen capability], ammonia, or natural gas as direct fuel sources, and many others.”

Henneberry said gas-fired generation “is necessary for energy security” for Mexico, at least in the near- to mid-term, and “it is also necessary for transition purposes over the longer term. But, it is also critical to incentivize these new technologies to be commercialized so as to enable innovative solutions to be implemented—be it in the form of microgrids, storage, dual-fuel capabilities, so as to ultimately reduce the cost of electricity to industrial and other end consumers. Ultimately, that means striking a balance among the needs of today for reliable supply, investment in enabling emerging technology, and flexibility for adaptation to those technologies.” Henneberry said the flexibility could be “power plants that can operate with natural gas or hydrogen or ammonia as a direct fuel source, much as we saw with diesel and natural gas back in the day, or some other solution.”

—Darrell Proctor is a senior associate editor for POWER.