Mexico’s renewable energy sector is defined by a gap between physical potential and practical delivery. The country has strong solar radiation, productive wind corridors, established hydroelectric stations and one of the world’s larger geothermal industries. It also has a large manufacturing economy whose electricity demand is rising. However, renewable development has not always advanced at the speed suggested by these advantages.
By the end of 2025, Mexico had approximately 35.2 gigawatts of renewable power capacity. Solar and hydropower each accounted for close to 13 gigawatts, while wind contributed about 7.5 gigawatts. Geothermal plants, bioenergy facilities and smaller renewable technologies completed a relatively diverse portfolio.
Renewables represented less than 30% of national generating capacity, leaving natural gas as the central fuel in the Mexican electricity system. The next stage of development will therefore depend on more than constructing generating plants. Mexico must also expand transmission, provide workable routes for private investment and connect renewable resources with industrial and urban demand.
Solar Power Moves to the Center of Mexico’s Expansion
Solar energy has become Mexico’s largest source of renewable capacity growth. Installed solar capacity increased from less than 3 gigawatts in 2018 to almost 13 gigawatts by the end of 2025. This expansion has included large utility-scale plants, commercial installations and residential distributed generation.
Northern Mexico offers some of the country’s strongest solar conditions. Sonora, Chihuahua, Coahuila and Baja California have large areas with high irradiation and relatively low population density. These conditions support large photovoltaic developments, although distance from major consumption centers can increase the need for new transmission lines.
The Puerto Peñasco solar complex in Sonora represents the state-led side of this expansion. The Comisión Federal de Electricidad is developing the project in stages, with a planned final capacity of around 1,000 megawatts. Its location also gives it a strategic role in strengthening electricity supply in northwestern Mexico and supporting the integration of the Baja California system.
Smaller solar systems are becoming important for a different reason. Rooftop installations allow businesses and households to reduce purchases from the grid and can be deployed more quickly than utility-scale plants. Warehouses, factories, shopping centers and agricultural operations are particularly suitable users because much of their electricity demand occurs during daylight hours.
Distributed solar cannot replace investment in central generation and networks, but it can reduce pressure on local infrastructure. It may also help extend reliable electricity access in remote communities where conventional grid expansion is costly.
Mexico’s Wind Industry Has Resources but Needs New Momentum
Mexico’s strongest wind development has historically been concentrated in the Isthmus of Tehuantepec in Oaxaca. The narrow geography between the Gulf of Mexico and the Pacific Ocean produces powerful and consistent winds, supporting one of Latin America’s most important clusters of wind farms.
Wind generation has since expanded into Tamaulipas, Nuevo León, Coahuila, Puebla, Yucatán and other states. Northern and northeastern wind resources are particularly relevant to industrial development because they are closer to manufacturing centers and cross-border supply chains.
Capacity growth has nevertheless slowed compared with the rapid expansion of the late 2010s. Regulatory uncertainty, limited transmission access and delays in permits reduced the number of projects reaching construction. Some developments also faced opposition connected to land agreements, consultation processes and the distribution of economic benefits.
These issues are especially important in Oaxaca, where wind projects occupy land held under communal and Indigenous systems. A technically strong project can still be delayed when developers fail to build durable local agreements. Future investment will require clearer consultation, transparent compensation and greater attention to community participation.
Mexico’s wind industry therefore has two separate tasks. It must restart the pipeline of large projects while improving the way developments interact with the regions where they are built.
Hydropower and Geothermal Energy Provide Valuable Stability
Solar and wind attract most new investment, but Mexico’s older renewable technologies remain essential to system reliability.
Hydropower provides approximately 12.8 gigawatts of capacity. Large stations are concentrated in southern states such as Chiapas, where the Grijalva River system supports several major dams. Hydroelectric plants can respond more flexibly to changes in demand than variable solar and wind facilities, making them useful for balancing the grid.
Their output is not guaranteed, however. Drought, reservoir conditions and competing water requirements can reduce generation. Many facilities are also decades old. Modernizing turbines and electrical equipment may increase output without requiring entirely new dams, while improved water management can help preserve their value during dry periods.
Geothermal energy plays a smaller but distinctive role. Mexico has around one gigawatt of geothermal capacity, supported by volcanic and tectonic conditions across several regions. The Cerro Prieto field in Baja California is the country’s best-known geothermal development, while other operations include Los Azufres in Michoacán and Los Humeros in Puebla.
Unlike solar and wind, geothermal plants can generate continuously. Development is slower because exploration and drilling involve high initial costs and uncertain underground conditions. Even so, geothermal power can provide firm renewable electricity that reduces the need for fossil-fuel backup.
A New Public-Private Model Reshapes Renewable Investment
Mexico’s renewable investment environment is changing again under the national electricity expansion strategy for 2025–2030.
The government intends to add around 29 gigawatts of generating capacity through a combination of CFE projects and private development. CFE is expected to retain a dominant position in electricity generation, while private companies participate through long-term production contracts, mixed-investment structures, self-supply projects and sales into the wholesale electricity market.
In June 2026, authorities advanced 37 mixed electricity projects with a combined planned capacity of approximately 7.4 gigawatts. More than 6.7 gigawatts of the portfolio was assigned to solar projects, with the remainder coming from wind. The selected developments are concentrated in areas including Sonora, Tamaulipas, Nuevo León, Baja California Sur and the Yucatán Peninsula.
The structure is designed to make private financing compatible with continued state control. Under the proposed arrangements, developers provide capital and operate projects, while CFE purchases a large share of their output through long-term contracts. This can improve project bankability because investors have a defined buyer for the electricity.
Permits and financing are only the first stage. The new plants must obtain workable interconnection points, complete environmental and social reviews, and reach construction without major delays. Mexico has previously accumulated large project pipelines that could not advance because grid access and regulatory approval did not arrive together.
Transmission Will Determine the Pace of the Transition
Mexico’s best renewable resources are not always located near its largest electricity users. Solar generation is strongest in northern deserts, wind resources are spread across several coastal and inland corridors, and major hydropower stations are concentrated in the south. Industrial electricity demand is growing around Monterrey, the Bajío, the northern border and other manufacturing regions.
This geography makes transmission the decisive link between renewable potential and economic use.
The national expansion program includes 158 transmission projects and thousands of distribution and electrification works. These investments are intended to increase transfer capacity, remove regional bottlenecks and prepare the system for higher electricity demand.
Storage is also moving from a secondary technology to a system requirement. Batteries can store surplus solar output during the day, release electricity during evening demand and provide services that stabilize grid frequency. They are particularly valuable in isolated or weakly connected systems such as Baja California Sur and parts of the Yucatán Peninsula.
Mexico must also address the reliability needs of manufacturers. Companies relocating or expanding production in the country generally require continuous electricity, not only access to low-cost renewable capacity when weather conditions are favorable. Renewable projects, storage, transmission and firm generation must therefore be planned as one system.
Mexico’s Renewable Opportunity Depends on Delivery
Mexico already possesses a substantial renewable industry. Its challenge is no longer proving that solar panels, wind farms, dams or geothermal fields can generate electricity. The challenge is converting a large resource base into an expanding, reliable national system.
The new investment cycle could restore project development after several years of uncertainty. Solar is positioned to deliver the largest capacity increase, while wind can regain importance if transmission and permitting improve. Hydropower and geothermal generation will continue to provide diversity and system support.
The outcome will depend on whether generation projects, storage facilities and network upgrades proceed together. Without that coordination, Mexico may add renewable capacity while retaining regional congestion and dependence on natural gas. With it, renewable electricity could become an important advantage for domestic industry, energy security and long-term economic growth.
