Abstract
The Mexico Energy Efficiency in Public Facilities (PRESEMEH) project, which was approved in 2016 and closed in 2023, promoted the efficient use of energy in Mexican municipalities and hospitals through investments in energy-efficiency (EE) investments. These included investments in energy-efficient street lighting in 20 municipalities across nine states (Campeche, Guanajuato, Hidalgo, Oaxaca, Quintana Roo, Sinaloa, Sonora, Veracruz, Zacatecas) and the Federal District (Mexico City). PRESEMEH also installed energy efficient indoor lighting, energy efficient air conditioning and the installation of solar rooftop photovoltaic (PV) systems in 17 hospitals in 10 states (Baja California, Colima, Guanajuato, Guerrero, Hidalgo, Jalisco, Michoacan, Oaxaca, Sinaloa and Tabasco) and Mexico City. The project successfully generated energy savings, greenhouse gas reductions, and lower energy expenditures for cash-strapped municipalities and hospitals. It helped modernize Mexico¡¯s infrastructure, and enhanced well-being, with added security brought about by better quality, increased street lighting in communities, and improved indoor comfort and working conditions in hospitals with better lighting and thermal improvements. Critically, through these achievements, it helped demonstrate the feasibility and impact of investments in energy efficiency and put in place a new sustainable energy-efficiency financing mechanism and implementation model.
Challenge
With increasing urbanization, economic growth in Mexico is substantially concentrated in urban areas. Significant ongoing demographic and economic growth is expected to put further pressure on municipalities to expand and improve public services, where most municipalities are already facing budgetary constraints. Based on assessments of untapped energy-savings opportunities, energy efficiency is a cost-effective way to manage energy consumption and reduce operational expenditures, as well as to help achieve greenhouse gas emission reduction goals. EE projects had the potential to free up a portion of municipal and other public resources for other priorities, while helping modernize key energy-consuming public infrastructure. City governments are in a unique position to lead the transition to more energy-efficient cities, but they face several barriers, including constrained budgets as well as limited borrowing and technical capacity.
Similarly, assessments indicate that facilities in Mexico¡¯s healthcare sector¡ªan important public sector with high energy consumption¡ªalso have a significant energy-efficiency potential, but face significant budgetary pressures.
Approach
ľ¹ÏÓ°Ôº Group¡¯s publicly financed Mexico Energy Efficiency in Public Facilities project was designed to address challenges to the implementation of energy-efficiency initiatives in public facilities and at the municipal level, as well as, subsequently, in health facilities. The project helped demonstrate the feasibility and impact of EE investments.
PRESEMEH was led by , Mexico¡¯s Ministry of Energy, initially as part of a strategy to steer the country toward greater energy efficiency, seeking to tap into the energy savings potential in municipalities, while helping them improve the quality of key public sector services and transition to more energy-efficient cities, without straining their often very limited budgets. SENER collaborated with the World Bank and its to conduct city energy diagnostics helping cities identify areas of opportunity, evaluate improvement and cost-saving potential, and prioritize sectors and actions for intervention.
The Energy Services Agreement (ESA), an innovative mechanism to finance EE investments in public facilities and municipalities, was introduced through the PRESEMEH. Through the ESA, a beneficiary¡ªin the case of this project a municipality or hospital¡ªreceives the benefit of an energy efficient investment without paying the upfront cost, and then repays the energy service (which in the case of this project, essentially represented the repayment of a share of the energy efficiency investment cost) with the achieved energy savings through the electricity bill over time. This approach allowed municipalities to address the difficulty that many of them face in accessing affordable financing without generating debt. It also helped hospitals that had suffered from neglected infrastructure and stretched budgets.
The project established a model that could work across the country and beyond the project¡¯s own timeframe. Among the most significant achievements are the effective operationalization of the revolving fund for financing EE investments and the energy service payment discipline exhibited by the beneficiaries, in a success story that could serve as an example for other projects.
Results
The PRESEMEH model enabled the implementation of EE investments in municipalities and in public facilities. The project demonstrated a sustainable new operational and financing mechanism, and helped to strengthen the institutional framework, increase transparency, and enhance procurement processes. It enabled municipalities and institutions to design and implement financial structures that verify repayments through energy savings and create trust in EE initiatives. It built capacity and established institutional arrangements with different entities, including SENER (the Ministry of Energy), FIDE (the operator of the project), CFE (the electric utility), municipalities, and hospitals.
The project also contributed to reducing inequality by bringing street lighting to communities that had previously been left behind. A total of 1.7 million citizens benefited from improved street lighting as inefficient, low-quality streetlights were replaced by new, energy-efficient streetlights, which also enabled increased economic activity. Energy cost savings enabled municipalities to free up scarce budget resources to fund other priorities.
The project has had a positive impact on women and children in communities where street lighting was installed. The perception of security is difficult to measure and attribute, but female beneficiaries said they felt safer going out and running errands when it was dark; and both men and women reported there had been fewer¡ªor no¡ªincidents related to insecurity or aggression against women.
PRESEMEH supported 20 municipalities located in nine states (Campeche, Guanajuato, Hidalgo, Oaxaca, Quintana Roo, Sinaloa, Sonora, Veracruz, Zacatecas) and Mexico City in the installation of efficient street lights. These are predicted to achieve energy savings of over 575,000 MWh over the lifetime of the installations, with emissions reductions ultimately exceeding 253,000 tCO2.
In the case of hospitals, the project benefited 17 health facilities in 10 states (Baja California, Colima, Guanajuato, Guerrero, Hidalgo, Jalisco, Michoacan, Oaxaca, Sinaloa and Tabasco) and Mexico City, improving energy efficiency and energy security through the installation of efficient lighting, air conditioning, and photovoltaic (PV) systems interconnected to the electricity grid. It achieved 20 percent in potential savings for overall health sector interventions. Over 11,000 doctors and nurses were provided with better lighting to carry out their consultations, benefiting 1.1 million patients per year.
In addition, the project supported important measures to enhance Mexico¡¯s enabling environment for energy efficiency. The expected implementation of updated energy performance standards based on assessments and capacity developed under the project will bring energy savings to households and communities across the country, with the potential to lower operational costs and to redirect these expenditures to meet other needs. Furthermore, the experience and knowledge acquired while delivering the investments also contributed to strengthening the EE enabling environment, by creating evidence-based cases and learnings.
Beneficiaries Quotes
¡°People can go out with more confidence in the streets; they can stay out later. People can go out to shop at a store with a sense of security¡± (Agust¨ªn Altamirano Garc¨ªa, Merchant, Minatitl¨¢n, Veracruz)
¡°It¡¯s something historic because for years, we lived in darkness. But in the past two years, with these new streetlights, the number of accidents, home burglaries and assaults in the city has gone down¡± (Jose Rivera Perez, Resident, Nanchital, Veracruz)
¡°As a municipality, as a country ¨C I believe we should focus more on this type of project [PRESEMEH], which will reduce costs, lower greenhouse gas emission and help protect the environment¡± (Israel Felix Soto, Municipal President, Minera; de la Reforma, Hidalgo)
World Bank Contribution
The project was made possible through an International Bank for Reconstruction and Development (IBRD) loan of $50 million. ľ¹ÏÓ°Ôº also contributed significant technical capacity and advisory throughout the preparation and implementation of the project, especially in terms of setting up the project¡¯s innovative implementation and financing model for energy efficiency investments. ľ¹ÏÓ°Ôº also enabled the mobilization of climate finance ($5.79 million grant) from the Global Environment Facility (GEF) to fund a ¡°municipal energy efficiency contingency facility¡± to backstop the potential default of municipalities regarding payments agreed under respective Energy Services Agreements.
Partnerships
While the project focused on the public sector, it also achieved positive impacts linked to private sector engagement. It demonstrated a financing mechanism for municipal EE investments, and gave private sector partners experience in responding to competitive procurement processes, aligned with World Bank Group standards. The project also incentivized local production of some of the EE technologies involved¡ªnotably, some of the streetlights were manufactured in Mexico.
Looking Ahead
Even after closing, the project continues to have an impact, enabling more energy efficiency investments in public facilities through the energy service payments collected with the revolving fund mechanism. Discussions are underway with Mexico¡¯s new administration on how to build on the PRESEMEH experience. These conversations are exploring a new phase focused on scaling up energy efficiency, deepening the impact on energy justice for vulnerable communities, and enhancing well-being in key public facilities like hospitals and schools, all while reinforcing Mexico's climate goals.