Thorsten Burandt, Konstantine Löffler, Pau-yu Oei, Luis Sarmiento

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This paper uses numerical techno-economic modeling to analyze the effect of current national renewable targets and climate goals on the cost and structural composition of the Mexican energy system. For this, we construct a scenario analysis to compare current policies with two alternative states of the world: one without climate policies and one attaining full decarbonization. Furthermore, an additional iterative routine allows us to estimate the cost-optimal share of renewable technologies in the energy sector and the effect that deviating from this share has on total discounted system costs, emissions, and the structure of the energy mix. In general, the model results exhibit three key insights: (1) A marked dependence of the energy system on photovoltaics and natural gas; (2) The 2050 cost-optimal share of renewables for the production of electricity, transportation, and industrial heating is respectively 75\%, 90\%, and 5\%; and (3) As national renewable targets for the power sector are lower than the cost-optimal share of renewables, equivalent to the shares in a scenario without climate policies, and completely disconnected from national climate goals, these should be modified.