While it is hard to know for sure what is causing the power shortages, it is common practice for the National Center for Energy Control to disconnect neighborhoods from the electric network to prevent the system from failing, says Flores. They do this to avoid bigger and harder-to-fix problems, Barrios says.

Citizens dealing with power outages are scrambling to adjust to the disruption and danger. Luis Alejandro Calderón, an American citizen who lives in Nuevo Laredo, Tamaulipas, and his wife had to sleep on their balcony because they didn’t have electricity, and the heat inside was unbearable. The power shortage lasted more than 40 hours, so they stayed in a hotel in another area the next night, and a lot of their food went bad.

“We have never had to deal with anything like this,” he said. “When there is a power cut, electricity is usually back in 15 minutes.”

Mexico typically surpasses the peak energy demand from the previous year in July, but this year it already happened, leaving many worried that the coming weeks could hold even worse blackouts. “This is a product of the climate emergency, and that is not the government’s responsibility, but it is their responsibility to build an electric system that is prepared for this,” Barrios said.

Eoin Treacy's view

Hot summers expose the biggest issue for electricity utilities. Demand is increasing faster than they are building new supply. Population growth, improving economic activity and rising living standards contribute to demand growth. The trend of EV demand growth and air conditioning demand are boosting the need for more electricity generation and transmission infrastructure everywhere.

Much of the foreign direct investment into Mexico has been focused on utilities for this reason. That’s a private capital market because Mexico does not have listed utilities. This is a global issue. Many utility shares have been ranging for several years as valuations are stretched and their dividends have not kept pace with interest rates. The infrastructure build required to meet demand is a potential source of inflationary pressures because it will continue to put upward pressure on electricity prices.

In the USA American Electric Power has been investing heavily in additional supply and just brought a new nuclear plant online. The share is firming within its three-year range.

NextEra Energy prioritises investment in new supply over profitability. That also helps to highlight how exposed the sector is to interest rates. When yields compress that is likely to be a bullish catalyst for the sector.