Baja’s Energy Deficit May Block Future Investments
By Wendy Fry
Maquiladora industry experts worry that a lack of available energy could deter future investments in the Mexicali and Tijuana regions, after local natural gas supplies were disrupted in February, and the state scheduled blackouts last summer.
The deep freeze across the central U.S. sparked an unprecedented energy crisis on both sides of the border, dimming some 4 million homes in Texas, and knocking out service at about 800 manufacturing facilities in northern Mexico, including some in Baja California.
The blackouts caused losses of at least $2.7 billion in the six border states of northern Mexico, with 2,600 companies affected and almost 1.3 million direct workers, according to data from the National Council of the Maquiladora and Export Manufacturing Industry (Index).
As supplies were diverted east and to Mexico’s energy grid, some of the maquiladora industry in Tijuana was left without power, affecting some 300 businesses locally, according to the former president of the Association of Industrialists of the Otay Table (AIMO), Salvador Díaz González.
The cut in supply affected factories like the Hyundai plant in Tijuana and General Motors’ plant in the central city of Silao. Mexicali Index president Joaquín Jiménez Arriaga indicated it’s not a good way to do business.
“We are very concerned because there has not been investment in this problem in the state,” he said. “It has happened to us that in the summer seasons they ask companies to move their peak consumption hours and in that case we have to stagger the flow of production. There is a deficit and this is an inhibitor for any company to come to Mexicali.”
Those doing business or living in Baja California have become accustomed to power outages every summer. The state suffers at least a 480-megawatt energy deficit during the hot season, forcing blackouts in Mexicali when the weather can become dangerously hot – between 113 degrees and 120 degrees Fahrenheit.
Last summer, the power outages affected not only the delivery of electricity, but also the operation of the Río Colorado-Tijuana Aqueduct, which provides water to the coastal zone of Baja California.
It left some industrial parks in Mexicali and Tijuana considering ways to generate their own electricity to keep up production during the summer state-wide power outages, according to Carlos Higuera with the Tijuana EDC.
The situation also prompted Gov. Jaime Bonilla to propose a solar power generation project that he said would attract investments by having greater availability of energy and allow saving of between 20 and 30% in the cost of electricity for the state.
That plan apparently ran afoul of Mexico City, however, and no progress was made.
“Now it turns out that (Mexico City) is outraged because we are trying to generate energy when we have talked for months with the CFE (Comisión Federal de Electricidad or “CFE”) to connect us or do whatever is necessary for the state to connect to the national system. Sometimes we have to shout to call attention for them to turn around,” said Bonilla in August.
At a national level, Mexican President Andrés Manuel López Obrador seized upon the February crisis originating in Texas as an opportunity to argue for more energy independence for Mexico.
“When they had the issue of the freeze in Texas, it became clear that the energy policy in place in that state and other states in the American union doesn’t work well,” said López Obrador. “They paid an extra $28 billion in Texas because of the privatization of the electricity industry.”
It’s not just privatization and interconnectivity López Obrador appears to detest, but also clean energy.
The president has halted new renewable projects, mocked wind farms in La Rumorosa a s “fans” that blight the landscape, and poured money into state oil company Petroleos Mexicanos, including US$9 billion for construction of a new refinery. Last month, he pushed legislation that requires that the energy grid first take power from state-run plants — fueled mostly by crude oil and coal — before less expensive wind and solar energy.
In March 2021, the so-called “Electricity Reform” went into effect, modifying provisions that previously attracted national and foreign investment to Mexico’s energy generation market. (Comisión Federal de Electricidad or “CFE”) at the expense of private investments.
Besides changing grid dispatch rules to benefit power plants owned by CFE, t h e Electricity Reform also limits free competition and open access principles in the generation and commercialization of electricity, making generation permits subject to the planning criteria of the Mexican government.
Experts say much of the reform basically dismantles Mexico’s 2013 energy reforms, returning the country to a time when it was unable to meet the growing demand for electricity.
During the upcoming summer season, Baja California will have an energy deficit of at least 600 megawatts, according to state regulators.
Miriam Álvarez Hernández, director of the State Energy Commission (CEE), said that the National Energy Control Center (Cenace) foresees the provisional installation of more energy producing companies to meet the deficit and reduce the blackouts that usually occur during the hot season. They are discussing installing temporary substations and other measures to mitigate the problem.
She said last year only 8 of the 11 companies that obtained contracts to bridge the temporary energy gaps managed to get up and running in time to combat the annual energy shortage.
“They could not all be installed due to the lack of availability of natural gas to be able to generate energy in the combined cycle mode and that was because the locations they chose, and then they were unable to obtain another location in time,” said Álvarez.
The Cenace is planning to begin a campaign promoting reasonable energy uses among residents during this upcoming summer “in order to avoid blackouts.”
The campaign will not include asking residents or businesses to suspend the use of air conditioning because the hot weather months in Mexicali can become dangerous without their use, but regulators do plan on asking residents to avoid using washing machines, dish washers and other appliances during peak hours. Like last year, heavy use industries will likely also be asked to operate at limited capacity during shortages.
Unlike across the border in California, there are no programs in northern Baja California that encourage residents or businesses to install solar panels or consider switching to cleaner, less expensive types of energy generation.
For example, in order to meet their climate change goals, California has instituted a law requiring certain new construction to include solar panels to generate energy during peak seasons.
The California solar mandate is a new building code that requires new construction homes to have solar photovoltaic systems as an electricity source. This code, which went into effect on January 1, 2020, applies to both single-family homes and multi-family homes that are up to three stories high.
Last summer, Baja California’s electricity deficit required at least 15 companies to operate at reduced capacity during the summer months, including Honeywell, Toyota and Cemex.
One of the main issues in Baja California is the lack of available energy infrastructure. The state requires 3, 0 4 0 megawatts per year, but it only has access to 85.5% of that amount, much of which it only manages to collect by buying excess power from California. Baja California is not connected to Mexico’s national power grid but to California’s, making it “an energy island,” according to State Infrastructure Minister Karen Postlethwaite Montijo.
When California grapples with heat waves of its own, there is not as much excess energy to sell to Mexico. So, the National Energy Control Center (Cenace) has to ask industries with the highest energy consumption – like maquiladoras and the manufacturing industry – to stop production at peak hours, state officials said.
Many businesses and residents also have to go without water because the pumps that bring water from the Colorado River over the mountain ranges to coastal Baja are among the highest energy users in the state.
“When we lack energy, (Cenace) turns around and says to large consumers ‘I need you to reduce energy consumption because I have no energy,’ and one of the major consumers is the aqueduct,” explained state Water Minister Salomón Faz Apodaca. Mexicali INDEX president Jiménez Arriaga said it’s not enough for the state to just depend on companies to adjust.
“We feel that there must be a formal initiative of the government to invest in Baja California in a gas, wind or solar plant,” he said.