Data Center Boom Strains Mexico’s Power Grid

Demand for data centers in Mexico is only expected to grow, driven by AI and nearshoring. This market opportunity, however, faces a fundamental obstacle: the current capacity and development of the national electrical infrastructure.

Projections show that energy demand from data centers could reach 3GW by 2030, equivalent to 6% of Mexico's total peak electricity demand recorded in 2023, reports Wired.

The International Energy Agency (IEA) projects that worldwide electricity demand from data centers will more than double in the next five years, with the United States being a primary driver. Mexico's geographical proximity and economic integration make it a strategic destination to absorb a portion of this demand.

This trend has already attracted hyperscale operators such as Amazon Web Services (AWS), Google, and Microsoft. These corporations have established operations in the country to serve both internal digitalization and US demand. Estimates from McKinsey indicate that, in addition to a baseline growth of 1.5GW from the local market, Mexico has the potential to capture another 1.5GW derived from the US market.

The national electrical system, however, operates with significant limitations. Rosanety Barrios, an independent energy consultant, tells Wired that there is no certainty for industries, including data centers, to secure the necessary power supply. At times during 2023, the system operated with reserves below 3%, a level considered critical.

The root of the problem lies in a lag in investment in transmission and distribution infrastructure, which are state responsibilities. Data from the Mexican Institute for Competitiveness (IMCO) shows that transmission lines grew 0.1% between 2022 and 2023, while electricity demand increased 3.5% in the same period.

Private Investment 

Facing the deficit in public infrastructure, the private sector has begun to finance and develop its own energy solutions. According to Adriana Rivera, Executive Director, Mexican Association of Data Centers (MEXDC), hyperscale data center companies invest an additional 35% to build electrical infrastructure that ensures their connection to the grid.

Microsoft, for example, invested in a distribution substation in Queretaro, while CloudHQ, a global sector provider, is building a 400kV transmission line in the same state. Queretaro is becoming a hub for the data center industry. According to MEXDC, half of all data center projects looking to establish in Mexico choose this entity, which now allocates 15% of data centers nationwide. Queretaro hosts an installed capacity of 200MW. 

Marco Del Prete, Minister of Sustainable Development of Queretaro, expects this figure to double. Wired projects that by 2030, Queretaro could concentrate 69% of the industry's operational megawatts in the country, which will intensify pressure on the local power grid.

Future Outlook and Energy Dependence

To meet rising demand, the federal government plans to add 2.5GW to the grid this year, with a target of 5.7GW by 2027, primarily through combined-cycle plants that use natural gas, reports Wired. 

This strategy, however, increases Mexico's dependence on natural gas imported from the United States. While analysts agree the risk is not immediate, it is a strategic factor to consider in long-term energy planning and in the viability of sustaining the growth of high-consumption industries like the data center sector.