Marco Navarro Steck

Ensenada: Building up Its Energy Infrastructure

Wed, 02/19/2014 - 14:22

“The last three to five years have seen a tendency away from globalization and toward a regional manufacturing approach,” says Robert Gallant, Vice-President of Industrial Development of the Ensenada Economic Promotion Commission (COPREEN). COPREEN has high hopes of bringing industrial investment to the Baja California region, given the competitive advantages it sees increasing the region’s appeal. Mexico is considered to be a low-cost manufacturing location, due to its proximity to the US and its infrastructure favoring supply chain logistics. According to Gallant, Ensenada combines these advantages with all the benefits of a border city without the usual problems such a location implies. The port of Ensenada is Mexico’s most northern and has the capability to transport containerized and non-containerized material, which is crucial when moving merchandise and inputs for the Mexican energy sector. COPREEN proposes that, by taking advantage of the research base in Ensenada, new technologies could be developed for energy efficiency and smart grids; the municipality could become an example in Mexico.The region is also aiming to combine the capabilities of Ensenada, Tijuana, Rosarito, Tecate, and Mexicali as municipalities by focusing on the main strengths of each one of them. “Baja California has 1,600km of coastline in total and we have a lot of land. Ensenada is the largest municipality in Mexico with 52,000km2,” says Gallant. “There is a lot of opportunity and hunger for new economic development and job opportunities.” The region is not saturated and these cities are connected by train in order to complement each other logistically. “We have the largest share of scientists per capita in Mexico,” says Marco Navarro Steck, President of COPREEN. “The region can complement industrial activity with technological research and development.” In addition, the Baja California III combined cycle power plant will aid Ensenada on its journey toward energy efficiency. The National Energy Strategy of 2012-2026 specifically mentions this project since, according to Gallant, the previous administration was not so supportive of it and the former municipal president would not allow the plant to progress during his term. With new federal and local governments, COPREEN and its members have been pushing for the plant to be built as fast as possible. However, a key aspect that is yet to be defined is the agreement between the natural gas supplier and CFE which will determine the cost of energy. The closer natural prices in Mexico get to those across the border, the higher the benefits will be for Baja California and for the new power plants. For example, COPREEN points to a plant established in Rosarito that is stuck paying US$9 per million Btu for natural gas due to a longterm contract signed before prices dropped. “We must make sure that this plant negotiates a competitive price at which it can acquire gas, which will pass on the low cost of generation to the consumer,” comments Gallant. “This would have a huge benefit for Ensenada and for all of Baja California.”

Baja California has the highest concentration of foreign investment for industrial activities in all of Mexico. However, most of this industry is related to light-assembly type operations, which are typically small energy consumers. If more competitive pricing structures are established in the region, more energy and capital-intensive industries would be attracted to this manufacturing hub, allowing the state to create better-paid and more technical jobs. Romero also believes the state, which currently functions under a separate island electrical grid, could be connected to the rest of Mexico in the next few years, with the installation of transmission lines with a capacity that would range from 150MW to 300MW. “This would allow Baja California togenerate and export more electricity to the rest of Mexico and the US,” comments Romero.

Within this context, the potential of renewable energies to create new economic activity in Baja California goes hand by hand with the growth of energy demand. “By adding more generation, our excess capacity margin will increase but we have to link this energy availability to the manufacturing sector, thus lowering the cost of electricity,” says Romero. In essence, the energy supply for companies must be ensured, a real concern given the experience of the Mexican grid with critical alerts. However, as opposed to the central system, the natural gas infrastructure of Baja California is only being used at 38% of its full capacity, meaning that the region has still potential for growth in the energy sector. COPREEN is proposing to Baja California that this excess capacity be used to reach out to companies that consume a lot of natural gas. They could establish themselves in Ensenada and promote the economic development of the region. “A new era of manufacturing could happen due to cheap gas prices,” says Romero. For renewable energies, Baja California offers important opportunities due to the high costs that CFE has to cover when generating power due to the inefficiencies of its transmission and distribution infrastructure. “It is possible to avoid such inefficiencies by attracting the solar sector and taking advantage of Baja California having 295 clear days on average per year,” comments Romero. “We should be promoting the use of solar panels at a residential and industrial level all over the state. This would allow us to experience the full economic advantages they offer.”