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Analysis

Mexicali: A Manufacturing Heaven for Renewable Energies

Wed, 02/19/2014 - 17:41

Mexicali, the capital of Baja California, is home to 160 foreign companies or maquiladoras that have made the city a true manufacturing hub. It has established a good reputation for itself across a number of sectors: electronics, aerospace, automotive and medical products. It is now looking to add one more sector to that list: renewable energy. Eugenio Lagarde, former President of the city’s Industrial Development Commission (CDI Mexicali), explains how the city’s demographic advantages have proven essential in capturing the imagination of investors. “We have a total population of 1 million, with more than 64% of it being under 34 years of age. Labor is currently our number one asset, mainly due to our educational system.” Mexicali has 12 universities, either private or public. This is on top of 40 technical trade schools that Lagarde says have been critical to provide the skillsets required by various industries. Lagarde now believes the city can combine its manufacturing appeal and its renewable energy potential into a strong combination.

Mexicali already has access to generating power through renewable opportunities through the 720MW Cerro Prieto Geothermal Facility, located south of the city. Electricity from this plant is exported to the US, mainly to Southern California. The reason that allows Mexicali to export energy to the US is because Baja California is the only state in Mexico that is not connected to the Mexican national grid, but to the neighboring grid in Southern California. “That gives us the opportunity to set up renewable energy projects in Mexico and hook them up to transmission lines that head into the US,” says Lagarde.

California’s aggressive renewable energy mandate states that by 2020, 33% of its energy needs have to be met by renewable energy. This represents a great opportunity for solar power because of Mexicali close geographic location. Near Mexicali in the US, Calexico and Imperial Valley have over 50 renewable energy projects in the works. Lagarde explains that two big solar parks, 110MW and 120MW respectively, are right next to the border. “The solar panels used in those projects are currently being produced in Europe and Asia, which makes them strong potential prospects for us. We are negotiating to have them manufactured in Mexico in a facility five minutes away from where they need to be installed,” he explains. This strategy is beginning to pay off dividends. In 2010, the first solar panel manufacturer arrived to Mexicali as SunPower set up shop in an old Mitsubishi facility and now has about 800 employees. Lagarde reveals that the two sides of the border are working on a joint strategy to offer manufacturing in Mexico and power generation in the US. “We have a couple of projects in the pipeline that will hopefully be confirmed in the near future.” The arrival of SunPower in 2010 was a big coup for the city as the company is among the top five solar manufacturers in the US. At the time, SunPower had two manufacturing facilities in Malaysia but due to growth in the American market and shipping costs, the company decided to set up operations in Mexico. “Mexicali was chosen because of the availability of skilled labor,” says Lagarde. On the other hand, the company did not want to go very deep into Mexican territory as it wanted to be within easy reach of San Diego in case of any technical problems. When there was an issue at SunPower’s manufacturing site in Malaysia, the distance meant it could take up to a week to get it fixed,” he explains.