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News Article

Mexico Could Have Bright Future as Solar Manufacturing Hub

By Pedro Alcalá | Tue, 03/08/2022 - 19:16

As Mexico continues to enjoy the benefits of a nearshoring boom that is restructuring investments across all the country’s industries, the possibility of developing globally competitive manufacturing capabilities for solar energy components becomes increasingly viable, according to energy sector experts.

Javier Romero, General Manager, EcoValue, established the groundwork for this positive perspective by claiming that “the size of the economy and Mexico's place within the sunbelt are some of the country's competitive advantages for solar manufacturing.” In Romero’s view, these conditions should be enough to clarify why the establishment of a manufacturing hub in Mexico is a worthy investment. The advantages extend to both the manufacturing of photovoltaic solar components as well as thermal solar elements. 

As President of Solarever, Simon Zhao also believes in the manufacturing potential of Mexico: “Mexico represents a massive market with ample solar resources. We also have high energy costs. These conditions increase the potential for the consolidation of solar generation and its entire production chain,” he said. Zhao believes that energy costs as defined and offered by some of the market’s most important power brokers, such as CFE and PEMEX, are currently too high when compared to the country’s available energy resources. In Zhao’s opinion, Mexico’s solar resources are competitive at a global level, not just in a Latin America comparison. He also highlights the enormous opportunities generated by the country’s proximity to the US, which would almost definitely become central to Mexican solar manufacturers despite the size of the Mexican market. Mexican manufacturing and logistical capabilities need to be developed with the US in mind to generate the amount of investment needed to make Mexico reach its full potential as a solar manufacturing hub. Zhao also highlighted the question of innovation and technological development as central to the manufacturing sector’s growth: he  noted that Solarever works with American engineers and UNAM researchers to address what he argues is a “lack of continuous innovation” in the Mexican solar market.  

The nearshoring boom is creating opportunities for Mexican solar manufacturers as more project developers understand the benefits of shorter supply chains, less regulatory expenses and simpler logistical systems. “We have become aware of the efficiency of shorter supply chains. Mexico has a privileged position as it connects with the US market and is also a platform to Central and South America,” said Daniel García, Director General, Módulo Solar. García claims that Mexico’s position is also benefited by its renown in the general manufacturing environment. As he puts it, "In Mexico, we have a long manufacturing tradition. We have skilled labor, good engineering and competitive costs, all attractive characteristics for manufacturing investment.”

The growth of Mexico’s solar energy industry may also generate a growth in solar manufacturing through a natural maturation process, suggested Luis Calderón, CEO, Solarvatio: “Now that the Mexican solar energy market matures, it will move toward the development of manufacturing around the solar economy.” However, Calderon also noted that installers need to play a more active role in this process. “We must transit toward developing demand for components to be made and bought in Mexico by installers. As project developers, a larger awareness regarding the need to buy Mexican components should be fostered, along with an understanding from manufacturers that supply lines need to be kept as national as possible in order to generate real collective benefits.” 

Katia Bernal, CEO of CITRUS, argued that incentives must be put in place if Mexico is to become a solar manufacturing hub. “There is a lack of financing incentives for solar manufacturing companies. We need more local suppliers,” she said. Bernal underscored that Mexico’s interest rates are not a great incentive for investment at the moment, so the industry needs to make itself more robust by securing a diverse portfolio of financing options. "Certainty and confidence in the regulatory framework are the best incentives needed for local investment in the solar industry," added Bernal. She also noted that a “manufacturing hub needs to have objectives in common. Incredible synergy can be found between competitors, but a more amicable environment in which clients are not given any reason to mistrust the technology is essential. This mistrust can develop when competitors are constantly spreading rumors about each other.” Romero agreed, noting that “competitors badmouthing each other ultimately affects us all. It has the potential of discouraging both national and international investment.”

All experts agreed that local content requirements were bound to increase over time, creating more incentives to grow national manufacturing capabilities. The use of local content also becomes an issue of logistical response times: more local content means a higher degree of reliability when responding to issues. Zhao noted that the presence of national investors is already significant. This activity can be boosted by further public sector involvement, including CONACYT investment in renewable energy projects for factories and manufacturing centers.

Pedro Alcalá Pedro Alcalá Senior Journalist & Industry Analyst