Power Grade Expansion and Upgrades for Energy Transmission
Renewable energy is key to global sustainability efforts. However, Mexico’s grid and transmission infrastructure still needs more investment to support the connection of more intermittent power producers. Many power plants, especially based on renewable sources, can be found in a variety of locations depending on where resources are found, which poses a great challenge to transporting this energy. One of Mexico's greatest challenges to achieving energy security is therefore how it manages to strengthen its struggling transmission infrastructure.
According to Eduardo Sánchez, Director of Energy and Mining Promotion, the Ministry of Economy of Nuevo Leon, it is important to tackle these issues with the specific context of each Mexican region in mind. While Nuevo Leon is a federal entity that exports 40% of the electricity it generates, the state’s projections for energy demand, combined with ambitious plans to avail of the benefits of nearshoring, will prove challenging for the country’s transmission and distribution infrastructure. “Fifty percent of the investment that came to Nuevo Leon in the past two years has been due to the nearshoring trend. However, these companies have highly energy-intensive production processes, which has been a great challenge for industrial parks that did not invest in this issue during the pandemic,” he explains.
Nuevo Leon is a state with strong industrial resources. Its closeness to the US, high energy availability and human capital are boons to attract FDI. “Monterrey became the second largest metropolis in the country. Much of this growth is because the state convinced large companies to set up their operations there,” says Sánchez. Moreover, the increase in FDI in Monterrey underlines a recovering economy after a global pandemic brought developments to a grinding halt.
Furthermore, the arrival of new companies to Mexico not only increases energy demand, but these players also demand cleaner energy to achieve their own decarbonization goals. Usually, the places where renewable energy sources can be found more commonly have a low population density, since heavy solar radiation or strong winds do not often make for an attractive living environment. What is more, transmission infrastructure needs vast amounts of space to be safe and efficient, which is expensive for an industry relying on costly investments, in Mexico’s case driven by federal spending. “Large companies that are relocating begin operations almost immediately upon arrival. With an increase in energy demand from these new operators, the transmission and distribution network needs more power and therefore increased investment. However, investment in this infrastructure is not as fast as the start-up of these projects,” said Sánchez.
Sánchez adds that the state of Nuevo Leon projected an increase in demand for the next two years of 1.2GW, but with the arrival of Tesla to Monterrey, this projection spikes to 2GW. He highlights that public and private cooperation is necessary to guide the necessary investment. With sufficient funding, the state can properly respond to these opportunities and challenges. Although he recognizes Mexico’s regulatory challenges, he also emphasizes the agency that states have to drive their interests and confront the difficulties specific to each region of the country.