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The Sonora Plan: Clean Energy and Nearshoring

By Arturo Carranza - Akza Advisory
Project Manager Energy


By Arturo Carranza | Energy Adviser - Thu, 02/16/2023 - 10:00

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On Jan. 9–10, US President Joe Biden and Canadian Prime Minister Justin Trudeau met in Mexico City with Mexican President Andrés Manuel López Obrador for the 10th North American Leaders’ Summit (NALS). During the summit, the three leaders discussed a variety of issues that shape North America's complex relationship.

One of the items on the agenda was nearshoring, a process conceived by the three nations as an opportunity to attract high quality investment, spur innovation, and strengthen the region’s resilience. The global changes that have affected supply chains in recent years were not the only reason to prioritize this issue. As far as North America is concerned, the opportunities that the US Inflation Reduction Act of 2022 offers to companies in the US markets is the reason that stands out.

To take advantage of nearshoring, the need to ensure a stable legal framework and a conducive investment climate in North America were emphasized during NALS, which  has already been addressed in the context of USMCA. The leaders of the three countries also recognized the necessity to provide regional security and access to modern infrastructure and a  highly qualified workforce.

A matter of priority during the NALS was the much-needed commitment to accelerate the energy transition by deploying clean energy solutions. It was a call for all industries in the region to modify supply chains in order to achieve clean manufacturing processes. Suffice it to say that future requirements for the US markets, established in the Inflation Reduction Act, will be such that conventional products will no longer be able to be sold in the US.

As a response to its commitment to clean energy, Mexico lay its cards on the table with the Sonora Plan. This represents López Obrador's answer to criticism — national and international — that his government does not promote clean energy. The main axis of the Sonora Plan is the development of a solar power plant in Puerto Peñasco, Sonora.

For the construction of this solar power plant, which is planned to bring 1,000MW of new power capacity to the National Electric System, Mexico’s Federal Electricity Commission (CFE) decided to divide it into four sequences. The first is currently being developed, which covers 120MW and will be ready this year. It is estimated that the three remaining sequences will be completed by 2027, which, given the country’s change of government in 2024, sounds like a vague political promise.

The CFE plans that the electricity generation in Puerto Peñasco will be consumed in the industrial parks of the northern border states of Mexico or exported and consumed in the US. To achieve this purpose, projects of high technical complexity are being developed for expanding the country’s electrical grid. It must be noted that these projects present the challenge of minimizing, as far as possible, the environmental impact on one of the richest biodiversity areas in the world: the Sonoran Desert. 

Although the Sonora Plan represents a milestone in the energy policy of Mexico’s current government, which has been characterized by promoting fossil fuels, its scope is insufficient in comparison to the opportunities that nearshoring represents for Mexico. Regarding the latter, in the context of energy consultations under the USMCA, Mexican Economy Minister Raquel Buenrostro has highlighted the interest of more than 400 companies from the US and Canada in establishing themselves in Mexico as part of the process of relocating their supply chains. Investment bank Credit Suisse recently revealed that from November 2022 until January 2023, Mexico attracted US$2.268 billion in new investments related to  nearshoring. 

For Mexico to truly take advantage of the global changes, especially nearshoring and the opportunities presented by the Inflation Reduction Act, it is necessary to decisively increase the participation of clean energy in the country’s energy mix. This decision must be complemented with the accelerated deployment of new technologies, such as energy storage systems, for controlling the variability of renewable energies and reducing their impact once they are incorporated into the electrical grid.

Some might say the Sonora Plan moves toward a large consumption of clean energy accompanied by the use of new technologies. While this is debatable , the truth is that the pace of its implementation and the adoption of clean energy does not correspond with the urgency of our times nor with the scale of the opportunity for Mexico. In this regard, López Obrador has recognized that his government must bet on clean energy. However, he has also warned that this is a slow and long-term process.

Facing North America’s reality, nearshoring demands a reinterpretation of Mexico's energy policy. It’s time to reframe the problems within the energy sector to redeem clean energy and demonize climate change; time to reconsider private investment as a key element to complement public energy companies; and time to reaffirm that the rule of law is the path to foster competitiveness and economic growth in North America.

Photo by:   Arturo Carranza

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