Renewable Energy: The Key to Mexico’s Nearshoring Wave
By Eduardo Sáenz e Iván Guirado | Real Estate Energy Coordinators at American Industries Group®
Since the beginning of globalization, companies have sought to reduce production costs in their supply chains by finding suppliers in other countries (offshoring) and diversifying suppliers, a circumstance that has significantly shaped Asia’s economic development in particular.
However, as the result of problems with global supply chains that were exacerbated by the COVID-19 pandemic and subsequently worsened by the war in Ukraine and the European energy crisis, more and more companies and industries are now considering transferring all or part of their production to regions closer to their main markets, a phenomenon known as “nearshoring.”
In this context, Mexico offers a unique advantage for companies serving the United States market looking to adopt a nearshoring strategy. In addition to its geographic location and extensive border with the United States, the United States-Mexico-Canada Agreement (USMCA) offers economic and commercial benefits that help optimize transportation costs, logistics, and even tariffs. For these reasons, the nearshoring trend in Mexico is already gaining momentum and represents an attractive investment opportunity.
Likewise, the effects of the climate crisis have highlighted the need to accelerate the transition to clean energy. Many major multinational companies, countries, and industrial sectors worldwide are adopting ambitious greenhouse gas emissions reduction targets. This transition is causing an increase in demand for renewable energy to meet the growing energy demands of industries worldwide, and Mexico is no exception.
With this in mind, American Industries has identified that Mexico’s biggest challenge in taking full advantage of nearshoring investment opportunities is ensuring fast, efficient, and affordable access to renewable energy to meet multinational companies’ decarbonization and sustainability objectives. Although Mexico has established both international and national commitments to reduce its greenhouse gas emissions through the integration of clean energy (35% by 2024), there are still areas of opportunity to take advantage of the enormous potential of the country’s renewable resources. According to estimates by the National Renewable Energy Laboratory of the United States (NREL), Mexico can potentially generate 28,591 GW1. At the same time, its installed renewable energy capacity at the end of 2021 was only 15.21 GW3. Comparing Mexico’s renewable energy generation data (15% in 2021) with the international average (28%)4, there is significant potential to continue investing in renewable energy without compromising the security or continuity of supply.
Consequently, to make the most of possible nearshoring investments, Mexico must ensure an expeditious development of the electricity sector to provide access infrastructure to the grid and the type of energy supply required by industry. According to data from the National Energy Control Center, the maximum system demand increased by 3.5% in 2022 compared to 2021; however, the annual growth of transmission lines was only 1.6% between 2013-2021, well below demand. Furthermore, 2022 was the first year with a reduction in wind and solar generation, at 3.5% and 4.6%, respectively, compared to 2021. This decrease highlights the need to continue expanding renewable energies as a vehicle for decarbonizing the country’s economy.
To meet these challenges, American Industries Real Estate division has created an Energy Committee that provides our clients with comprehensive and ongoing support to meet their specific energy objectives and requirements. Our goal is to facilitate their establishment in Mexico by developing solutions that optimize access to the electrical grid and ensure renewable energy supply using the various market mechanisms available in Mexico.
Our extensive experience in developing industrial parks and warehouses enables us to systematize the process of connecting our clients to the power grid, saving time and lowering costs. In addition, we are working closely with the system operator and the Transporter and Distributor in planning the expansion of the national power grid. We also promote the implementation of sustainable construction projects with international certifications, such as Leadership in Energy and Environmental Design (LEED) and Excellence in Design for Greater Efficiencies (EDGE). These measures allow us to maximize energy efficiency in the occupancy and operation of our properties and implement renewable energy projects on-site for all our industrial park operations by installing solar panels. In these ways, we can reduce our carbon footprint and support our international clients in obtaining renewable energy supply through the highest traceability standards, such as I-RECs and certificate of origin guarantees.
- 124,918 GW of photovoltaic solar capacity, 3,669 GW of wind, 2.5 GW of geothermal, and 1.2 GW of additional capacity from existing hydroelectric power plants.
- 2Mexico Clean Energy Report, NREL 2022.
- 3PRODESEN 2022 includes hydroelectric plants with a capacity of ≤30 MW, as well as solar, wind, geothermal, and biomass sources.
- 4World Energy and Climate Statistics Yearbook
- 5Report Highlights of the Mexican Electricity Market 2022 by Fresh Energy Consulting.
If you would like to find out more about this topic or are interested in receiving a complimentary business case analysis for your operation in Mexico, please fill out this form or contact us at:
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