State Watch

Mexico is moving to power California and Arizona. But who will pay for it? 

Residents of the U.S. Southwest could one day power their homes with solar energy generated across the border — if a multi-pronged plan from the Mexican government comes to fruition. 

A 120-megawatt capacity photovoltaic plant in the Sonoran seaside city of Puerto Peñasco already began feeding the national grid last month, while another 300 megawatts are expected to be online next year. 

“Who could have told me that a state like Sonora, a net importer of energy that has historically been a net importer, now has the potential to be an energy-exporting state?” Sonora Gov. Alfonso Durazo asked at a recent sustainable energy forum.

Durazo’s remark underscores the ambition behind the project.

The domestic output is just the first step in an extensive $48 billion plan envisioned by Mexico’s leaders, who have their sights set not only on neighboring Baja California, but also potentially on California and Arizona. 

Yet deep questions remain, including who exactly is footing the bill for the project and whether the U.S. will be involved with the financing.

‘First of its kind in Mexico’

Mexican officials hailed the Puerto Peñasco facility for its future ability to produce up to 1,000 megawatts of clean energy, alongside 192 megawatts in battery storage at an inaugural event held by President Andrés Manuel López Obrador in February.

“It will be the first of its kind in Mexico, the largest in all of America due to its generation capacity and fifth worldwide when considering the storage system,” a statement from Mexico’s state energy firm, the Comisión Federal de Electricidad (CFE), said following the inauguration.  

Owned and operated by the CFE, the Puerto Peñasco plant is the first tangible product of a sustainable energy initiative known as the “Sonora Plan.” 

The expansive federal program involves the construction of five massive photovoltaic solar facilities, new transmission lines and a lithium mining venture — all in the northern Mexican state of Sonora. 

The project’s first mission is to provide solar power to “the national electricity system where everything is interconnected,” David Figueroa, Sonora’s state government representative in Arizona, told The Hill. 

The second stage would involve transmitting part of the generated capacity to the Baja California circuit, which is entirely separate from Mexico’s national grid, Figueroa explained. 

During this phase, the sizable boost in capacity could power some 160,800 homes in Sonora and Baja California — up from an initial 64,300 Sonoran households, according to the CFE.

“Third, we will look for the possibility of selling to the south part of the United States,” Figueroa said. “It is something that is contemplated.” 

Such a transaction would be feasible because Baja California and California area already linked through a binational electricity system. That network is part of the Western Interconnection, which stretches from Western Canada to Baja California in Mexico. 

Riccardo Bracho, a senior international program manager for the National Renewable Energy Laboratory (NREL), said if Mexico can connect Baja California to the national grid, he expects that Baja California will end up with an “over-capacity” of electricity. 

That surplus “likely could be exported to the U.S.,” Bracho told The Hill. 

Mexico has long planned to connect Baja California to the national grid, and the conditional approval of a $254 million transmission line from the Puerto Peñasco plant to Baja California would make that a reality.  

That transmission line would run roughly parallel to a Sea of Cortez coastal highway and connect to the Santa Clara electrical substation, according to Forbes México. From there, the line would connect to the Cucapah substation, south of Mexicali, in Baja California. 

While experts have voiced concerns that electricity produced at the plant could be expensive, Figueroa said that costs “will be low” in part because the land was “completely donated” — by real estate magnate Daniel Chávez, who has apparent family connections to López Obrador. 

Regardless of the land, Figueroa stressed that the amount of solar energy available in this region is among the highest in the world, enabling any solar panel situated there to “produce much more than anywhere else on Earth.”

Bracho, who has long been studying Mexico’s clean energy potential, described the country in a 2022 report as “ideally positioned to become a clean energy powerhouse.” 

By developing renewable energy across the country and increasing interconnections with the U.S. and Central America, Mexico “could increase system reliability and resilience, and provide opportunities for clean energy exports,” he wrote in the report. 

Solar panels at the largest solar plant in Latin America in Puero Peñasco, Mexico. (Photo by RAQUEL CUNHA/AFP via Getty Images)

What will the US involvement be? 

Whether the U.S. will have any involvement in the Sonora Plan remains uncertain, and there are conflicting statements and signs from the two countries and their officials.  

U.S. climate envoy John Kerry and U.S. Ambassador to Mexico Ken Salazar last week met with López Obrador, Mexican Foreign Relations Secretary Marcel Ebrard and CFE head Manuel Bartlett in Oaxaca. 

At a press conference on Monday, López Obrador told reporters that he spoke with Kerry about the “possibility of an investment of $5 billion” while discussing the need to replicate the Puerto Peñasco plant in other parts of Sonora.

“He has made seven trips to Mexico, and we agreed to meet in two more months, for this plan that we are carrying out,” López Obrador said. 

Immediately following the visit, the newspaper El Universal reported that Kerry had confirmed the possibility of future U.S. investments in Mexican renewables — agreeing that such transactions would occur in compliance with standards set by López Obrador. 

Mexican officials have been making such comments for months, with López Obrador declaring at a December press conference that “the United States government is willing to help with cheap loans for the construction of all this infrastructure, that is, at very low rates.” 

Asked if an agreement had already been reached, the president responded that “progress is being made” and that Mexican officials had recently discussed the subject with Kerry. 

López Obrador noted that one goal of the Sonora Plan is “to take advantage of all the potential that Sonora has, and its border situation with the United States.” 

Future solar plants, the president explained, could help support the U.S. electric vehicle industry and bolster Arizona’s aims to become a semiconductor manufacturing hub. 

Ebrard, who also accompanied López Obrador at the December press conference, said that financing could potentially come from the North American Development Bank — a bilateral financial institution capitalized and governed by the U.S. and Mexico. 

Stressing that the U.S. did initially “insist a lot that it be a private investment,” López Obrador said that American officials ultimately agreed to Mexico’s terms: the financing must be public credit sent directly to the CFE and interest rates must remain low. 

He also explained that in contracts for the construction of the plants, there will be an exclusivity clause for Mexican and American companies, and possibly Canadian firms as well. 

U.S. officials, however, have not offered public confirmations of the remarks by Mexican officials.

“The Mexican government has presented Plan Sonora on a number of occasions and the U.S. has been talking with the Mexican government about how to catalyze finance for investments for renewables nationwide,” a senior official from the Biden administration told The Hill. 

In early February, Salazar shared photos of a visit to the Puerto Peñasco plant, thanking Ebrard for the invitation and Durazo for his hospitality. The ambassador described a regional goal to “transform North America into an economic and clean energy powerhouse.” 

Both Kerry and Salazar also visited Hermosillo, Sonora, in October, where his goal was “to discuss bilateral cooperation” on climate initiatives and renewable energy investments, the State Department announced at the time. They met with López Obrador, Ebrard and Durazo, and promoted “shared goals in clean energy,” according to the U.S. Embassy.  

Salazar declined to be interviewed for this story. His office referred The Hill to his “public remarks on bilateral cooperation on clean energy and the overall emphasis the U.S. mission in Mexico places on sustainable energy projects.” 

US, Mexico at odds

The U.S. and Mexico have in the past few years been at odds over López Obrador’s domestic energy policies, which the U.S. sees as favoring CFE, Mexico’s federal electricity company.  

Mexico’s previous administration had launched an extensive procurement process to attract private solar enterprises, but many of the plants that were then built are now sitting idle. 

The U.S. Trade Representative (USTR) attributed the situation to “a 2021 amendment to Mexico’s Electric Power Industry Law that prioritizes CFE-produced electricity” — and then launched a formal request for consultations under the U.S.–Mexico–Canada Agreement in July. 

The measures have not only led to “inaction, delays, denials and revocations” of private company permits, but they also “undermine American companies and U.S.-produced energy in favor of Mexico’s state-owned electrical utility,” USTR declared. 

Asked whether there had been any progress on the matter, a spokesperson said that the office does not “have any information to share at this time or imminent updates.” 

“The federal government had shifted the way it was going to meet the renewable energy targets,” Bracho, from NREL, told The Hill. “Before, it used to have clean energy auctions, in previous administrations, and those were cancelled by this federal administration.” 

Luisa Sierra, energy director for Iniciativa Climática de México, echoed these sentiments, noting that the biggest influx of renewables “was happening with the long-term auctions.” 

“It’s fundamental that the market instruments are reactivated,” Sierra added. 

To meet long-term climate goals, Mexico will “need more private owned renewable energy” in its system, Bracho agreed. But he was skeptical as to whether such integration could occur on schedule, barring any “dramatic” policy changes. 

In the meantime, Bracho expressed hopefulness about the prospects of cross-border collaboration on renewable energy, as the Puerto Peñasco facility continues to take shape.  

Despite any diplomatic difficulties that have rattled the region, Bracho recalled an “increased level of bilateral conversation between the U.S. and Mexico, which actually have been a lot more positive over the last year.”  

“I’m definitely much more optimistic in what is happening and could happen,” he added. 

Tags Andres Manuel Lopez Obrador Andrés Manuel López Obrador Arizona California Climate change Mexico

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