At the beginning of March, Tesla announced plans to construct a new Gigafactory in Mexico, its first outside of the U.S., Germany, and China. The plant will be built in Monterrey, Nuevo León, around a three-hour drive from Texas, providing efficiencies for its supply chain. 

We expect Jalisco to become a regional leader in green energy and environmental action, having already introduced schemes such as the Low Carbon State Program, which encourages reduced fossil fuel consumption and the development of renewable energy operations.

State-owned Pemex already produces hydrogen as a by-product of its fossil fuel output, using it mainly for refining and ammonia production processes. Air Liquide, Linde, and Cryo-Infra/Air Products also have hydrogen operations in Mexico. As the country develops its green energy market, it could rapidly expand its hydrogen production to meet the needs of a growing global market.

We expect the implementation of Guadalajara’s Climate Action Plan to help the city to reduce pollution and improve the quality of life for its residents, while ultimately supporting the combat of climate change. If successful, we believe the strategy could be replicated in Mexico’s other urban areas, as well as elsewhere in Latin America.

With a burgeoning renewable energy industry and well-established shipping routes, Mexico could quickly become a major international hub for low-carbon freight and transport. This would not only boost the country’s long-term energy security but would ensure its position in the global energy market in the transition to green.

We expect the development of distributed generation in Mexico to deliver multiple benefits, including reducing greenhouse gas emissions, delivering electricity to rural communities, and decreasing the burden on the national grid system.

Baja California’s energy structure is different from the rest of Mexico, as it runs off an independent electric power grid, separate from the country’s main grid system. Despite significant solar and wind potential, the state continues to rely heavily on the importation of natural gas from the U.S.

Due to the regulatory environment with respect to new utility-scale projects in Mexico, the large suppliers have been reluctant to put forth aggressive bids at our RFP auctions like in the past. However, we are still seeing discounts of 5% to 15% for new Qualified Users in Mexico. 

Mexico’s EV market is growing at a steady rate, and we believe its strong automotive manufacturing industry makes it well-positioned to become an EV production hub. In addition, concerns around air pollution and carbon emissions mean that a shift to EV, both for consumer vehicles and public transport, is likely to see robust growth over the next decade.

As Mexico establishes itself as a regional renewable energy hub, we expect battery storage to become an essential means for enhancing the flexibility of its grid system to provide more versatile energy delivery across the country.