Spotlight: Mexico's US$48bn clean energy plan for Sonora

Mexico is preparing a US$48bn clean power and manufacturing plan for its second largest state Sonora that is meant to pave the way for an end to the ongoing USMCA dispute with the United States.

The so-called Plan Sonora would involve strengthening the northern state's supply chains with the US, spurring electric vehicle production, and the construction of several large clean power plants, foreign minister Marcelo Ebrard told reporters on Tuesday.

According to Ebrard and President Andrés Manuel López Obrador, the plan is in the last stages of negotiation, and several key hurdles have been cleared. Among these is the involvement of public utility CFE, which the government insisted would have to own any power generation assets involved in the deal. US officials agreed to that as long as the construction of the plants were assigned exclusively to North American companies, said López Obrador.

The new solar parks will be built with US-backed financing at preferential rates, with the debt load being taken on directly by the Mexican treasury. This will allow CFE to own new large-scale solar parks without increasing its debt.

"We told [US climate envoy] Mr [John] Kerry that we did not want to establish any debt commitment, we have avoided it, and we would only make this decision because it is Plan Sonora, it is the future of our country, the great industrial transformation," López Obrador said. "We will not see this flourish, but we want to leave this plan going forward, thinking of the coming generations."

If it happens, the plan would mark a broad strategic shift for Mexico in terms of its attitude to renewable energy. While the administration has tried so far to discourage the segment’s growth, it is now pushing for CFE to get involved directly after its first foray into the technology through the US$1bn Puerto Peñasco solar park, originally promoted by the Sonora state government.

"We already started to build the Puerto Peñasco solar park, and our objective is to repeat that plant, to replicate it, to make five plants and, at the same time, to project a new set of transmission lines [north] towards the border," the president said.

The new projects could sell clean energy to neighboring Arizona, which is preparing for a large expansion of its microchip manufacturing industry with US government support and investments by Intel and the Taiwan Semiconductor Manufacturing Company (TSMC).

"All of this is ultimately about the automotive industry," López Obrador said. "We need to fulfill the goal that, in 2030, electric vehicles can become commonplace in the United States. We have electric power in Sonora ... The plan also includes the exploitation of lithium, which will be used to make batteries ... and of copper."

A lack of sufficient clean energy production in Mexico's north has often been cited as a concern for manufacturing firms looking to fulfill internal and national goals. The new plants are seen by the government as a way to encourage "the creation of electric car manufacturing plants in Sonora," the president said.

Plan Sonora would also aim to develop the northern state's logistics by improving customs, overhauling rail lines, building new highways and expanding the port of Guaymas, as well as the Obregón and Guaymas airports, he said.

According to Ebrard, in negotiations with John Kerry, Mexico has committed to have "a shared goal for clean energy production in 2030," where Plan Sonora will play a key role.

"CFE has already given us the list of projects [contained in the plan]," Ebrard said. "It just delivered it, and we’re going to present it in the [North American Leaders'] Summit to President Biden. Solar energy is the priority, and there are others presented by CFE as well."

Since mid-year, complaints by the US and Canada regarding Mexico's anti-renewables approach led to a dispute under the USMCA free trade deal between the three countries. The spat has led Mexican authorities to gradually soften their stance on renewables in a bid to avoid an arbitration panel, which could eventually lead to tariffs being imposed by the US and Canada.