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A leading source for news and analysis about Mexico and the U.S.-Mexican border.

November 2011

Tijuana could become solar-panel center
just like it is TV manufacturing capital

Solar, wind generation technology costs keep dropping and Chinese salaries keep rising,
making Mexican labor rates more competitive

By David Gaddis Smith
solar panelsTijuana could become a solar panel manufacturing panel center, just as it is a television-manufacturing capital, the general manager of Siliken USA says.

He and other businessmen involved in cross-border clean technologies say Mexico is helping provide cheaper alternative energy for California and helping the North American market better compete against Chinese solar energy products.

China's labor costs have risen such that Mexican labor costs are quite competitive, particularly in light of lower transportation costs from Mexico, the businessmen told the competitveness conferenceclean technologies panel at last week's conference on North American Competitiveness held by the San Diego Regional Chamber of Commerce.

Also, the overall competition for providing solar and wind energy is driving the cost of the technology down tremendously, the businessmen said. This is helping drive a movement of solar panel production to Mexico. Scott Sporrer, the vice president and general manager of the solar-panel manufacturer Siliken USA, closed its San Diego plant and opened one in Tijuana this year to save on labor costs and stay competitive.

scott sporrer and david munozSporrer saw the opportunity for Tijuana to become a solar-panel center just as it has become a television-manufacturing capital.

"I kind of compare the solar panel to a television. And that is, on average it weighs about 50 pounds, it is made up of a lot of glass and a lot of semiconductor chips, which very much parallels a television, and when you consider the weight factor I believe now there is in excess of 60% of large-screen televisions supplied to the U.S. market ... manufactured out of Mexico."

He said that as subsidies fall for photovoltaics and the field becomes less policy-driven, "The product becomes just like an air conditioning unit or a refrigerator. It makes more sense to have that product manufactured in North America rather than, so far, elsewhere geographically." Mexico has a comparative advantage over China for heavier products because its transportation costs to the U.S. are much lower.

windsunSome businessmen on the panel said they thought solar power was turning out to be better situated than wind power because it is produced at times of high energy demand and often is produced closer to customers.

Sempra Generation, which is investing in both technologies, is finding wind to be cheaper at the moment, as have others.

In terms of cost, "Both technologies have come down tremendously over the years," said William Engelbrecht of Sempra Generation, which is building a wind farm in Mexico south of Jacumba. "The competition in the pv (photovoltaic) panel market is extreme. We actually see the cost curve of solar coming down quicker, but the actual energy produced from a wind farm tends to be usually less per megawatt (hour) than from a solar farm — but typically that wind energy is not as valuable as the solar energy because of the time-of-delivery aspect," said Engelbrecht, vice president of planning and development for Sempra Generation.

"Solar you only get during the day but that is actually a good thing because that's when power is the most valuable," he said, adding that wind power tends "to be more nighttime producing." He said, however, that the upcoming Energia Sierra Juarez plant "actually produces quite a bit of energy during the daytime as well as at night because it's pretty much a constant breeze out there."

Sporrer said solar energy typically is "producing when everyone has the air conditioning on high" and "can be located close to the load," while wind energy is often generated in the desert and requires more "infrastructure to get it here."

Siliken was founded in Valencia, Spain in 2001 and has plants in that country, Romania and Windsor in Canada's Ontario province. He said the only reason Siliken has manufacturing in Windsor is that "policies in Ontario demand local manufacturing."

Calling U.S. photovoltaic demand "the long-term market opportunity," Sporrer said Siliken originally decided to build the San Diego plant because California was the United States' biggest photovoltaic market and because, at least at the time, San Diego was "the largest install base in California."

He said the company wanted to be in the United States to meet perceived "Buy America" demand, and was able to establish a strong customer base. But he said woes caused by the 2008 financial crisis and seeing Chinese units "flood the markets at extremely low cost" caused Siliken to move operations 12 miles away to Tijuana, where it is able to expand operations, lower costs and still remain close to its target market.

He said the company had no desire just to fill a niche, "made in USA" market, which he indicated is what would have happened if the company kept manufacturing solar panels in the Otay Mesa area of San Diego.

The company was strongly criticized for exporting what had been U.S. jobs and for the way it announced — or did not announce — its move to Tijuana.

Manufacturing in Mexico also can be a better value for companies than manufacturing in China because of a much lesser chance of intellectual property theft south of the border, the businessmen said. "Asian countries are famous for reverse engineering," Sporrer said.

Update, January 2013: Siliken files for bankruptcy (Story, San Diego Business Journal)

mark kerbel Mark Kerbel of REGEN Energy recently relocated to San Diego to open an office. His company, whose head office is in Toronto, makes a "small wireless control device that uses our patented swarm logic ... to reduce energy costs for large buildings."

He said the company might look into having its product made in Mexico and sold in Mexico, and also cited the intellectual property advantages of manufacturing in Mexico over the Far East.

David Muñoz, the director general of the Baja California State Energy Commission, said the state can provide opportunity for companies wishing to invest in "immense renewable energy resources" such as solar, wind and even biomass biogas. He said some solar energy generation projects are in the works.

He said Mexico's subsidized energy costs are an impediment for some alternative energy investment in Mexico. "The first obstacle Mexico faces is pretty much its energy rates and how subsidies come into the picture and make renewable energy projects and energy-efficiency projects, pretty much they take all of the financial feasibility (away), so in a way, you really don't need incentives, you just need need the subsidies to go away." The new president of the Institute of the Americas at the University of California San Diego, Charles Shapiro, said regulations on both sides of border were impeding wind generation.

Update, Dec. 5: Muñoz says tours are being offered of El Parque Eólico Rumorosa I. Story was in El Mexicano.

ddave hesterDave Hester, president of Kyocera Mexicana, also spoke. "Can we be competitive in this region against our Asian competitors? The answer to that from our perspective is absolutely," Hester said. Kyocera's parent company is based in Kyoto, Japan, and Hester pointed out that Kyocera has manufacturing operations in China.

He said Kyocera has solar manufacturing on both sides of the San Diego-Tijuana border. Hester said a lot of low-cost solar panels are coming into the market from China "and we are having to compete with that."

Helping North America compete, however, is that Chinese labor costs have risen to roughly those of Mexico. Hester said he thought Chinese labor costs would rise above Mexican ones in two years.

Hester said Kyocera operates on both sides of the border, with 400,000 square feet of manufacturing in Tijuana and 300,000 in San Diego. He said Kyocera has been operating in Tijuana for 22 years. He said Kyocera been manufacturing solar for 36 years, and said its experience counts for a lot when it comes to signing contracts. He said it can produce products made in the U.S. when there is a demand for that.

bill engelbrechtEngelbrecht said Sempra Energy, through all its companies, has over $2 billion invested in Mexico "and we are expanding that."

He said the 625-megawatt combined cycle technology gas-fired Termoelectrica de Mexicali power plant, or TDM, was built "to U.S. emissions standards. It actually is the cleanest fossil fuel power plant in all of Mexico." He said that while it exports electricity into the U.S. grid, it has the potential to deliver local energy.

The planned Sempra Generation wind plant, Energia Sierra Juarez, is about 70 miles east of San Diego and two to three miles wind powersouth of the border near the San Diego-Imperial County line, Engelbrecht said.

The first phase of the plant is 156 megawatts, with the plan to ultimately serve 65,000 SDG&E customers and help the utility "meet its 33% renewables target set by state." Construction may start in late 2012 and will create 300 construction jobs, Engelbrecht said. He said it will take eight full-time people to operate and maintain the plant.
Update, Nov. 29, 2011: Lawsuit filed against proposed wind farm in Mexico City, saying its negative environmental impact was not taken into account. Terra Peninsular press release.

Some politicians, such as San Diego state Sen. Juan Vargas, oppose the wind farm being on the Mexican side, citing an impact on U.S. jobs.

Engelbrecht said the plant and cross-border transmission line "will unlock more than 800 megawatts of wind potential in this area," as Sempra has "locked up enough land to generate more than 1,000 megawatts over time."

The Mexico Power Group headed by Gerald Monkhouse also plans a billion-dollar wind farm close to Sempra's. It also plans a billion-power wind-power facility in Zacatecas and a half-billion one in Quintana Roo. Story, rechargenews.
Press release, ProMexico (PDF). Monkhouse has said that wind at the Baja California site peaks in the late afternoon and early evening, when demand for power is high, and has also said his wind farm would be dependent on someone else building a transmission link to get the power to U.S. customers.

Sempra Generation also has a solar plant in Nevada and one that should start producing solar energy this year in Arizona, next to the company's gas-powered electricity plant there, Engelbrecht said.

Also discussed at the panel were carbon footprint costs and how efficient alternative energy is, particularly compared with more traditional forms of energy, which traditionally have cost far less than alternative forms.

No definitive answers were given. Sporrer said building solar panels in Tijuana and shipping them to the U.S. involves a much lower greenhouse-gas and carbon footprint cost in terms of transportation than shipping them from China.

Hester said Kyocera "is in the business of doing transportation across the world" and "makes its transportation decisions based on carbon footprint."

* * * * * *

Mexico Power Group may start generating
72 megawatts in wind energy next fall

Update, Dec. 12, 2011: Frontera publishes story about Mexican Power Group's planned wind farm, quoting executive John Prock as saying his company is employing 30 people. The paper quoted him as saying that when construction begins in the spring in La Rumorosa area, there will be 300 direct jobs, 90% of them for local workers. The paper said generation of 72 megawatts would begin in the fall. The rules for selling that energy are complicated, and Frontera said the Federal Electricity Commission has a virtual monopoly on electricity sales. Mexican Power Group apparently can invite private and public companies to be partners in the company. Baja California municipalities are looking into investing into the company as a way to get power at 5% to 10% less than what they are paying now, the paper said. Frontera's story (PDF).

Prock said the company is not currently contemplating exporting energy to the United States, but noted that La Rumorosa could produce three to four more times energy than the entire state of Baja California uses. First, however, it would need to piggyback onto a transmission line to the United States. Sempra Energy is planning on building one in the area for its nearby wind farm. Previous mention of Mexican Power Group's plans.

* * * * * *

New York Times story on large number of solar energy companies in San Diego.
San Diego Union-Tribune story on Sempra Generation's plans.

competiveness conference logoPrevious story on the North American
Competitiveness Conference
.

 

The "North American Competitiveness Conference: Sustainable Jobs Creation for a Continent of Innovation" was held at the Joan B. Kroc Institute for Peace and Justice and the University of San Diego on Tuesday, Nov. 8. The title sponsor was SDG&E. About 280 were in attendance. It was organized by James Clark, director general of the Mexico Business Center at the San Diego Regional Chamber of Commerce. Clark recently was profiled in Frontera newspaper.

Solar panel photo by Opticks3
Texas wind farm photo by Billy Hathorn

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