Answer to Power Crisis May Be Right Across U.S. Border

Baja California, already a prime source of televisions, textiles and other U.S.-bound exports, is poised to start shipping a more critical commodity to California in the next few years: electricity.

California’s power shortfall--and a newly approved natural gas pipeline linking Baja to the United States--have led investors to propose building several new power plants and expanding previously announced ones in Baja, Mexico’s top energy regulator disclosed Friday. By 2005, the region could be exporting 1,000 megawatts of power--enough to light 1 million homes.

That level of exports would represent as much as 2% of California’s current power consumption, enough of a buffer to save the state from the rolling blackouts that loomed this week. It also would reverse the current situation in which Baja frequently has to import as much as 10% of its peak summer load from Southern California, utility officials say.

“By any standard, what we are looking at in Baja California is major energy development that will serve not only Mexico but the California market,” said Dionisio Perez Jacome, president of Mexico’s Energy Regulatory Commission, known by its Spanish acronym, CRE.

Sempra Energy of San Diego plans a 500-megawatt power plant near Mexicali; InterGen of Boston is already building a nearly 900-megawatt plant nearby, or double the size originally envisioned; and a Mexican consortium plans a 100-megawatt plant at San Luis Rio Colorado, near the California-Arizona border.

These and three other projects in the planning stage will turn Baja into a net exporter of power. The first stream of exported Mexican electrons could start flowing by the end of next year, when InterGen’s plant outside Mexicali is scheduled to go on line. As much as one-third of its electricity will be sold to California.

Even before California’s crisis, the roaring Mexican energy market beckoned power plant developers. Power consumption across Mexico is growing at 6% a year, more than double the U.S. rate. In Baja California, Mexico’s fastest-growing region, fed by a booming population and foreign-owned factories, demand is increasing 10% in cities such as Rosarito.

But the latest ratcheting-up of Baja electricity projects has more to do with the energy crisis in California and the high prices being paid there to outside power generators. In addition, Baja grants permits for construction of power plants in as little as six months, compared with 24 months in California. Actual construction takes an additional two years on either side of the border.

“The general perception is that it is easier to build one in Baja than in California,” said Raul Monteforte, a CRE commissioner closely involved in Baja energy development. If all the Baja power plants on the drawing board are built, the region’s generating capacity will more than triple from the current 600 megawatts by 2005. “That’s a cautious estimate,” Monteforte added.

Financing Needed for Electricity Flow

Infrastructure problems could impede the trade in electrons, however. The lack of adequate high-voltage transmission lines linking Mexico to California could stunt electricity exports unless means of financing them are found.

A 258-megawatt power plant proposed for Mexicali by AEP Resources of Columbus, Ohio, is stalled for that reason, spokesman Pat Hemlepp said Friday. “Until we get that worked out, we can’t make a commitment,” he said.

But the biggest infrastructure hurdle apparently was cleared last month when the Mexican government approved a 135-mile pipeline to bring natural gas from the U.S.-Mexico border at Algodones, Baja California, near Yuma, Ariz., to Tijuana. The pipeline will connect to a grid that moves gas around North America from Texas and Canada.

The pipeline, which will be built by a U.S.-Mexican consortium that includes Sempra, will have the capacity to feed as many as five power plants and will be on line by the end of 2002, said George Liparidis, North American regional president of Sempra Energy International.

In an interview, Liparidis said the Baja Norte pipeline, which will cost $230 million, was initially conceived to deliver gas to a Mexican power plant in Rosarito that last year was converted to burn gas instead of dirtier fuel oil.

But in light of growing scarcity of natural gas in California--and Sempra’s proposal to build a power plant near Mexicali--the pipeline now represents the critical fuel artery for as many as half a dozen additional power plants.

For Mexico, the host of power plants represents a critical economic and employment boost, as well as a new phase in its efforts to open the nation’s electricity market to outside investment. CRE President Perez Jacome says there is no way that Mexico can meet its galloping energy needs without foreign investment.

The country needs to boost energy capacity by 15,000 megawatts, or 40%, by 2008, he said, adding, “As the system is currently structured, the government cannot build it all.”