Mexico – ‘Ideal’ for Hydrogen Development – President

Hurtado: The association was founded at the end of last year when a group of companies got together to discuss opportunities for hydrogen development, which has become a popular topic of interest in the energy industry globally. The association was created to promote the development of the green hydrogen industry in Mexico.

The truth is that hydrogen is the backbone and there are various other colors of hydrogen that fall under the same umbrella, such as green hydrogen, which are the types of projects that we’re going to promote.

There was a previous association formed a few years ago — known as the Mexican Hydrogen Society — though it is more focused on academic study, investigation and scientific research on hydrogen. The members of the group are investigating methods to develop hydrogen as a source of energy, which they are doing with academic institutions, such as the Universidad Nacional Autónoma de México (UNAM). So, we considered it necessary to create an industry association that incorporates all of the companies that are developing projects on a global level, as well as companies active across the entire value chain.

There are technical companies, such as Siemens AG and Mitsubishi Power Americas Inc., that are developing technology for hydrogen electrolyzers, for example. There are also companies that are already working with gases such as nitrogen, oxygen and hydrogen. Natural gas companies are also participating, including companies that transport or commercialize natural gas. For these companies, it is a natural step to move from natural gas to hydrogen. Some gas companies are already active in blending in Europe and the United States which is something that, eventually, all companies will have to learn to do because there is a connection between the two and hydrogen and natural gas will be increasingly intertwined.

Companies such as Engie SA, for example, as well as Enagas, Fermaca and Gas Natural Noroeste are part of the association, as well as developers of green energy and energy generators like Mitsui & Co., Iberdrola SA and others. Consumers that can eventually use hydrogen, such as steel and mining companies, are also participating, and currently we’re at around 50 members. We’ve had important growth in just a few months, which is a result of the fact that hydrogen energy development is being pushed globally and the fact that Mexico needs to be part of the movement.

[Want to know how much natural gas is being imported into Mexico? Check out NGI’s Mexico Natural Gas Flow Tracker.]

NGI: You mentioned blending being done by natural gas companies. How can hydrogen be used to do blending using natural gas infrastructure?

Hurtado: The projects that are being developed in Mexico are still in their initial phases but are backed by budgetary commitments that will allow them to advance, which is important. There are some other green hydrogen projects in Mexico that have already reached the ready-to-build phase. Currently, there are at least two projects that are budgeted and supported financially to produce green hydrogen. These projects are linked to the injection of green hydrogen in the national natural gas pipelines network. One of these projects is positioned to utilize a natural gas pipeline to produce green hydrogen and inject it into the pipeline system.

This practice is already being done in a residential natural gas network in the UK, for example, in Newcastle, where hydrogen is already being injected and blending is being done with 15% hydrogen. In California, hydrogen is also being injected into an industrial natural gas pipeline network. Similar practices are being done in Spain. Other companies are changing or reconverting their combined cycle centers from gas to hydrogen.

You can adapt combined cycle plants to use hydrogen in place of natural gas. Turbines, for example, can be changed and adapted, though there would have to be a cost-benefit to adapt them. In the case of the CFE, they are thinking of changing turbines that were used for natural gas to use hydrogen. The company has earmarked investment to continue to develop new technology for hydrogen generation for the next decade. These plans have already been introduced in the Development Program for the National Electric System (PRODESEN) to increase the utilization of green hydrogen in some of their centers, which will be adapted.

In the case of the natural gas pipelines, what is being conducted are tests to determine how the materials behave or what needs to be done regarding how hydrogen interacts with natural gas in the pipelines. We don’t see major infrastructure changes as a result, and the intention is to take advantage of the existing infrastructure to keep costs down.

In some places, such as Spain, there are pipelines that solely transport hydrogen. However, in most parts of the world, blending is done to take advantage of the infrastructure and promote decarbonization, which is really the central idea, regardless of costs.

NGI: What is the CFE’s stance on hydrogen development? Is there interest within the CFE and the Mexican government to develop more hydrogen projects?

Hurtado: We have had several meetings with the CFE and also had a workshop about hydrogen. Additionally, the CFE submitted plans in PRODESEN to develop new technology to advance the development of hydrogen. It’s still a small number at this point but, given the size of the CFE, it could mean some significant growth opportunities. So, up to this point, it has been a good response from the CFE and they are going to keep exploring the subject. They plan to continue to investigate the matter to be able to broaden and expand the use of hydrogen in electricity generation.

NGI: In terms of potential and opportunities for green hydrogen development, do you see a lot of new opportunities in Mexico?

Hurtado: Yes, I think there is potential. Actually, there is currently a study underway to determine the amount of green hydrogen potential that exists in Mexico, and we should have the results by next month. And, the companies that have joined the association also consider that there is large potential for green hydrogen development in Mexico.

For starters, Mexico’s geographic location is a big plus. Mexico has the U.S. as a neighbor, there is a trade agreement in place, and we have access to two oceans and routes to Asia or Europe. There is a study that was conducted by McKinsey & Co. where they mention that Mexico could have up to 65% lower production costs of hydrogen compared to other countries, above all for the renewable energy potential we have.

Also, if there’s an industrial plant that is tied to the United-States-Mexico-Canada-Agreement (USMCA), like for automobiles and other industries, there is an opportunity for green hydrogen to be used. It could be sourced locally, injected to the network and used to solve problems of intermittency, which occurs in some renewable centers, for example, which would allow for production 24-7. This could also be applied to solar energy centers as well to allow for energy to be generated 24-7. Green hydrogen could be used as another fuel and either substitute or complement natural gas.

NGIIn terms of the costs to develop green hydrogen projects, are they currently competitive with other alternatives?

Hurtado: Not yet, no. For the sake of comparison, grey hydrogen, which is produced using fossil fuels such as natural gas, is valued at about $1.50/kilogram, whereas green hydrogen is currently valued around $5/kilogram. Recent studies that have been conducted predict that the cost of green hydrogen will fall in the next five years to around $1.50, about the same price as grey hydrogen.

One factor that applies to the eventual lower cost of green hydrogen is that it is renewable and contributes to decarbonization, which is of interest to companies looking to meet climate change goals as part of their international compliance or corporate governance, if they are listed in the stock exchange, or if the federal governments where they operate have green targets. The large majority of international oil and gas companies also have these climate change targets, meaning that there is additional interest in developing green hydrogen alternatives. And, for that reason, there are predictions that the costs to develop green hydrogen will continue to drop.

Also, once the use of hydrogen is more widely accessible, costs will fall. And, of course, once the costs fall, hydrogen will be used more broadly. The forecasts are clear in that the market thinks that in the next five years green hydrogen will fall in cost to $1.50/kilogram from its current value of around $5.

NGI: In simple terms, how is energy generated with hydrogen?

Hurtado: Basically hydrogen behaves like a gas. It really depends on how you want to apply it to operations. You can store it, transport it, inject it into the pipeline network and you can use it in fuel cells where, if you burn it, it generates only an aqua vapor.

One of the ways to obtain it is through water molecules, from which you get hydrogen. It’s important to understand that hydrogen is the most abundant element in the universe. It is the first element in the periodic table, but you can’t find hydrogen alone, which is one of the characteristics of hydrogen. It is always found paired with other elements, such as water, which is H20 and combined with oxygen. It is also found paired with other elements, such as methane, and, regardless of how it was obtained, it behaves like a gas, or like a fuel. There are of course differences in terms of how to measure it in comparison to other gases.

NGI: What are the next needed steps to continue to develop the hydrogen industry in Mexico?

Hurtado: The next step for us is similar to what is being done in Europe, which includes consulting with other countries that are further along in their green hydrogen development models. We will continue to work with and study the results of strategic allies of the Mexican Hydrogen Association and we are going to continue to try to develop a national hydrogen strategy, similar to other countries such as Chile, France, Germany and the United States.

So, Mexico has to work to create a national hydrogen strategy and a blueprint. The country also needs to develop industrial policies to promote and drive hydrogen use. To do so, regulation is necessary, and the development of a national regulation will hopefully follow models already implemented in other countries where hydrogen is developed for energy generation.

As an association, we need to focus on promoting hydrogen use, increase awareness of the topic for the masses and work with the authorities to develop a national strategy that includes the creation of regulation and industrial policies. If we can align in these areas and work together, we hope to continue to promote hydrogen development in the upcoming months and years.

Source: NGI – Adam Williams.

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