Mexican hydrogen regulatory efforts gain ground

Spanish Market: Hydrogen, Natural gas
01/11/24

The Mexican hydrogen association (AMH2) has made significant strides in recent discussions with regulators and officials, unveiling a comprehensive roadmap for industrial hydrogen adoption.

The group's report estimates there will be demand for about 392,189 tonnes (t) of hydrogen per year across seven major industries during Mexico's pilot hydrogen development phase. This includes sector-specific hydrogen demands of 148,350 t/yr from oil refining through 10 potential applications; 107,325 t/yr for mining; 55,877 t/yr for hydrogen blending in natural gas; 23,932 t/yr in the metals industry; 35,040 t/yr tied to ammonia production; 15,265 t/yr for public transport; and 6,400 t/yr for methanol production.

AMH2's strategy urges the administration of President Claudia Sheinbaum to designate a lead ministry for hydrogen development, prioritize green hydrogen production and introduce incentives for project financing, technology development and energy transition initiatives. Additionally, it calls for regulatory adaptations to facilitate hydrogen's integration into Mexico's natural gas infrastructure, including quality, transportation, distribution and safety standards, especially for industrial equipment.

Legal reforms to support hydrogen development will also be needed, according to the report, targeting laws governing mining, water, hydrocarbons, nuclear energy, energy transition, environmental protection, electric power, bioenergy and geothermal power. For green hydrogen — generated with renewable energy — the focus would be on the latter five areas.

These efforts align with Mexico's long-term energy plan (Prodesen 2023-2037), which envisions converting 12 combined cycle power plants, totaling 1.024GW, to operate on a 70pc natural gas and 30pc hydrogen blend between 2033 and 2036. AMH2 president Israel Hurtado said although Mexico's pipeline infrastructure could handle up to a 15pc green hydrogen blend, achieving a 30pc blend would require further technological advances expected over the next decade.

Prodesen also identifies regions for hydrogen injection into pipeline networks, including Sonora, Sinaloa, Tamaulipas, Oaxaca, Veracruz, Baja California and the Yucatan peninsula. Yet new regulations will be crucial to establish a robust framework for hydrogen blending in existing infrastructure.

The Sheinbaum's administration has committed to reducing carbon emissions and promoting clean energy, Hurtado said, with a $13.5bn investment pledge in renewables over six years and a target for 45pc of national power from renewables by 2030. AMH2 has built early connections with Sheinbaum's team, including Jorge Islas, her energy and climate advisor during the campaign, who now heads the energy ministry's (Sener) energy transition unit and supports green hydrogen initiatives.

AMH2 leaders also recently met with energy regulator (CRE) president Leopoldo Melchi and commissioner Walter Jimenez, who expressed strong interest in hydrogen regulation. The association and CRE agreed to form a technical workgroup to develop clean hydrogen regulations collaboratively.

Looking ahead, AMH2 plans to meet with energy minister Luz Elena Gonzalez and Mexico's economy ministry to further discuss the hydrogen strategy. But CRE's workgroup is on hold pending potential legislative reforms that could reorganize Mexico's energy regulators under Sener's supervision.

Projects in development

AMH2 has identified 16 hydrogen projects in Mexico, with eight in various development stages and eight announced. Primarily focused on green hydrogen, these projects represent an estimated $19bn investment.

The largest, Helax, is a $10bn green hydrogen production facility in Oaxaca, connected to the Interoceanic Trans-Isthmus Corridor. AMH2 anticipates production to start within two years following initial permitting.

The roadmap suggests that, even if only six projects are operational by 2030, the sector could generate 3.351GW and attract $1.8bn in investments. These projects are projected to bring in $2.5bn in revenue over six years and yield $1.9bn in tax contributions.

By James Young

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09/12/24

Shale M&A to pick up pace in 2025 after hitting pause

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US H2 hopes at risk with 45V uncertainty: Industry

06/12/24

US H2 hopes at risk with 45V uncertainty: Industry

Houston, 6 December (Argus) — US hydrogen industry developers need more clarity on federal production tax credits (PTC) before moving forward with projects but are hopeful they can convince the incoming administration of the benefits they represent. A raft of hydrogen projects were announced in the US after President Joe Biden announced billions of dollars in federal funding and tax credits for hydrogen within the 2022 Inflation Reduction Act. But much of that euphoria fizzled after the US Treasury last December proposed rules mimicking European standards that some in the industry argue are too stringent and would make many projects, especially those using natural gas, uneconomical. "Everyone looked at the US as a very promising market but the reality is that as time goes by uncertainty is growing," said Ana Quelhas, managing director of hydrogen at EDP, on a panel this week at the Reuters EnergyLive conference in Houston, Texas. "There's a big question mark related to the implementation of 45V and that's very bad for investors." The US still has the opportunity to be a leader in hydrogen if it can implement rules around how the 45V credit is applied correctly, said Tomeka McLeod, vice president of hydrogen at BP. If so-called blue projects — which make hydrogen from natural gas — can get the full $3/kg credit, "... it would make our projects some of the most competitive globally," McLeod said. Rules related to the use of renewable and certified natural gas in hydrogen production still need to be "hammered out," she said. BP aims to have 5-10 projects online by the end of decade but McLeod says they will be evaluated by the same internal standards of any other project. "We need to make sure that the economics of those projects work, they need to be able to compete within our portfolio," she said. BP is part of the Midwest Alliance for Clean Hydrogen (MachH2) that recently received $1bn in Department of Energy (DOE) funding and plans to produce hydrogen from natural gas with carbon capture to power its Whiting refinery in Indiana. Christmas gift or lump of coal Many of those gathered at the conference in Houston this week said they hoped further guidance would arrive "like a Christmas present" in the waning weeks of the year, and the Biden administration would sew up any lingering details before leaving office. Nonetheless, they still expect to be subjected to further scrutiny under the Trump administration, which has made clear its disdain for clean-energy mandates. Learning to speak to the concerns of the new administration will be crucial to success, industry leaders said, including explaining hydrogen's role in promoting national security and job creation. "We need to educate this incoming administration and collaborate and make sure that the momentum that is already here continues, and [show] that we can actually do the right thing from a national energy security perspective," said Sanjay Shrestha, president of Plug Power, a company that develops hydrogen fuel cells to replace conventional batteries. Keystate Energy chief executive Perry Babb, whose company is looking to produce clean hydrogen in Pennsylvania, said aligning with the administration's goals as well as a solid business case will be key to survival. "We will need to speak the language of the administration," Babb said. By Jasmina Kelemen Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

Atlantic LNG: US fob prices edge lower

06/12/24

Atlantic LNG: US fob prices edge lower

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Republicans weigh two-step plan on energy, taxes

06/12/24

Republicans weigh two-step plan on energy, taxes

Washington, 6 December (Argus) — Republicans in the US Congress are considering trying to pass president-elect Donald Trump's legislative agenda by voting first on a filibuster-proof budget package that revises energy policy, then taking up a separate tax cut bill later in 2025. The two-part strategy, floated by incoming US Senate majority leader John Thune (R-South Dakota), could deliver Trump an early win by putting immigration, border security and energy policy changes into a single budget bill that could pass early next year without Democratic support. Republicans would then have more time to debate a separate — and likely more complex — budget package that would focus on extending a tax package expected to cost more than $4 trillion over 10 years. The legislative strategy is a "possibility" floated among Senate Republicans for achieving Trump's legislative goals on "energy dominance," the border, national security and extending tax cuts, Thune said in an interview with Fox News this week. Thune said he was still having conversations with House Republicans and Trump's team on what strategy to pursue. Republicans plan to use a process called budget reconciliation to advance most of Trump's legislative goals, which would avoid a Democratic filibuster but restrict the scope of policy changes to those that directly affect the budget. But some Republicans worry the potential two-part strategy could fracture the caucus and cause some key policies getting dropped, spurring a debate among Republicans over how to move forward. "We have a menu of options in front of us," US House speaker Mike Johnson (R-Louisiana) said this week in an interview with Fox News. "Leader Thune and I were talking as recently as within the last hour about the priority of how we do it and in what sequence." Republicans have yet to decide what changes they will make to the Inflation Reduction Act, which includes hundreds of billions of dollars of tax credits for wind, solar, electric vehicles, battery manufacturing, carbon capture and clean hydrogen. A group of 18 House Republicans in August said they opposed a "full repeal" of the 2022 law. Republicans next year will start with only a 220-215 majority in the House, which will then drop to 217-215 once two Republicans join the Trump administration and representative Matt Gaetz (R-Florida) resigns. By Chris Knight Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

Denmark's wind tender flop linked to H2 network doubts

06/12/24

Denmark's wind tender flop linked to H2 network doubts

London, 6 December (Argus) — Denmark's failure to attract bids in an offshore wind tender was partly caused by the country's lack of firm commitment to a hydrogen pipeline network, according to Danish and European hydrogen associations. For Denmark's hydrogen industry the failed tender is raising concerns that Copenhagen might resort to state aid for offshore wind, which could jeopardise renewable hydrogen production that is compliant with EU rules. Denmark unsuccessfully offered three areas totalling 3GW in a first part of the auction that ended on 5 December, and will offer another 3GW in a second part ending in April 2025. The "very disappointing" result will now be investigated by the Danish Energy Agency to discover why market participants failed to bid, energy minister Lars Aagaard said. Wind project developers may have worried that low electricity prices in an increasingly saturated power market and inadequate export routes — either via power cables or as hydrogen via pipeline — would deny a return on investments, industry participants said. Ample offshore wind potential could allow Denmark to generate power far in excess of its own needs. But in order to capitalise on this the country would need to find a way of getting the energy to demand markets. Turning offshore wind into renewable hydrogen for export was "a very attractive solution" for developers, Hydrogen Europe chief policy officer Daniel Fraile said, but would rely on timely construction of a network "all the way from the coast to Germany's hydrogen-hungry industry." Denmark's hydrogen network was recently pushed back to 2031-32 from an initial 2028, partly because of an impasse over funding that provoked anger from industry. The government has said it will only help fund the hydrogen transport network if there are sufficient capacity bookings guaranteeing its use. But this approach increases risks for developers, according to Fraile. "You need to handle the risk of winning the offshore tender, finding a hydrogen offtaker in Germany and commit to inject a large amount of hydrogen over several years. Then deliver the project on time and on cost," he said. "This is a hell of an undertaking." Industry association Hydrogen Denmark's chief executive Tejs Laustsen Jensen agreed, calling the failed tender "a gigantic setback". "The uncertainty about the hydrogen infrastructure has simply made the investment too uncertain for offshore wind developers," he said. "Now the task for politicians is to untie this Gordian knot." "Of course, the tender must now be re-run, but if the state does not guarantee in that process the establishment of hydrogen infrastructure, we risk ending up in the same place again," he said. The booking requirement as a prerequisite for funding the network "must be completely removed," Jensen said. Green energy association Green Power Denmark said "there is still considerable uncertainty about the feasibility of selling electricity in the form of hydrogen," but pointed to other factors that may have led to the tender failing to attract bids. Wind turbines and raw materials have become more expensive because of inflation while interest rates have risen sharply, reducing the viability of such projects, the group's chief executive Kristian Jensen said. Unlike some other countries, Denmark does not intend to fund grid connections or provide other subsidies, he said. Unwanted help Hydrogen Denmark's Jensen warned against the government resorting to subsidies to help get offshore wind farms built. "State support for offshore wind would be the death knell" for the hydrogen sector and would "de facto kill all possibilities for a green hydrogen adventure in Denmark," he said. Granting state support for offshore wind farms would mean these assets would not comply with the additionality requirement of the EU's definition for renewable fuels of non-biological origin (RFNBO), which are effectively renewable hydrogen and derivatives. EU rules state renewable assets are only considered 'additional' if they have "not received support in the form of operating aid or investment aid," although financial support for grid connections is exempt from this. "If state aid is provided for the offshore wind that is to be used to produce the hydrogen, we will lose the RFNBO stamp, and the Danish hydrogen cannot be used to meet the green EU ambitions for, among other things, industry and transport, and the business case is thus destroyed," Jensen said. By Aidan Lea and Stefan Krumpelmann Geographical divisions of Denmark's H2 network plan Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

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