Issue link: https://digital.shearman.com/i/1479176
LatAm H2: The Growing Importance of Low-Carbon Hydrogen in Latin America | September 2022 9 MEXICO Mexico's geography and renewable energy capacity make it well-suited for green hydrogen development, and it has a 2019-2024 National Development Plan to promote the development and use of hydrogen. Mexico has an active renewable generation industry, although it is not strongly supported by the current administration and has suffered regulatory setbacks in the last few years. The Electric Industry Law deems the generation of power through green hydrogen and fuel cells as clean energy; however, there is no specific regulation of the sector yet. Industry players, such as the Mexican Hydrogen Association, have been actively proposing specific regulations to foster hydrogen production. Current hydrogen use in Mexico is mainly confined to oil refineries operated by the state-owned oil company, PEMEX, and to the petrochemical industry. The following are some of the hydrogen projects that have been announced in Mexico: • In 2017, Air Liquide acquired the hydrogen production business unit of Pemex for US$59 million. Under the terms of the agreement, Air Liquide will supply hydrogen to PEMEX's Miguel Hidalgo refinery, based in Tula de Allende, Hidalgo State, for 20 years. • Linde will invest approximately US$40 million into hydrogen plants at the Madero Refinery (Tamaulipas) and PEMEX will operate it. It is estimated that the plant will have a capacity to produce around 1,190,000m 3 /day of hydrogen. • Mexican company Delicias Solar, S.A. de C.V. is reportedly developing a 58MW solar power plant planned for green hydrogen generation. The plans have already been submitted to the environmental agency for an environmental impact assessment. The plant is expected to rely on approximately 140,000 solar modules and will power a 75MW hydrogen power plant with an estimated annual production of 4,425Mt. Mexico stands to gain significantly from an effective hydrogen strategy. It is the world's 7 th largest vehicle manufacturer and 15 th largest steel producer. As highlighted earlier, steel production is responsible for considerable amount of GHG emissions — if it were a country, steel would be the third largest emitter of CO 2 behind the U.S. and China. The industry is therefore under intense pressure — including from customers such as car makers — to lower its GHG emissions. Steel production emits such high volumes of GHGs because the process itself requires fossil fuel-powered thermal power and because the by-product of the smelting process produces CO 2 . The steel industry is ripe for decarbonization because it requires very few new technological inputs in order to replace fossil fuels. Instead of using coal to separate the oxygen molecules from the iron ore, an alternative process simply substitutes coal with hydrogen, which not only separates the oxygen molecules, but produces only water vapor as a by-product instead of CO 2 . At present, Mexico's plans and emissions targets have been rated by the Climate Action Tracker as "highly insufficient" to meet the warming limitations goal of the Paris Agreement. In its updated Nationally Determined Contribution, Mexico did not revise its targets and its emission projections remain likewise unchanged. Decarbonizing its steel industry would allow the country to better meet international net-zero emission goals without compromising on the competitiveness of its steel and automotive industries.