Roberto Ballinez
Executive Finance and Infrastructure Director
HR Ratings
Expert Contributor

Green Hydrogen: Electrification and Decarbonization

By Roberto Ballinez | Thu, 07/07/2022 - 09:00

Green hydrogen production is not the solution to all our problems related to generating cheap and environmentally friendly energy. But, undoubtedly, it should be considered within our energy matrix to become a more competitive, clean, and efficient economy in the coming years.

In this sense, I believe that the transformation of the energy matrix in Mexico, as in any other country, must consider the use of this fuel within the following two strategies: 1) the electrification of our daily lives and 2) the decarbonization of those industries that intensively use fossil fuels in their production processes (gray or black hydrogen).

Many countries have begun to promote the production of another type of less polluting hydrogen, such as green or blue. On the one hand, green hydrogen is obtained through electrolysis, a method that uses electrical energy to split water into hydrogen and oxygen. If this energy is generated with 100 percent renewable resources, the product obtained is completely clean. On the other hand, the production of blue hydrogen considers some fossil fuel as an input but the method considers the capture and storage of greenhouse gas (GHG) emissions that are generated in the process.

In relation to the first strategy mentioned above, in my opinion, green hydrogen should be conceived as an additional energy source within our energy matrix that helps us complement existing sources. In this sense, given the intermittency that renewable energy sources naturally show, if we had the technology and infrastructure to produce and store green hydrogen, we could solve this problem and we could create an aggregate power generation curve similar to our own curve of electricity demand. Green hydrogen can be transported and stored for weeks or months; therefore, this fuel can be used to generate electricity when the sun goes down or the wind does not blow. In this way, we could use this clean energy in many more activities in our daily lives.

Unfortunately, the technology required to produce green hydrogen is still very expensive. Furthermore, we do not have the infrastructure to transport and store it efficiently and safely. For all this, producing green hydrogen today would be more expensive than continuing to use gray hydrogen. Even those countries that are investing in the production of this resource report a cost equivalent to double or triple compared to the production of gray hydrogen. Part of this cost is due to the fact that green hydrogen is not a primary fuel but is produced from another element, such as the wind or sun.

However, if we start to consider the price of GHG emissions generated by industrial processes within the cost of gray hydrogen, it is possible that green hydrogen will become increasingly competitive. If carbon prices continue to rise (which are tied in some way to environmental damage), it is likely that the industries that pay to pollute will eventually see this impact on their financial statements and then start looking for alternative energy sources.

Therefore, in addition to the potential that green hydrogen has to produce electricity, it can also help meet emission reduction targets. This is related to the second strategy that we discussed above: the decarbonization of industrial processes, partially or totally replacing natural gas or any other fossil fuel used to generate thermal energy. Industries that can transition to green hydrogen include petrochemicals, iron, steel, glass, fertilizers, cement, ceramics, and mobility (airplanes, ships, and trains through fuel cells).

Regarding the issue of costs, it is also likely that the technology to produce green hydrogen will be more commercially viable in the coming years, as happened with wind or solar technology. Some analysts believe that by 2030, the cost of generating power via green hydrogen will be very similar to the cost of generating using fossil fuels.

It has often been said that Mexico has great potential for the production of green hydrogen, especially due to the amount of renewable resources it possesses. However, we lack an industrial policy for the production of this fuel and a public strategy for the decarbonization of the industrial sector. In Latin America, Chile, Colombia, Costa Rica and Uruguay have already announced a public policy for the development of this market.

Despite this, interest in using this resource is slowly growing in our country. For this reason, it is important for the government to create the right conditions to promote the production of green hydrogen, encourage investment in infrastructure, support technology research and development, provide legal certainty to final consumers and thereby facilitate compliance with our environmental goals.

In my opinion, the first steps we must take before decisively promoting the production of this resource are: 1) create a regulatory framework that establishes the rights and obligations of each participant in this market and 2) invest in infrastructure for transportation and storage.

Finally, we must say that CFE has announced its interest in developing a green hydrogen production plant in Baja California. This plant would receive renewable energy from the Cerro Prieto photovoltaic plant or from the solar plant that CFE also intends to build in Puerto Peñasco, Sonora. According to the announcement, the green fuel would be sent to the Presidente Juárez thermoelectric plant in Baja California. In the early stages, the project would use 4 percent hydrogen and the rest would be natural gas. In this context, let us remember that about half of the electricity production of the National Electric System comes from plants that use partially or totally natural gas or other fossil fuels.

Photo by:   Roberto Ballinez