Incentives, Infrastructure Key to Mexico’s Hydrogen Takeoff

To support the continued influx of foreign investment looking to influence the early development of Mexico’s green hydrogen industry, the public sector must assist via the legislation and ratification of fiscal incentives and the construction of green infrastructure.

“The timely execution of these initiatives has the potential to catapult the formation of a competitive hydrogen industry, stimulate the development of new manufacturing industries and prevent the emission of 300 million tons of carbon emission by 2050,” said Israel Hurtado, President, the Mexican Hydrogen Association.

Technological innovations and increasingly efficient hydrogen production processes have progressively improved the technology’s economy of scale, hinting at the rapid growth of a global hydrogen economy expected to bring about significant geoeconomic and geopolitical shifts. In the Americas, Mexico is poised to become a strategic center given its natural and favorable geographic and macroeconomic conditions. Its forecasted potential has motivated early entrants like Spain’s SENER Ingeniería Mexico and Japan’s External Trade Organization in Mexico (JETRO) to invest and seek out collaboration.

“Beyond the oil and gas that will still last many decades, green energy and decarbonization will be gaining ground. That is why we want to be the first to consolidate ourselves as leaders in Mexico. There is even the potential to export green hydrogen to the rest of Latin America from our country,” said Javier Pascuale, Commercial Director, SENER Ingeniería Mexico.

While symbolic, the inclusion of hydrogen in Mexico’s National Electricity Sector Development Program (PRODESEN) indicates that the country already recognizes the strategic importance of the domestic hydrogen industry. However, increasingly extreme weather events and the Russia-Ukraine war have shifted geopolitical priorities. This has forced countries to accelerate their clean energy transition, a process in which hydrogen may play a protagonist role. To seize on the opportunity, Mexico’s emerging hydrogen sector is looking to the federal government to support it through the codification of fiscal incentives that would encourage the use and adoption of hydrogen.

Some key hydrogen applications include the storage of renewable energy, replacing industrial fuel inputs, the decarbonization of natural gas through blending and green mobility. Individually, the formation of a domestic hydrogen industry is expected to generate 3 million jobs, attract US$59 billion in foreign investment and prevent the emission of 300 million tones of CO2 from 2021 through 2050. Furthermore, Hurtado envisages it encouraging the formation of new manufacturing industries, including electric turbines for hydrogen, electrolyzers, storage tanks and compressors, among others. 

Fundamental to the maturity of Mexico’s hydrogen industry will be a concerted effort by governments to encourage sustainable mobility, evidenced most recently by legislative efforts in Europe and California, said Hurtado. In Latin America, Mexico currently leads in the sale of hybrid and electric vehicles, speaking to domestic appetite. What is more, the need for hydrogen to support the intermittency caused by wind and solar technology adds to its uses. To encourage this shift, the federal government must create fiscal incentives like immediate deductions, zero percent interest rates on aggregate value, tax deductibility on interests as well as accessible bonuses or credits and access to financing.

Other non-monetary incentives include the adoption of green license plates, which would allow the use of parking spaces reserved for electric and hybrid vehicles. Confined lanes for hybrid and electric vehicles, an exemption or reduction in toll fees and free parking could also serve as powerful incentives.