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Mexico and the New Generation of Fuels

By Andrés Alfonso Bayona Insignares - AMGNV Asociación Mexicana de Gas Natural Vehicular


By Andrés Bayona | President - Tue, 04/11/2023 - 13:58

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For some time now, the US and Europe have been developing an ecosystem to allow new fuels — renewable natural gas (RNG) and hydrogen — to expand across their geography. In the US, we are witnessing the case of Clean Energy Fuels (NASDAQ: CLNE) that has changed its vehicular energy offer from 100% natural gas to over 85% RNG, with the goal to te close out the decade with 100% RNG supply and a projected network of 700-plus stations (560-plus today). 

In Europe, there’s a hydrogen craze with an ample offer of  motorizations from several manufacturers. Governments are playing a key role in boosting this market, since H2 production is pricey by all means today but is evolving rapidly so at the close of the decade it might be affordable by itself without the environmental attributes put into play.

In both cases, the market has been supported by generous subsidies that have acknowledged the economic importance of having cleaner air that translates, for example, into fewer pulmonary diseases and a more productive and happy population. There are numerous papers from the World Bank, among many other respected institutions, that goes back decades.

Mexico, too, is awakening to these new realities, although it does not have a concise program from the federal environmental authorities. The Mexican Clean Fuels Act is mostly directed through the production of biodiesel, which from a world context is not top of mind anymore. Nonetheless, there is a market that is coming into play, mostly from the export sector, such as the very powerful automotive industry. Several of these export companies have in some form a mandate from their shareholders to become “greener.” A very practical way to achieve this is by shifting from natural gas to RNG, since they are fully compatible in a daily industrial operation. This means that no changes to the production line are needed.

The RNGoffer could be as ample as the country is. There are a large number of good landfills that can produce biogas in a stable way, some of them pretty large in size with a controlled disposition.

 Then there is the very large meat producing sector, both from hog farms and cattle farms. According to the law, these sectors have to comply with federal environmental acts related to emissions control that pave the way to the methanization process of biogas to pour out RNG. Both kinds of farms as well as chicken facilities are mostly of pretty large proportions in Mexico, some of them with tens of thousands of animals that produce the manure required for RNG stock. 

The challenge here is pipeline injection since Mexico’s gas network is very restricted and usually is tens of miles away from most facilities. The solution is in virtual pipelines that are currently transporting and selling CNG. Mexico has developed a substantial CNG virtual pipeline sector in the last 10 years, so RNG compression, transportation and decompression should not be difficult to solve.

The transportation sector will see a great benefit from using RNG instead of diesel, if they implement a full-size program that involves capitalizing its environmental attributes,

Much of the same scenario is present in the future of green hydrogen in Mexico. Mexico has many feasible green hydrogen production sites, with abundant solar availability and access to water. Locations include Sonora, Baja California, Sinaloa and several other states. The downside with hydrogen is the total absence of governmental incentives to support growth and benefits that could help drive the market. Now, technology is evolving rapidly and the cost per kilogram is falling compared to some years ago. One of the latest innovations coming this year is the application of electrolysis with salt water that eliminates the need  for the very expensive desalination process. If this innovation hits the market soon it will lower the price of green hydrogen and push production sites to Mexico’s sunny seaside, both in the Pacific and in the Gulf of Mexico.

Green hydrogen today is being requested by most of the main export or global companies operating in Mexico. Their search for greener fuels to feed their industrial processes has faced a void till now, but this  can be reversed rapidly in the future.

Hydrogen can also be produced by g RNG steam reforming, which is the same process used in the oil and gas industry but from a clean source and with clean energy (solar, wind or RNG gensets) driving the production line. This innovation already has been commercially implemented in Europe and promises to be much more cost-effective than the current water hydrolysis.

As for local regulations, both markets operate under a nonspecific act that today is being regulated by the Energy Secretariat (SENER) on a case-by-case basis. The lack of proper regulation in Mexico makes the road to obtain licenses for the various operational needs of any project a bit  harder, but it is not a deal-breaker. 

In the end, Mexico has a huge opportunity to develop a green energy sector that is in demand by most of the new companies coming to the country via a relocation from China, mostly to the north of Mexico and from global and export companies already established in Mexico that have a clean fuel or clean energy compliance rule. The development of this market will generate tens of thousands of jobs and  huge revenues for those companies willing to embrace the challenge of producing clean fuels under the Mexican sun.

Photo by:   Andrés Alfonso Bayona Insignares

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