Hydrogen Regulation in Mexico

In the latest years, the number of states promoting policies related to the use of hydrogen and renewable energy has increased, as well as the actors involved (e.g., the international community, national governments, private companies of different sectors, researchers, etc.). Certainly, the aim to use renewable energy, combat climate change, and reduce carbon emissions represents an opportunity to position hydrogen in the regional and international markets.

The purpose of this article is to provide an overview of the current regulation in Mexico applicable to the use of Hydrogen as an energy source, however it is important to point out that this regulation has not been fully developed and it may be subject to change in the near future.

Current regulation of Use of Hydrogen in Mexico

The applicable laws for hydrogen are the laws for renewable energies, including the Electricity Industry Law (LIE, for its Spanish acronym), which aims “to promote the sustainable development of the electricity industry and guarantee its continuous, efficient and safe operation for the benefit of users, as well as compliance with the obligations of public and universal service, Clean Energy and the reduction of polluting emissions.”

Regarding the use of hydrogen, the article 3 of the LIE states the following:

"XXII. Clean Energies: Those energy sources and electricity generation processes whose emissions or residues, if any, do not exceed the thresholds established in the regulatory provisions issued for such purpose. Clean energies include the following:

…

g) Energy generated using hydrogen through combustion or its use in fuel cells, if it complies with the minimum efficiency established by the CRE and the emissions criteria established by the Secretariat of Environment and Natural Resources in its life cycle."

According to the Energy Transition Law (LTE, for its Spanish acronym) “the minimum efficiency for the use of hydrogen to be considered a Clean Energy shall not be less than 70% of the lower calorific value of the fuels used in the production of such hydrogen".

In this regard, the LIE stipulates that the Energy Regulatory Commission (CRE, for its Spanish acronym) may grant Clean Energy Certificates (CEL’s, for its Spanish acronym) under the Secretariat of Energy requirements and guidelines. According to the LIE, the CEL’s are a title that accredits the production of a determined amount of electric energy from Clean Energies.

It is important to take into account that the above mentioned may change since on October 1st, 2021, the President of Mexico sent to Congress for its discussion and if applicable approval, a Reform Initiative to the Political Constitution of the United Mexican States in Energy Matters (the "Reform"). Among the main points of the Reform is contemplated the cancellation of the CEL’s and the disappearance of the CRE, which is the Coordinated Energy Regulatory Entity in charge of its issuance. The foregoing will affect directly the development of clean energy projects which were incentivized with the CEL´s, since they could be commercialized at the CEL´s market or long-term auctions organized by the National Energy Control Center ("CENACE" for its Acronym in Spanish).

The reason of the mentioned above is that the current Administration is planning to strengthen the Federal Electricity Commission ("CFE" for its Acronym in Spanish) presence in the country through its generation plants, which does not operate with clean energies, and therefore, they are not entitled to CEL´s.

As mentioned before, currently the Reform was sent to Congress for its discussion, where it is expected that it will not prosper or, if it does, it will have relevant modifications, since it will affect considerably the development of renewable energy projects in Mexico.

On the other hand, the CRE published on the Official Federal Gazette (DOF, for its Spanish acronym) the following Official Mexican Standards (NOM, for its Spanish acronym) applicable for the use of hydrogen:

• NOM-018-STPS-2015 Harmonized system for the identification and communication of hazards and risks from hazardous chemicals substances in workplaces:

The aim of this NOM is to “prevent harm to workers and personnel acting in case of emergency”, through the implementation of the Harmonized system in workplaces where hazardous chemicals are handled. It establishes specifications for the labelling of hazardous chemicals, as well as training for employees.  

• NOM-017-CRE-2019 Measurement methods of variables for the calculation of the percentage of free energy of fuel and procedure for conformity assessment:

This NOM is applicable to, among others, Hydrogen-fueled Power Plants that need to obtain the values of the variables for the determination of the Carbon free energy (ELC, for its Spanish acronym) in terms of the Efficiency and ELC Provisions. This NOM establishes the Metrological requirement and the Measurement method of Hydrogen utilization.

Likewise, in 2014, the Secretariat of Energy published the Transition Strategy to Promote the Use of Cleaner Technologies and Fuels, which purpose is to promote the reduction of polluting emissions for the electricity industry and reduce the dependency on fossil fuels in the mid-term and long-term.

In 2020 the Secretariat of Energy published on the DOF the Update of the Transition Strategy, which catalogs Gasification to produce hydrogen as an efficient technology for the use of bioenergy. Furthermore, it indicates that its level of global maturity is low; its tendency of development is moderate; its costs are high; and the level of use locally is null, meanwhile globally is low. 

In addition, the LTE implemented the following programs:

1. Special Program for Energy Transition: its objective is to implement the actions established in the Transition Strategy, ensuring its economic viability, through actions, promotional instruments, and financial and regulatory incentives, to achieve Energy Efficiency Goals.
    
2. National Program for Sustainable Energy Use (PRONASE, for its Spanish acronym): includes the actions, projects and activities derived from the Transition Strategy to achieve Clean Energy Goals.

Besides, according to the Energy Sector Program 2020-2024, published in the DOF, the second phase (2021-2024) for the consolidation of Mexico as an economic, energy and industrial power will be guided by twenty-three principles, including the sustainable use of all Nation's energy resources; increase reserves; and increase energy security. In order to do so, the principle states that 1) the energy policy should be linked to the Nation's water and subsoil resources policy; and 2) it should explore the use of other energy sources, e.g., hydrogen.

Despite the above, Mexico faces a lack of regulatory provisions on hydrogen, for example, provisions for its use and commercialization, storage, and transportation, etc. In this regard, it is important to note that according to article 12, section XX of the LIE, the CRE is entitled to “issue the norms, directives, methodologies and other administrative provisions that regulate and promote the generation of electric energy from Clean Energies, in accordance with the provisions of this Law and in compliance with the energy policy established by the Secretariat”.

It will be important to keep monitoring the development of the Reform and legislation, although considering the approach of the Mexican Government to renewable energies it is unlikely that we will see the any new legislation on the next 3 years.