The Renewable Energy Agency of Nuevo Leon joined the World Bank's Hydrogen for Development initiative for the deployment of low-carbon hydrogen, increasing renewables requirements and potentially turning into a new source of demand for International Renewable Energy Certificates.

Launched by the World Bank Group in November 2022 at the Convention of Parties 27, the initiative aligns with global efforts to enhance the deployment of low-carbon hydrogen in developing countries.

"The aim through the H4D partnership is to create a platform for exchanging experience and knowledge," Natalia De la Fuente, Director of Energy Security and Transition at the Renewable Energy Agency of Nuevo Leon, told S&P Global Commodity Insights, Dec 18.

"Related information gathered by the Agency such as companies' ecosystem and further research will add to this initiative, boosting worldwide hydrogen momentum," she added.

The state of Nuevo Leon, the third largest by GDP in Mexico and a key center for industry and manufacturing, is positioning itself to leverage best practices and funding opportunities related to the energy transition and the State's Renewable Energy Agency has made significant strides in promoting hydrogen as an energy vector.

De La Fuente said that "with approximately 1000 MW of renewable energy capacity (12.5%) out of 8000 MW in the state, there is an opportunity for growth in renewable energy projects and we are working to attract them."

Earlier this year, Nuevo Leon also joined the h2 Regional Energy Hub, part of the Clean Energy Ministerial's H2 Twin Cities initiative, with Houston mentoring the state to enhance the hydrogen economy through local supply chain development and integration across various sectors.

Despite progress towards a low-carbon hydrogen pathway, commercial scalability remains a distant prospect. Key factors that could drive down the weighted average cost of capital (WACC) include improvements in renewable energy prices, enhanced electrolyzer efficiency to lower costs, increased scale of hydrogen facilities, and reduced financing costs through effective risk mitigation.

In the Hydrogen Virtual Week that took place in November, Silvia Carolina Lopez Rocha, the World Banks' Energy Regulation Specialist Officer, said that project financing in Latin America faced political, macroeconomic, consumption, regulatory, technological and supply constraints as well as operational risks.

The revised Global Hydrogen Review 2024 report by the International Energy Agency showed that to deploy the whole estimated potential of over 7 Mtpa of low-emissions hydrogen in Latin America by 2030, the region would require a massive expansion of renewable capacity. It added that if all hydrogen projects in the pipeline come to fruition, wind and solar PV generation would need to increase by 140% within this decade.

Sebastián Rodríguez, I-REC lead at the Mexican I-REC issuer Normex, pointed out that the development of a hydrogen economy in Mexico could stoke demand for Mexico I-RECs for green hydrogen projects.

"Currently, certificates' supply is not keeping up with demand, leading to price increases", he said Dec. 16.

Platts, part of S&P Global Commodity Insights, assessed any technology vintage 2024 Mexico I-RECs at $2.15/MWh, and vintage 2023 certificates at $1.19/MWh on Dec. 17.

Rodríguez explained that the new devices' registration for certificates' issuance has fallen short this year, further exerting upwards pressure on prices.

The registration of new facilities in the Mexico's I-REC market has dropped significantly in 2024. Until November the capacity merely added 0.31 MW, which contrasts with the 798.43 MW registered during 2023, according to the latest data published by I-TRACK Foundation.

Normex agrees that if demand continues increasing in Mexico's I-REC market along with supply constraints and low devices registration, prices could continue rising in the future.