A Roadmap To Our Emerging Hydrogen Economy: Part 1

Editor’s Note: We kick off today a three-part series: “A Roadmap to Our Emerging Hydrogen Economy,” written by Alexis Pappas and Maggie Hanna.

Alexis Pappas is a technology strategist and writer with diverse projects in energy innovation and industrial digital transformation. Maggie Hanna, PGeo, BSc, is a Fellow at Energy Futures Lab (www.energyfutureslab.com).

Today they review how Canada’s oil and gas industry can take the lead in the development of a sustainable hydrogen economy. Parts 2 and 3 of this series explore what a transitional energy infrastructure looks like, how we can mitigate the social and capital costs of pipeline construction through clean energy compatibility, and why one of our least valuable energy resources — stranded cheap natural gas — could become the foundation for a new era of Canadian clean energy exports.

Decades ago, it might have seemed a little unbelievable that in the futuristic-sounding year of 2020, our economic engines would still mainly be powered by fossil fuels. Lofty predictions include those from futurists Peter Schwartz and Peter Leyden, who said in a 1997 Wired story that the world would see widespread adoption of hydrogen for transportation by 2010, with all new vehicles entering the market a decade later being fueled by hydrogen.

“Sitting here in the late 1990s, it's possible to see how all the pieces could fall into place. It's possible to construct a scenario that could bring us to a truly better world by 2020.”

Schwartz and Leyden were far from alone in their optimism. We’ve been imagining a full transformation in the way we use energy for decades, and it always seems more imminent than our past experiences should credibly suggest. When trying to peer past the horizon of the next five, 10 or 20 years, it’s easy to forget that while major energy transitions have the potential to move quickly, it takes a massive commitment to create the infrastructure needed for full deployment of emerging technologies.

But the way humanity sources and uses energy isn’t just a product of individual technologies. It’s also a reflection of our inherent quality of life, one that emerges from a complex system and touches every aspect of our lives. Another Wired article from the same year called ‘Dawn of the Hydrogen Age’ may have been a little more prescient in its acknowledgment of the immense task of the systemic transformation of our vehicles, energy grids and storage solutions. As a result, it extended the timeline for full replacement much further into the future.

“It is likely to take 50 to 100 years to achieve a mature hydrogen economy, but the impact of fuel cells should be felt long before that.”

We’ve been seeing waves of this hydrogen transformation and its promise of a cleaner, more cost-effective and equitable society. Hydrogen is already created and used in the oil and gas sector that it will augment and perhaps someday replace, and this infrastructure provides us with some of the initial building blocks for a hydrogen transition. Collectively, we can see a vision for a new future of energy, but a viable roadmap requires overcoming significant challenges.

Moving forward quickly and strategically in an energy environment that has been largely the same for three generations is difficult. Systemic challenges require systemic solutions, and often, a seismic disruption shakes up the existing order and provides breathing room for new solutions to emerge on a large scale.

As lower demand continues to destabilize oil and gas markets, the need for a new system of locally controlled, low carbon and ‘crisis-resilient’ power has entered the public dialogue. At the same time, our dependence on, and need for, a functioning oil and gas industry in Canada has never been more undeniable — especially with prices plunging briefly into negative territory earlier this spring during an already frightening economic downturn due to COVID-19.

Canada needs innovative solutions that move beyond the dichotomy of oil and gas advocates vs. clean energy proponents that dominates public discourse, and that address both our future ambitions for a cleaner world and our current need for profitable hydrocarbon production. In the short term, the oil and gas supporters make a valid case — if we look too far ahead, we run a very real risk of causing economic damage that could take decades to repair.

As the world’s fifth largest producer of natural gas and sixth largest crude oil supplier, traditional energy contributes ~$120 billion a year to Canada’s GDP. But over the last six years, as both oil and gas prices have fallen from their once-lofty levels, that sector has taken a beating. We’ve seen that take the form of tens of thousands of unemployed energy workers, the reduced profitability of Canada’s regional oil producing economies, and a sharp decline in federal and provincial revenue.

Canada currently needs these billions in oil and gas taxes and royalty payments, whether we have an ethical issue with the industry’s impact or not, because this revenue is helping to fund a future where we won’t need as much of them.

And right now, Canada turning off its own spigots would simply transfer the funds we could use to support our own energy transition infrastructure development into the coffers of countries with far less strict environmental regulations or human rights track records. The world will still buy oil, but it will come instead from the U.S., Saudi Arabia, Nigeria and Venezuela. As Prime Minister Justin Trudeau said in a 2017 speech, “There isn’t a country in the world that would have billions of barrels of oil in the ground and just leave it there.”

But few people would argue that our petroleum dependence is permanent. We know our future holds something else for our species, and low prices and demand declines will inevitably shorten the lifespan of Canada’s high-cost reserves. Initially, the pandemic set cleaner alternatives back almost as much as the oil and gas industry, with more than a hundred thousand jobs lost in the sector in the U.S. since the crisis began, higher uncertainty for new projects in development, and widespread predictions that due to resource constraints the adoption of new energy sources would be significantly slowed.

However, headlines are showing that clean energy is regaining momentum. Large hydrogen projects in places like South Korea, Japan, and Australia have recently begun to move forward again as the pandemic stabilizes, along with increased government support around the world for funding hydrogen infrastructure. Twenty countries have already published detailed hydrogen strategies. To avoid being left behind in the global energy transition, Canada needs to find the same impetus, while balancing the survival, in some form, of our domestic oil and gas industry. For Canada in particular, hydrogen holds a key — one that leverages many of our country’s existing energy sources, technology, skillsets, and geological advantages.

As a near-zero-emissions fuel with water as the only by-product, hydrogen is producible from a range of sources, the lowest cost being natural gas combined with CO2 sequestration. Through major advances in hydrogen production, transportation and storage technologies, large-scale hydrogen usage for low carbon emission transportation and power generation has become highly viable. Western Canada is ideally suited to the creation of ‘blue hydrogen’, made from combining natural gas and water at high temperature, and injecting the resulting CO2 in deep geological formations where it is permanently sequestered. The rest of the country, meanwhile, is well suited to making ‘green hydrogen’ that comes from splitting water molecules using low emissions electricity from sources like wind, solar and hydro dams.

If it gets this right, Canada could potentially have some of the lowest-cost blue hydrogen in the world and carve out an important segment of a growing export market.

Western Canada’s abundant supply of inexpensive natural gas; porous, permeable and laterally extensive deep rock for CO2 sequestration; and a strong culture of innovation create an environment found in few other oil producing countries in the world. With the development of large-scale transportation pipeline infrastructure, Canada could become a world leader in high-value hydrogen fuel for eager international markets like the Netherlands, Japan and South Korea.

This crisis is the time for bold thinking and forging a new and profitable reality. The market for blue hydrogen is predicted to grow significantly over the next few years; by 2028, production is expected to reach about 3.3 million metric tons per year, up from its current capacity of 0.6 million mt, according to a recent report issued by Platts Analytics' Hydrogen Market Monitor. Embracing this global shift could create some much-needed (and high-value) jobs, and with hydrogen’s appeal to global clean energy funders, help attract a broader range of international investment to Canada.

In so many respects, blue hydrogen now holds the potential to shape an innovative third way for our economy, one where Canada can step outside of the forced dichotomy between our legacy oil and gas sector and a cleaner future aligned with the changing needs of the global market. This shift in thinking can turn the traditional industry that many perceive as an obstacle to our progress towards energy transformation into the compelling pathway that leads us there faster than we could have imagined. Or, as the great thinker Marcus Aurelius once wrote, “The impediment to action advances action. What stands in the way becomes the way.”

Rather than being a barrier to change, our oil and gas industry can take the lead in the development of a sustainable hydrogen economy, shaping the way to an eventual transition using much of the existing know-how and infrastructure. Parts II and III of this article explore more about what a transitional energy infrastructure looks like, how we can mitigate the social and capital costs of pipeline construction through clean energy compatibility, and why one of our least valuable energy resources — stranded cheap natural gas — could become the foundation for a new era of Canadian clean energy exports.

We might be far afield from the world envisioned by some of the more optimistic prognosticators of just over two decades ago — and there are still no fleets of flying cars overhead — but by 2020, we’ve seen enough of the path to know that ‘either/or’ and contentious division aren’t going to get us to where we want to be in another 20 years. Petroleum and clean energy proponents are united in a common vision for a prosperous, sustainable and equitable Canada. By putting aside our old schisms, we can embrace the innovation, investment and policy it will take to get us there.

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