Hydrogen Economy Could Rival Oilsands, Align Province With Energy Transition
The province has likened its new hydrogen roadmap to Alberta’s drive to develop the oilsands a half century ago, envisaging a similar hydrocarbon fuelled bonanza for the economy for decades to come.
The roadmap released Friday projects tens of thousands of jobs created during the construction of new projects and more than $30 billion in capital investment being attracted by 2030 as the province leverages the world’s transition to carbon neutrality.
“Today is a historic day as we unveil plans to advance a low-carbon future in Alberta that will create a tremendous amount of jobs and prosperity for our province,” said Dale Nally, associate minister of Natural Gas and Electricity. “Hydrogen can absolutely be a game changer for our province on many levels.”
“Alberta is on the cusp of one of the greatest economic recoveries that the province has ever seen, and a clean affordable energy future driven by hydrogen will be front and centre.”
David Layzell, energy systems architect at the Transition Accelerator, told the news conference announcing the roadmap that it marks “a pivotal moment in the evolution of Alberta s energy sector. I would argue that it's equivalent to when some 50 years ago Premier Peter Lougheed decided to move forward on developing the oilsands to drive the economy of Alberta and ultimately of Canada.
“But this time around the tapping of Alberta's natural resources will align with the need to address climate change and to accelerate the transition to a more sustainable global energy system and economy. This roadmap is so important because it points to credible and compelling transition pathways to a low carbon future.”
Premier Jason Kenney said the global hydrogen market is predicted to be worth upwards of $2.5 trillion by the year 2050. “With enormous demand expected from global economies looking to lower their greenhouse gas emissions, hydrogen has the potential to be Alberta's next great opportunity. We can become one of the world's biggest suppliers of responsibly produced hydrogen for customers around the world, and in the process we'll create billions of dollars of investment and tens of thousands of high paying jobs for Albertans.”
He added, “We are doubling down on Alberta's energy resources like natural gas and hydrogen because we know that they hold almost limitless potential to create jobs and diversify the economy.”
Hydrogen could provide up to 24 per cent of global energy demand by 2050, growing to almost 700 million tonnes per year, an almost eight-fold increase from the current global consumption of over 90 million tonnes in 2020, based on scenarios that would track 1.5 degrees Celsius rise in temperatures this century.
Meeting that global demand would require more than US$11 trillion of investment in production, storage and transport infrastructure. The global sale of hydrogen could exceed US$700 billion by 2050, concludes the report. Clean hydrogen also provides opportunities to decarbonize Alberta’s industries.
“For Alberta to become a major player in the global hydrogen economy, the province will be required to take bold steps — leverage core strengths, catalyze technology development, and orchestrate the pathway to self-sufficiency and growth for the sector,” it states.
Limited emissions reductions
The roadmap promotes the low-emissions nature of the hydrogen economy, noting that if hydrogen is widely integrated into the energy system the province could cut greenhouse gas emissions by 14 megatonnes annually by 2030.
“In addition, reducing emissions leads to increased investment attraction where investors are looking for companies that demonstrate a positive performance on ESG [environmental, social and governance] considerations,” it states. “This is relevant to Alberta’s energy sector and clean hydrogen deployment, as companies with superior ESG performance are expected to perform better in the future and transition to a low carbon economy.”
But the emissions cuts would only represent a five per cent reduction in the roughly 275 megatonnes emitted by the province in 2019, 51 per cent of which are discharged by the oil and gas industry. Alberta, which represents almost 40 per cent of Canada’s total emissions, has no 2030 or 2050 reductions targets — and no plans to introduce them, according to Nally.
“At this point we are not making any net-zero commitments other than the fact that we will support any industry or jurisdiction that wants to get there. We are determined to be a global leader and it's not about empty platitudes and virtue signaling, it's about meaningful actions, and we are choosing the meaningful actions,” he told the news conference.
Generational wealth creation
The comparison to the oilsands is not so much about the investment that's made, but about “the generational wealth that's created, and that's what we have to focus on,” added Nally.
“The oilsands have been an absolute bounty for all Albertans and we believe that hydrogen has the potential to create the same type of generational wealth, and we will make whatever investments are required to make sure that Albertans receive those benefits. But it will absolutely be with private industry at the table and in the front seat for sure.”
Nally said consultations determined that the most important thing the province could do is to build new market demand. “And so what we are going to be doing as we build that market demand is look at things like blending hydrogen into natural gas, and that means we're going to have to amend the Gas Utilities Act, so we will be coming back in the spring with some legislation that will allow that to happen.”
Building hydrogen demand
The roadmap focuses on several key pillars to support the growth of a hydrogen economy, including building demand, enabling CCUS, de-risking early investments and establishing exports.
It modelled two possible scenarios for the future of hydrogen in Alberta in 2030: an incremental future where clean hydrogen has slow uptake into the provincial economy based on existing policy and regulations and less optimistic growth rates; and a transformative future where clean hydrogen is integrated into provincial energy systems with growth rates that will lead to large-scale domestic hydrogen deployment and exports.
It starts with the deployment of CCUS to decarbonize current industrial hydrogen production and significantly reduce the carbon intensity of the fossil fuels the province produces, uses and exports.
The incremental future sees CCUS added to hydrogen production at bitumen upgrading and/or oil refining sites to reduce emissions by six megatonnes per year, while the transformative future sees CCUS also added to hydrogen production at ammonia and methanol facilities to reduce emissions by 12 megatonnes per year.
Secondly would come the use of low-carbon hydrogen as a zero-emission fuel for sectors such as transportation, buildings and industrial heating. By displacing traditional carbon-based fuels, Alberta hydrogen could dramatically reduce emissions across the province and around the world, according to the roadmap.
Third, the new markets for hydrogen will enhance the deployment of renewables like wind and solar by creating a secondary market for power generation. Hydrogen would represent a backup for renewables when demand exceeds supply.
The roadmap also identifies the key sectors, investment priorities, policies, regulations and partnerships that are needed for success.
Low carbon energy carrier
The energy carrier is highly touted for its zero carbon emissions when used. But it is emissions-intensive to produce from hydrocarbons when carbon capture is not utilized, as is the case with the vast majority of so-called grey hydrogen produced today.
While Nally said the province is agnostic as to the low-emissions production process used, officials said the province has all the ingredients to produce blue hydrogen — created from natural gas with CCUS — at scale, and suggests green hydrogen (produced by electrolysis of water using emission-free power) “needs to improve to be cost competitive.”
However in the medium to long term (10 years or more) wind-powered hydrogen production via electrolysis could present significant opportunities to produce clean hydrogen with the lowest life cycle GHG emissions footprint.
Autothermal reforming of natural gas — which can lower the cost and increase the efficiency of carbon capture compared to conventional steam methane reforming — coupled with CCUS is another technology gaining momentum, while natural gas decomposition, biomass-derived hydrogen, chemical looping and partial oxidation of methane, and underground gasification are also emerging technologies for H2 production.
Blue hydrogen focus
The report talks mainly about blue hydrogen, and the potential benefits for the natural gas sector that its production would bring. The 2030 transformative scenario would require approximately 0.7 billion cubic feet of new natural gas demand, should hydrogen be integrated across Alberta and be destined for export, it states.
A hydrogen market exporting 10 million tonnes of clean hydrogen per year to international markets by 2050 could demand about four billion cubic feet per day in natural gas, further growing Alberta’s natural gas value chain.
Some jurisdictions have moved to promote green over blue hydrogen production for its lower emissions, as CCUS does not necessarily zero out emissions in blue hydrogen production. The roadmap proposes the establishment of Canadian and global carbon intensity thresholds for clean hydrogen and to improve public literacy on clean hydrogen.
“An emerging narrative against natural gas-based hydrogen production can disrupt Alberta’s efforts to build a clean hydrogen economy. As Canadian and global carbon intensity benchmarks and Guarantee of Origin schemes are proposed and developed, Alberta needs to actively inform their development with data grounded in robust analysis and science.”
As clean hydrogen is an emerging opportunity with challenging economics compared to conventional, higher-emission fuel sources, long-term investment certainty and funding are needed to ensure investments can happen today, according to the roadmap.
“We acknowledge that we are in a competition with other jurisdictions, that there do need to be some incentives because, like early CCUS, hydrogen at this stage, it's not necessarily a profitable technology. We believe it will be in the future and that's what's drawing private sector investors here,” Kenney said.
To de-risk investment, the province can take measures such as advancing fuel switching and refuelling infrastructure and exploring the concept of a hydrogen trading hub to enable global trade. It could also promote demonstration projects, research and innovation to prove and scale up emerging clean hydrogen technologies.
Kenney said more is expected from Ottawa. “We appreciate the budget commitment from this past February, but we urge the federal government to significantly increase the scale of its ambition, and future investment in CCUS to be probably the single most powerful thing they could do to help reduce emissions from the Canadian economy.
“And so that's why we renew our call for a refundable tax credit that's similar to the U.S. 45Q [tax incentive] that is stackable, that allows for enhanced oil recovery as well, to get net-zero conventional oil, but we will continue to work with the feds, with the industry, and we are prepared in principle to do more.”
In terms of dollars from the province, Nally pointed to the Alberta Petrochemical Incentive Program, which provides direct financial incentives to attract investment in hydrogen production facilities using CCUS.
“This is a significant financial investment that we are making in hydrogen and I'm happy to say the early results show that it's working. We have seen four significant, world scale hydrogen facilities that have been announced since January.”
Those include a multibillion dollar project announced by Suncor Energy Inc. and ATCO Ltd. in May to produce more than 300,000 tonnes of hydrogen per year in Alberta's industrial Heartland and Air Products announced plan to build at $1.3 billion blue hydrogen production and liquefaction plant in Edmonton, representing the largest net-zero hydrogen energy complex in the world.
That was followed by PETRONAS Energy Canada Ltd. and Japan-based ITOCHU Corporation, announcing a feasibility study into producing blue hydrogen for export to Asian markets and Mitsubishi and Royal Dutch Shell plc partnering to examine producing blue hydrogen in Alberta for export mainly to Japan. Both projects would convert the hydrogen to ammonia for transportation overseas.
“I can assure you based on my advanced conversations with global companies that there will be several more over the next year or two, announcements about major new hydrogen projects in Alberta, so I think that our retargeted approach is working,” Kenney told reporters.
On exports, it proposes the province lock in export markets and establish market access through establishment of a clean energy corridor with connection through British Columbia and other jurisdictions.
Potential target export markets include Canadian and North America jurisdictions, Europe and Asia Pacific customers. To meet overseas demand for clean hydrogen, liquid hydrogen carrier ships are currently under development.
Pipeline exports to California — a leading hydrogen adopter — could help establish a foothold in a key North American market. “California’s projected clean hydrogen demand is expected to be one to four million tonnes per year by 2050, with demand for clean hydrogen in the entire U.S. forecast to be approximately 22 to 40 million tonnes per year.”
In Asia, Japanese power utilities are interested in burning clean ammonia in gas turbines or co-burning with coal to reduce GHG emissions for power generation, according to the roadmap. “Additional economic analysis and feasibility studies are required to better understand the hydrogen export opportunity.”
As exports are currently restricted by the developing global supply chain, existing infrastructure, such as rail, can be used to ship hydrogen carriers such as ammonia today, before dedicated pipelines and export infrastructure are established.
“Achieving significant hydrogen exports in Alberta is dependent on the supply chain reaching maturity with the establishment of infrastructure to tidewater and large-scale liquefaction ships available to export hydrogen or hydrogen carriers to global markets. Support from Canada, British Columbia, and Indigenous and local communities will be critical to establish hydrogen export supply chains.”
In its incremental future scenario, the roadmap sees Alberta exporting clean hydrogen carriers like ammonia by rail to the U.S. with a framework to export clean hydrogen to global markets.
In its transformative future scenario, it envisions Alberta exporting one million tonnes of gaseous hydrogen — noting this would require a fully permitted and constructed pipeline to the west coast, liquefaction and export infrastructure — in addition to export of one million tonnes of hydrogen carriers to global markets by 2030.
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