Although the federal government has supported the hydrogen sector for many years, the domestic low-carbon intensity (CI) sector is unlikely to develop on its own without further government support, says a new report from a Canadian Senate committee.

“Or at least it will not develop at the pace required by NZE2050 [net zero greenhouse gas emissions by 2050],” according to the report, Hydrogen: A Viable Option for a Net-Zero Canada in 2050? from the standing committee on energy, the environment and natural resources. The domestic hydrogen sector also is at risk of investments going to other countries such as the United States that offer more generous incentives than Canada, warns the committee.

“Government policies establishing continually lower-carbon intensity standards across the economy could accelerate the growth of the low-CI hydrogen industry while enabling other decarbonization solutions,” says the report that includes 14 recommendations for the federal government to consider as it designs policies to support its net-zero goal.

Although electricity will play the largest role in decarbonization, low-CI hydrogen possibly could replace high-CI fossil fuels where electricity is not a good option, it says.

“However, hydrogen energy won’t be a silver bullet solution for the energy transition; the federal government must take a systems perspective to understand its role in achieving net-zero emissions by 2050,” Rosa Galvez, committee chair, said in a statement.

Hydrogen is used globally mainly as a feedstock for chemicals, fertilizers and oil. Canada, one of the top 10 hydrogen producers in the world, produces approximately three million tonnes of hydrogen annually. However, while NZE2050 demands that Canada use only the lowest carbon intensity energy options in the economy, the carbon intensity of grey hydrogen produced and consumed today from steam methane reforming without carbon capture and storage is more than twice as carbon intensive as methane, it notes.

And while green hydrogen from solar, wind and hydro electrolysis produces no emissions, production costs on a per gigajoule basis are higher than for grey hydrogen, the report shows. For example, the cost of hydro electrolysis is $22/gigajoule versus $16.70 for grey hydrogen and $3.79 per gigajoule for natural gas which emits 60 kilograms of carbon dioxide equivalent per gigajoule.  

The federal government in an earlier  report, Hydrogen Strategy for Canada: Seizing the Opportunity, suggested that hydrogen could deliver up to 30 per cent of Canada’s end-use energy by 2050.

The growth in low-CI hydrogen would require a transformational change to infrastructure and energy mixes over the coming few decades but “if successful, new industries, products and services could emerge with different regional benefits,” the Senate report says.

The government of Canada, it says, must focus on growing the domestic low-carbon intensity hydrogen supply and demand for the critical sectors and applications that will help achieve net-zero but it should invest strategically, in partnership with other levels of government and the private sector, not taking on too much risk with public funds. Where possible, Ottawa must seek arrangements where it shares the funding, risk and rewards with hydrogen suppliers and investors in a pro-rated fashion, ensuring mutual benefit and risks, says the report.

The provinces and territories also have their own hydrogen ambitions, including Alberta with its Hydrogen Roadmap. “What ends up determining the hydrogen pathway in each region may come down to the relative cost of methane, geological sequestration of greenhouse gases and low-CI electricity,” says the committee.

It urges the government to identify and invest in hydrogen hubs that will help achieve NZE2050 and work in partnership with provinces, territories and Indigenous peoples to achieve regional hydrogen ambitions. Hubs are in regions such as Edmonton where hydrogen infrastructure is built to co-ordinate the development of supply and demand and to take advantage of regional differences in energy systems, resource availability, energy prices, skilled labour and other factors.

The report also calls for measures to increase certainty that the national carbon-pricing framework will endure and that the carbon price will continue to rise. The carbon price in Canada, set under the 2018 Greenhouse Gas Pollution Pricing Act, is set to rise to $170/tonne by 2030.

The committee says that during its hearings on the role of hydrogen in decarbonization it heard from many witnesses that the price signal is critical to developing projects in Canada’s hydrogen sector, and that without certainty about future carbon prices, some projects will not move forward.

“More importantly for the development of the hydrogen pathway overall, we heard, is that without sufficiently high carbon prices, certain low-carbon intensity hydrogen production methods or uses in new sectors and applications will not be economically competitive on their own compared to conventional hydrogen or other alternatives,” says the report. “That could mean that the opportunity to develop and deploy certain hydrogen pathways could be delayed or even lost as energy infrastructure is built to serve other energy alternatives that occupy hydrogen’s potential place.”