The Canada Clean Hydrogen Series, Part 1 – A Foundation For A Strong Hydrogen Economy?

The federal and a number of provincial governments have released strategies in the past few years to help develop a strong clean hydrogen economy in Canada in the coming decades to stimulate economic growth and job creation and to slash the country’s greenhouse gas (GHG) emissions.

In its strategy released in December 2020, the feds pegged the potential size of the hydrogen prize at $50 billion in domestic revenue by 2050, and possibly another $50 billion in export revenue — compared to oil and gas export revenue of $119 billion in 2019. The short-term goal of the federal strategy is to lay the foundation for Canada’s hydrogen economy by mid-decade.

To determine where Canada presently stands in achieving this short-term goal, and what more needs to be done, the Bulletin interviewed David Layzell, energy systems architect at The Transition Accelerator, and one of the country’s foremost hydrogen experts.

Domestic markets

According to Layzell, there are two main domestic markets for clean hydrogen — as an energy carrier to displace fossil fuel demand; and to decarbonize existing hydrogen markets (such as bitumen cracking, oil refining and ammonia production) — with Canada presently doing a much better job laying a foundation for the latter than the former.

“As an energy carrier to displace domestic fossil fuel demand is where the new hydrogen economy should have the largest impact on Canada’s GHG emissions,” says Layzell. “The Canadian government and some provincial governments have supported a number of pilot and demonstration projects, and that is good. Projects tend to be around municipal buses, heavy-duty trucks, trains and space heating.”

“However, other countries are already building the value chains and regulatory/policy environments to enable full commercialization of fuel hydrogen in strategic areas. Canada is falling behind in this area despite the opportunities we have as one of the world’s lowest cost producers of low GHG hydrogen.”

On the other hand, “some of the large companies that operate in existing hydrogen markets have received substantial tax incentives and government grants to start producing low GHG hydrogen from natural gas using autothermal reforming (ATR), coupled to carbon capture and storage (CCS) in geological reservoirs,” he says. “These large, billion-dollar-plus projects, each producing many hundreds of tonnes of hydrogen per day, are in various stages of planning and deployment, and Canada is well positioned compared to the global competition.”

In terms of hydrogen hubs, Edmonton “is probably the best positioned in Canada, since it already has significant hydrogen production supporting existing markets, and it has proven ability and the infrastructure for CCS. A slipstream of low GHG hydrogen production diverted to new markets could start to transition domestic fuel markets in the region.”

Other well positioned hubs of the future also have refineries producing and using hydrogen and have nearby geological storage potential, including Regina, Lloydminster and Sarnia, according to Layzell.

Export markets

On the export front, low GHG ammonia should dominate transoceanic trade because it is easier and substantially cheaper to store and ship ammonia in large quantities than hydrogen, says Layzell.

“Countries like Japan, South Korea and Germany have expressed an interest in importing such ammonia, for which they are willing to pay a premium, and Canada is well positioned to supply it.”

“Coastal regions of Canada that have an excellent wind power resource and deep-water ports such as Newfoundland and Labrador, Nova Scotia and New Brunswick are well positioned to produce low GHG ammonia for export markets, and they could create opportunities to grow regional/domestic hydrogen demand as well,” he says.

The export of blue hydrogen/ammonia produced in northern B.C. and/or Alberta and shipped by train to Prince Rupert on the coast is another promising possibility, according to Layzell.

“Over the past two to three years, numerous Canadian projects have been announced for both electrolytic [green] and ATR [blue] hydrogen/ammonia,” he says. “Electrolytic ammonia production from wind power in Eastern Canada seems to be moving faster [for export to Europe] than ATR ammonia production for export off the B.C. coast [to Asian markets]. But it seems to me that other countries are moving faster.”

These include Australia, Saudi Arabia, Chile, Brazil and the U.S., as these countries have deep water ports near a supply of relatively low-cost clean hydrogen, according to Layzell, with especially stiff competition from U.S. producers given recent federal government policies in that country.

“In dealing with industry, the USA tends to only use ‘carrots’ while Canada tries to balance both ‘carrots’ and ‘sticks’ to shift industry to address societal needs,” says Layzell. “I think the Canadian system makes more sense, but it is difficult to compete with ‘Industrial Socialism’ practiced in the USA.”

“This is a significant problem for Canada, especially for electrolytic hydrogen production from renewables, where the IRA [Inflation Reduction Act] is particularly supportive. In the case of ATR-CCS hydrogen production, Western Canada has the advantage of lower cost natural gas, government owned pore space for CCS, and some taxes on carbon emissions. However, the U.S. is more generous in its tax credits for CCS than is Canada.”

As a result, Layzell continues to expect the export of Alberta produced blue hydrogen by pipeline to the U.S., especially to the budding California market. “If technologies were to be developed to make it possible to repurpose existing natural gas pipelines, this export market could develop quickly,” he says.

Next steps

“I would like to see federal and provincial governments get more serious about setting up a domestic fuel hydrogen economy in Canada,” says Layzell. “There needs to be better co-ordination of government funding to create this new value chain, in a way that there are no ‘weak links’ that undermine the strength of the entire chain. The current system is highly fragmented and will not generate the outcomes that Canada wants and needs.”

And the focus of governments should not be just hydrogen hubs, but corridors connecting these hubs, and either shipping in the hydrogen or making it on-site, according to Layzell. “If the primary objective of the hydrogen economy is to reduce GHG emissions, while creating jobs and economic opportunity, then I think it is best to focus on the creation of hydrogen corridors where the primary market is heavy-duty transportation, but other markets can be served.”

“The initial focus needs to be on a limited number of hydrogen corridors, supporting heavy duty trucks, trains and buses. With vehicle demand being the ‘anchor tenant’ for strategically located fueling stations, other uses of hydrogen such as space or industrial heating could be encouraged to increase demand and get to the scale where the per kilogram price is cost competitive with diesel.”

According to Layzell, the best initial hydrogen corridors in Canada include: Highway 2 between Calgary and Edmonton; Windsor/Sarnia through Toronto and Montreal to Quebec City; Highway 1 connecting Winnipeg through Regina and Calgary to Vancouver; Regina through Saskatoon and Edmonton to Prince George and Vancouver; and many corridors linking Canada to the U.S. where the Americans are also creating hydrogen corridors.

“Corridors of hydrogen fueling stations supporting heavy-duty transportation creates the opportunity for distributed, smaller scale (less than 10 tonnes of hydrogen per day) low GHG hydrogen production from electrolysis, natural gas pyrolysis, biomass gasification or byproduct hydrogen,” he says. “This is a great economic opportunity with large environmental benefits.”

On the clean hydrogen/ammonia export front, the potential remains for exports to Asia, Europe and the U.S. before 2030, “but this would require an alignment of federal, provincial, municipal and First Nation interests in Canada to attract the contracts and investment dollars,” says Layzell.

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