The Canada Clean Hydrogen Series, Part 5 – Ontario’s Shotgun Approach


Ontario appears to be taking more of a shotgun approach to its low-carbon hydrogen industry, in terms of sources of clean hydrogen and the markets it will serve in the province, than Alberta, Nova Scotia, Newfoundland and Labrador, and Quebec — the focus of earlier parts of this series — based on a strategy document released in April 2022.

At the same time, the export potential of low-carbon hydrogen produced in Ontario appears relatively low.

To learn more about the potential of Ontario’s low-carbon hydrogen industry, the Bulletin interviewed Todd Smith, the province’s minister of energy, and Shelley Babin, president and CEO of Atura Power. Atura is a wholly-owned subsidiary of Ontario Power Generation (OPG), a provincial Crown corporation, with an expanding remit from primarily gas-fired power generation into low-carbon hydrogen production and storage.

Key accomplishments

Since its release in April 2022, there has been significant progress to advance the pillars of Ontario’s Low-Carbon Hydrogen Strategy, with Babin and Smith independently identifying the same three key accomplishments to date. These are:

1)   Atura Power’s Niagara Hydrogen Centre, with construction to commence in early 2024. The facility will produce hydrogen with a 20 MW proton exchange membrane (PEM) electrolyzer using surplus electricity from the Sir Adam Beck II hydroelectric station, while providing grid regulation services to the Independent Electricity System Operator (IESO).

2)   The IESO expected to report to the minister of energy by mid-September on a plan to implement an interruptible, reduced rate pilot (IRP) program for electrolytic hydrogen producers utilizing the Ontario grid in exchange for agreeing to reduce consumption during system or local reliability events.

3)   The IESO launching the three-year $15 million Hydrogen Innovation Fund in February to advance both research and demonstration projects that will utilize hydrogen to balance and strengthen reliability on Ontario’s electricity system.

Low-carbon hydrogen

Electrolyzers to produce low-carbon hydrogen in Ontario are likely to be powered by a wide range of energy sources, while the province could also produce blue hydrogen in the longer term, according to both Babin and Smith.

“As we look to future growth of low-carbon, electrolytic hydrogen production in Ontario, most of this production will be supported by Ontario’s low-carbon electricity grid,” says Babin. “Ontario’s electricity grid is already one of the lowest carbon intensity grids in Canada and over 90 per cent of the electricity in Ontario is produced from zero-carbon sources.”

In 2022, nuclear power dominated the province’s fuel supply mix at just over a half of the total, hydropower contributed a quarter, natural gas and wind contributed roughly 10 per cent each, while the remaining four per cent was made up of solar PV, bioenergy and other fuel sources.

“With that said, there is potential for projects to connect behind-the-meter renewable energy resources including wind, solar or hydro-electric power sources,” says Babin. “Atura’s Niagara Hydrogen Centre is a great example of a behind-the-meter project. The project will utilize electricity from the Sir Adam Beck II Generating Station, while supporting OPG’s provision of grid regulation services to the IESO, to produce Ontario’s lowest-carbon intensity hydrogen.”

“Longer-term, low-carbon hydrogen could be produced by combining hydrogen production via steam methane reforming with carbon capture and storage,” says Smith.

On that note, the Ontario government amended the Oil, Gas and Salt Resources Act to remove the prohibition on CCUS in April of this year to provide an opportunity to test, assess, pilot, and demonstrate special projects utilizing CCUS in the province.

“This amendment is a positive signal to advance blue hydrogen production in Ontario in the future,” says Babin. “However, in the near term, we believe hydrogen projects built in Ontario will continue to advance via electrolytic hydrogen production pathways.”

Ontario markets

Babin and Smith both see a large number of potential markets developing for low-carbon hydrogen in Ontario in the coming decades.

“The low-carbon hydrogen market is continuing to develop across Ontario and Canada with a focus on decarbonizing the hardest to abate sectors including transportation, petrochemical production and refinement, and industrial processes,” says Babin. “In addition to the hard-to-abate sectors, the market for hydrogen will also continue to develop for use in the electricity sector.”

“In 2021, transportation contributed 32 per cent of Ontario’s total GHG emissions with heavy duty and freight transportation comprising almost half of that amount. It is projected that, before the end of this decade, low-carbon hydrogen will achieve price parity with diesel fuel. As a result, over the coming three-to-five years, the heavy-duty transportation sector, including municipal buses and fleets, is poised to be an early adopter of low-carbon hydrogen resulting in increased demand across the province. Additionally, hydrogen-based fuels are also anticipated to help decarbonize marine shipping and aviation fuels in the future.”

“Currently, over 150,000 tonnes of grey hydrogen [about five per cent of the Canadian total] are consumed by the industrial sector in southwestern Ontario and projections show that additional demand for low-carbon hydrogen in Ontario will range between 25,000-60,000 tonnes annually in the short- to medium-term,” she says. “With the industrial and manufacturing sectors contributing 23 per cent of Ontario’s total emissions in 2021, there is a substantial opportunity to supply low-carbon intensity hydrogen to these sectors to achieve their respective net zero goals.”

“Finally, low-carbon intensity hydrogen can also be used as a long-term [seasonal] energy storage solution for use in clean power generation to supply Ontario’s grid. Atura Power is working to understand the economics of producing low-carbon hydrogen and storing it in underground salt caverns with our partner Plains Midstream at our Brighton Beach Generating Station in Windsor, Ont. This hydrogen can then be blended up to 30 per cent with natural gas at our generating stations to reduce the carbon intensity of electricity produced.”

Ontario hubs

In terms of potential low-carbon hydrogen hubs in Ontario, Babin and Smith both also expect a relatively large number to develop across the province in the coming decades. “Hydrogen hubs in Ontario will develop around localized offtake opportunities in various regions across Ontario where existing energy infrastructure can be leveraged,” says Babin.

“Currently, the most promising hubs are in the Niagara and Hamilton regions to support decarbonization of the transportation/transit and heavy industry sectors including ArcerlorMittal Dofasco’s new hydrogen-ready electric arc furnace as well as Hamilton-Oshawa Port Authority’s decarbonization plans. The Sarnia Lambton region, to support the petrochemical and refinery industries. And the Durham region, to support local hydrogen offtakes and research projects capitalizing on the region’s decades of energy experience hosting major nuclear electricity production facilities.”

“Atura Power is also advancing projects in the Halton Hills, Windsor and Nanticoke regions, where the end-use applications support significant decarbonization opportunities in transportation, refining, steel manufacturing and electricity sectors,” she says.

Export potential

Despite their optimism about low-carbon hydrogen production servicing a wide range of industries and hubs in Ontario, both Babin and Smith do not presently see significant potential to export provincially produced hydrogen.

“One of the biggest challenges in the hydrogen industry is transportation and storage,” says Babin. “Until the costs for producing, storing, and transporting hydrogen are reduced, even with innovations in utilizing ammonia or other liquid organic hydrogen carriers (LOHC), it will be challenging for Ontario to compete as a major exporter of hydrogen.”

On that note, “given the nascent low-carbon hydrogen market, we don’t have projections on the export potential of low-carbon hydrogen/ammonia at this time,” says Smith.

Although neither Babin nor Smith made mention of it, many energy experts are concerned that the cost of electricity will climb in Ontario in coming decades, primarily due to planned increases in nuclear generation capacity, which could price Ontario-produced low-carbon hydrogen out of export markets.

The cost of producing power from solar and wind projects is generally viewed as lower than new nuclear capacity, even when adding in the additional cost of power storage, while nuclear power projects have a long history of cost overruns in Canada and elsewhere around the world— with China a notable exception.

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