For Canada to secure its place in the future global hydrogen market, it is maintaining fossil fuels as the centrepiece of its strategy today

Canada’s strategy is to grow a hydrogen industry at home until there is global demand. At that point, it will want to crank up exports. However, there are two massive problems on this front. One is that while using natural gas is currently the cheapest way to produce hydrogen, the International Energy Agency expects the cost of green hydrogen to fall substantially this decade to the point where it will be cheaper to produce hydrogen using solar panels than natural gas. In other words, to be successful, Canada’s blue hydrogen bet depends on the cost of renewable energy staying higher than the cost of natural gas. John Woodside discusses the future of hydrogen in Canada in an article on the National Observer website.

 

Canada is pushing ‘clean’ hydrogen to the world — with no end in sight for fossil fuels

In Jonathan Wilkinson’s ideal future, Canada is home to a booming hydrogen industry.

Decades from now, the natural resources minister and his government want hydrogen to generate electricity, power vehicles, heat buildings and play a part in cleaning up heavy-polluting industries like steel making. Specialized ships will dock at ports in Halifax, Montreal and Vancouver to load up on made-in-Canada liquid hydrogen, destined for European and Asian markets.

While that may be on the horizon, it’s a long way off and far from certain. In the short term, Canada is focused on executing Step 1 of its grand energy strategy — facilitating the construction of export terminals to ship liquefied natural gas (LNG) overseas. The federal government says that will eventually lead to Step 2, when one day, that infrastructure will ship hydrogen as well.

This was the future Wilkinson’s team was pushing in meetings with international counterparts at last year’s COP26 climate conference, briefing materials received through a federal access-to-information request by Canada’s National Observer show — one that included both Canadian LNG and an entire vision for Canada’s role in a global hydrogen market expected to be worth nearly $12 trillion by 2050.

For Canada to secure its place in the future hydrogen market, it is maintaining fossil fuels as the centrepiece of its strategy today. Its hydrogen strategy, published in late 2020, makes clear that while there is potential to produce hydrogen from renewable energy sources with zero greenhouse gas emissions, the short-term focus is to produce it from natural gas in concert with the fossil fuel sector.

As previously reported by Canada’s National Observer, Natural Resources Canada believes “Canada’s oil and gas sector is well-positioned to develop domestic hydrogen supply chains.” As of last summer, the department was interested in learning how “to persuade financial institutions to invest in blue hydrogen projects.”

Blue hydrogen refers to hydrogen made from methane — the main ingredient in natural gas — using technology to capture most, but not all, of the planet-warming carbon dioxide emissions this process creates. Green hydrogen is made exclusively with renewable energy and produces zero emissions.

Wilkinson’s director of communications Ian Cameron said the department isn’t focused on colours, it’s focused on emissions. Ottawa’s hydrogen strategy overwhelmingly refers to its plans as “clean hydrogen” without distinguishing between green and blue.

“The talk in Canada is to use the euphemism of ‘clean hydrogen’ because Canada is not a low-cost jurisdiction to manufacture green hydrogen,” explained Paul Martin, a chemical engineer and co-founder of the Hydrogen Science Coalition.

“… What’s going on is the fossil fuel industry, particularly the fossil gas industry and the people that distribute fossil gas for a living, are looking to stay in the energy business.”

Canada says it can repurpose LNG infrastructure for hydrogen exports. “It’s so factually incorrect that it kind of drives you crazy to hear people say it,” says hydrogen expert Paul Martin.

Canada’s strategy is to grow a hydrogen industry at home until there is global demand. At that point, it will want to crank up exports. However, there are two massive problems on this front. One is that while using natural gas is currently the cheapest way to produce hydrogen, the International Energy Agency expects the cost of green hydrogen to fall substantially this decade to the point where it will be cheaper to produce hydrogen using solar panels than natural gas. In other words, to be successful, Canada’s blue hydrogen bet depends on the cost of renewable energy staying higher than the cost of natural gas.

The second problem is the markets Canada is eyeing in Europe are an ocean away and require specialized export terminals, ships and other infrastructure to reach, adding to the cost of Canada’s hydrogen strategy and the risk this infrastructure could one day become worthless as the world quits fossil fuels in favour of renewable energy. Taken together, the risk is Canada’s hydrogen made from natural gas could be more polluting and more expensive to produce and deliver to market than the green hydrogen options that may be available elsewhere.

Germany factors heavily into Canada’s plans because it has significant demand for natural gas and is also untangling itself from Russia, which supplied about half of its demand prior to the invasion of Ukraine. Because of the war — and the implied threat that gas supplies could be entirely cut off — Germany is in a full-blown energy crisis and is looking to secure new supplies of natural gas for the short term while holding onto a longer-term goal of ditching fossil fuels for power by 2035. To do this, it wants any new LNG infrastructure to eventually be able to handle cleaner fuels like liquid hydrogen. Germany prefers green hydrogen over blue, although briefing materials suggest that, like Canada, its first priority is simply growing a hydrogen market.

Wilkinson was not made available for an interview, but in a speech to the Regina & District and Saskatchewan chambers of commerce last month, the natural resources minister said: “As a nation, as a people, surely, we can walk and chew gum at the same time. We can help our European friends in the short term and achieve our ambitious and vital climate goals.”

It’s clear that producing fossil fuels over the coming decades is still firmly in Canada’s plans. Over the next 30 years, fossil fuels will still be burned, and even beyond 2050, “countries that focus on producing hydrocarbons with ultra-low production emissions are likely to be the last producers standing,” Wilkinson said.

The key to Canada’s grand bargain with its fossil fuel sector is carbon capture technology, which to date has failed to live up to its promise. However, if this technology is someday successfully implemented, it could open up market opportunities for hydrogen made from natural gas. In this calculation, the fossil fuel industry would not need to be phased out, it would simply need to transition. But even if the technology captures an ambitious 90 per cent of carbon dioxide emissions someday (the target outlined in the hydrogen strategy), the remaining 10 per cent that reaches the atmosphere would still contribute to global warming.

This plan to continue investing in the fossil fuel sector’s future was on full display at COP26 when Quebec joined the Beyond Oil and Gas Alliance (BOGA), a coalition led by Denmark and Costa Rica that seeks to phase out fossil fuels around the world. Canada refused to sign on.

“This initiative is not in Canada’s interest, as its aim to phase out the oil and gas sector conflicts with Canadian policy ensuring the sector has a sustainable role in a net-zero world,” reads a briefing note prepared for Natural Resources Canada staff ahead of a meeting with Denmark’s climate change ambassador Tomas Anker Christensen.

Fossil fuels are the top driver of climate breakdown, and the Intergovernmental Panel on Climate Change (IPCC) is clear: their use must be slashed dramatically this decade if there is any hope of keeping global warming as close to 1.5 C as possible. Fossil fuel production and consumption have to fall 30 per cent over the next eight years to align with the Paris Agreement’s 1.5 C target.

Briefing materials prepared for a meeting with European Union commissioner for energy Kadri Simson link LNG exports with hydrogen. Canada wanted to pitch the EU on Canadian LNG but the briefing note acknowledges the EU “may not fully understand the alignment with Canada’s Hydrogen Strategy.”

Beyond the briefing materials, reusing LNG infrastructure is openly the plan in Canada’s hydrogen strategy and was recently reiterated by Prime Minister Justin Trudeau.

Martin said he laughed out loud when he first heard that was even being considered.

“It’s so factually incorrect that it kind of drives you crazy to hear people say it,” he said.

Where to start with the problems? First, methane, the main ingredient of natural gas, and hydrogen are not the same. They have different densities, and it takes different amounts of energy to liquify the gas. To safely transport hydrogen through existing natural gas pipelines, the network would require upgraded piping and compressors. Then, when it gets to an export terminal, it needs different equipment and significantly more energy to cool it to a liquid than natural gas. Methane has to be cooled to -162 C before it turns to liquid, whereas hydrogen needs to be cooled to -249 C. It then needs specialized ships to transport it. Practically all of this means the infrastructure can’t be easily reused; it needs to be replaced, Martin said.

Moreover, hydrogen leaks more than natural gas without specialized infrastructure. Hydrogen is not a greenhouse gas, but when it reaches the atmosphere, it interacts with other chemicals and slows the breakdown of methane, a greenhouse gas roughly 86 times more potent than carbon dioxide over a 20-year period. Extending the life of methane in the atmosphere contributes to global warming.

Last year, the IPCC specifically highlighted methane pollution reduction as an important short-term priority for the world to keep its grip on a climate-safe future.

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8 thoughts on “For Canada to secure its place in the future global hydrogen market, it is maintaining fossil fuels as the centrepiece of its strategy today

  1. Martin is not alone when laughing out loud when “we all first heard that was even being considered”….elsewhere
    “It’s so factually incorrect that it kind of drives you crazy to hear people say it,” he said….again, not at all alone here as well.
    Let’s others spend couple of tens of bill. USD to discover, in a hard way, in our lifetime that, H2 whatever color doesn’t make any sense (except some limited applications).
    Wondering if even 1% of those talking about H2 have ever experienced the “minor” problems operating a H2 electrolysis plant in a large power station, to generate H2 to cool down the large electric generators.
    I would better leave the others find out the technology, materials, infrastructure needed, justifyiable costs, etc., and possible applications IN AN ECONOMIC WAY of the whatever color hydrogen…then, I will probably think about it.
    How can we stop, for the moment, the HYDROGEN IDEOLOGY ?…and keep us (and our money) busy for other things ?

  2. A while back (June) I made a presentation to the Japanese gov & corporations on hydrogen – specifically in Spain. I went over some green-H2 costs (current costs – not 2030 costs).
    PV Spain (LCOE @ Euro30/MWh) = Green H2 @ Euro49/MWh
    Wind DE (LCOE on-shore @ Euro45/MWh) = Green H2 @ Euro74/MWh
    Blue H2 (nat gas price Euro27/MWh) = Euro34 – Euro44/MWh (depends on the tech)
    Blue H2 (nat gas price Euro95/MWh) = Euro107 – Wuro123/MWh
    Perceptive readers will notice that even at low nat gas prices (hands up anybody who thinks that they will relax back to Euro27/MWh).. Blue H2 and Green H2 are almost at parity in Spain – NOW. If we accept that the days of low nat gas prices are gone then I’d suggest that on-shore & off-shore wind elec delivers Green H2 at a cost that is much lower than Blue H2 & what’s more, lower than grey (if you use gas price of Euro95/MWh & factor in ETS then you are looking at Euro200/MWh++ for grey H2).
    The figures speak for themselves and expose both the inbeciles at the IEA & Wilkinson in Canada for what they are: liars and fantasists – cooking the numbers to build castles in the sky in the hope that their fossil business will continue. It won’t the end game for fossil ius upon us.

    1. Thanks so much for this, Mike. We are in a crisis where we should not be building castles in the sky.

    2. Hi Mike,
      I’m not challenging all these figures…let’s have them accepted as of today
      The only question I dare to ask is how will these solve my power and heat systems efficiency problems ?…starting from H2 already produced (whatever color and price you put on it), in terms of:
      – electricity generation capacities (additional from existing demand !…because I need EXCESS green electricity, do I ?…which increases the system costs !) required for THAT hydrogen to be produced for “green electricity generation”, to replace existing fossil units;
      – additional infrastructure costs, storages, transports, safety, etc. + new adapted generation technologies

      You may realise that I am speaking only for energy generation through hydrogen…not other applications !
      so, where do we end up ?!…also, you may very easy understand that PV or WInd, will never be paid by their LCOE….they are part of the market !…and an investor will build first, a wind or a PV for the opportunity cost of electricity which he may get…so, the “economic” complications may arise…who will build the PVs and Winds and for what purpose ?…for hydrogen only ?…or for “balancing” as well ?! (but storage competition is there ! and it will become even severe !) so, the “opportunity cost lost” should be recovered from / through hydrogen, shouldn it ?!…and so on, so forth…

      1. “The only question I dare to ask is how will these solve my power and heat systems efficiency problems ?”

        What “power and heat systems efficiency problems” do you have, exactly?

        I did not understand the text that then followed. You mentioned “excess green elec” – but of course you are aware of the dedicated RES systems being built to power electrolysers? You imply that excess green elec increase system costs? Perhaps you would like to elaborate? At the moment the Germans export their “excess green elec”. Does this increase system costs? Over to you.

        As for the rest of your comment, Spain, Germany (recently) and UK all have symmetric CfDs and auctions. The results of the auctions closely track real LCOEs for either wind or PV, and as far as I can see, many/most/all RES developers are happy to take part in these auctions.

        As all EU MS & the Uk build out RES, there will be a requirement for a system redesign given that more RES will lead to more “excess” RES elec looking for a home. The only “home” is probably H2. At the moment a system redesign (including H2 storage) is noticeable by its absence. The assumption at the moment amongst the “political elite” is that markets will deliver. They won’t.

      2. 1. on overall, Romania is a net importer of electricity and, the import capacity is <10% of of peak demand, so, in general on DAM we have higher electricity prices than most EU member states (connected to CEE markets)
        2. having deficit of power, I think that there is no brainer to think to produce hydrogen for power generation and, presumably there is no need for demonstrating this;
        3. thus, there are required for new capacities; what type ? this is a key question. Suppose that we install only wind or PV's – there will so much capacities needed to cover the demand first and then to think about H2 from that green electricity
        4. besides, in the winter ~30% of elecricity is generated by CHP for heating, then, we have ~30-50% baselod nuclear + hydro on the river (Danube) ~1200 MW – there will be stupid to generate green H2 from these "green electrcity" already available;…so, eventually, the "home needed" for excess wind green electricity is simply dumping it into DH systems (electrifying the heat !)…avoiding the H2 problem…or, simply generating steam, directly to industrial users needing it !
        5. as for green electricity (not H2), we have available approx 45 mill MWh/year from RDF (municipal wastes) and another ~60 mill MWh primary energy from biomass (agriculture & forest)…all of them, possible generating power & heat.
        At the end of the day, at least for our system, I don't see (for the moment) any pressing reason to look for H2 and all that headache since there are many other options available very quickly, much simple and cost effective.
        I feel our problems are not like those of Germany's or UK…
        Probably I am wrong, am I ?

      3. I was talking generally, you are talking specifics about Romania. It would have been helpful had you made clear at the start that you were indeed, referencing a specific member state situation. However, regardless, Romania will need to build out its renewables fast, something it has signally failed to do since around 2016. Inevitably, it will face increasing levels of surplus elec – in which case, depending on the circumstances it could/should put the surplus into H2.

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