ALBERTA EYES HYDROGEN TO HELP DECARBONIZE ECONOMY
Today, much of Alberta's economy stems from its vast natural resources, from the oilsands to coal and vast natural gas fields.
But as the world moves away from fossil fuels, some provincial leaders, along with the federal government, are hoping Alberta can turn to hydrogen, an abundant element and versatile form of energy that has been on the brink of success for decades but has never quite lived up to expectations, to help build the economy.
“It's just so fascinating what's happening with hydrogen,”
David Legg, chief executive of Invest Alberta told the Financial Post. “It's sort of like electric vehicles back in the '70s or A.I. in the '80s — you heard about those things and nothing seemed to happen, so everyone sort of rolled their eyes but now it's just part of the furniture.
“And that's what it feels like is happening with hydrogen right now.”
At issue, as the federal government contemplates how to dole out a proposed $8-billion “net zero” fund, is whether investing in hydrogen production makes sense as a way for Alberta's fossil fuel industry to bridge the transition to a decarbonized economy in the coming years. Long hailed as a new energy, hydrogen has fallen flat before because it can be inefficient to produce, results in some greenhouse gas emissions, requires significant infrastructure investment and is also highly combustible. But proponents say advances in technology have solved these problems.
Earlier this month, both the feds and Invest Alberta, the economic development corporation that the province set up in 2020 to help rejuvenate its economy, announced they have each signed a memorandum of understanding with a subsidiary of U.s.based Air Products and Chemicals Inc. about building a new $1.3-billion hydrogen production facility outside Edmonton.
Legg, who left his position last week but remains an adviser to Invest Alberta, said it is only the first of several multi-billion dollar projects that his organization hopes to bring to fruition in Alberta in the next five years, and Alberta has already put up $15 million to support the project.
A spokesman for Françoisphilippe Champagne, federal minister of science, innovation and industry declined to comment on how the government might support the project. Analysts have suggested the government might actually buy some of the hydrogen produced, while the company has said it expects some level of support.
If built as has been proposed, Air Products would use the province's natural gas reserves to make hydrogen, which could be liquefied and sold as transport fuel to heavy trucks, railcars or even planes or used for other industrial purposes.
The company has pledged to make the project “net zero” emissions in several ways.
First, it would capture and store greenhouse gas emissions, using Alberta's 240-kilometre carbon trunkline. Second, it would use an auto-thermal reformer to produce hydrogen with fewer emissions.
Those two would capture
95 per cent of the emissions, and the company said it also plans to build a hydrogen-powered wind turbine that could export power to the grid, which would offset any emissions.
“We are making it possible to use hydrocarbons and make
... hydrogen, which is as good as almost green hydrogen,”
Air Products chief executive Seifi Ghasemi said at Deutsche Bank's Virtual Global Basic Materials Conference earlier this month.
Although definitions vary, blue hydrogen generally means hydrogen produced from natural gas through steam reformation and in which emissions are captured. Grey hydrogen is produced the same way but without capturing emissions.
According to the Pembina Institute, which was contracted to independently assess the proposed facility's emissions, the company's auto thermal technology (ATR) technology could produce hydrogen with 47-per-cent fewer emissions than hydrogen produced from natural gas using conventional steam reformation methods.
But emissions would still be nearly three times as high as socalled green hydrogen, produced using renewable power such as wind or solar. Most of this would come in the form of fugitive methane emissions that escape into the atmosphere whenever natural gas is produced.
To Legg, it's “so close to zero, it almost doesn't matter anymore.”
Still, part of the uncertainty around hydrogen relates to pricing.
Currently, green hydrogen is more expensive than blue or grey hydrogen. But in a 253-page report this month Sanford C. Bernstein & Co. analysts concluded this price advantage is not likely to last very long.
“With the costs of renewable energy and electrolyzer capex set to continue to fall in the future
... we expect to see a steep fall in the cost of green hydrogen in the coming years, making it cheaper than grey hydrogen and blue hydrogen by 2030 in optimal locations,” the Bernstein analysts wrote.
Simon Dyer, deputy director of the Pembina Institute, issued tentative support for the project, noting that it would likely be cleaner than any energy it replaces.
Plus, Dyer said hydrogen has been singled out as a necessary energy for Canada as well as other countries to meet emissions targets and limit global temperature increases.
It could also help replace some of the jobs linked to the natural gas industry around Edmonton as fossil fuel demand declines, he said.
“There's a lot of questions about hydrogen, and we're not in the position to give blanket endorsements,” said Dyer, adding that one of the biggest questions comes down to whether hydrogen “is a climate solution, or is this a way to extend the oil and gas industry?”
Already, some environmentalists, such as Julia Levin, of Environmental Defence, have said that the fugitive methane emissions from natural gas production, and the many questions about whether hydrogen will function as expected — given its checkered past — suggest that the government would be wise to invest in more proven technologies, such as wind turbines or solar power, or in retrofitting homes for energy efficiency.
Those would also create jobs, she said.
Last year, Natural Resources Canada released a hydrogen strategy that called for the feds to form strategic partnerships to de-risk investments. It contemplates producing hydrogen for export as well as a new source of energy in Canada.
But there are questions about who exactly would buy the hydrogen: Ghasemi has repeatedly declined to disclose proposed customers for the new hydrogen, citing confidentiality agreements.
But Samir Serhan, chief operating officer for Air Products, told analysts earlier this month that “the majority” of the hydrogen would be sold to refining and industrial clients.
Legg said that some hydrogen is already being used to heat homes, although he said it's still too expensive to use except as a blend.
Air Products has released some details, including that it hopes to bring the new facility online by 2024, producing as much 400 tonnes per day of hydrogen, but said its final plans, presumably including whether it builds a “net zero” facility, come down to the level of government support.
“Certainly we always need support around the permits,” said Simon Moore, Air Products' vice-president of investor relations. “But I think there's a potential for support above and beyond that, but I think it's a little difficult for us to comment on what flavour or shape.”
The company already produces around 700 tonnes of hydrogen per day in Alberta, which is used as feedstock for petrochemical refining operations, but it is considered “grey” because there is no carbon capture or associated emissions offsets.
Ghasemi told the Deutsche Bank conference the company has enough land that it believes it could eventually expand the proposed “net zero” plant to double or triple the size.
“Every dollar that we spend, we expect about 10 cents of operating income,” Ghasemi said. “And this project is in line with that and depending on what is the final price of this green hydrogen or this blue hydrogen that we sell, that would determine the return.”
Another part of the plan is to produce as much as 30 tonnes per day of liquefied hydrogen.
Legg said much of the infrastructure currently used for liquefied natural gas could be “easily converted” for use for hydrogen, and that opens the door for the energy's use as a transportation fuel or for export.
It's an area that the federal and Albertan government are already eyeing.
In June, the feds announced $2.3 million for a hydrogen fuelling station in Edmonton, while the non-profit Emissions Reductions Alberta, which invests revenues paid by heavy carbon emitters, provided $7.2 million toward two hybrid hydrogen fuel cell and electric long-range trucks. Both are capable of travelling more than 700 kilometres with heavy payloads in Alberta's challenging climate, where temperatures often require vehicles to use heating or air conditioning, according to a press release from the ERA.
The Canadian Pacific Railway Ltd. said last October it plans to develop North America's first long-haul hybrid locomotive, powered by hydrogen fuel cell and electric batteries.
At the moment, hybrid fuel cell vehicle makers, such as British Columbia's Ballard Power Systems Inc. and Loop Energy Inc., are targeting the hard-to-electrify parts of the vehicle market, such as heavy-duty, long-range trucks and buses, which battery technology is not yet advanced enough to support.
Tesla Inc. founder Elon Musk, among others, have questioned such efforts, because producing hydrogen involves significant energy loss, compared to powering a car directly from a battery.
Plus hydrogen transportation requires infrastructure build out, such as fuelling stations, even as advances in battery technology could limit its use.
In Quebec, Lion Electric Co. is already producing trucks and school buses for urban usage, and its chief executive Marc Bedard predicted battery technology for long-range trucks would soon advance and overtake hydrogen fuel cells.
“The (hydrogen) fuel is almost like a very temporary measure,” said Bedard, “because in almost 10 years, it won't be needed any more. We will be able to do everything including long haul with electric trucks and buses.”
Still, hydrogen itself may yet make a comeback.
In Varennes, Que., the government is investing to build an 88 megawatt electrolysis plant that would use hydroelectricity to produce green hydrogen with virtually no emissions, beyond what was required to make the hydro dam.
Other projects are also being planned elsewhere in the province.