National Post (National Edition)
QUEBEC, ALBERTA VIE FOR HYDROGEN CROWN
QUEBEC AND ALBERTA TAPPING THEIR RESOURCES TO BECOME CANADA'S TOP HYDROGEN HUBS
Quebec and Alberta are leveraging their respective strengths to emerge as hydrogen hubs, and hoping to take pole position in a nascent industry that's gaining popularity amid a global move toward decarbonization.
Ut i l i ty provider Hydro-Québec is aiming to position its home province as the ideal location to produce so-called `green' hydrogen, capitalizing on its abundant hydroelectricity. Meanwhile, Alberta unveiled its natural gas vision and ambitions in October, which identified the export of `blue' hydrogen products as one of the key planks of its diversification strategy.
Globally, hydrogen is being embraced as an emerging clean energy source, including in Canada where the federal government wants to make the country a “global supplier.” And the race to emerge as a hydrogen powerhouse has begun, with both Alberta's and Quebec's different strategies poised to capture at least a slice of the global market.
While hydrogen is emissions-free, the process of producing the element, is often not clean. Using electrolysis technology, water is split into hydrogen and oxygen, which requires massive amounts of electricity. If the electricity is generated from fossil fuels such as natural gas, the resulting hydrogen is actually produced through an emissions-heavy process. `Grey' hydrogen is produced from natural gas through steam methane reforming, which emits carbon dioxide. The incorporation of carbon capture technologies in the process, makes it `blue' — the one Alberta is advocating — leading to a low-to-moderate carbon intensity. Green hydrogen is produced by running an electric current through water using zero-carbon sources of electricity, such as hydro.
THE DEVELOPMENT OF BLUE HYDROGEN IN WESTERN CANADA
BENEFITS FROM AN ABUNDANT SUPPLY OF NATURAL GAS, EXTENSIVE
FUEL TRANSMISSION INFRASTRUCTURE … AND ESTABLISHED
REGULATIONS AND TECHNICAL EXPERTISE. — PETERS & CO. REPORT
BLUE HYDROGEN
IS NOT A SUSTAINABLE
AVENUE.
This is where Hydro-Québec sees an obvious edge. The utility is one of the largest hydroelectricity producers in the world, operating some 60 hydroelectric generating stations. In 2018, Quebec produced a third of all the electricity generated in Canada, and more than 99 per cent of Hydro-Québec's electricity comes from renewable sources, with the vast majority flowing from hydro generation.
“There will be a huge market for hydrogen in coming years. It's something that is going to develop rapidly,” Jonathan Côté, a Hydro-Québec spokesperson, said in an interview. “Hydro-Québec wants to facilitate this emerging industry here in Quebec.”
Hydrogen's key advantage is that it can be used in fuel cell vehicles that carry heavy loads over long routes, such as trucks, buses, rail, marine. Fuel cell batteries also have higher energy storage density, shorter refuelling times and are lighter in weight than battery electric vehicles.
“We believe hydrogen is going to be the key to decarbonize a lot of other sectors of the economy," Côté said.
On Dec. 8, Hydro-Québec announced plans to build and operate an electrolysis plant in Varennes, an off-island suburb of Montreal. The utility says it will be one of the world's most powerful electrolyzers for making green hydrogen, with a capacity of 88 megawatts.
Hydro-Québec will invest $200 million in the facility that will supply hydrogen and oxygen to a biofuel plant, which will convert non-recyclable waste into ethanol and methanol. In this case, hydrogen is required for the chemical process of converting waste into biofuels. The project is being developed in partnership with Montreal-based Enerkem, Shell Canada Ltd., Suncor Energy Inc., and Switzerland-based Proman AG, with both plants scheduled to begin production at the end of 2023.
Hydro-Québec doesn't currently produce hydrogen, but French company Air Liquide S.A. has a hydrogen facility in Bécancour, in the Centre-du-Québec region, which is expected to be expanded by 50 per cent.
Quebec's focus on green hydrogen is part of a larger global trend.
According to IHS Markit, annual investment in green hydrogen production will exceed US$1 billion by 2023. “Investment in electrolysis is booming around the world. The pipeline through 2030 is for over 23 GW of capacity to be developed — more than 280 times current capacity,” noted Catherine Robinson, IHS Markit's executive director, hydrogen and renewable gas. “The increasing interest has been driven by falling electrolysis and renewable power costs and by increasing government focus on green hydrogen.”
Since May, six European countries, the European Commission, Russia, and Chile have released hydrogen strategies with production targets. Recently, the Canadian government launched its own hydrogen strategy, which its says will help make the country become a “a global hydrogen leader”, creating jobs and helping it reach its ambitious climate targets.
Ottawa expects the hydrogen market to be a US$12 trillion opportunity by 2050. IHS Markit says its modelling shows that by the early-2040s, green hydrogen production could be the single largest use of electricity, exceeding industrial electricity use. And lots of renewable power will be required to meet that demand.
Like Quebec, Alberta is attempting to be a global producer and exporter of the blue version of hydrogen, by leveraging its expertise in the fossil fuel industry. Canada is the world's sixth-largest natural gas producer, with Alberta accounting for more than two-thirds of output. Alberta also produces two-thirds of Canada's current hydrogen supply, primarily focused in the industrial heartland around Edmonton and northern Alberta.
Currently, the cost of developing blue hydrogen is well below that of the green version across the world, giving Alberta an early advantage, notes Peters &
Co., a Calgary-based investment brokerage.
“The development of blue hydrogen in western Canada benefits from an abundant supply of natural gas, extensive fuel transmission infrastructure, geology supportive of carbon capture and underground storage (CCS) and established regulations and technical expertise. It is estimated that blue hydrogen can be produced in western Canada for as low as $10/GJ, one of the lowest costs in the world,” Peters said in a report.
While the cost advantage of blue is expected to erode in coming years, blue hydrogen has the potential to be a lower cost solution and be an attractive near or net-zero energy source.
Alberta already enjoys a global leadership position in the production of blue hydrogen, with emissions from 40 per cent of hydrogen production in the industrial heartland region currently being reinjected, Peters said.
Some analysts, however, have warned of a 'hydrogen hype cycle' that could result in a bubble of rising capacity that will eventually burst before the hydrogen revolution begins in full.
“(The gas) Industry's hydrogen hype machine is in full swing ... While hydrogen is presented as a climate panacea, concerted lobbying by the gas industry has ensured that for the next few crucial decades at least, Europe's much-hyped `hydrogen economy' will be powered by hydrogen made from polluting fossil fuels rather than from renewable electricity,” according to Corporate Europe Observatory, an independent research group that rejects funding from EU institutions and corporations.
Hydro-Québec also argues that emissions resulting from using natural gas, could make blue hydrogen less attractive over time.
“Blue hydrogen is not a sustainable avenue and should only be a temporary solution,” Côté noted.
On the other hand, green hydrogen also has potential to lay the platform for sustainable and smart transportation, a sector that's already growing quickly in Quebec, says Sarah Houde, president and CEO of Propulsion Québec, a government- and industry-funded non-profit that aims to elevate the province's electric and smart transportation industry.
The sector includes companies involved with manufacturing charging stations, components for autonomous vehicles, and electric trucks, bicycles, and buses, as well as a range of companies across those supply chains.
In late November, Lion Electric Co., a Québec-based electric vehicle manufacturer, announced a merger with Kansas City-based Northern Genesis Acquisition Corp. The two companies said the move would lead to a listing on the New York Stock Exchange with an expected US$1.9-billion market capitalization.
Founded in 2008 and based in Saint-Jerome, Lion Electric has built a reputation by putting 300 electric medium-duty vehicles such as trucks and buses on the road. In September, Lion Electric said it would deliver
10 electric trucks to Amazon. com Inc.
Another Québec company hoping to follow Lion Electric and secure a toehold in the growing electric vehicle industry is Taiga Motors, a Montreal startup that has produced prototypes of electric snowmobiles and watercraft, essentially an electric Sea-Doo.
Three students at McGill University, including CEO Samuel Bruneau, formed the company in 2015. The ambitious goal, he says, is to make Taiga the Tesla Inc. of recreation vehicles, but it faces stiff competition from Bombardier Inc., Arctic Cat Inc., Yamaha, Polaris Inc., and Quebec-headquartered BRP Inc., the maker of both Sea-Doo and SkiDoo.
In 2018 there were 147 Quebec companies in the innovation cluster, with 6,250 employees and $2.2 billion in sales, 40 per cent of which were exports, according to Houde.
“I'm very confident those numbers will grow,” she said in an interview. “We've seen it in the last two years: there are so many new companies or companies have grown and hired so many people … The idea is to add ingredients to the recipe so that it grows faster.”
When it comes to the broad green industries, including renewable energy development and use, Houde says Québec is “absolutely” leading Canada. “Definitely and without a doubt,” she said, adding that salaries in her sector are 18-51 per cent higher than the provincial average.
“If we were to raise the industry, it would have an effect on the whole province,” she said.
In Alberta, the hydrogen sector, meanwhile, is expected to breathe new life in the natural gas sector, likely accelerate expansion of the nascent carbon-capture industry, and provide much-needed new employment opportunities to highly-skilled workers in the struggling oil and gas industry.
But when it comes to climate benefits, not all hydrogen is created equal, said Simon Dyer, deputy executive director of Pembina Institute, in a report earlier this year. "Before making long-lasting decisions about the role of hydrogen to decarbonize our economy, it's critical to understand that the carbon intensity of hydrogen depends on how it's produced. And right now only a small fraction of the hydrogen being produced today is low- or zero-carbon,” Dyer said.