Federal and provincial policy-makers are actively exploring myriad opportunities presented by hydrogen, attracted by its potential to spur economic development in the wake of a pandemic, while enabling governments to attain their climate change goals and leveraging existing assets and capabilities. With various roles hydrogen could play – from decarbonizing industrial processes to cutting vehicle emissions and providing expanded storage capacity – federal and provincial governments are increasingly organizing their efforts around this fuel source through the development of hydrogen strategies.
Governments of Canada and Alberta released strategies focused on hydrogen in 2020, and governments in British Columbia (BC), Ontario, Quebec and Newfoundland are soon expected to follow suit. This article summarizes the status of hydrogen strategy development across the country.
Canada's Hydrogen Strategy
On December 16, 2020, the Government of Canada released its Hydrogen Strategy for Canada (the "Canada Strategy"). In addition to positioning Canada as a global, industrial leader in the area of clean renewable fuels, the Canada Strategy aims to help Canada achieve net-zero emissions by 2050. The Canada Strategy relies and builds on existing policy measures, including Canada's recently announced Climate Plan, carbon pricing, the Clean Fuel Regulations, the $1.5 Billion Low-carbon and Zero-emissions Fuels Fund, and the Incentives for Zero-Emission Vehicles program.
At the heart of the Canada Strategy are: (i) a 30-year roadmap containing near- to long-term goals; and (ii) various recommendations which have been proposed in eight "pillars."
Near term: laying the foundation. For the first five years (2020-2025), the focus will be on planning for and developing new hydrogen supply and distribution infrastructure to support early deployment HUBs in mature hydrogen applications while supporting Canadian demonstrations in emerging applications.
Mid term: growth and diversification. Between 2025-2030, the focus will be on the growth and diversification of the hydrogen sector. Early deployment HUBs will grow and new ones, connected by corridor infrastructure, will be initiated. As the technology matures and the full suite of end-use applications is at or near commercial readiness, hydrogen use in the mid-term will be focused on the applications which provide the best value proposition relative to other zero-emission technologies.
Long term: rapid market expansion. In the 2030-2050 timeframe, the Strategy aims for market expansion. During this period, new transportation applications will move into the commercial and rapid expansion phases, and dedicated hydrogen pipelines will become an attractive alternative as the percentage of hydrogen in natural gas systems increases.
Key Pillars. The Strategy contains 32 recommendations across the following eight pillars:
- Pillar 1: Strategic Partnerships – use existing and new partnerships to collaborate and plan the future of hydrogen in Canada.
- Pillar 2: De-Risking of Investments – establish funding programs, long-term policies, and business models to encourage industry and governments to invest in growing the hydrogen economy.
- Pillar 3: Innovation – take action to support further R&D, develop research priorities, and foster collaboration between stakeholders to ensure Canada maintains its competitive edge and global leadership in hydrogen and fuel cell technologies.
- Pillar 4: Codes and Standards – modernize existing codes and standards and develop new ones to keep pace and remove barriers to deployment, domestically and internationally.
- Pillar 5: Enabling Policies and Regulation – ensure hydrogen is integrated into clean energy roadmaps and strategies at all levels of government and incentivize its application.
- Pillar 6: Awareness – raise awareness of hydrogen's safety, uses, and benefits as technology develops.
- Pillar 7: Regional Blueprints – implement a multi-level, collaborative government effort to facilitate the development of regional hydrogen blueprints.
- Pillar 8: International Markets – work with international partners to ensure the global push for clean fuels includes hydrogen so that Canadian industries thrive at home and abroad.
Towards a thriving hydrogen economy. According to the Strategy, by 2050 our hydrogen economy has the potential to generate $50 Billion in domestic revenue; create more than 350,000 jobs; and deliver up to 30% of Canada's end-use energy, abating up to 190 Mt-CO2e of GHG emissions through deployment in transportation, heating, and industrial applications. Looking beyond Canada, the Strategy notes that the global market for hydrogen is being valued at $2.5-$11.7 Trillion by 2050.
Alberta's Natural Gas Vision and Strategy
In October 2020, Alberta released its Getting Alberta Back to Work - Natural Gas Vision and Strategy (the "Alberta Strategy"), which positions hydrogen as one of the key growth areas for Alberta's natural gas sector. The Alberta Strategy intends to deploy hydrogen and hydrogen-based technologies in the transportation and home heating sectors, further incorporating hydrogen as fuel for electricity generation and other industrial processes, and becoming a significant exporter of hydrogen to domestic and international markets.
The Alberta Strategy proposes two notable objectives: (i) the achievement of large-scale blue hydrogen production and the deployment of hydrogen in various commercial applications across the Province by 2030, and (ii) the export of hydrogen and hydrogen-derived products to domestic and global markets by 2040. The Strategy also sets out a number of short-medium-and long-term action items, which appear to be aimed at helping achieve these objectives. Action items include establishing common interest and partnership opportunities with the federal government, aligning hydrogen-related policy among Western provinces, and establishing partnerships with industry leaders.
Industry in Alberta is becoming engaged. In July of 2020, Emissions Reduction Alberta announced that it has extended funding through the Natural Gas Challenge to three proponents who are prototyping new approaches to convert natural gas to hydrogen. This is in addition to funding extended to hydrogen-related projects through the 2020 Biotechnology, Electricity and Sustainable Transportation Challenge, the winners of which included projects envisioning a "bold new use for hydrogen".
Alberta's potential hydrogen economy has also received increased attention from think-tanks such as the Transition Accelerator's Alberta Industrial Heartland Hydrogen Task Force (the "Task Force"). In November 2020, this Task Force released a report titled "Building a Transition Pathway to a Vibrant Hydrogen Economy in the Alberta Industrial Heartland". This report sets out a road map for how to deploy a hydrogen fuel economy in Alberta, with a particular focus on the greater Edmonton region.
Overall, it is expected that hydrogen production and consumption will spread at an increasing rate across Alberta in the coming years, in tandem with the development of hydrogen-related infrastructure to facilitate hydrogen transportation and, eventually, exports. As such, we can expect Alberta will be a key player in the development of this important new industry.
British Columbia's Forthcoming Strategy
Hydrogen is not a new industry to BC, and the Province is already home to several private sector hydrogen innovators. Ballard Power Systems has developed hydrogen fuel cell technology for decades, and now deploys hydrogen fuel cell buses, trucks, and other technologies worldwide. Hydrogen Technology and Energy Corporation owns and operates four hydrogen fueling stations in the Province, with more in development. Vancouver-based Loop Energy Inc. also recently announced that a German company may order 20 of its hydrogen fuel cells for use in an electric truck fleet.
On the legislative front, the Province enacted the Zero-Emission Vehicles Act, which requires automakers to reach escalating proportions of zero-emission vehicle sales until 2040, when all vehicles sold must be zero-emission. There is potential for hydrogen vehicles to be used in the commercial transportation sector as well, but due to financial and logistical constraints, widespread change has not transpired. The Province has also been a leader in adopting climate-related regulatory instruments, such as its carbon tax and low-carbon fuel requirements. In 2018, BC released its CleanBC plan, which aims to achieve progressive GHG reductions, as required by the Climate Change Accountability Act. The development of hydrogen technology supports BC's decarbonization goals advanced by this regulatory regime. Concurrently, BC's Renewable and Low Carbon Fuel Requirements Regulation prescribes both a renewable content requirement for diesel and gasoline and a general decrease in the carbon intensity of liquid fuels. This too is driving demand for hydrogen use in the Province.
Meanwhile, the Province is offering incentives and funding which will support the development of hydrogen infrastructure. On September 10, 2020, the provincial government announced funding for the construction of an additional ten hydrogen fueling stations. On January 28, 2021, BC announced it will provide discounted electricity rates until 2037 for industrial customers with operations that will reduce GHG emissions.
With all of this activity around the Province, British Columbia has announced its intention to release a hydrogen strategy to focus further investments and steps in the hydrogen industry. In 2019, the BC Hydrogen Study found that because locally developed hydrogen technology is often exported, there is a risk that BC's hydrogen innovation may move to other jurisdictions. The upcoming strategy may address this risk. It is also expected to encourage further decarbonization of fuel sources and potentially to provide increased support for the fuel cell industry.
Ontario's Consultation on Strategy
In November 2020, Ontario's government took a first step toward development of a provincial hydrogen strategy, with the release of the Low-Carbon Hydrogen Strategy Discussion Paper (the "Discussion Paper") intended to spur feedback from industry and the broader public. The Ontario Government believes investing in a hydrogen economy makes sense for the Province: "Ontario is well-positioned to drive growth in a low-carbon hydrogen economy, with our low-carbon electricity supply supported by an extensive natural gas distribution system as well as several projects and companies already established and/or in development."
The Discussion Paper outlines a vision for a low-carbon hydrogen economy that supports economic growth and GHG emission reductions (in line with targets set by the Made-in-Ontario Environment Plan). It builds on the Made-in-Ontario Environment Plan released in November 2018, which announced the government's commitment to reduce Ontario's GHG emissions by 30% compared to 2005 levels by 2030, in line with the federal government's 2030 target. The Province hopes to achieve this target, in part, by encouraging the use of low-carbon hydrogen energy sources across key industries.
Government intends for Ontario's hydrogen strategy to be guided by four principles:
- generating economic development and jobs;
- promoting energy resilience;
- reducing barriers and enabling action; and
- using hydrogen where its makes sense (i.e., where it is most likely to become cost-competitive).
The Discussion Paper posits hydrogen could become cost-competitive with traditional fossil fuels in four main areas: (i) industry, where low carbon hydrogen could be used in fertilizers and oil refineries; (ii) transport, where hydrogen can be used in vehicles that would include buses, commuter trains, ferries and forklifts; (iii) electricity production and storage, where hydrogen can be produced from excess electricity and stored for later use in high demand periods; and (iv) buildings and communities where it can be blended with natural gas for heating purposes.
The Discussion Paper was open for comment until January 18, 2021. Now the Ontario Government and the hydrogen working group it convened are reviewing the feedback received on the Discussion Paper and developing a hydrogen strategy for release later this year. We expect that policy and regulatory tools, which may be used to kick-start the low-carbon hydrogen economy, will be announced as part of the strategy.
Quebec's Green Hydrogen Plans
Green hydrogen is increasingly seen as essential for the Quebec Government to meet its emissions targets. To highlight this priority, the Quebec Government published various policies demonstrating its interest in developing a hub for green hydrogen in the Province.
The 2030 Plan for a Green Economy (only available in French), published in 2020, will help achieve the 2030 GHG emissions reduction target Quebec has set for itself, namely a 37.5% reduction compared with 1990 levels, and to reach carbon neutrality by 2050. This plan identifies various areas of application for green hydrogen, including industrial processes, intensive and heavy transportation, green chemistry, massive energy storage and heat production. The Green Economy Implementation Plan 2021-2026 (only available in French), also published in 2020, sets out a detailed investment schedule to support innovation namely in the field of green hydrogen and bioenergy. The Quebec Government intends that the province should become the leader in the production of green hydrogen and other bioenergies. This plan also notes that Quebec will develop its first green hydrogen and bioenergy strategy in fall 2021 and will launch a consultation process as of spring 2021.
Quebec's hydroelectricity public utility, Hydro-Québec, has also published its Strategic Plan 2020-2024 that proposes promising applications for clean hydrogen and emphasizes the importance of research and development. To implement this policy, Hydro-Québec has announced its support for this emerging industry by building one of the world's most powerful green hydrogen electrolysers in Varennes, Quebec, in collaboration with partners from the private sector.
Other notable projects in green hydrogen have emerged such as the Evolugen and Gazifère partnership to build a 20-megawatt water electrolysis hydrogen production plant in the Outaouais region. This plant will inject the green hydrogen it produces into the natural gas distribution network avoiding 15,000 metric tons in GHG emissions per year. Industrial applications for green hydrogen have been the main focus for new developments. However, with more projects seeing the light of day in the coming years, we can expect many of them to target the consumer market for hydrogen, increasing the amount of hydrogen fuelling stations available in the province.
Despite the current lack of specific regulation for green hydrogen in Quebec, the government has enacted the Act mainly to ensure effective governance of the fight against climate change and to promote electrification ("Act") to facilitate the implementation of its green policies. The Act gives the Minister of Energy and Natural Resources responsibility for ensuring integrated governance regarding energy transition, innovation and efficiency. As a result, the Minister is now responsible for preparing an energy transition, innovation and efficiency master plan, in effect abolishing the organization that was previously responsible for this task, Transition énergétique Québec.
The Quebec government has put in place several financial support options to encourage companies to produce and use green hydrogen. Notably, the Technoclimat program, which has a budget of $15 million in relation to green hydrogen, offers grants of up to $3 million to industrial and heavy transportation projects (details on the admissibility criteria are only available in French). We believe that financial incentives like this one will continue to become more advantageous once the hydrogen strategy and further regulations are in place.
Newfoundland's Nascent Hydrogen Plans
On May 6, 2021, the Premier's Economic Recovery Team ("PERT") released a report titled, "The Big Reset", outlining actions to address the Province's fiscal challenges and set it on a path to growth. Seizing on opportunities for hydrogen development is a theme explored in The Big Reset. PERT observed that Newfoundland and Labrador has all of the ingredients needed to develop a hydrogen economy: access to renewable electricity, water, and deepwater ports for export, but that it was not presently taking steps necessary to develop that economy.
PERT recommended that the Newfoundland and Labrador Government take the following steps to seize opportunities in the hydrogen space: "establish a team of hydrogen experts from the private sector, academia, and other governments to develop a green hydrogen plan to:
- Identify infrastructure needs for industrial, transportation and consumer use;
- Identify funding and economic opportunities and potential private sector partners;
- Overcome technical challenges;
- Adapt provincial infrastructure to be ready for export opportunities; and
- Focus on the development of a large-scale green hydrogen pilot project.
Interestingly, PERT noted in its report that a provincial hydrogen strategy or feasibility study for the Province has been prepared, though not yet released. With the PERT report's recommendations around development of the hydrogen economy in Newfoundland and Labrador, we can expect that the strategy or feasibility study is likely soon to be released or, refreshed and then released.
What will Come of all this Strategizing?
Governments are not alone in their desire to capitalize on opportunities in the hydrogen industry. Industry too, is making strategic investments in this area. Between 2015 and 2018, BC jobs in the hydrogen sector increased markedly. In Quebec and Alberta, hydrogen production has been significantly expanded to allow for export to Europe and the USA. Moreover, Canada is seen as a global leader in fuel cell technology and hydrogen energy systems, producing approximately three tonnes of hydrogen annually for industrial use, approximately 4% of total worldwide production. Though much of current hydrogen production is "grey" hydrogen, a pivot to blue or green hydrogen production is possible to unlock deep decarbonization potential, with appropriate government support.
With substantial momentum in government and industry, and faced with imminently looming climate change commitments, it seems that the conditions are ripe to support the development of a robust, clean hydrogen economy. Governments, however, will need to get the details of their strategies and policies right to send the appropriate signals to industry and investors. Substantial investments will be required to build the infrastructure to support a clean hydrogen economy. Government must, through policy and strategic investment, take concrete steps that will support the production, distribution and delivery of hydrogen in order to realize the many advantages that a hydrogen economy can offer the country.
The article was co-authored by Shamus Slaunwhite and Luis Cousin, articling students at Gowling WLG's Toronto office who will be returning to the firm as associates later this year.