Paul Rodden • Season: 2024 • Episode: 342
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Welcome to The Hydrogen Podcast!
In episode 342, Canada’s hydrogen hubs are feeling the same regulatory pinch as the EU and the US. What can be done, and where should we as the hydrogen value chain, focus our attention? I’ll go over all of this and give my thoughts on today’s hydrogen podcast.
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Transcript:
Canada’s hydrogen hubs are feeling the same regulatory pinch as the EU and the US. What can be done, and where should we as the hydrogen value chain, focus our attention? I’ll go over all of this and give my thoughts on today’s hydrogen podcast.
So the big questions in the energy industry today are, how is hydrogen the primary driving force behind the evolution of energy. Where is capital being deployed for hydrogen projects globally, and where are the best investment opportunities for early adopters who recognize the importance of hydrogen? I will address the critical issues and give you the information you need to deploy capital. Those are the questions that will unlock the potential of hydrogen, and this podcast will give you the answers. My name is Paul Rodden, and welcome to the hydrogen podcast.
In an article in Reuters, Paul Day writes, Canada’s hydrogen strategy advances, But challenges remain. Paul writes, Canada unveiled its clean hydrogen strategy in 2020 and in a May 2024 progress report, the government highlighted a slew of developments, including the introduction of investment tax credits for hydrogen production, clean technology and manufacturing methods and carbon capture, utilization and storage. Some 80 low carbon hydrogen projects have been announced, representing an expression of interest of over 100 billion Canadian dollars, or 73 billion US dollars in potential investment, as well as the establishment of 13 low carbon hydrogen production facilities, projects are also underway to boost demand across the energy spectrum.
In a quote from Michael McDonald, Natural Resources Canada spokesperson, hydrogen continues to have a role to play in meeting global energy needs in the context of energy security, energy transition and the broader climate imperative, this provides significant investment and export opportunities across Canada in March, the government finalized an export accord with Germany, together committing around 600 million Canadian dollars to establish a transatlantic hydrogen corridor. However, since the original strategy was announced four years ago, developers and producers alike have struggled with a slow rollout of government subsidies, few final investment decisions or fids, insufficient infrastructure and uneven definitions of what constitutes clean hydrogen. The slow start is not unique to Canada. As in Europe and the United States, the Canadian government has taken time to clarify the quantity of hydrogen subsidies, as well as the eligibility criteria, leading to some frustration within the clean hydrogen industry. In a quote from Ivette Vera-Perez President and CEO of Canadian Hydrogen Association.
The fact that we have taken so long to legislate an ITC or an investment tax credit, and there’s no clear application process, is hard saying you cannot say that. It is only late in Canada. It’s everywhere. The Clean Hydrogen Investment Tax Credit (CHITC) was first introduced in the 2022 Fall Economic Statement, though was not passed into law until June of this year. The CHITC was passed with the Clean Technology ITC, CCUS ITC, and the Clean Technology Manufacturing ITC. Together they represent CAN$93 billion in federal incentives by 2034-35, and will play an essential role in attracting investment, supporting Canadian innovation, and creating jobs, the government says.
The accord with Germany was originally signed in 2022, with a commitment to, among other things, begin exporting clean Canadian hydrogen to Europe by 2025.
While progress has been made, it’s unlikely exports will be ready to begin by next year.“I have been in Germany with our members, and we have made a lot of progress,” says Vera-Perez. A functioning export industry by next year was unrealistic for such a nascent industry, she says, but the goal has motored project proponents and the whole industry so it can be ready as soon as possible. “There has been a lot of enthusiasm and optimism in the sector as a whole and occasionally there are those who think we will be developed much quicker. We must be realistic. We need to recognize that we are building a new industry, and that takes time,” she says.
Canada is a net exporter of electricity, generating just 2% of global production while being one of the top exporters, sending some 9% of its power abroad.
Exporting hydrogen, however, poses its own challenges.
“It’s a good policy, but there are a lot of difficult factors; the liquefaction process associated with hydrogen, a lack of availability of ammonia
, opens new tab carriers, and then the costs associated with re-gasifying on the other side,” says Kyle Hayes, Partner at Foley & Lardner who serves as Co-Chair of the firm’s Hydrogen Practice. Other uncertainties include how to stimulate demand and find the off-takers for the subsidized gas produced. “The lack of a robust universe of off-takers, creates a snowball effect in that … it generally means a lack of financing, and therefore it somewhat limits the universe of viable producers to strategics, who do not necessarily want to dip their toes in the water alone, and so you reach this impasse,” says Hayes.
New and developing technology also means some methods for hydrogen production aren’t included in the ITC, a loophole that could, potentially, sink certain innovations. Aurora Hydrogen, which has signed Memorandums of Understanding (MoU) in Edmonton, Alberta, is working on methane pyrolysis and microwave technology. The method is considerably more efficient and, as such, a much more economical method of clean hydrogen production than electrolysis, opens new tab or steam methane reforming (SMR), according to Aurora Hydrogen CEO Andrew Gillis.
The technology has a patent in Canada and the United States, and the company in July received CAN$3 million from the government to scale production, and another CAN$1 million from the not-for-profit NGIF Accelerator. However, methane pyrolysis is not included in the ITC, Gillis says. “There is a lot of emerging technology that we think is going to be really important, but the regulators haven’t necessarily caught up to that yet,” says Gillis.
Canada, the second largest country in the world by landmass but with a population that is half the size of Britain, has seen an uneven distribution of hydrogen projects between Nova Scotia, on the Atlantic coast, and British Colombia (BC), on the Pacific Coast and almost 6,000 km away. Some of the greatest advances in clean hydrogen production have been seen in BC and Quebec, each of which receive around 90% from hydroelectricity, while heavily-forested Quebec has also begun work on production from biomass.
Alberta, an oil- and gas-rich, opens new tab province, has taken steps toward the production of hydrogen via SMR, much of which is being funneled toward the massive agriculture sector for fertilizer production.
Regional use of clean hydrogen is low-hanging fruit for decarbonizing hard to abate industries, according to President and CEO of Source3 X Ayaz Khokhar, with larger scale projects contingent on developing infrastructure and transport such as by Canadian National Railways on west coast export projects. The ‘Power-to-X’ company in July signed an MoU to collaborate on the Skeena Clean Hydrogen Hub in BC which will produce up to 50,000 tons of low-emission hydrogen, ammonia, e-fuels, or sustainable aviation fuels, a year.
Provincial approaches could be viewed as existing in three categories, including jurisdictions that just talk about it, or pay lip service to the industry, those involved in structuring and policy work, and those busy with implementation, says Khokhar.
The key to working within such a changing political, opens new tab environment was the ability to pivot rapidly if a province or region is not ready for the fuel you are producing, Khokhar says. “While we are focused on hydrogen production from renewable energy sources in Canada, our implementation strategy is to keep pace with market acceptance and uptake,” he says.
“In short to medium term, our focus is on various applications, including derivatives and e-fuels, with long term goal of hydrogen use in its own form.”
Okay, so the hydrogen economy in Canada is also looking at the political and socioeconomic hurdles that have been plaguing the US and the EU, with offtake and subsidy distribution being key factors that are holding up project development. Now I do understand the importance of detailing and getting a complete understanding of what makes clean hydrogen clean. But that’s also the problem. Those controlling the government pocketbook are having a hard time drilling down to what clean hydrogen is.
The EU and the US both rolled out a three pillars program, but the US has pulled back on that and has yet to release its finalized regulatory framework. But with that said, we’ve already seen three hubs get their initial funding, one of which arch two will be reliant on blue hydrogen for at least some of its hydrogen production. So there are very murky waters when dealing with federal subsidies and loan programs, again, making it understandable why investment in offtake has been so minimal. The risk is astronomical, and that’s not the biggest aggravation, at least to me, with production technologies currently in development or deployment. Why are they not in consideration for these subsidies? You all know my predilections for natural hydrogen and methane pyrolysis, and I’ll dive into that in a moment.
But why not include nuclear electrolysis, that is clean, abundant energy that can be used under low grid load to generate hydrogen. The water is readily available at these sites, as is the energy needed for hydrogen development, but that was also left off the regulations, least here in the US. And back to natural hydrogen and methane pyrolysis, I can understand. Not including natural in this initial list is still a very new technology and very unproven method of hydrogen production with years of subsurface research yet to be performed. But the potential is there, and it looks good, but methane pyrolysis, I’ve talked with juggernauts in the global energy economy, who have called it the holy grail of hydrogen production.
It’s as clean a technology as can exist for hydrogen production, with the added benefit of generating solid carbon all the while being more economic than green or blue. Perhaps the lobby isn’t big enough, or there are still technical hurdles to climb, but that’s why it’s still critical to push the hydrogen economy rather than promoting one technology over another.
But with that being said, the production methods that drive down off take investment risk right now are the ones that need to be focused on and promoted.
All right, that’s it for me, everyone. If you have a second, I would really appreciate it. If you could leave a good review on whatever platform it is that you listen to Apple podcasts, Spotify, Google, YouTube, whatever it is, that would be a tremendous help to the show. And as always, if you ever have any feedback, you’re welcome to email me directly at info@thehydrogenpodcast.com. So until next time, keep your eyes up and honor one another. Hey, this is Paul. I hope you liked this podcast. If you did and want to hear more. I’d appreciate it if you would either subscribe to this channel on YouTube, or connect with your favorite platform through my website at www.thehydrogenpodcast.com. Thanks for listening. I very much appreciate it. Have a great day.
