Desmarais family member part of investor group launching $4-billion project in Quebec to reduce fossil fuel dependence

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A group of investors including businesswoman France Chrétien-Desmarais is making a big bet on hydrogen production in Canada, launching a project in Quebec worth $4-billion that the province hopes will help make its transportation and heavy industry less dependent on fossil fuels.

The promoters are billing it as one of the largest ever decarbonization projects in Quebec, a facility entirely financed with private-sector money that will remove 800,000 tonnes of carbon dioxide a year from the atmosphere when it’s up and running. The group also has earlier-stage plans under way for four other projects in Western and Eastern Canada.

Ms. Chrétien is the daughter of former prime minister Jean Chrétien and a member of Quebec’s billionaire Desmarais family, which controls Power Corp. of Canada.

She’s partnering, independent of the Desmarais family, with Belgian renewable-energy company Tree Energy Solutions on a new green hydrogen production facility near Shawinigan, Que., through their venture, TES Canada.

“This sends a big message about hydrogen being a financially viable solution for certain markets,” Éric Gauthier, general manager of TES Canada, said in an interview Friday. “Everything that we’re going to produce is going local.”

Hydrogen is enjoying renewed momentum around the world as countries eye the fuel as a means of reducing greenhouse-gas emissions. The focus isn’t so much on using it to fuel cars but rather to power long-haul trucks and trains for which electric batteries are impractical. Hydrogen is also seen as a future energy source for industrial users such as cement plants.

Still, the fuel isn’t universally embraced by energy experts, particularly those who saw excitement surrounding it 20 years ago dissipate when the economics precluded mass adoption. Even today, rising equipment and financing costs are putting projects at risk and reducing the impact of government support, according to the Paris-based International Energy Agency.

Mr. Gauthier said the financing for the Quebec project is largely secured, and will incorporate a mix of private equity, bank debt and government tax incentives. TES Canada has also struck a long-term off-take agreement that will see Montreal-based natural gas distributor Énergir buy two thirds of the hydrogen the company makes with the balance earmarked for long-haul trucking companies.

That means all of the fuel produced will be used in Quebec and not exported as was originally envisioned when the idea was first conceived two years ago. That will, in turn, cut costs and lower risk, Mr. Gauthier said.

As a fuel, hydrogen is light, storable and energy-dense. When burned, it produces no direct emissions of pollutants or greenhouse gases, making it an attractive prospect for decarbonization.

To produce hydrogen, massive electrolyzers split the hydrogen and oxygen contained in water to create an industrial fuel. The process requires a significant amount of energy to run the electrolyzer. If that source of energy is low emission or renewable, like wind, the result is typically called “green hydrogen.”

In this case, TES Canada is proposing to build a massive wind farm near Shawinigan containing an estimated 140 turbines to power its electrolyzer facility. That will be supplemented with some solar-power generation and 150 megawatts of dedicated hydro-power capacity from Hydro-Québec.

Quebec has for years used its vast and affordable hydro-power resources to lure business investment and drive growth. Now, as electricity surpluses dwindle, requests for that power are vastly outstripping supply and companies are being told no.

TES Canada is among the rare hydrogen production companies whose projects are being given access to Hydro-Québec power. One other project that’s won such support, which hasn’t yet been announced, is ethanol producer Greenfield Global Inc.’s green hydrogen venture slated for Varennes, Que., Radio Canada reported.

The TES plan is “a very positive” announcement, said Pierre-Olivier Pineau, an energy specialist at Montreal’s HEC business school. For once, the promoter is committing to generate its own electricity, not only buy from Hydro-Québec at a (probably discounted) regulated rate, he said via e-mail.

“It sets a precedent,” he said, “that will allow the government to say ‘Look, we can help you with some base-load power, but you have to cover most of your needs through your own production.’ ”

So far, new hydrogen projects in Canada have been concentrated in the Atlantic provinces, where dozens of companies have popped up with proposals that take advantage of the constant wind gusts that rip over the sea and land. In Nova Scotia, the government has approved at least two green-hydrogen projects, one spearheaded by EverWind Fuels and the other by Bear Head Energy.

In August last year, the Canadian and German governments signed a deal to co-operate on exporting hydrogen fuel to Europe. The agreement set an ambitious target: Begin shipments from Eastern Canada in 2025. Ottawa’s 2023 budget also included an investment tax credit for clean-hydrogen production.

The TES project still has to complete its environmental permitting. The company has begun setting up meetings with citizens in the region to explain its plans. It hopes to start construction in 2026.