Ottawa’s hydrogen strategy must overcome challenges of high costs, lack of industry standards

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The federal government’s national hydrogen strategy envisages building a $5-billion industry that would create 100,000 jobs and include a nationwide network of hydrogen-vehicle fuelling stations by 2050 – but it must overcome challenges of high costs and a lack of cohesive industry standards.

A federal government briefing document, seen by The Globe and Mail, lays out a vision for a new hydrogen industry and identifies key sectors where hydrogen could be a boon, including using it as a source of heat for industry and buildings, power generation, and fuelling trucks, trains and ships where electric batteries aren’t feasible.

Ottawa has spent three years consulting with industry to develop a strategy, slated for release this year.

The federal government’s goal of reaching net-zero carbon emissions by 2050 has brought hydrogen into keen focus. The fuel is light, can be stored, is energy-dense and produces no direct emissions of pollutants or greenhouse gases.

Canada is joining other countries around the world eyeing the fuel as they work toward climate targets. The European Union, for example, released a hydrogen strategy last month, and in May, Australia established a hydrogen project fund worth 300 million Australian dollars ($286-million).

“We’ve all been waiting for that moment when there would be a critical mass for investment and technological breakthroughs, and I think these things are happening now,” Natural Resources Minister Seamus O’Regan told The Globe during a recent interview.

But even as governments embrace hydrogen, development of the Canadian sector continues to face challenges.

The main one is cost – it’s simply not yet economically viable compared with other conventional fuel options. The report supposes that could be addressed through government capital and production incentives, or implementing financial incentives for end-users.

The hydrogen sector also lacks cohesive regulations and standards. International collaboration is already happening in that space, as the federal government works with other countries to develop and align codes, standards and a common methodology to determine hydrogen’s carbon intensity.

The EU strategy highlights similar challenges. Hydrogen development, it notes, will require a “critical mass in investment, an enabling regulatory framework, new lead markets, sustained research and innovation into breakthrough technologies and for bringing new solutions to the market.”

In Canada, Mr. O’Regan would particularly like to see more hydrogen-powered vehicles, including in long-haul transportation. An Alberta pilot project along those lines – operating two such trucks between Edmonton and Calgary – recently received $7.3-million from Emissions Reduction Alberta, a Crown corporation funded by the province’s carbon tax on large emitters.

“I think we’ve got a real opportunity to be globally competitive, and that’s exciting,” Mr. O’Regan said.

A national hydrogen fuelling network would be a “breakthrough,” he said, that would help dissolve the ”psychological barrier” of range anxiety that can accompany electric- and hydrogen-powered vehicles.

That plan, however, is still decades away.

The billions in revenue and job windfall is also a long-term vision. It will depend on the growth and diversification of the sector over the next five to 10 years, followed by new commercial applications and technology advancements, particularly in fuel cells.

In the short term, the report notes the importance of laying the foundation for a hydrogen economy in Canada, including developing new supply and distribution infrastructure.

The government also sees an opportunity to partner with the energy industry and drive commercial “blue” hydrogen projects, despite the oil price downturn and uncertainty over Canada’s recovery from the COVID-19 pandemic. Blue hydrogen is created by extracting hydrogen from natural gas, then capturing and storing the resulting carbon dioxide.

By adding carbon capture to upgrading processes that already use hydrogen to remove impurities from crude, the report says Alberta’s oil sands operations have a significant opportunity to reduce their greenhouse gas emissions.

With abundant stocks of natural gas, Alberta, British Columbia and Saskatchewan are the most suited to producing blue hydrogen, the report notes. Green hydrogen (where renewable power is used to split the hydrogen atom from water via electrolysis) could be developed in British Columbia, Manitoba, Ontario, Quebec, New Brunswick, and Newfoundland and Labrador, the report says.

Mr. O’Regan said the national strategy will encourage development of both blue and green hydrogen, adding, “We’d be foolish not to look at blue” given that Canada is the world’s fourth-largest producer of natural gas, and has established expertise in carbon capture and storage.

That focus is particularly important for companies such as Ekona Power Inc., which recently received a $5-million grant from ERA to develop and field-test a system that cracks methane into hydrogen and solid carbon – a kind of black, sandy-looking material – which can then be developed into other products.

Ekona, like many other companies and industry associations, has been part of the sweeping consultations on Canada’s hydrogen strategy.

“There’s an increased visibility and appetite for blue hydrogen,” vice-president Gary Schubak said.

“It won’t last forever – because fossil resources won’t – but at the same time, it’s highly reduced in terms of carbon intensity.”

The government in Canada maintains that early action is crucial if the nation is to successfully build a booming hydrogen economy. Key to that effort will be programs to encourage investment, establishing an innovation and research strategy, raising public confidence in hydrogen systems, and collaboration between governments, industry and academia.

When the strategy is released, Mr. Schubak said he wouldn’t be surprised if it contains some big – even “audacious” – goals.

“We’ve set ourselves some difficult targets to be net-zero by 2050, so we’re going to have to make significant changes to do that,” he said.

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