Hydrogen: An emerging innovation in Canada's renewable energy industry

Francis Campbell, Analyst, Research, Invest in Canada

street sign indicating electric and hydrogen stations ahead

The world is headed into an unprecedented energy transition, and Canada—with emerging industries like hydrogen and cleantech—is poised to lead that transition. This week at GasTech Virtual Summit, leaders in the global energy industry are gathering to discuss that transition and Canada will be on the centre stage. While the country has been a leader in the production of oil and gas for decades, innovation in industries like hydrogen will be essential to Canada’s energy leadership in the future.

Canada has committed to reducing its greenhouse gas (GHG) emissions by 30% (below 2005 levels) by 2030. In addition, the federal government is developing a plan to achieve net-zero emissions by 2050. Although this goal is ambitious, it presents a distinct opportunity for innovative Canadian industries to lead. As Canada navigates the energy transition, clean technologies must step up to the plate—and the hydrogen industry is appearing once again as a crucial component to achieve these emissions goals.

What is the hydrogen economy?

The notion of the hydrogen economy was first proposed in the 1970s, when carbon-based fossil fuels were to have been substituted by hydrogen. It imagined a system where the economy would rely primarily on hydrogen as the energy carrier, abolishing the use of fossil fuels, decreasing carbon dioxide emissions, and ensuring energy independence. The focal point for development was on the commercialization of consumer fuel cell vehicles and the creation of fuelling infrastructure. 

Now that the hydrogen economy concept is being applied in practice, this industry could significantly reduce greenhouse gas emissions and create highly skilled jobs, all while improving the air quality.

Canada’s hydrogen industry

The hydrogen economy concept has evolved in recent years. Canada has moved beyond the long-term commercialization of consumer fuel cell vehicles to focus on near-term developments where fuel cell products can be implemented using existing technology and simpler infrastructure—think long-distance commercial transportation, high-heat industries (metals manufacturing), and large-scale building heating.

Canada is not only one of the largest hydrogen producers in the world, but domestic and global companies in Canada are developing innovative end-use applications and technologies for industry. At a micro level, there are a number of companies stepping up to the plate, including:

  • British Columbia-based Ballard Power Systems has been leading hydrogen fuel cell development for over 40 years
  • Manitoba-based New Flyer is the biggest bus manufacturer in North America and has started making hydrogen-fueled buses
  • Ontario-based Hydrogenics is the worldwide leader in building industrial and commercial hydrogen generation, hydrogen fuel cells, and large-scale energy storage solutions
  • US-based Air Products has more than 50 years of hydrogen experience and is on the forefront of hydrogen energy technology development
  • France-based Air Liquide is actively involved in the energy transition with the supply of hydrogen and related solutions, and is the number one producer of gases derived from air in Canada

The hydrogen supply chain

At a high level, the supply chain for hydrogen is consistent regardless of location. Starting with a large energy source, the supply chain moves through production technology, to storage, transportation, and ends with refuelling infrastructure for end-use applications. Historically, hydrogen has been produced from natural gas and other fossil fuels, though, as costs fall, producers are looking at renewable energies to drive green growth. The sources need to be powerful and abundant enough to power the production technologies such as steam methane reforming, gasification, and electrolysis. Once produced, hydrogen needs to then be stored, often through liquification and compression processes. From there, hydrogen can be transported via truck, train, or pipeline to refueling stations where it can be used in a variety of efficient consumer and industrial applications—limiting greenhouse gas emissions.

From grey hydrogen to green hydrogen

The production method for hydrogen matters significantly. As it stands, the bulk of hydrogen today is produced by subjecting natural gas to an extremely high temperature and separating its elements. This produces a considerable amount of greenhouse-gas emissions, giving it the name “grey hydrogen”; meaning, the environmental benefit of hydrogen is negated due to this production process. “Grey” hydrogen can become “blue” through carbon capture and sequestration, and lastly (or ideally) “green”, by hydrogen production that is derived entirely from renewable sources.

Canadian producers will benefit from both blue and green hydrogen. In the long term, once the green hydrogen process becomes economically feasible to implement, a number of provinces like British Columbia, Manitoba, Ontario, and Quebec will have an advantage given cheap off-peak renewable power, with hydroelectricity accounting for the largest source.

Building a competitive hydrogen industry

The biggest challenge impeding the immediate success of the hydrogen industry around the world has been its price tag. The costs associated with hydrogen for everyday use make it unaffordable in comparison to other alternates. A recent report, Path to Hydrogen Competitiveness: A Cost Perspective, released by the Hydrogen Council (a global coalition of over 80 companies), highlights that, by scaling up hydrogen production, distribution, and equipment and component manufacturing, the cost of hydrogen solutions is projected to decrease by up to 50% by 2030. In a wide variety of applications, hydrogen could therefore become competitive with other low-carbon alternatives.

Significant cost reductions are expected in the near future. Long-distance and heavy-duty transportation, industrial heating, and heavy-industry feedstock (which together comprise roughly 15% of global energy consumption) could view the potential of hydrogen as a great decarbonization option. This dramatic cost trajectory can be attributed mainly to economies of scale: a  fall in the cost of producing low-carbon and renewable hydrogen; lower distribution and refuelling costs due to scale effect on infrastructure use; and a dramatic drop in the cost of components for end-use equipment.  However, there is considerable work and, therefore, opportunity to reach this point.

Canadian hydrogen strategies

Right along these lines, the Canadian government has committed to having a comprehensive hydrogen strategy, which signals the federal government’s intention to pursue hydrogen fuel as a key component of its goal to reach net zero in greenhouse gas emissions by 2050. This strategy is likely to be focused on supporting blue and green hydrogen developments, particularly since Canada is already a major producer of both gas and renewables.

Alongside federal developments, the Alberta government is hoping to lead the country’s production of blue hydrogen. As the country’s largest producer of natural gas, it already has some important building blocks in place. The province’s hydrogen development plan is also meant to reduce Alberta’s greenhouse gas emissions while diversifying its economy, and is to be released in the fall.

In 2019, the International Energy Agency (IEA) delivered a report to evaluate the current status of hydrogen across the world, and to offer guidance on its further development. The report finds that blue and green hydrogen are currently enjoying unprecedented political and business growth, with the number of standards and projects around the world intensifying. It concludes that now is the best time to scale up hydrogen technologies, which would therefore lower costs and allow hydrogen to become widely used.

Hydrogen fuel technologies are not new, though with renewed attention growing both nationally and on an international stage, there is increased willingness to overcome challenges—and therefore the opportunities for growth and investment are extremely promising.

If you are a global company looking to invest in Canada, contact us to discuss your hydrogen project.