What role can hydrogen play in Canada’s energy future?

Posted on Tuesday, January 26, 2021

Author: Prof. Kamiel Gabriel

Kamiel Gabriel

Senior Fellow, ISSP
Professor, Faculty of Engineering and Applied Science, Ontario Tech University

On January 19, 2021, the ISSP hosted a panel entitled Hydrogen and Canada’s Energy Future: Opportunities, Challenges, Next Steps. This blog is an adaptation of the author’s remarks.

Hydrogen is an important part of Canada’s energy future. A key obstacle to a full-fledged hydrogen economy lies in identifying a sustainable, low-cost method of hydrogen production with reduced dependence on fossil fuels. Globally, about 96% of today’s hydrogen is derived from hydrocarbons (e.g., natural gas, gasification and coal) via steam methane reforming using natural gas. This method is not environmentally sustainable and produces large amounts of carbon dioxide as a by-product.

Although most of it currently comes from fossil fuels, there are a number of other ways to produce hydrogen. Water electrolysis with electricity from renewable sources has one of the lowest carbon intensity footprints. However, it has some drawbacks as well. There is limited capacity, it is only as clean as the electricity source, and it is more affordable in jurisdictions where the cost of electricity generation is already low. Alternatively, electrolysis via high temperature thermochemical cycles is economically one of the best options for shifting from high marginal cost generation to low marginal cost generation with no greenhouse gas emissions. 

The focus of Canada’s hydrogen strategy should be on meeting the current challenges in producing low-carbon intensity, low-cost hydrogen from renewables at large enough scale to meet growing industrial and transportation demands. Hydrogen is an economically viable option to solve the curtailment of electricity supply (known as the Duck Curve). The development of regional blueprints (or nodes), including unique regional opportunities in this sector, is crucial to create demand and establish a supply chain at this early stage.

Currently, Canada has globally established industries in the production of hydrogen from water electrolysis (e.g., Hydrogenics/Cummins). Yet many argue that Canada falls short of fully exploiting the technology’s economic and environmental potential. In this regard, domestic deployment of hydrogen is critical to supporting the hydrogen and fuel cell sectors, as well as meeting climate change objectives by 2050. The earlier the deployment of the hydrogen economy starts, the sooner infrastructure development and end-user acceptance will come into place, allowing the full realization of longer-term projections on uptake and associated benefits.

I expect adoption of hydrogen to primarily focus on energy-intense applications where electrification is not technically or economically feasible, and where economics that rely on low-cost natural gas are more suited to energy dense fuels. This includes using hydrogen as a fuel for long-range transportation and power generation, providing heat for industry and buildings and as a feedstock for agricultural and industrial processes.

There are a number of steps that Canada can take to accelerate the deployment of a hydrogen economy. There is a clear need to demonstrate that hydrogen can be produced at low-carbon intensity and low cost. We also must establish the infrastructure necessary for large-scale deployment of hydrogen, including production, storage and transport. Lastly, investors and companies require greater encouragement to establish the full value chain for hydrogen deployment locally, nationally and internationally. It is important that industry and investors see expressed support from municipal, provincial and federal governments with targeted meaningful incentives to stimulate small- and medium-sized enterprises (SMEs) to enter this new economy with as few regulatory hurdles as possible. Spurring innovation in this sector is key. Government should consider creating a start-up fund to support SMEs seeking to take their innovative solutions to markets.

The release of a hydrogen strategy for Canada is a good first step. What we need now is for governments, regulators, industrial users, and suppliers to work together towards establishing specific goals with timelines to kickstart the implementation of its recommendations.

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