British Columbia Announces Hydrogen Strategy

July 15, 2021

Written By Duncan McPherson, Sharon Singh, Radha Curpen, Thomas McInerney, Vivek Warrier and Duncan Pardoe

On July 6, 2021, the Government of British Columbia released its Hydrogen Strategy outlining 63 actions to be undertaken over the short-term (2020-25), medium-term (2025-30) and long-term (2030-50) to make B.C. a leader in local hydrogen adoption and global hydrogen business.

The Strategy’s immediate priorities include scaling up hydrogen production, establishing regional hydrogen hubs and deploying medium- and heavy-duty fuel-cell vehicles.

Strategic Flexibility in Hydrogen Development

Reflecting B.C.'s abundant hydro and wind resources, on the one hand, and world-class natural gas reserves with geological storage potential on the other, the Strategy seeks to promote both 'green' hydrogen produced using renewable electricity, and 'blue' hydrogen derived from fossil fuels in combination with carbon capture and storage (CCS). More generally, the Strategy supports diverse hydrogen production methods, provided they are low carbon intensity.

Regulated Low Carbon Intensity Threshold for Hydrogen

The Strategy indicates 36.4g CO2e/MJ as the initial threshold target for produced hydrogen to be considered low carbon. This aligns with European Commission policy and the Federal Hydrogen Strategy for Canada. The 36.4g CO2e/MJ threshold, is, according to the Strategy: "a starting point and [B.C.] will ensure that its regulatory frameworks relating to hydrogen production and use are aligned to achieve continued reductions in carbon intensity over time." The carbon intensity of hydrogen will be determined using a rigorous life-cycle approach that accounts for all associated emissions including feedstock development, transportation, hydrogen production and any CCS. B.C. intends to work with other jurisdictions to develop a common methodology for measuring and verifying the carbon intensity of hydrogen.

Regulatory Change at the Heart of Short-Term Actions to Promote Hydrogen

Recent regulatory innovations in B.C. to promote hydrogen include:

• B.C. Hydro's Clean Industry and Innovation Rate discounting electricity rates for green hydrogen production starting in 2021; and
• amendments to the Greenhouse Gas Reduction Regulation dated May 25, 2021, which allow natural gas utilities to blend prescribed volumes of hydrogen into their systems, in addition to renewable natural gas blending.

The Strategy sets out a series of other planned regulatory changes to be completed by 2025:

• allowing the B.C. Oil and Gas Commission to regulate hydrogen production, storage and transportation if produced from fossil fuels;
• amending the Water Sustainability Act related regulations to include hydrogen production as an authorized industrial water use purpose and setting new water fees and rentals; and
• establishing a regulatory framework for CCS.

Notable Pricing Assumptions

The Strategy notes that green renewable hydrogen production at scale via electrolysis will require electricity rates in the range of $40/MWh: above current B.C. Hydro rates, even it appears with B.C. Hydro's recent Clean Industry and Innovation Rate (20 percent discount from standard industrial rates for the first 5 years, 13 percent discount in year 6 and 7 percent discount in year 7). In an apparent acknowledgment that B.C. Hydro rates are not currently conducive to scaled green hydrogen production, the Strategy describes as an action for 2025-30 considering introducing alternative electricity rate designs to support hydrogen production.

Without elaborating in great detail on a stated aim for B.C. to become a hydrogen exporter, the Strategy does estimate that to be globally competitive, the production price of hydrogen needs to be less than $3/kg by 2030, achievable in B.C. according to the Strategy by blue hydrogen production, but not green hydrogen.

Fueling Hubs and Incentives for Zero-Emission Medium- and Heavy-Duty Vehicles

The Strategy states that B.C. will continue to support projects that expand the Province's public hydrogen fueling station network, including by further leveraging the Part 3 Agreement program of the Province's Low Carbon Fuel Standard. Under this program, fuel suppliers can obtain valuable tradable compliance credits for undertaking projects that increase the use of low carbon fuels. This hydrogen fueling station network expansion is expected to involve the creation of hydrogen production and use hubs across the Province, requiring the B.C. Government to commence to determine possible hub sites in the foreseeable future.

The Strategy states that B.C. will explore amendments to the Zero-Emission Vehicles Act (ZEVA) to allow medium- and heavy-duty vehicles sales to generate credits under the ZEVA in addition to light-duty vehicles, and that B.C. may further amend the ZEVA to impose compliance targets for the medium- and heavy-duty vehicle classes. If implemented, these changes to the ZEVA would create significant incentives for the sale of zero-emission medium- and heavy-duty vehicles in B.C.

Ongoing Financial Support for Hydrogen Commercialization

B.C. also aims to incentivize investment and accelerate technology commercialization in the hydrogen sector generally. To facilitate this, in addition to providing policy supports for increasing hydrogen demand certainty and de-risking the development of hydrogen infrastructure, B.C. will continue to provide incentives and direct support, such as financing eligible hydrogen businesses through the InBC Investment Fund, to foster business growth in the hydrogen sector.

In Summary

B.C. is the first Canadian province to develop and announce a comprehensive hydrogen strategy. 

• The B.C. Government anticipates a series of legislative changes to occur within the next four years to facilitate hydrogen production and use in the province.
• B.C. is supportive of both green and blue hydrogen production, and has already implemented polices and legislative amendments designed to incentivize and support the growth of such projects.

If you have questions regarding new or existing hydrogen projects, please do not hesitate to contact a member of the Bennett Jones Energy, Energy Regulatory, Environmental or Capital Projects groups.

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