Canada's Hydrogen Strategy

December 17, 2020

Written By Duncan McPherson, Marie H. Buchinski, Vivek T.A. Warrier, Radha Curpen, Brad Gilmour, Lawrence E. Smith Q.C., Keely Cameron, Samuel Denstedt and Kenryo Mizutani

Following its recent announcement of A Healthy Environment and a Healthy Economy, an accelerated climate plan for Canada, the Government of Canada released the Hydrogen Strategy for Canada: Seizing the Opportunities for Hydrogen on December 16, 2020. The Strategy seeks to galvanize Canadian production, use, and export of clean hydrogen as an important element in reducing carbon emissions to net zero by 2050, while maintaining Canada's role as a leading global energy player.

The Strategy expects that carbon pricing, to reach $170 per tonne by 2030 under the new climate plan, and the soon to be released Clean Fuel Standard for liquid fuels, will play a key role in channeling investment to the emerging hydrogen economy. Funding for hydrogen projects is also available through the $1.5-billion Low-carbon and Zero-emissions Fuels Fund announced in the new climate plan.  

The culmination of extensive consultation with the private sector, academia, associations and NGOs, research groups, provincial governments, Indigenous organizations, communities, and other stakeholders,  the Strategy envisages the possibilities for hydrogen to reduce emissions across various industries, including steel, oil refining, aviation, shipping, rail, heavy-haul trucking, and natural gas utility service. It is accordingly of broad interest to Canadian business, setting out comprehensive steps for the federal government to encourage hydrogen in Canada, and against which future government action can be benchmarked and measured. 

Key Goals of Canada's Hydrogen Strategy

• Canada will create regional hydrogen hubs domestically to take advantage of different regional strengths for hydrogen production and utilization opportunities. 
• By 2050, clean hydrogen will deliver up to 30 percent of Canada's energy, reducing up to 190 Mt CO² equivalent per year. 
• Canada will become one of the top three producers of clean hydrogen globally by 2050.  
• Canada will capitalize on hydrogen export opportunities and become the world's hydrogen supplier of choice.   

To reach its 2050 goal, Canada will first focus on laying the foundation in the next five years. This includes the development of regional and provincial hydrogen roadmaps, identifying good hydrogen hub candidates, planning and developing new hydrogen supply and distribution infrastructure, and pilot or demonstration projects in emerging applications of hydrogen. 

In the mid-term, between 2025 and 2030, Canada intends to enter a "growth and diversification" stage, where existing hydrogen hubs continue to expand while new hubs are initiated that are directly connected to established hubs. In this phase, maturing technology is expected to increase commercially viable end-use applications of hydrogen, and the focus will shift to pursuing the highest value opportunities for hydrogen as compared to other viable zero-emission alternatives for the given application. 

Between 2030 and 2050, Canada aims to scale up deployment of hydrogen technologies to realize the full advantages of the hydrogen economy, envisaging significant increases in hydrogen powered transportation fleets, the use of dedicated hydrogen pipelines, and increasing percentages of hydrogen in natural gas grids, among other innovations. The Strategy also envisages clean hydrogen as a key feedstock or source of industrial heat for a variety of industrial processes, including petroleum refining, bitumen upgrading, ammonia production, methanol production, and steel production.

Opportunities and Challenges

The Strategy provides a comprehensive strengths, weaknesses, opportunities and threats analysis for hydrogen in Canada, emphasizing that Canada: 

• is currently one of the top 10 hydrogen producers globally, with over 3 million tonnes of annual hydrogen production, providing an excellent base on which to build out clean hydrogen infrastructure; and 
• has a remarkable mix of natural and energy resources that provide myriad opportunities for clean hydrogen using diversified technologies. These include: hydrogen from natural gas where geology supports carbon capture utilization and storage, such as in northeast B.C., Alberta, and Saskatchewan; hydrogen from electrolysis using nuclear power particularly in Ontario; and hydrogen from electrolysis using renewable power where this is abundant, such as in B.C., Manitoba, and Quebec.   

The Strategy also identifies many challenges to scaled development of clean hydrogen, including:

• the draw of large projects globally on Canadian talent pools (on international developments, please see our prior blogs on Australia, Germany and the EU, and Japan and South Korea); 
• lagging Canadian development of regulatory codes and standards to support hydrogen deployment; and
• technological risks of different emergent hydrogen uses. 

Recommendations 

To overcome the various challenges, the Strategy provides 32 recommendations emphasizing:

• collaboration across governments to fill regulatory gaps;
• increased R&D spending in Canada on hydrogen;
• investment in export infrastructure, notably hydrogen pipelines to U.S. markets; and 
• the establishment of flagship hydrogen projects that highlight Canada's expertise to attract investments into the Canadian market, and that can be replicated internationally. 

Hydrogen is expected to play an important role for Canada to meet its Paris Agreement commitments and pledge to achieve net-zero carbon emissions by 2050. The new federal Strategy clearly sets this objective, complimenting other provincial and regional plans for hydrogen, including the Alberta government's Natural Gas Vision and Strategy and the Alberta Industrial Heartland's plan.

Bennett Jones is actively involved in emerging hydrogen developments. On the fundamentals of the hydrogen economy, please see our prior post, Hydrogen 101: Basics of Hydrogen Supply Chains. If you have questions regarding hydrogen business opportunities, including the implications of the federal hydrogen Strategy for your business, please contact one of the authors of this post or a member of the firm's Energy, Regulatory, Environmental Law, or Climate Change groups.  

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