The Canadian government released its much-delayed and heavily telegraphed hydrogen strategy in mid-December. As anticipated by Petroleum Economist in July, Ottawa’s strategy lacks significant federal funding commitments, is really more a roadmap than a comprehensive strategy and relies on a combination of substantially blue but increasingly green hydrogen, since Canada is a major producer of both natural gas and renewables.

Unsurprisingly, the provincial government of Alberta applauded the strategy’s initial heavy reliance on blue hydrogen, whereas environmental groups severely criticised it even before the its formal release.

Federal natural resources minister Seamus O’Regan introduced his government’s strategy on 16 December to “position Canada as a global hydrogen leader”. The first step is to create regional producing and consuming hubs over the 2020-25 period, with the Alberta Industrial Heartland area, near Edmonton, at the top of the list given the availability of low-cost and plentiful gas as well as carbon capture and storage (CCS) infrastructure.

The federal government expects blue hydrogen to dominate production in the shorter term

Other initial hubs, benefiting from either low-cost gas or surplus zero-carbon power—nuclear, hydro and other renewables—include port areas in British Columbia, Manitoba, Ontario, Quebec and the Atlantic region, as well as the transportation corridor between Montreal and Detroit, in the US state of Michigan.

The federal government expects blue hydrogen to dominate production in the shorter term, but additional hubs to emerge as green hydrogen becomes increasingly economic to produce. By 2050, hydrogen is projected to permeate the Canadian economy as the federal and provincial governments strive for net-zero emissions.

Investment challenge

Ottawa is predicting Canada’s hydrogen economy will become “self-sustaining” by 2030, at which point it should reduce national greenhouse gas (GHG) emissions by up to 45mn t/yr. It is also predicting the domestic hydrogen market to be worth C$50bn ($US39bn) by 2050, creating up to 350,000 jobs over this timeframe.

However, the Canadian government is committing far less funding for the development of its hydrogen sector than some countries, potentially putting Canada at a competitive disadvantage. To date, Ottawa has committed just C$1.5bn to a low-carbon and zero-emissions fuels fund, only part of which will go towards hydrogen.

The federal government is hoping tax credits and higher costs for conventional fuels, due to its rapidly rising carbon tax and the Clean Fuel Standard (CFS), will be enough to encourage the C$5-7bn in investment needed to kickstart the hydrogen sector over the next five years.

By contrast, the EU, with a far greater focus on green hydrogen production, announced a plan last July that could unlock up to €340bn for new solar and wind projects over the next decade and up to €470bn for electrolyser capacity through 2050.

Extreme reactions

Despite the lack of federal funding, Alberta is highly supportive of the federal government’s hydrogen strategy given its heavy emphasis on blue hydrogen over the next decade.

“As a province central to Canada’s efforts to build a globally groundbreaking clean hydrogen sector, Alberta’s government supports Ottawa’s work on a collaborative strategy that will rely on our industry’s experience and expertise in natural resource production and emissions reduction technology,” said Alberta energy minister Sonya Savage in a statement.

C$50bn – Annual value of Canadian hydrogen production by 2050

Opposing the strategy, a group of 27 environmental and other organisations—including Environmental Defence Canada and Greenpeace—sent an open letter to O’Regan on 27 November warning his government against using federal dollars to promote the development of what they call “fossil fuel-derived hydrogen”.

According to the group of 27, federal funding for blue hydrogen is a form of subsidy for the oil and gas industry that goes against Canada’s G7 and G20 commitments. In addition, these groups claim there is “little evidence” that blue hydrogen can make a substantial contribution to a net-zero economy on a cost-effective basis because it relies on the “unproven technology” of CCS.

“To the extent that any public resources are available for hydrogen development, they should be reserved for renewable hydrogen for the hardest-to-decarbonize sectors that do not have viable decarbonization alternatives,” the group wrote.

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Author: Vincent Lauerman