Canada’s goal of creating a flourishing hydrogen sector is making progress, with tax credits likely to become law in the next few months.
But the head of Alberta’s ATCO Ltd. says there are still bottlenecks that need to be fixed before the industry can fully develop.
The federal government this month released a progress review of targets in its hydrogen strategy, and Federal Natural Resources Minister Jonathan Wilkinson said he believes there has been a lot of headway, particularly work with Germany on importing hydrogen from Eastern Canada.
Mr. Wilkinson said in a recent interview that while he’s pleased with movement on hydrogen, challenges remain – and are vastly different in Eastern Canada than in the West.
In the east, it’s the economic challenges related to the high cost of using renewable energy to produce hydrogen, as well as establishing regulations for offshore wind farms.
Over on the other side of the country, safety and infrastructure issues need to be resolved to ensure the fuel can get safely to ports and shipped to export markets such as Japan.
“That requires some real thought and care and attention,” Mr. Wilkinson said.
Hydrogen is light, storable and energy-dense. When burned, it produces no direct greenhouse-gas emissions, making it an attractive form of decarbonization. It can be made by using high-pressure steam to produce hydrogen from a methane source, such as natural gas.
But the chief executive of ATCO, Nancy Southern, says a few things have throttled hydrogen’s potential, including how slow Alberta was to allow hydrogen blending, where it’s mixed with natural gas for heat and other uses.
Carting the fuel west by rail is another challenge stymieing sector growth.
ATCO was initially banking on domestic demand for hydrogen, but has since shifted its focus to the export market. That means shipping ammonia via rail from Alberta to Prince Rupert, B.C., where it can be shipped to Asia.
Ottawa, British Columbia, Alberta and CN are all working together to figure out a solution, Ms. Southern told media recently, because it’s the only railroad that can link markets. But there are numerous issues to figure out when it comes to concerns around shipping ammonia, including who covers liabilities and how Indigenous communities along the route can be economically involved.
“That’s going to be the hard one to really crack,” she said.
Still, ATCO has faith in the role natural gas-derived hydrogen will play in the energy transition. It already has a hydrogen-blending project in Fort Saskatchewan, near Edmonton, and one in Western Australia.
It’s also looking to construct a hydrogen facility near Fort Saskatchewan. The company says the potentially world-scale clean-hydrogen project would be used to supply hydrogen to the Alberta gas grid, and make volumes available for other industrial, municipal and commercial transport users in the province.
Then there’s ATCO’s recently announced Yellowhead project, which will consist of approximately 200 kilometres of natural-gas pipeline from Peers, Alta. – about 170 kilometres west of Edmonton – to Fort Saskatchewan. The pipeline is expected to have the capability to deliver up to one billion cubic feet a day of natural gas, reinforcing Alberta’s natural-gas network for its growing population and industries.
Companies eyeing hydrogen projects on both coasts are still waiting on the finalization of clean-hydrogen investment tax credits, announced in last year’s federal budget. Mr. Wilkinson said those credits are set to become law in the next few months.
The credits will cover between 15 per cent and 40 per cent of eligible costs that produce hydrogen through both electrolysis and natural-gas reforming.
Clean-hydrogen production in the West, where it’s made by using high-pressure steam to crack natural gas, will rely on carbon capture to ensure emissions created during production aren’t released into the air.
Alberta’s government and the fossil-fuel sector believe that same technology will be key to ensuring the province can continue producing oil and gas.
Indeed, carbon capture is at the heart of a plan to bring greenhouse-gas emissions from production of oil-sands crude to net zero by 2050.
Asked if she is concerned that the recent cancellation of a massive carbon-capture project by Capital Power in Alberta signals a broader rejection of the technology, Ms. Southern shook her head no and said she’s very confident in the future of the technology.
Mr. Wilkinson also said the cancellation of Capital Power’s project is unlikely to undermine a broader pursuit of carbon capture, particularly where new plants would have carbon-capture systems from the beginning.