$7 billion in subsidies raises spectre of Canadian hydrogen development

Toyota Mirai, hydrogen-fuelled car. (Reference image by the Province of British Columbia, Flickr.)

BC’s abundant clean hydro power is attracting a wave of hydrogen production and export proposals, including two significant green hydrogen projects proposed for the Prince George area.

But the United States’ recent designation of $7 billion in federal subsidies for the creation of seven regional hydrogen hubs raises the spectre of Canadian hydrogen development – like LNG development – taking a back seat to activity and investment led by the US.

While US hydrogen hubs may pose a competitive challenge for Canadian proposals, they could also bring potential benefits for BC companies in the hydrogen space, said Matthew Klippenstein, executive director of Hydrogen BC and regional director for Western Canada for the Canadian Hydrogen and Fuel Cell Association (CHFCA).

Of the seven hydrogen hubs announced by the US Department of Energy, one is in the Pacific Northwest (Washington-Oregon-Montana).

“We hope that our members can surf the wave, as it were,” Klippenstein said. “There’s going to be a lot of activity in Washington state. Our members are close, we have experience, we can be of assistance. We can maybe sell products to some of the people who are scaling up consumption – perhaps fuel cells or even combustion engines for heavy trucking.”

He cited BC-based Westport Fuel Systems (TSX, Nasdaq: WPRT) as one example of a potential beneficiary of US hydrogen hubs, which will focus on hydrogen production as well as hydrogen fuel use. Among other things, Westport developed an engine – the H2 HPDI – that can burn hydrogen for use in long-haul trucking.

In the planned Pacific Northwest hub, Australia’s Fortescue Metals Group (ASX: FMG) is pitching a green hydrogen proposals. It follows the company’s recently announced plans for a green hydrogen plant in Prince George – one that has approximately three times the capacity as the one proposed for Washington state.

The latter suggests a 300-megawatt green hydrogen project to repurpose the Centralia coal power plant, which is slated for closure in 2025. It would produce 110 metric tonnes of hydrogen per day, which adds up to as much as 40,150 metric tonnes annually.

Fortescue’s Coyote project is larger. According to a project description filed recently with the BC Environmental Assessment Office, the C$2 billion project would produce 140,000 tonnes of green hydrogen annually and 700,000 tonnes of green ammonia for export to Asia. (Hydrogen is difficult to transport, so it is easier to combine it with nitrogen to turn it into ammonia, which can then either be decomposed back into hydrogen and nitrogen, or burned as a zero-emission fuel.)

Green hydrogen is produced by splitting water molecules into hydrogen and oxygen using electricity. It is a highly energy-intense way to produce hydrogen, but one that doesn’t create emissions (unless the electricity used comes from fossil fuels like coal and natural gas).

Fortescue’s Prince George project will require 1,000 megawatts of power – 900 megawatts to produce the hydrogen and 100 megawatts to produce ammonia.

In addition to the Fortescue proposal, the McLeod Lake Indian Band and Mitsubishi are also pitching a BC hydrogen plant on the Kerry Lake East Indian Reserve. That project appears to be in the early proposal stage, as it has not entered the BC environmental assessment process with a project description.

Juergen Puetter, a wind power pioneer and developer of a proposed green methanol plant in Chetwynd, is skeptical about large-scale green hydrogen projects like the one from Fortescue.

He points out that, though the Site C dam has nameplate capacity of 1,100 megawatts, it would only produce at maximum capacity 54% of the time, which functionally puts its capacity at around 525 megawatts.

“A thousand megawatts of green hydrogen is not the size of Site C – it’s two Site Cs,” Puetter said. “There’s only enough water to run at 54% of the time at 100%. We cannot imagine how BC Hydro would be in a position to provide 1,000 megawatts firm [power], which is over 2,000 megawatts of installed capacity. It would take two Site Cs. Where would the energy come from?”

Washington state would have the same challenge of finding enough clean power to produce large volumes of green hydrogen. The latter can be four to five times more expensive to produce than blue hydrogen (which is made from natural gas with carbon capture and storage), although PwC last year produced a report that projects the cost of producing green hydrogen will be cut in half by 2030.

Washington state’s grid isn’t quite as green as BC’s, where 98 per cent of the province’s power is renewable (mostly from hydro power). Only 65 per cent of Washington’s grid comes from hydro, and 14 per cent comes from natural gas, according to the US Energy Information Administration.

David Austin, a lawyer at Stirling LLP who specializes in electricity, believes BC Hydro could accommodate the large industrial demand for power that will come from some of the proposed green hydrogen plants and from the electrification of LNG plants. BC’s hydro dam reservoirs could provide a foundation on which wind and solar power can be built to meet the needs of industry.

“I think we’ve got sufficient potential sources of electricity that we can do both,” Austin said. “It also depends on what the cost of that is and whether the costs would become a factor in making the investment decision.”

David Craig, executive director of the Commercial Energy Consumers Association of BC, agrees.

Generally, he said BC may have a slight advantage over Washington state in that it has more hydro storage capacity and somewhat lower industrial power rates.

“I would say that BC has an advantage and that would be one reason that there’s a big player in Prince George,” Craig said.

BC Hydro recently updated its load forecast and announced it will issue a power call next year to obtain 3,000 gigawatt hours of new clean power. Asked if the updated load forecast and power call anticipates large industrial draws from projects such as Fortescue’s, the Ministry of Energy, Mines and Low Carbon Innovation told BIV it did.

BC Hydro uses three scenarios to estimate future power needs: Low, reference and accelerated.

“The reference load scenario, for example, includes potential load associated with proposals that are at very early stages, such as Fortescue,” the ministry said.

There are two hydrogen-related projects already underway in BC. They include a 10 megawatt green hydrogen plant that Hydra Energy is building in Prince George, and a new export terminal being built in Prince Rupert by Trigon Terminals for hydrogen and ammonia exports. That project received C$75 million in federal funding through the National Trade Corridors Fund. 

(This article first appeared in Business in Vancouver)