Alberta’s Hydrogen Roadmap – On the Right Road?
Hydrogen, as an emerging source of clean power, has received lots of attention from all levels of government. In December of 2020, the federal government released a national hydrogen strategy. In July of 2021, British Columbia became the first province to introduce a provincial hydrogen strategy. Following suit, the Government of Alberta has now released the Alberta Energy Roadmap (“Roadmap”).
Does the Roadmap achieve the stated objective of positioning Alberta to be a global producer of clean hydrogen, or is the strategy taking the province down the wrong road?
In this article, we will seek to address this question by doing three things:
- Examining the key aspects of the Roadmap;
- Considering the legal and regulatory implications of the Roadmap; and
- Answering the question of whether the Roadmap is taking Alberta in the right direction.
1. Breaking Down the Roadmap
Alberta’s 2020 Recovery Plan and Natural Gas Vision and Strategy articulated a strong desire to see the province’s energy system portfolio incorporate hydrogen. The reasons why are clear – the Alberta government views natural gas, with carbon capture, as a significant means of producing hydrogen. Hydrogen development allows the province to both create a market for an abundant resource (i.e., natural gas), while responding to demands for lower carbon energy sources (i.e., hydrogen).
The Roadmap articulates why Alberta is well positioned to be a leading hydrogen producer:
- Alberta is home to an established oil and gas industry which includes ready natural gas for use in hydrogen production;
- Alberta already houses robust carbon capture technologies and capabilities;
- Alberta has industrial centers able to utilize and process hydrogen; and
- Alberta has vast storage capabilities (i.e., salt caverns) to house hydrogen for later use or transport.
The Roadmap identifies two phases of development. In the first phase, to start immediately, Alberta will establish policy foundations, close technology gaps with research and innovation, reduce carbon intensity of existing hydrogen production, and deploy clean hydrogen into end use markets. The second phase, to start in 2030, will focus on growth, commercialization, and the export of Alberta’s hydrogen to the world.
The Roadmap readily acknowledges challenges to Alberta’s ambitions. These include technology gaps, consensus on CO2 emissions, and the need to encourage investment. These challenges are purportedly addressed through seven policy pillars discussed below.
b. Hydrogen Production
Hydrogen is produced through differing processes such as thermochemical, electrochemical, and biological. Emissions released during production are key to whether hydrogen is considered “clean” or not.
At present, hydrogen in Alberta is predominately produced by thermochemical processes (i.e., steam methane reforming) coupled with carbon captured utilization and storage (“CCUS”). This process uses natural gas and creates CO2. Other processes include the use of water, wind, or solar resources. While the Roadmap discusses other options, presently the technology and scale of these alternatives is simply insufficient to make them practical.
c. Policy Pillars
The Roadmap outlines development of domestic “energy systems” which will see hydrogen used for transportation, heating, power generation, and renewable energy storage in addition to industrial uses. Once a solid domestic market is in place, production can be scaled up to allow for international export.
To bring about these objectives, and address current weaknesses, seven policy pillars are set out:
- Building new market demand;
- Enabling carbon capture utilization and storage;
- De-risking investment by providing long-term investment certainty and funding;
- Activating technology and innovation;
- Ensuring regulatory efficiency, codes, and standards to drive safety;
- Leading the way in building alliances; and
- Pursuing hydrogen exports.
d. Near Term Goals – Present to 2030
As noted, the Roadmap calls for a phased approach. Phase one, ending in 2030, involves development of policy foundations and the closing of technological gaps. Specifically, work to further develop the means to reduce carbon emissions from production of hydrogen and increase the levels of CCUS.
e. Long Term Goals – 2030 to 2050
Phase two of the Roadmap focuses on growth and commercialization in the period between 2030 to 2050. The Roadmap anticipates by 2050 approximately 24% of global energy demand will be met by hydrogen. Annualized sales are expected to be $700 billion by 2050. Phase two intends to see Alberta producers capitalize on these predictions.
The Roadmap identifies the need to increase investment in Alberta’s hydrogen system while keeping Alberta hydrogen competitive in the international market. Responding to both issues requires consideration of environmental, social, and governance factors (“ESG”). Specifically, the Roadmap is keen to have Alberta’s hydrogen development viewed as a low carbon energy alternative, thus satisfying the ESG demands of investors and broader market.
The Roadmap proposes storing large volumes of hydrogen in salt caverns and depleted hydrocarbon reservoirs in the form of compressed gas. This creates the potential to store hydrogen produced by renewable methods for use at peak demand times.
2. Regulatory Matters
a. Current Regulatory Regime
The Alberta Energy Regulator oversees Alberta’s energy industry. Relevant to hydrogen is the AER’s oversight and approval of pipelines, wells and processing plants, and facilities. In the past, the AER has approved hydrogen carrying pipeline infrastructure under the Pipeline Act.
The Alberta Utilities Commission regulates Alberta’s investor-owned electricity, gas, water utilities and certain municipally owned electric utilities. The AUC’s jurisdiction includes natural gas utilities and pipeline transmission facilities. The AUC has approved power plants and utilities using hydrogen or hydrogen blended fuels.
Federally, the Canada Energy Regulator is responsible for any pipeline system or electric power system that crosses provincial or international boundaries. For Alberta’s hydrogen to reach national and international markets by pipeline, Canada Energy Regulator approval is needed.
b. Future Regulatory Regime for Hydrogen
The Roadmap calls for regulatory efficiency to ensure successful and scalable production. Harmonizing hydrogen regulation with other jurisdictions is vital. So too is ensuring that Alberta codes and standards are consistent with both national and international practice.
Amendments to the Gas Utilities Act and Gas Distribution Act, may be required to allow increased hydrogen blending into natural gas distribution systems. Implementing and enhancing Alberta’s CCUS regulatory framework to address current challenges and deficiencies will also be needed.
One of the most significant areas of harmonization will be in relation to emissions associated with hydrogen production. Specifically, what level of carbon intensity in production will be permissible? Standards looking specifically at life cycle emission intensity should also be developed to guarantee the climate impact of a given stream of hydrogen, whether “low carbon”, “zero carbon” or “carbon negative” is fully understood.
Varying constituencies have taken different positions on this issue. Both the European Union and the government of British Columbia are developing carbon intensity thresholds that define low carbon hydrogen. In the Hydrogen Strategy for Canada, the federal government has stated that near mid-term projects must meet an emissions intensity threshold of less than 36.4g CO2 per MJ with the threshold declining after 2030. Many advocate for a threshold that is higher and which would see 90% of all emissions captured in order for hydrogen production to be considered “clean”.
3. Is Alberta Headed in the Right Direction?
It is noteworthy that the Roadmap does not adopt or use the terms green, blue, or grey hydrogen. These terms are widely used in other contexts to denote carbon intensity associated with a particular type of production. Rather, the Roadmap simply concludes that hydrogen production with carbon capture is “clean hydrogen”, while noting that national and international consensus on emission intensities is needed.
This approach is risky. It is entirely conceivable that hydrogen produced with natural gas will not be viewed favorably by national or international regulators or by the investment community at large if the production emission intensities are too high, the CCUS levels too low, or a combination of both.
Further, the analysis on emissions is increasingly one of life cycle emissions. Production and transportation of gas creates bi-products such as methane which is a major source of greenhouse gas emissions. There are emissions from production of hydrogen and emissions associated with the energy needed to operate carbon capture facilities. Increasingly the calculus is more far reaching than the Roadmap considers.
The failure to adopt the terms grey, blue, and green or consider in greater detail life cycle emissions is endemic of a larger risk, namely whether the Roadmap is too far behind the current state of hydrogen development and discussion. By not tackling these most important metrics, the Roadmap is open to valid criticism that it fails to address the issues at the heart of investment or ESG concerns in the market. This in turn potentially impacts investment attractiveness and market share.
Further, the advantages associated with hydrogen in Alberta are largely related to production using natural gas. As noted, this is problematic because natural gas production of hydrogen has significant emissions. Moreover, should technology advance such that other production methods, such as those using renewable resources, are as feasible or more so, Alberta’s advantage of production through ready natural gas would be lost.Despite these concerns, the Roadmap is helpful in setting out a direction for industry, government, and others to move towards. The question will be whether the government is able to attract the companies and investment needed to execute on a large scale. This calculus, in turn, is predicated on whether the world will really be a wholesale consumer of hydrogen as the energy transition unfolds.