If Green Party of Canada Leader Elizabeth May had her way, 70% of natural gas production in Canada would be shut down through a ban on fracking, and six million Canadian homeowners who use natural gas for heating would have to convert to electricity or other heating sources by 2030.
But what if there were a way to meet one-third of the province’s long-term greenhouse gas reduction targets without killing the natural gas and LNG sectors, and develop a new $15 billion export business?
A new study on hydrogen offers a compromise solution to the natural gas conundrum by developing a hydrogen industry that would both build on and help decarbonize B.C.’s natural gas industry.
Those advantages include:
- abundant natural gas and natural gas infrastructure;
- significant geological sequestration potential;
- proximity to the largest hydrogen markets (Asia and California);
- abundance of water and hydroelectricity for “green” hydrogen production;
- renewable gas standards; and
- a hydrogen fuel cell technology hub.
Hydrogen is finally a thing
Despite the many false starts of the hydrogen fuel cell sector, the International Energy Agency (IEA) in June noted the significant potential for hydrogen as a flexible, low-carbon energy source, especially for hard-to-abate sectors, like transportation.
“It is enjoying unprecedented momentum around the world and could finally be set on a path to fulfil its long-standing potential as a clean energy solution,” the IEA report said.
B.C. is well positioned to develop a hydrogen industry for both domestic and export markets, according to a study sponsored by the B.C. Ministry of Energy, Mines and Petroleum Resources, FortisBC and the BC Bioenergy Network.
The report, produced in response to a call for proposals from the BC Bioenergy Network, proposes a strategy with both near-term and long-term goals.
The longer-term goal is to use B.C.’s abundant water and electricity to produce “green hydrogen” through electrolysis for export, mainly to Asia, where the biggest market is.
“B.C.’s coastal access and relative proximity to leading markets such as California, Japan, China and South Korea position B.C. to become an exporter of clean hydrogen,” the study says.
It’s estimated that by 2050, demand in Asia and California for hydrogen will be 100 million tonnes per year.
“If B.C. were to capture 5% market share in those regions, the export market could be $15 billion annually,” the report states.
However, making hydrogen through electrolysis – from water and electricity – is much more costly than producing it from natural gas, even when the added costs of carbon capture and storage (CCS) are included.
“Using grid power at the industrial rate, it is cheaper to draw the hydrogen from natural gas, even after carbon capture sequestration,” said Matthew Klippenstein, one of the energy consultants involved in the study.
So until green hydrogen is cost-competitive with “blue hydrogen,” made from natural gas or chemical processing, with CCS, the report recommends that it be produced from natural gas. A lot of the infrastructure for a hydrogen industry is already in place.
“We have 50,000 kilometres of pipelines already installed in the province that are delivering energy very cost-effectively to people,” said Tyler Bryant, public policy adviser for FortisBC. “We need to use this infrastructure as best as possible, even in a low-carbon situation.
“It makes no sense to abandon it.”
Klippenstein added that “in the long term, the goal would be to supplant or at least twin the natural gas transmission with hydrogen.”
The immediate domestic market for hydrogen would be to inject it into the natural gas grid to lower its carbon intensity. But how does stripping hydrogen out of natural gas only to inject it back into the natural gas grid reduce greenhouse gases (GHGs)?
The answer is that when methane (one carbon atom and four hydrogen atoms) is broken up through steam reforming, the carbon can be captured and sequestered. Northeastern B.C. not only has huge reservoirs of natural gas, but also has huge geological sequestration potential.
Hydrogen-enriched natural gas would qualify under the renewable-content requirements for natural gas in the CleanBC plan.
The City of Vancouver plans to phase out natural gas by 2050, which will require gradually increasing its renewable content. Meeting those requirements through things like landfill gas would be virtually impossible, since there aren’t enough landfills or dairy farms to meet the demand.
Blue hydrogen produced through steam reforming and CCS would be an alternative way of meeting renewable standards for natural gas, and it could also be exported.
“The nice thing about hydrogen is that it can scale to be 100% renewable,” Bryant said.
Matt Horne, climate policy manager for the City of Vancouver, confirmed that hydrogen-
enriched natural gas could qualify as renewable content for natural gas.
“If hydrogen starts to displace fossil natural gas in the pipeline system, we’d want to recognize the emissions intensity of that hydrogen,” he said.
“As pointed out in the B.C. study, there is a large range of emissions intensities depending on the source of hydrogen, so we’d want to account for the actual blend injected into the system and the resulting emissions intensity.”
Hydrogen could put a big dent in GHGs
A hydrogen industry could go a long way to addressing the climate-change concerns associated with natural gas production and use in B.C. The National Energy Board forecasts an increased demand for both natural gas and refined fuels in B.C. over the next two decades.
“This is at odds with the province’s emissions reduction goals unless we can find ways to decarbonize those energy sources,” the report states.
“Hydrogen can play a key role in this through the decarbonization of natural gas at the source of extraction, and as a renewable feedstock for refined petroleum products and lower-carbon-
intensity synthetic fuels to replace conventional refined petroleum products.”
To meet B.C.’s climate action commitments, provincial emissions would have to fall 40% from the 2007 baseline by 2030 and 80% by 2050. The hydrogen study estimates hydrogen could account for up to 31% of the 2050 carbon reduction target.
Creating a new hydrogen industry in B.C. would require government subsidies. The report recommends the provincial government earmark $176 million over five years to kick-start the industry. About one-third of that would be to subsidize a switch to hydrogen fuel cells in the transportation sector, similar to electric vehicle subsidies, to create a domestic demand for hydrogen. About $30 million would be to encourage private-sector development of a steam-reforming and CCS plant in the Peace region.
The capital cost of a large-scale blue hydrogen plant, producing 50,000 kilograms per day, plus CCS is estimated at $273 million, according to Gniewomir Flis, an energy and clean-tech consultant with Liebreich Associates. An electrolyzer plant would currently cost 1.5 to 2 times that much.
One concern over investing in blue hydrogen is that it could over time become uncompetitive with electrolysis.
While green hydrogen is at least twice as expensive than blue hydrogen, experts agree that the falling cost of renewable energy and rising carbon prices could at some point make it competitive.
Flis noted that by 2040, hydrogen from electrolysis could undercut the cost competitiveness of a steam reforming plant before the end of its 25-year lifespan.
Juergen Puetter, who developed B.C.’s first wind farm, is already trying to build Canada’s first large electrolyzer plant. His Renewable Hydrogen Canada proposal in northeastern B.C. would use wind power to produce hydrogen from water.
He concedes that electrolysis is more costly than steam reforming, but he thinks green hydrogen will become competitive quicker than some predict.
“It is still a little bit higher today, but the long-term tendency is down,” he said.
Bryant doesn’t think there is a danger that blue hydrogen plants would become stranded assets.
“The volumes of hydrogen that we’ll need, we’ll need a kind of all-of-the-above approach,” he said. “Will it be just natural gas and CCS? No, it won’t be just primarily that. We’ll also use renewable electricity and electrolysis. We need all, not one or the other.”