INTRODUCTION

Hydrogen is the most abundant chemical element in the universe. It can serve as a low or no-emission fuel alternative and has a number of other applications in energy storage, transportation, power production, and heating. When blended with fossil fuels, hydrogen plays an important role in decreasing their carbon emissions. In short, this element makes a compelling case as a self-contained solution to the clean energy transition.

Across the globe, countries are committing to achieve carbon neutrality with some aiming to reach this milestone as soon as 2050. As a result, the focus is shifting to hydrogen as the key to the diversification of the planet’s energy sources and a resulting cleaner and greener economy. However, hydrogen does not exist in a natural state that may be incorporated into commercial applications, and must be converted from other raw materials like water or natural gas. Further, the conversion process is expensive and energy intensive.

So, is hydrogen the silver bullet? While political and societal will is increasing, can technology keep up with the pace? This article provides an overview of hydrogen’s role in the clean energy transition beginning with a general introduction to hydrogen production, usage, transportation and storage, followed by a look at government commitments to date in Canada and around the globe and potential regulatory challenges, and concluding with the perspective of an industry player.

THE TECHNOLOGY

Hydrogen Basics

Recent interest in hydrogen revolves around its ability to act as a fuel or energy carrier, and therefore serve as an alternative to fossil fuels. Hydrogen carries roughly three times more energy per mass than gasoline, produces only water when consumed, and has a lower lifecycle carbon intensity than fossil fuels.^[1] On this basis, hydrogen represents an excellent fuel alternative in a range of applications including transportation, power production and heating, including both process heating (industrial) and space heating (residential and commercial). The primary drawback is that hydrogen is currently more expensive to produce than fossil fuels. While hydrogen may be derived from several feed stocks (e.g., natural gas, agricultural waste, forest products, water) and chemical processes, the price differential between hydrogen and fossil fuels largely depends on the method of hydrogen production.

Today, most hydrogen production across the globe is derived from natural gas. This “grey” hydrogen is produced through the steam reforming of methane or natural gas, generating carbon emissions when measured over the lifecycle of the product from extraction to consumption. However, as hydrogen has no emissions at the point of consumption, the lifecycle carbon intensity of grey hydrogen is lower than traditional fossil fuels.

When paired with carbon capture and storage technology, grey hydrogen is characterized as “blue” hydrogen. It has even lower lifecycle carbon emissions than grey hydrogen, but at a greater production cost given the added requirement of carbon capture.

Hydrogen can also be produced by splitting water molecules into hydrogen and oxygen with electric currents through the process of electrolysis. When the electricity used to power the electrolyzers comes from a non-emitting source (i.e., hydroelectric, nuclear, solar, wind), the entire process is emission-free. This hydrogen is called “green” hydrogen and is the most expensive to produce.

Currently, the largest use for hydrogen, both in Canada and globally, is as feedstock in emission-intensive industrial sectors. The most common uses of hydrogen today are in oil refining, and the production of ammonia, methanol and steel.^[2]

Transportation and Storage of Hydrogen

Due to its lower volumetric density, transport and storage of hydrogen can be challenging and costly, impacting its competitiveness when compared to other fuels. More specifically, the volume of hydrogen needed to supply the same amount of energy as natural gas is threefold, increasing the costs and infrastructure required for transmission and storage of hydrogen across the network. This is particularly challenging for long distance transportation of hydrogen, as the primary means of transporting hydrogen in Canada, both gaseous and liquid, is by tanker truck.^[3]

Because of this, hydrogen is primarily utilized at the site of production. However, a number of different options exist to increase the storability and transportability of hydrogen, such as compression, liquefaction or chemical process involving the incorporation of hydrogen into larger molecules (chemical carriers) that are more readily transported and stored as liquids in natural gas transmission and distribution pipelines.^[4]

While a number of dedicated hydrogen pipelines are already in operation, the existing gas network has a significant inherent storage capacity.^[5] By carrying a blend of hydrogen and natural gas, Canada’s existing natural gas transmission and distribution pipelines can be repurposed to expedite the growth of hydrogen use in Canada. This blend can also be directly used in a number of end-use applications instead of natural gas, as discussed below.

Other storage options include fuel cells, which are expected to play a significant role in a variety of applications including transportation, fuel for power generation, heat, and feedstock for industry. Geological means of storage also exist, as hydrogen in its gaseous form can be stored underground in salt caverns, depleted natural gas or oil reservoirs and saline aquifers.^[6]

Hydrogen Blending

As a fuel source, hydrogen and natural gas have a number of similarities, particularly with regard to their safety considerations, transportability and versatility. With increasing interest in hydrogen as a fuel source, blending hydrogen with natural gas or even with propane, provides an opportunity to increase hydrogen demand while lowering carbon emissions and optimizing the use of existing fuel delivery infrastructure as the hydrogen market develops. This blended fuel can be used in many applications in place of pure natural gas. Currently, blend ratios of up to 20 per cent hydrogen are being tested with limited impact on delivery infrastructure and end-use appliances.^[7]

Blending relatively small amounts of hydrogen into the existing natural gas pipeline networks would at most require minor changes to fuel delivery infrastructure and end-user appliances while providing a boost to hydrogen supply technologies. This has the advantage of minimizing the high upfront capital costs and associated risks related to the development of dedicated hydrogen transmission and distribution infrastructure.^[8]

While hydrogen blending will be an important contributor to the development of the hydrogen economy, a number of challenges remain, namely with regard to pipeline compatibility, tolerance of end-use equipment, as well as considerations related to the density and volume variability of hydrogen. As noted above, at room temperature, hydrogen has roughly one-third the volumetric energy density of natural gas, which in turn reduces the energy content of blended gas. As hydrogen blending increases, the average calorific content of the blended gas falls, and thus an increased volume of blended gas must be consumed to meet the same energy needs. This is but one factor that must be taken into account for transportation, in light of pipeline capacity, as well as for end-use applications.

Further, depending on the composition and operating conditions of a given pipeline, exposure to hydrogen can lead to embrittlement and degradation over time. Newer steel and polyethylene used in natural gas distribution systems are not typically subject to embrittlement concerns, however, the steel used in older distribution infrastructure and natural gas transmission pipelines may be susceptible to such issues when exposed to higher concentrations of hydrogen and higher pressures over an extended period of time.^[9]

Hydrogen blend ratios intended for distribution can only be as high as the capacity and tolerance of the end-use equipment connected to the grid. As such, the tolerance of the overall grid is limited by the end-use component with the lowest tolerance. This may be particularly challenging for finely tuned industrial processes that utilize natural gas as a feedstock. Evaluation of more conventional (residential and commercial) end-use appliances is ongoing.

Electricity Generation and Storage

Hydrogen has a number of uses in the electricity industry. While it can be used directly (and/or as a blend) in combustion turbines, its use in stationary fuel cell power plants has been rapidly increasing.^[10] Fuel cells convert hydrogen into electricity and heat, producing water and no direct emissions.

Another role for hydrogen in the power sector is through the provision of load management capabilities. Hydrogen can be employed as a back-up power and storage option to support variable renewable energy, providing for additional flexibility, stability, and a means to address seasonal variations and intermittency in both the demand and generation capabilities of renewable electricity.^[11]

Excess electricity generated from wind and solar during off-peak hours can be used to produce hydrogen via electrolysis (such facilities are referred to as ‘power-to-gas’ or P2G), which in turn can be stored and used to produce electricity at a later time, either through combustion turbines or stationary fuel cells.

Pursuant to an energy storage contract with Ontario’s Independent Electricity System Operator, the first P2G facility in Canada was established to provide regulation services to balance and manage real-time electricity supply and demand, and ensure reliable operation of Ontario’s electricity grid by converting surplus renewable electricity into hydrogen. The hydrogen is stored for conversion back into electricity through hydrogen fuel cells when needed by the grid. Recently, Enbridge Gas and Cummins announced a new project that will blend this renewable hydrogen into a segregated loop of the existing Enbridge Gas natural gas distribution network.^[12]

The efficiency of such conversion and storage methods remains a challenge, as a significant amount of the original electricity is lost in the process, especially when compared to the storage cycle losses of lithium-ion batteries, for example.^[13] That said, hydrogen can contribute to improving “the economics of variable renewables by providing large-scale energy storage that optimizes the utilization of these power generation assets.”^[14]

Beyond supporting variable renewable electricity, fuel cells can also facilitate access to reliable electricity in remote locations. Currently, off-grid and back-up power generation remains largely fueled by diesel, which can be costly to transport to remote and Indigenous communities. Hydrogen can be integrated into renewable energy systems and produced locally through electrolysis. It can also be stored through fuel cells to provide back-up power, supply a microgrid system, and be distributed with cogeneration of heat and power. Fuel cells offer an interesting alternative that would not only reduce reliance on imported diesel and other fossil fuels, but also provides a much cleaner and healthier alternative by reducing emissions and improving local air quality.^[15] Another important consideration in the context of vehicles used in remote areas is that fuel cells perform better than batteries in colder temperatures.^[16]

Transportation Industry

As noted throughout, hydrogen fuel cells have a number of applications and are expected to play a significant role in a variety of industries including power generation, heat, feedstock for industry, and in particular, transportation. New markets are emerging for transportation powered by hydrogen fuel cells, including passenger vehicles, freight trucks, coach buses, city transit systems, trains, marine vessels, and even aircrafts.^[17]

As with battery electric vehicles, fuel cell electric vehicles (or FCEVs) produce zero tailpipe or exhaust emissions and could improve local air quality and reduce pollution.^[18] However, passenger vehicle emissions comprise only a small portion of the emissions from the transportation sector, with most coming from the other modes of transportation mentioned above. Hydrogen fuel cells have the potential to power all of these vehicles. However, the large vehicle fuel cell industry is still in the nascent stages due to low adoption rates, lack of widespread hydrogen refueling infrastructure and high costs when compared to fossil fuel and battery electric vehicles.

Light-duty passenger FCEVs and transit buses are commercially available in certain countries,^[19] and a number of major automakers have fuel cell vehicles either on the market or in development.^[20] While battery electric vehicles are currently expected to comprise the lion’s share of the Canadian market for light-duty vehicles^[21], FCEVs perform better in long-haul, heavy-duty commercial trucking and transportation applications, and have the benefit of providing extended range, faster refueling, and more reliable performance in colder climates.^[22] That said, FCEVs’ competitiveness will largely depend on the costs of fuel cell technologies and the availability of refuelling stations.^[23]

As governments explore the use of hydrogen to assist in meeting their emissions reduction targets, they are rolling out a number of direct and indirect legislative and policy measures. In the next section, we discuss measures in Canada, the United States, Europe, the United Kingdom, as well as several international partnerships, all of which will aid in the energy transition.

GOVERNMENT COMMITMENTS

Canada

Federal

In 2016, the same year Canada ratified the Paris Agreement, the Canadian federal government released a national climate plan designed to help Canada reach its 2030 goal of reducing greenhouse gas emissions by 30 per cent below 2005 levels.^[24] Four years later, in December 2020, the Government of Canada followed up with an updated and strengthened climate plan: A Healthy Environment and a Healthy Economy (the “Climate Plan”). The Climate Plan includes 64 federal policies and programs that target the transition to clean energy and aim to put the country on track to exceed its 2030 Paris Agreement emission reduction goals. The Climate Plan not only supports a new federal target of net-zero emissions by 2050, but also aligns with the accelerated interim targets set out by the Canadian Net-Zero Emissions Accountability Act, legislation that, once passed, will make these targets legally binding.

On December 16, 2020, the Government of Canada released its Hydrogen Strategy for Canada (the “Canada Strategy”).^[25] The Canada Strategy positions hydrogen as a crucial component to meeting Canada’s 2050 net-zero targets, projecting that hydrogen could account for 30 per cent of Canada’s end-use energy by 2050. The Canada Strategy sets out short, medium, and long-term timelines. Canada’s short-term focus, from present to 2025, will be on creating a foundation for hydrogen production and use in Canada by developing new hydrogen supply and distribution infrastructure. The mid-term focus (from 2025 to 2030) will be on growth and diversification of the hydrogen sector, specifically deploying and connecting regional hydrogen hubs. Canada’s long-term focus from 2030 to 2050 will be on rapid market expansion, as dedicated hydrogen pipelines become a feasible and cost-competitive alternative to natural gas.

The Canadian Government has recognized that all blue and green low-emission hydrogen production pathways are required to meet the targets set out in the Canada Strategy.^[26] To jumpstart planning and production, the Government is prioritizing strategic coordination and investment across the entire value chain. To this end, the federal government has launched a number of funding programs designed to support investments in the production of low or zero carbon infrastructure.

Of particular note is the Government of Canada’s proposed Clean Fuel Standard regulation that aims to drive the adoption of clean fuels by requiring fuel suppliers to gradually reduce the carbon intensity of their fuels.^[27] Canada’s $1.5 billion Clean Fuels Fund (“CFF”), introduced as part of the Climate Plan and reaffirmed in its 2021 Budget, supports the objectives of the Clean Fuel Standard and the Canada Strategy by providing funding to projects designed to build out clean fuel production, including hydrogen, ethanol, renewable diesel, and renewable natural gas. The CFF helps tackle the upfront costs that would otherwise present a barrier to growth in the domestic clean fuels market. Natural Resources Canada will provide funding through conditionally repayable contribution agreements of up to 30 per cent of the total eligible project costs to a maximum of $150 million per project.^[28] Together, the Clean Fuel Standard and the CFF operate as a carrot-and-stick approach, where the CFF incentivizes, and the Clean Fuel Standard mandates Canadians to reduce the carbon intensity of their fuels.

The federal government has also rolled out a host of other funding programs aimed at accelerating the transition to low carbon fuel through the development of clean energy technology and infrastructure. These include a pledge of $150 million to support the deployment of infrastructure for zero-emission vehicles,^[29] and through programs such as the Canadian Emission Reduction Innovation Network (CERIN), Clean Growth Program (CGP), Green Infrastructure Program and Indigenous Off-Diesel Initiative.

Provincial

Governments at the provincial level are also exploring opportunities to deploy hydrogen to meet climate goals.

In BC, hydrogen is a focal point for the Province in its efforts to attain ambitious greenhouse gas reduction targets. On July 6, 2021, the Province released the BC Hydrogen Strategy (“BC Strategy”), breaking ground as the first province in Canada to release a comprehensive provincial hydrogen strategy.^[30] The BC Strategy, designed to spur investments in hydrogen in the province, outlines a series of policy commitments and long and short-term strategies to scale up hydrogen in the province. The BC Strategy sees hydrogen as the most practical solution to decrease emissions in hard to decarbonize sectors like medium and heavy-duty transportation. As at the federal level, many provincial regulations align with the Hydrogen Strategy to support clean energy transition. BC’s Renewable and Low Carbon Fuel Requirements Regulation prescribes both a renewable content requirement for diesel and gasoline and a general decrease in the carbon intensity of liquid fuels. The regulation, which offers credits to fuel suppliers looking to transition to low carbon fuels, recently enabled a fleet of 65 heavy-duty trucks to switch from diesel to hydrogen in northeastern BC.^[31] The Province also recently amended the Greenhouse Gas Reduction (Clean Energy) Regulations to increase the production and use of renewable gas and green and waste hydrogen in BC. The changes will provide natural gas utilities with more flexibility, stimulate investments in renewable energy and accelerate growth of hydrogen and renewable gas supply in their systems.^[32]

In October 2020, Alberta released, “Getting Alberta Back to Work – Natural Gas Vision and Strategy” (the “Alberta Strategy”) which sets out the provincial government’s plan for Alberta’s economic future.^[33] The Alberta Strategy identifies hydrogen as one of the key growth areas in Alberta’s natural gas sector. The Alberta Strategy plans to achieve large-scale blue hydrogen production across Alberta, to deploy hydrogen in various province-wide commercial applications, and to export hydrogen and hydrogen-derived products to domestic and global markets by 2040.^[34]

Also in 2020, Quebec released its Plan for a Green Economy, a plan designed to help the province achieve its self-imposed 2030 GHG emissions reductions targets.^[35] The plan identifies various areas of application for green hydrogen, including industrial processes, intensive and heavy transportation, green chemistry, massive energy storage and heat production. The Government of Quebec intends the Plan for a Green Economy to help establish the province as a leader in the production of green hydrogen and other bioenergies.

Forthcoming hydrogen strategies are also expected from the government of Ontario, as well as Newfoundland and Labrador.

United States

In January 2021, the Biden-Harris Administration officially rejoined the Paris Agreement, putting the country on track to meet a goal of net-zero carbon emissions no later than 2050.^[36] The commitment finds support from legislation such as the CLEAN Futures Act, which was introduced to the House in March 2021. If passed into law, the CLEAN Futures Act would set decarbonisation standards for the power, building, and transportation sectors to achieve net-zero by 2050.The CLEAN Futures Act will also establish a Clean Energy and Sustainability Accelerator which, with $100 billion in funding, will mobilize public and private investments to provide financing for low and zero emissions energy technologies.^[37]

To achieve the country’s emissions targets, the US plans to decarbonize the energy sector by scaling up hydrogen use and production. In particular, the Biden-Harris administration has identified a use for hydrogen in power production and as a zero-emissions alternative fuel.^[38]

The US Department of Energy’s (“DOE”) Hydrogen and Fuel Cell Technologies Office (“HFTO”) provides competitive grants to conduct research and development in hydrogen production, delivery, infrastructure, storage, fuel cells, and end uses.^[39] The Office’s H2@Scale initiative, launched in 2016, focuses on bringing together stakeholders to develop projects for the advancement of affordable hydrogen production, storage, transport and utilization.^[40] HFTO has provided funding for projects devoted to fuel cell technology and manufacturing of heavy-duty fuel cell trucks, large-scale hydrogen use at ports and data centres, academic research on the application of hydrogen for the production of “green steel” and training programs for a hydrogen and fuel cell work force.^[41] Congress allocated $150 million to HFTO for 2021.

The DOE’s Loans Program Office (“LPO”) also provides funding for American manufacturers to develop and deploy innovative energy technologies. There is $4.5 billion in remaining Title XVII Innovative Clean Energy Loan Guarantee authority to support green and blue hydrogen production and infrastructure through the open Renewable Energy and Efficient Energy Projects solicitation, and more than $10 billion in the Advanced Technology Vehicles Manufacturing Loan Program to support the manufacture of fuel-cell electric passenger vehicles and components.

On June 7, 2021, Secretary of Energy Jennifer M. Granholm launched the US Department of Energy’s Energy Hydrogen Shot initiative. The initiative seeks to reduce the cost of clean hydrogen by 80 per cent to $1 per kilogram within the next decade. As part of the launch, the DOE’s Hydrogen Program issued a Request for Information on viable hydrogen demonstrations that can help lower the cost of hydrogen.^[42] The DOE’s overall fiscal year 2022 budget request seeks roughly $400 million for various hydrogen related efforts, a significant boost from current funding.^[43]

Europe

The EU committed to net-zero by 2050 in March 2020. On July 8, 2020, the European Commission set out much more ambitious targets with the release of the EU’s Hydrogen Strategy for a Climate-Neutral Europe (“EU Hydrogen Strategy”). In it, the EU has also committed to a low-carbon hydrogen target of 40GW of installed electrolyser capacity by 2030 with at least 6GW of green hydrogen electrolysers by 2024.^[44] These are ambitious targets given current electrolyser production capacity in Europe is under 1GW per year.

The EU Hydrogen Strategy makes clear that the European Commission expects hydrogen will play an indispensable role in the transition to a new low-carbon energy system in Europe. While the EU’s Hydrogen Strategy focuses heavily on green hydrogen, in the short term, the EU Hydrogen Strategy plans to replace existing grey hydrogen production with blue hydrogen to leverage the capacity of existing production facilities.^[45] To support the development of a market for green and blue hydrogen, the EU has also committed to creating a standard classification system of types of hydrogen and a certification system to support its trade.^[46] Ultimately, the EU aims to create a large regional hydrogen market encompassing Eastern Europe and North Africa.

The European Commission has created the European Clean Hydrogen Alliance to help implement the hydrogen strategy. The alliance coordinates scaling up the hydrogen value chain across Europe by identifying hydrogen projects and support for necessary investments.^[47] The Alliance brings together industry, civil society, national, regional, and local government authorities to provide a forum for coordinating investments by all stakeholders.^[48]

To finance the massive scale up the EU Hydrogen Strategy envisions, the European Commission is deploying EU funds and European Investment Bank financing. Phase 1 of the EU Hydrogen Strategy requires between €24 billion and €42 billion invested in electrolysers, with a further €220 to 340 billion to scale up and connect 80 to 120GW of solar and wind capacity to the electrolysers. Retrofitting half of the existing hydrogen production plants is estimated to cost around €11 billion. A further €65 billion will be required for hydrogen infrastructure.^[49]

Several EU member states have also published their own hydrogen strategies in recent years with independent targets and financing plans, most notably Germany (published June 2020), France, the Netherlands and Spain.^[50]

The UK

The UK committed to achieving net-zero by 2050 in June 2019, and recently went a step further by increasing its emissions reduction target from 68 per cent by 2035 (compared to 1990 levels) to 78 per cent. The Government’s “Ten Point Plan for a Green Industrial Revolution” sets out a framework for achieving net-zero, with hydrogen identified as a prominent contributor in achieving net-zero, and establishes a target of 5GW of low-carbon hydrogen production capacity by 2030. The 5GW production target assumes a mix of blue and green hydrogen, a key difference from other European markets. For a deeper analysis of the UK and the EU’s Hydrogen Strategy see Sustainable Hydrogen: Green and Blue and the EU/UK Policy Overview, supra note 45.

International Partnerships

The momentum behind hydrogen is taking hold on an international scale. In the private sector, one of the biggest international initiatives currently building steam is the Hydrogen Council, a CEO-led initiative that unites member companies behind a coherent global strategy to deploy hydrogen solutions at scale. At the state level, a number of countries are working collaboratively through international organizations and global governmental partnerships to deploy a collective hydrogen strategy.

Mission Innovation is a global initiative designed to advance action and investment in the research and development of clean energy in this decade.^[51] The initiative works in conjunction with member states’ Paris Agreement goals to accelerate progress on pathways to net zero. One of the initiative’s three key missions, launched at the June 2021 Mission Innovation ministerial, is the Clean Hydrogen Mission that aims to increase the cost-competitiveness of clean hydrogen by reducing end-to-end costs to $2 USD per kilogram by 2030.^[52]

Some countries are also seeking to strategize through bilateral agreements. These agreements are designed to leverage signatories’ combined comparative strengths to efficiently scale up hydrogen use and production. On May 16, 2021, Germany and Canada signed an agreement that provides a framework for the two countries to collaborate on the deployment of hydrogen in the clean energy transition. Germany has identified hydrogen as a central component to its clean energy transition, and, amongst other things, the agreement names Canada as Germany’s main hydrogen supplier moving forward.^[53] The agreement also establishes a mutually beneficial framework for the two countries to cooperate on the development of innovative hydrogen technologies.

REGULATORY CHALLENGES

Surging interest in hydrogen by governments, businesses, and consumers across the globe will present a myriad of regulatory challenges as this emerging sector develops. These challenges may require a rethinking of current regulatory frameworks. For example:

Hydrogen Blending

There is currently no industry consensus on how much hydrogen can be safely blended into natural gas (current ongoing trials around the world range from 1% to 22%) in order to reduce the carbon emissions for residential and commercial heating. This blending discussion implicates both the physical vessel distributing the gas as well as the end-use appliance of the gas. Resolving these questions and setting clear standards will provide much-needed certainty to the industry to reduce regulatory risks and encourage investment. For more information on blending hydrogen with natural gas, see our article: How About Some Clean, Green Hydrogen With that Natural Gas?^[54]

Accounting and Guarantees of Origin

Tracking the volume of hydrogen injected into the grid and its carbon intensity of the overall mix will be an important regulatory consideration. Such an accounting method — sometimes called a “guarantee of origin” — is essential if operators are to be paid a premium for supplying lower-carbon gas.

Transmission and Distribution

As jurisdictions race to develop regional and national hydrogen economies, storage and distribution will become a key issue. The search for the most techno-economically optimal way to distribute hydrogen (i.e. road, rail, pipeline, etc.) is still ongoing. Standardization of certain parameters like compression, storage, and distribution will play a role in driving this analysis. Each method will require unique regulatory considerations to achieve a safe and economically efficient solution in the coming months and years. For more information on the transmission and distribution of hydrogen, see our article: Hydrogen: The Next Clean Energy Frontier.^[55]

Alternative Clean Energy Rate Designs

Energy regulators are showing an increasing willingness to fund innovative clean energy technology through innovative rate structures. Previously, these types of mechanisms were rejected, viewed as unfair to require rate-payers to fund experimental technology.^[56] Such hesitancy is now giving way to the pursuit of clean energy objectives by a growing body of jurisdictions around the world. Accordingly, we might expect to see an increase in approvals of novel hydrogen-related projects that are funded by rate-payers. However, this may not be without controversy: the cost premiums on clean hydrogen remain stubbornly high as compared to the incumbent fossil fuels, and are projected to remain so throughout the next decade. It is unclear whether such cost disparity is a price that rate-payers will be willing to accept in the near-term. Either way, these market forces are likely to result in a host of new regulatory procedures.

Regulatory Jurisdiction, Codes and Standards

Most jurisdictions currently rely on their natural gas frameworks to regulate hydrogen. However, the differences between natural gas and hydrogen (e.g. chemical, thermodynamic, volumetric) may warrant a new regulatory approach. Provincial, federal, and international codes, standards, and regulations for hydrogen production will have to be reviewed in order to establish a compatible and enabling framework.

Part of this approach should consider whether the current energy and natural gas regulators are appropriate for hydrogen, or whether new regulatory bodies should be designed. The vast range of applications for hydrogen (e.g. transportation, energy generation, and heating, to name a few) will make this especially challenging given the number of regulators that will be engaged. Reflecting this range, hydrogen projects may need to be regulated in accordance with the specific end use or production pathway. For example, there may be parallels in the treatment of hydrogen produced from fossil fuel sources with oil and gas activities. Ultimately, whatever approach is taken should support the industry by reducing unnecessary red tape and barriers to entry for both demand-side and supply-side participants.

A TECHNOLOGY PROVIDER’S PERSPECTIVE^[57]

Green Hydrogen – Catalyst for the Energy Transition^[58]

Hydrogen generated with renewables could play a key role in accelerating the transition to a low carbon economy by facilitating long-term storage of renewables and balancing out grid fluctuations caused by non-dispatchable sources. Experts believe this flexibility will have to double by 2040. At the same time, power-to-gas — the technology of using electricity, especially surplus green power, to produce gas fuel by way of electrolysis — makes it possible to electrify those sectors that are currently still reliant on hydrocarbons and to make that power usable to transport goods and people, for making steel and cement, or as feedstock for the chemical industry. Establishing such an energetic link between previously separated sectors by way of renewables — also known as “sector coupling” — can reduce primary fossil energy consumption by 50 per cent despite growing power demand. Generally, a more diversified fuel supply would also help to improve energy security, and some countries with cheap and abundant renewable power could dedicate that capacity entirely to making green hydrogen for local consumption and export.

Large-scale integration of hydrogen and related commodities would also further foster the demand for renewable power generation, creating a self-sustaining incentive towards an economically viable and ecologically sustainable energy system.

In order to harness the full potential of green hydrogen, it will be necessary to find the most effective projects today and close the cost gap with grey hydrogen as the application is scaled up. Just as important, however, is the need for close collaboration between various stakeholders. Power producers, for instance, will have to exchange know-how and coordinate with mobility service providers, and all market players will have to be clear about their own role and those of their companies in what promises to be a highly disruptive industry. Finally, bringing about a breakthrough for the hydrogen economy will also necessarily involve more support from governments and regulators, since they have the authority to change regulatory frameworks and drive decarbonization targets.

As more governments, municipalities, and the industry become involved, manufacturers will have an order pipeline that justifies further investments in technology and production processes, which will trigger scale effects and ultimately bring down costs. This dynamic, which was effective in bringing about the break-through of solar power, can also foster green hydrogen and make this sustainable energy carrier a success story.

CONCLUSION

So, is hydrogen the silver bullet?

Although hydrogen represents a viable solution in the pursuit of carbon neutrality, it currently comes with a number of drawbacks, most notably production costs and transportation challenges. Governments around the world are actively investing and passing legislation aimed at supporting the growth of the hydrogen industry, but it is still early days. Much work remains on both the technology and regulatory fronts before hydrogen can truly be considered a key component of the clean energy transition.

* Jay Lalach is a partner at Gowling WLG. Adriana Da Silva Bellini, Jimmy Burg, and Emma Hobbs are associates and Gabrielle Matheson is a law student at the firm.

1. US Department of Energy, “Increase your H2IQ!” (September 2019) at Presenter’s Notes 5, online (pdf): Office of Energy Efficiency and Renewable Energy <www.energy.gov/sites/prod/files/2019/09/f67/fcto-increase-your-h2iq-training-resource-2019-update.pdf>. The lifecycle approach measures the total carbon emissions over time, from the extraction of the product until its ultimate consumption.
2. Government of Canada, “Hydrogen Strategy for Canada: Seizing the Opportunities for Hydrogen” (December 2020) at 64, online (pdf): Natural Resources Canada <www.nrcan.gc.ca/sites/www.nrcan.gc.ca/files/environment/hydrogen/NRCan_Hydrogen-Strategy-Canada-na-en-v3.pdf> [Hydrogen Strategy for Canada].
3. Ibid at 40.
4. International Energy Agency, “The Future of Hydrogen: Seizing today’s opportunities” (June 2019) at 70, online (pdf): <iea.blob.core.windows.net/assets/9e3a3493-b9a6-4b7d-b499-7ca48e357561/The_Future_of_Hydrogen.pdf> [IEA Hydrogen]; Hydrogen Strategy for Canada, supra note 2 at 40.
5. Ibid at 152; Hydrogen Strategy for Canada, supra note 2 at 41.
6. Ibid at 69; Hydrogen Strategy for Canada, supra note 2 at 39.
7. Hydrogen Strategy for Canada, supra note 2 at 41.
8. IEA Hydrogen, supra note 4 at 182–83.
9. Hydrogen Strategy for Canada, supra note 2 at 60.
10. Ibid at 57.
11. Ibid; IEA Hydrogen, supra note 4 at 150.
12. See Cummins Inc., “In its Second Year, North America’s First Multi-Megawatt Power-to-Gas Facility Shows Hydrogen’s Potential” (12 November 2020), online: <www.cummins.com/news/2020/11/12/its-second-year-north-americas-first-multi-megawatt-power-gas-facility-shows>; see also Enbridge Gas Inc., “Groundbreaking $5.2m Hydrogen Blending Project Aims to green Ontario’s Natural Gas Grid” (18 November 2020), online: <www.enbridge.com/stories/2020/november/enbridge-gas-and-hydrogenics-groundbreaking-hydrogen-blending-project-ontario>.
13. “Hydrogen-based storage options suffer from low round-trip efficiency: in the process of converting electricity through electrolysis into hydrogen and then hydrogen back into electricity, around 60% of the original electricity is lost, whereas for a lithium-ion battery the losses of a storage cycle are around 15%.” (IEA Hydrogen, supra note 4 at 158)
14. Hydrogen Strategy for Canada, supra note 2 at 23.
15. Ibid at 58; IEA Hydrogen, supra note 4 at 154.
16. Ibid at 45.
17. See Ballard, “The Future of Clean Transit is Electric” (last visited 18 August 2021), online: <www.ballard.com/markets/transit-bus>.
18. IEA Hydrogen, supra note 4 at 124.
19. Hydrogen Strategy for Canada, supra note 2 at 45.
20. Such as Hyundai, Toyota, Honda, GM, Mercedes, Ford, Nissan, and Volkswagen.
21. Hydrogen Strategy for Canada, supra note 2 at 46.
22. Ibid at 45–46.
23. IEA Hydrogen, supra note 4 at 123.
24. In 2021, an enhanced target was submitted to the United Nations of 40–45 per cent below 2005 levels by 2030. See Government of Canada, News Release, “Government of Canada confirms ambitious new greenhouse gas emissions reduction target”, online: <www.canada.ca/en/environment-climate-change/news/2021/07/government-of-canada-confirms-ambitious-new-greenhouse-gas-emissions-reduction-target.html>.
25. Hydrogen Strategy for Canada, supra note 2.
26. Environment and Climate Change Canada, “A Healthy Environment and a Healthy Economy”, (2020) at 40–41, online (pdf): Government of Canada <www.canada.ca/content/dam/eccc/documents/pdf/climate-change/climate-plan/healthy_environment_healthy_economy_plan.pdf>.
27. Government of Canada, “Clean Fuel Standard” (last modified 26 July 2021), online: <www.canada.ca/en/environment-climate-change/services/managing-pollution/energy-production/fuel-regulations/clean-fuel-standard.html>.
28. Natural Resources Canada, “Clean Fuels Fund” (last modified 16 July 2021), online: <www.nrcan.gc.ca/climate-change/canadas-green-future/clean-fuels-fund/23734>.
29. Infrastructure Canada, “Zero Emission Transit Fund” (last modified 10 August 2021), online: <www.infrastructure.gc.ca/zero-emissions-trans-zero-emissions/index-eng.html>.
30. Ministry of Energy, Mines and Low Carbon Innovation, “B.C. Hydrogen Strategy – A sustainable pathway for B.C.’s energy transition” (6 July 2021), online (pdf): <www2.gov.bc.ca/assets/gov/farming-natural-resources-and-industry/electricity-alternative-energy/electricity/bc-hydro-review/bc_hydrogen_strategy_final.pdf>.
31. Ministry of Energy, Mines and Low Carbon Innovation, “Heavy-duty hydrogen fuelling station powers clean energy transition” (28 June 2021), online: Government of British Columbia <news.gov.bc.ca/releases/2021EMLI0044-001213>.
32. Ministry of Energy, Mines and Low Carbon Innovation, News Release, “Province enables increased investments in renewable gas, hydrogen” (2 July 2021), online: Government of British Columbia <archive.news.gov.bc.ca/releases/news_releases_2020-2024/2021EMLI0046-001286.htm>.
33. Government of Alberta, “Getting Alberta Back to Work – Natural Gas Vision and Strategy” (6 October 2020), online (pdf): <open.alberta.ca/dataset/988ed6c1-1f17-40b4-ac15-ce5460ba19e2/resource/a7846ac0-a43b-465a-99a5-a5db172286ae/download/energy-getting-alberta-back-to-work-natural-gas-vision-and-strategy-2020.pdf>.
34. Paule Hamelin et al, “The Frontier Comes Into View: Canadian Governments’ Hydrogen Strategies” (8 June 2021), online: Gowling WLG <gowlingwlg.com/en/insights-resources/articles/2021/canadian-governments-hydrogen-strategies/>.
35. Government of Québec, “Plan pour une économie verte 2030 – Politique-cadre d’électrification et de lutte contre les changements climatiques” (2020), online (pdf) : <cdn-contenu.quebec.ca/cdn-contenu/adm/min/environnement/publications-adm/plan-economie-verte/plan-economie-verte-2030.pdf?1605549736>.
36. The White House, Press Release, “FACT SHEET: President Biden Sets 2030 Greenhouse Gas Pollution Reduction Target Aimed at Creating Good-Paying Union Jobs and Securing U.S. Leadership on Clean Energy Technologies” (22 April 2021), online: <www.whitehouse.gov/briefing-room/statements-releases/2021/04/22/fact-sheet-president-biden-sets-2030-greenhouse-gas-pollution-reduction-target-aimed-at-creating-good-paying-union-jobs-and-securing-u-s-leadership-on-clean-energy-technologies/”>.
37. House Committee on Energy & Commerce, Press Release, “E&C Leaders Introduce the Clean Future Act, Comprehensive Legislation to Combat the Climate Crisis” (2 Mars 2021), online: <energycommerce.house.gov/newsroom/press-releases/ec-leaders-introduce-the-clean-future-act-comprehensive-legislation-to>.
38. Molly Wood, “President Biden says green hydrogen is key to a lower emissions future. So, what is it?” (29 April 2021), online: Market Place <www.marketplace.org/shows/marketplace-tech/president-biden-says-green-hydrogen-is-key-to-a-lower-emissions-future-so-what-is-it/>.
39. See Office of Energy Efficiency & Renewable Energy, “Hydrogen and Fuel Cell Technologies Office” (last visited 18 August 2021), online: <www.energy.gov/eere/fuelcells/hydrogen-and-fuel-cell-technologies-office>.
40. Office of Energy Efficiency & Renewable Energy, “H2@Scale” (last visited 18 August 2021), online: <www.energy.gov/eere/fuelcells/h2scale>.
41. Alan Mammoser, “How to build the foundation for a hydrogen economy in the US”, GreenBiz (15 September 2020), online: <www.greenbiz.com/article/how-build-foundation-hydrogen-economy-us>.
42. Department of Energy, Press Release, “Secretary Granholm Launches Hydrogen Energy Earthshot to Accelerate Breakthroughs Toward a Net-Zero Economy” (7 June 2021), online: <www.energy.gov/articles/secretary-granholm-launches-hydrogen-energy-earthshot-accelerate-breakthroughs-toward-net>.
43. Andrew Freedman & Ben Geman, “Exclusive: DOE launches push to meet hydrogen “Earthshot” goal”, Axios (7 June 2021), online: <www.axios.com/biden-hydrogen-climate-change-f79de0f9-e240-4b4d-a8f2-0de2826d1d63.html>.
44. European Commission, “A Hydrogen Strategy for a Climate-Neutral Europe” (8 July 2020), online (pdf): <ec.europa.eu/energy/sites/ener/files/hydrogen_strategy.pdf> [EU Hydrogen Strategy].
45. Dan O’Donnell, Gareth Baker & Gus Wood, “Sustainable Hydrogen: Green and Blue and the EU/UK Policy Overview” (2 June 2021), online: Gowling WLG <gowlingwlg.com/en/insights-resources/articles/2021/sustainable-hydrogen-green-and-blue-and-the-eu-uk/>.
46. Alan Mammoser, “Europe Looks To Become The Global Leader In Hydrogen”, Oil Price (29 July 2020), online: <oilprice.com/Alternative-Energy/Fuel-Cells/Europe-Looks-To-Become-The-Global-Leader-In-Hydrogen.html>.
47. European Commission, “European Clean Hydrogen Alliance” (last visited 18 August 2021), online: <ec.europa.eu/growth/industry/policy/european-clean-hydrogen-alliance_en>.
48. EU Hydrogen Strategy, supra note 44.
49. Ibid at 7.
50. O’Donnell, supra note 45; See German Federal Government, “Die Nationale Wasserstoffstrategie” (June 2020), online (pdf ): <www.bmwi.de/Redaktion/DE/Publikationen/Energie/die-nationale-wasserstoffstrategie.pdf?__blob=publicationFile&v=20>; Ministry of the Ecological and Social Transition, “Stratégie française pour l’énergie et le climat” (21 April 2020), online (pdf): <www.ecologie.gouv.fr/sites/default/files/20200422%20Programmation%20pluriannuelle%20de%20l%27e%CC%81nergie.pdf>; Government of the Netherlands, “Government Strategy on Hydrogen” (6 April 2020), online (pdf): <www.government.nl/documents/publications/2020/04/06/government-strategy-on-hydrogen>; Government of Spain, “Hoja de ruta del hidrógeno: Una apuesta por el hidrógeno renovable” (Octobre 2020), online (pdf): <www.miteco.gob.es/images/es/hojarutahidrogenorenovable_tcm30-525000.PDF>.
51. See Mission Innovation, “Overview” (last visited 18 August 2021), online: <mission-innovation.net/about-mi/overview/>.
52. Mission Innovation, “Clean Hydrogen Mission” (last visited 18 August 2021), online: <mission-innovation.net/missions/hydrogen/>.
53. FuelCellsWorks, “Canada, Germany Sign Hydrogen Cooperation Deal” (16 March 2021), online: <fuelcellsworks.com/news/canada-germany-sign-hydrogen-cooperation-deal/>
54. Jay Lalach & Adriana Da Silva Bellini, “How About Some Clean, Green Hydrogen With that Natural Gas?” (8 June 2021), online: Gowling WLG <gowlingwlg.com/en/insights-resources/articles/2021/clean-green-hydrogen-with-that-natural-gas/>.
55. Jimmy Burg et al, “Hydrogen: The Next Clean Energy Frontier” (2 February 2021), online: Gowling WLG <gowlingwlg.com/en/insights-resources/articles/2021/hydrogen-the-next-clean-energy-frontier/>.
56. See Gordon E. Kaiser, “Canadian Energy Regulators and New Technology: The Transition to a Low Carbon Economy” (2021) 9:2 Energy Regulation Q 7.
57. Chris Norris, Research Director, Siemens Inc.
58. Siemens Energy, White Paper, “Green Hydrogen: Cornerstone of a Sustainable Energy Future” (2021), online: <www.siemens-energy.com/mea/en/company/megaprojects/dewa-green-hydrogen-project.html#Download>.