Canada is signalling through a new hydrogen fuel strategy that it sees massive potential for the technology in a country where long-haul distances for transportation — ranging from boats to buses and trucks to trains — must be conquered
Editor’s update: Loop Energy’s IPO, cited below, closed successfully and the company began trading on the Toronto Stock Exchange under the symbol LPEN on Feb. 25.
When Loop Energy, a B.C.-based fuel cell developer, announced earlier this month that it was preparing an initial public offering projected to gross $100 million, it became the latest in a string of hydrogen firms to jump on to what looks, increasingly, like a global shift in this specialized energy sector.
Loop’s news came just days after the company, which makes components such as range extenders and stacks for light and heavy-duty trucks, inked a deal with ECubes, a Slovenian firm that makes stationary fuel cell modules. Even more relevant is the fact that this move came shortly after the federal government’s year-end unveiling of its long-awaited hydrogen strategy, which made Canada the latest country to signal its interest in pushing hydrogen as a potentially clean energy source.
The federal strategy wasn’t part of Loop’s announcement, but the company’s growing promise and success to date — born, in part, out of a long research partnership with the National Research Council — is exactly the kind of the thing Ottawa hopes to spark more of in the years ahead.
“Development of an at-scale, clean hydrogen economy is a strategic priority for Canada, needed to diversify our future energy mix, generate economic benefits and achieve net-zero emissions by 2050,” the strategy states.
Pathway to net-zero
The motivation is clear. Worldwide, according to a 2020 study by BloombergNEF, hydrogen could eventually “abate up to 37% of energy-related greenhouse gas emissions.” In this country, Natural Resources Canada predicts hydrogen may account for six per cent of delivered energy by 2030 and 30 per cent by 2050.
Not only does that spell potential economic opportunity for Canada from a production standpoint, but a growing contribution from hydrogen in our energy mix is needed to meet the government’s pledge to achieve net zero emissions in Canada by 2050. That’s why the federal government’s Climate Plan, released days before the hydrogen strategy, earmarked $1.5 billion for a “low carbon and zero-emissions fuel fund.”
While significant parts of the strategy’s content and expected policy action is focused on hydrogen production and distribution, Canadians with a direct interest in downstream applications, particularly in transportation, are buoyed by its potential to stoke opportunities there.
“We are very pleased to see Canada’s government announce its hydrogen strategy,” says Guy McAree, director of marketing and investors relations at B.C.-based Ballard Power Systems, one of the earliest players in the hydrogen fuel cell sector.
Daniel Breton, president and CEO of Electric Mobility Canada, called the strategy “big news” in a statement when it was announced. “We see great opportunity ahead for hydrogen in heavy duty vehicles, ships and planes, in particular,” said Breton.
McAree agrees: “Ballard expects to see global growth particularly in fuel cell bus, commercial truck, rail and marine verticals over the coming decade, along with potential upside opportunities in such areas as off-road vehicles, material handling equipment, passenger cars and stationary backup power systems.”
The federal strategy offers a suite of 32 recommendations under eight pillars. While reaction has been generally positive — leaders of the Canadian Hydrogen Fuel Cell Association (CHFCA) and Hydrogen Business Council of Canada (HBCoC) issued a joint statement “applauding” its potential to stimulate private sector investment — any assessment of its impact will have to wait. However, when it comes to the downstream sectors, there are some emerging indicators as to which areas show the most, and the least, promise.
Cars and light-duty trucks are in the latter category. With long-range lithium batteries and expanding recharging infrastructure driving electric vehicle sales and production, it seems unlikely, absent giant subsidies, that hydrogen fuel cells — once touted as the way of the future — will make significant inroads in the car and light-truck market, according to BloombergNEF.
Larger trucks a “battleground”
When it comes to larger medium- and heavy-duty trucks, Colin McKerracher, BloombergNEF’s head of advanced transport, speaking last week in a webinar hosted by Clean Energy Canada, called it “a battleground segment.”
Companies like Loop, their investors and many sector experts are bullish on hydrogen’s prospects. And their view is echoed in the federal strategy, which states that fuel cells are expected to play a significant role in medium- and heavy-duty trucks where there is “high power demand, coupled with energy-intensive and long duty cycles.”
Clean energy consultant Robert Stasko, who heads the HBCoC, adds that for fleets with heavier loads, longer distances or regular routes, like buses, the economics of swapping out hydrogen for diesel look increasingly viable. “We see that as low-hanging fruit,” he observes.
However, McKerracher says battery-electric technology is continuing to make gains. And the road is still open. A literature review published in 2019 in Energy Reports journal pointed out that while heavy-duty trucks account for a large and growing proportion of carbon emissions, there was no clear evidence to that point that technologies such as hybrid electric or hydrogen fuel cells fitted onto trucks with electric powertrains and motors will gain significant traction anytime soon.
Rail, marine and aviation all meet the same “high power demand, coupled with energy-intensive and long duty cycles” criteria outlined in the federal strategy. However, hydrogen applications in these areas remain largely unproven. According to an evaluation by Carbon Brief published last fall, there are new demonstration projects of liquid-hydrogen fuelled ships and small planes, but these are in their infancy and use hydrogen derived from fossil fuel, with its high carbon footprint, rather than clean energy sources like hydro-electricity or wind.
“Hydrogen in ships could be either burned in engines or used to generate electricity in fuel cells, but both options would require expensive new infrastructure to transport and store the gas on ships,” the report notes, adding that both eat up cargo room because of the additional space required to transport and store hydrogen on board.
Canada’s hydrogen strategy identifies end-use applications like fuel-cell electric buses as a home-made market; there are several demonstration projects but, as the federal strategy points out, these will have to be expanded with the creation of hydrogen depots.
Other end-use applications envisioned in the strategy include the displacement of diesel-power vehicles used in mines and, more speculatively, electric trains that rely on hydrogen-powered engines. Among the contenders in this space is Alstom, which uses fuel cells manufactured by Hydrogenics, a Mississauga fuel cell firm acquired in 2019 by Indiana-based Cummins Inc.
On that front, however, Metrolinx, Ontario’s regional transit agency, just dealt hydrogen-powered trains a blow. In 2018, it conducted a study looking at the viability of using so-called “hydrail” to electrify the GO rail network. The concept was on the table until a couple of weeks ago, when Metrolinx announced its next round of tenders for new trains will not include hydrogen.
Canada in the mix
One of the safest bets across the board is that hydrogen advocates will remain undaunted. Stasko, for example, points out that hydrogen can be used as an additive to natural gas, up to about 10 per cent, not unlike ethanol can be added to gasoline. Other potential fuel-source applications include fertilizer, ammonia and steel production. Indeed, Greenpeace Canada energy analyst Keith Stewart points to a Swedish pilot project — by HYBRIT, a four-year-old joint venture between a steel giant, a national utility and a coke producer — which uses hydrogen derived from hydro-electricity as a replacement for coal in the production of so-called “green steel.”
In the main, however, environmentalists like Stewart are skeptical that hydrogen will become more than a niche source of clean energy. But Stasko is confident that the current wave of investor and policy-maker interest will be lasting and rewarded. “The technology has developed to the point where suppliers [of hydrogen fuel cell components] will give you a 20-year warranty,” he says.
Ballard’s McAree perhaps sums up best where we’re at. “Canada is now in the mix,” he says. To succeed, it falls to everyone to “facilitate execution of the hydrogen strategy.”