Canada’s greater potential, bigger strengths are hydrogen and fuel cells technology

TORONTO—If it plays its cards right, Canada should benefit much more from pursuing an aggressive strategy for hydrogen and fuel cells than it would from pinning its hopes on electric vehicle battery plants and battery-ready minerals. This is not an either-or-choice. We should do what we can to be part of the battery-powered future. But our bigger strengths and greater potential are in hydrogen and fuel cells technologies. Whether we can capitalize on our hydrogen economy strengths in an increasingly competitive environment though will be a real test of our ability to move beyond potential possibilities to achieving our potential. The key public policy players will be Natural Resources Canada and Industry Canada, along with Finance Canada, though provinces will have an important role as well, which British Columbia, Alberta, and Quebec already recognize. Ontario, though, is largely absent. But key investment decisions will have to be made by industry, which will be seeking tax incentives as well as direct funding, and policies that help build a market in Canada. This is a huge challenge. Over the next few years alone, the investment needs could run to well over $5-billion. Interestingly, much of the drive in Canada today is being pushed by foreign multinationals, such as Shell, Air Liquide, Toyota, and Daimler while established or emerging Canadian companies being targeted for takeovers or controlling investments by foreign corporations. Today, we are having to make up for lost time. In the 1990s and into the early 2000s, Canadian companies developed patent portfolios and exported hydrogen and fuel cells technology around the world. But Canada no longer has the lead it once enjoyed, in part because of our public policy failure to support the technology in those earlier days. Despite persistent efforts by Canadian companies for well over a decade for a national hydrogen strategy they had to depend on export markets to survive and grow. The failure to build a domestic market led to a pullback in innovation. In the eight years between 2004 and 2011, Canada was spending on average US$45.3-million in inflation-adjusted dollars annually on hydrogen and fuel cells research and development, according to the International Energy Agency. But in the eight years 2012-2019, that annual average fell to US$15.2-million. In 2019 Canada spent US$14-million, not much more than one-third of what we spent in 2004 on hydrogen R&D. In December 2020 the federal government finally released a hydrogen strategy. But it was strongly aspirational rather than quickly actionable. It is also overweighted in its emphasis on blue hydrogen from natural gas which after carbon capture still emits a high level of greenhouse gases, rather than on green hydrogen, which uses renewable energy to produce totally clean hydrogen from water. Nonetheless, the strategy assumes that if everything works out, by 2050 Canada would create 350,000 well-paying jobs, become one of the world’s top three hydrogen exporters with exports of $50-billion, create a domestic market of more than $50-billion in revenues as hydrogen met 30 per cent of Canada’s energy needs, and see five million fuel cell vehicles on the road with a nationwide network of refuelling stations. But there are some big “ifs” and it remains to be seen what Canada will actually do. A real strategy that delivers is yet to come. And it will have to take into account that many countries are building capacity and will become formidable competitors, backed by strong government support and corporations operating at greater scale than Canadian companies. Under the strategy from 2020 to 2025, Canada is supposed to spend on immediate steps laying the foundation for industry growth, pursuing an aggressive strategy from 2025 to 2030 to build up Canadian strengths, and from 2030 to 2050 growing the hydrogen and fuel cell economy, becoming a world leader. While Canadian companies took the lead—notably Ballard Power in British Columbia and Hydrogenics in Ontario—in developing Canadian technology and encouraging related supply chain companies, there was little effort by Canadian federal or provincial governments to create a market in Canada, representing a lost opportunity. This has to change. Canadian fuel cells are being used in roughly half the more than 2,000 fuel cell buses in use around the world but there are no fuel cell buses in Canada. Commuter rail lines in many countries are turning to fuel cells for zero-emission power and many are using Canadian fuel cells. But Metrolinx, the Ontario agency building the commuter rail system in southern Ontario, has deemed fuel cells too risky. As Germany’s hydrogen strategy stresses, “the first step that needs to be taken to speed up the rollout of hydrogen technology is establishing a strong and sustainable domestic market for the production and use of hydrogen at home.” This philosophy hasn’t resonated in Canada. Building that domestic market has to be a priority now. We need evidence quickly that this will happen. At the same time, for commercial benefits for Canadians, we need policies to help scale up Canadian-controlled companies with their own proprietary technology. As in many other tech sectors, foreign corporations have been shopping for successful Canadian fuel cell companies. Hydrogenics, one of our anchor firms, has been purchased by a U.S. company, Cummins Inc., which is also the principal shareholder of another Canadian fuel cell company, Loop Energy. The controlling ownership of Hydrogen Technology and Energy Corp. is now held by two U.S. investors, Chart Industries and I Squared Capital. There are many examples of smaller Canadian companies being sold to foreign investors who acquire their intellectual property and often the talent as well. A wide range of consultations are currently underway, spearheaded by a Hydrogen Strategy Implementation Strategic Steering Committee, and backed by specialized working groups. Now we need to see some first steps. For its part the Hydrogen and Fuel Cell Association is seeking support for up to 30 demonstration hubs across the country. The next budget should send some important signals on how serious Canada is. Setting aspirations is easy. But success requires commitment to achieve our potential and that’s what we need now. David Crane can be reached at crane@interlog.com. The Hill Times