Canada needs to get ambitious about green hydrogen, or risk being left behind

TORONTO—After a successful German visit by Chancellor Olaf Scholz, Canada now joins that country’s global network of potential green hydrogen suppliers. But shouldn’t we have a higher ambition? Germany has a two-pronged strategy: First to ensure a well-diversified worldwide network of green hydrogen suppliers and, second, to use its transition to green hydrogen as a chance to build world-competitive manufacturers of green hydrogen technologies to benefit from green hydrogen projects. This explains the high-powered delegation of German industrialists who came to Canada with Scholz. But where were the Canadians? There are three potential green hydrogen projects in Atlantic Canada, and all are led by American companies. The first is the World Energy project in Stephenville, N.L. World Energy is a Boston company. Another potential initiative, also in Newfoundland, is led by Pattern Energy, a San Francisco energy company. And the third, led by EverWinds, a New York private equity group, has acquired a site near Halifax to deliver green hydrogen to E.ON, a major German energy company. While the German delegation included top industrial companies that hope to supply much of the technology for use in Canada, where were their Canadian counterparts? Is there any serious Canadian private sector leadership that can pursue these industrial opportunities? One of the world’s leading electrolyser manufacturers, Ontario-based Hydrogenics, has been sold to Cummins, an Ohio company which now owns all of its intellectual property. This is not a criticism of Germany and its strategic approach. It is a criticism of the absence of the same in Canada. Public policy in Canada today seems content to rely largely on foreign corporations for jobs and growth. The result is a derivative or branch plant economy where much of the decision-making on our future depends on foreign head offices, and where the economic benefits from profits and intellectual property rents accrue to foreign owners. This can quickly produce jobs, but it neglects the critically important need to build a new economy that includes Canadian-controlled companies to drive future growth, innovation and exports. We can see this reliance on foreign corporations in the research and development branch plants that Canada has encouraged Google, Amazon, Meta, and other big U.S. corporations to establish here. Canadian university talent is being employed to produce intellectual property for the U.S. parents. We can see it in the transition to electric vehicle and battery production—the investments, with generous Canadian taxpayer support, are being led by U.S. automakers and Korean battery producers. Will there be Canadian companies with key technologies in the supply chains? We can see it in the ease with which foreign multinationals can snap up promising Canadian tech companies before they can scale to become Canadian-headquartered global companies. Canada published a hydrogen strategy in 2020, but we have yet to see much in the way of tangible benefits. Budget 2022 added to the list of subsides available for hydrogen projects but it is still hard to discern a strategy. In the meantime, Canada and Germany have signed a joint declaration of intent to establish a Canada-Germany Hydrogen Alliance “to kickstart the hydrogen economy and to create a transatlantic supply chain for hydrogen well before 2030, with first deliveries aiming for 2025.” But how much Canadian technology will be in these plants? The agreement includes promises of collaboration in developing co-operation in research, development, and demonstration initiatives, but sidestepped the issue of intellectual property rights; these will be addressed in “a separate and appropriate instrument.” Then-innovation minister Navdeep Bains stands beside a hydrogen-powered car on Parliament Hill on 'Hydrogen Day' in 2017. The Hill Times photograph by Jake Wright For its part, Germany is working round the clock to meet its energy needs. Its 2020 National Hydrogen Strategy was designed to obtain green hydrogen supplies and also to play a leading role in the development and export of hydrogen technologies. Guidehouse, a Washington-based consultancy in a study for the German Ministry of Economic Affairs, concluded that most of Germany’s green hydrogen demand will have to be met through imports; the country has limited potential for green hydrogen in Europe. “Spain, the U.K., and Scandinavia have the highest production potential for green hydrogen in Europe,” while “the largest potential for exports is expected in Spain, and in Scandinavia,” it said. “Outside of Europe, studies identify the highest export potential in Australia, Argentina, Brazil, Canada, Chile, Morocco, Oman, Saudi Arabia, and the United Arab Emirates, among others.” It urged Germany to “support joint flagship projects and export German technology solutions to promote innovation and enable scaling of hydrogen production.” To show how serious Germany is, during one week in March, its Economy Minster Robert Habeck went to Norway to negotiate a feasibility study for hydrogen pipeline, travelled to Qatar to conclude an energy partnership, and went on to the United Arab Emirates to sign a number of energy agreements. Australia was well ahead of Canada in pursuing green hydrogen with Germany. In June of last year it signed the Germany-Australia Hydrogen agreement, with the goal of producing the cheapest green hydrogen in the world. In June of this year German companies, along with Australia’s Fortescue Future Industries, released a roadmap for large-scale green hydrogen exports to Germany. Fortescue had already announced a partnership with E.ON to supply five million tonnes of green hydrogen a year by 2030. Canada lacks an industry leader like Australia’s Fortescue. Germany is also looking to African and Middle Eastern countries. It has developed a partnership with Morocco and is also working with Namibia on green hydrogen through a German-Namibian partnership. Germany is also looking at South America, pursuing a green hydrogen project in Chile, for example. At the same time the Americans, Europeans, Japanese, and Chinese are all investing heavily in new green hydrogen technology, so Canada has to pursue advantage in a highly competitive environment. The U.S. Bipartisan Infrastructure Law provided US $21-billion for clean energy research, development and demonstration projects, including hydrogen. This includes US $8-billion for four clean hydrogen energy hubs. The Inflation Reduction Act, with US $369-billion committed for climate investments over the next decade, includes a generous clean hydrogen production credit that’s expected to significantly increase hydrogen production. The European Union is banking heavily on green hydrogen as a future source of clean energy. In May it issued its REPowerEU plan. It estimated that about $275-billion would need to be invested by 2027 and unveiled its Recovery and Resilience Facility as the core funding mechanism. Then there’s all the activity in China, Japan, and elsewhere. So if Canada wants to be a serious player in the new hydrogen world, it will take more than aspiration. It will have to take the challenges much more seriously. So far, there’s little evidence of that. David Crane can be reached at crane@interlog.com. The Hill Times