THE STANDING SENATE COMMITTEE ON ENERGY, THE ENVIRONMENT AND NATURAL RESOURCES
EVIDENCE
OTTAWA, Tuesday, October 4, 2022
The Standing Senate Committee on Energy, the Environment and Natural Resources met with videoconference this day at 6:31 p.m. [ET] to conduct a study on emerging issues related to the committee’s mandate.
Senator Paul J. Massicotte (Chair) in the chair.
[Translation]
The Chair: Honourable senators, my name is Paul Massicotte. I am a senator from Quebec and the chair of the committee. Today, we are conducting a meeting of the Standing Senate Committee on Energy, the Environment and Natural Resources. Before we begin, I would like to introduce the members of the committee who are participating in this evening’s meeting: Michèle Audette from Quebec; David Arnot from Saskatchewan; Pierre-Hugues Boisvenu from Quebec; Peter Harder from Ontario; Julie Miville-Dechêne from Quebec; Judith G. Seidman from Quebec; Karen Sorensen from Alberta; Josée Verner, P.C., from Quebec. I welcome all of you, respected colleagues, as well as any Canadians who are watching us.
Today, we are meeting to continue our study on hydrogen energy. This evening, we are welcoming, from the Canadian Gas Association, Kevin Larmer, Director of Innovation and Markets, and from the Institute for Hydrogen Research, Bruno G. Pollet, Professor and Deputy Director. Welcome and thank you for accepting our invitation. You each have five minutes to deliver your opening remarks, which will be followed by questions and answers. Mr. Larmer, go ahead.
[English]
Kevin Larmer, Director of Innovation and Markets, Canadian Gas Association: Thank you to the entire Senate Committee on Energy, the Environment and Natural Resources. This is a timely study, and we welcome the opportunity. My name is Kevin Larmer, I am the Senior Director of Innovation and Markets at the Canadian Gas Association. I am also the co-chair of the natural gas working group, along with Natural Resources Canada representatives, as part of the implementation of the Hydrogen Strategy for Canada.
The Canadian Gas Association is the voice of Canada’s gaseous energy delivery industry, including natural gas, renewable natural gas and hydrogen. CGA members deliver nearly 40% of Canada’s energy needs through a network of over 577,000 kilometres of underground infrastructure. The versatility and resiliency of this infrastructure allows it to deliver an ever-changing gas supply mix to over 7.4 million customer locations, representing approximately two thirds of Canadians.
One of the most significant low-emission energy options for distribution and storage in our infrastructure is the utilization of hydrogen as an energy carrier and storage medium. Globally, hydrogen is emerging as one of the most significant opportunities to decarbonize energy systems and energy-intensive processes. Industrial end uses, heavy transportation, including rail and marine, power generation and blending of hydrogen or 100% hydrogen in natural gas infrastructure have the opportunity to utilize hydrogen as a low-emission resource to support deep emission reductions.
So, what is our opportunity in Canada? Canada has a competitive advantage in leveraging our abundant renewable and low-emission resources to economically produce hydrogen at scale. The Puget Sound Clean Air Agency found natural gas from Canada to have a cleaner footprint than natural gas produced in the United States. It states that methane emissions in the U.S. may be as much as five times higher than those from Canada. Further, the International Energy Agency’s Global Methane Tracker indicates that both upstream and downstream emission intensities from the production of Canadian oil and natural gas to be 42% lower when compared to the U.S. This benefits the production of hydrogen from natural gas while capturing and storing the CO2, referred to as blue hydrogen.
Hydrogen derived from low-emissions natural gas can be competitive on a life cycle basis with that which is derived from renewables while substantially using fewer freshwater resources. Our renewable electricity resources also have great potential to support hydrogen production. The modern natural gas system offers benefits for hydrogen adoption in terms of bulk energy transportation capacity, long-term energy storage and supply resiliency.
We can look at our infrastructure and underground storage systems as Canada’s largest battery. Today, we can store three months’ worth of natural gas in our underground storage caverns. The existing natural gas infrastructure that is in place now is built with polyethylene pipes that will be able to safely deliver blends of hydrogen and natural gas. Engineering assessments are being conducted to ensure that safety remains the number one priority.
Research by our member utilities, and globally, all show that this is possible to do right now, and it is being done. Enbridge Gas in Markham, Ontario is home to the first hydrogen blending project in North America. It has been safely operating for one year, delivering low carbon hydrogen blended with natural gas to 3,600 homes and businesses. This fall in Alberta, ATCO Gas is preparing to deliver a blend of natural gas containing 5% to 20% hydrogen by volume into a subsection of the Fort Saskatchewan natural gas distribution system. Further projects are planned across our country, including 100% hydrogen communities. It should also be noted that in Alberta today there are approximately 80 kilometres of pure hydrogen transmission pipelines and 300 kilometres of carbon capture pipelines, which have been operating safely and successfully for over a decade.
Hydrogen and the natural gas system have great potential in helping Canada achieve net-zero greenhouse gas emissions. To meet these goals there is no silver bullet; we need to put all options on the table. Hydrogen is a non-emitting molecule that the natural gas industry is proving we can safely supply to Canadians via our existing infrastructure. Our industry offers reliable and resilient infrastructure, an important factor that cannot be overlooked.
Last year, the natural gas system met nearly 40% of Canada’s energy, versus 20% by electricity. If we were to blend 20% hydrogen into the natural gas system, it could result in 7.2 megatonnes of GHG reductions. There are those who oppose this and say it is not possible; they are misinformed and misleading. I point to Hawai’i Gas who have been delivering a blend of 13% hydrogen to their customers for decades using the same materials and end use appliances as we use in Canada. So yes, it is possible.
We do face challenges in this work, and we are working with stakeholders to meet these. Codes and standards need to be developed. Metering for hydrogen blends needs to be approved. One challenge, as was witnessed by this committee recently, is the divisive nature around the future of hydrogen. The scale of the emission reduction challenge and the need to deliver affordable and resilient energy is one that will require a multitude of options. Hydrogen is one of those and should very much remain a tool at the disposal of policy makers and private industry.
With this, I would like to leave you with some recommendations from our industry. First, capital follows messages. Canada has yet to send a fully positive signal to the market. To get that message out in a real way, we need a gaseous energy strategy for the domestic and export market. This would include opportunities for renewable natural gas, hydrogen and LNG. We are competing with other nations for capital for RNG, hydrogen and natural gas projects. If we want that capital, and the jobs, we need a firm and clear message that we are open for business.
Second, we need a more robust hydrogen and RNG funding program for Canada. The Clean Fuels Fund, administered by NRCan, has earmarked $1.5 billion for biofuels, hydrogen and RNG. We support this. With that said, it remains smaller on a per capita basis in comparison to several other countries including Germany, Australia and other competing nations. Canada needs to leverage private dollars with smart policy and programming that can compete on the global stage.
As well, there are three key areas where we would like to see further development. First, work to fast track the codes and standards process for hydrogen blending into gas systems in Canada. This will allow companies to more fully develop project opportunities to lower the emissions profile of gaseous energy in Canada. Second, continue to fund innovation into hydrogen research and development. This means government and industry jointly supporting new hydrogen technologies and improving the cost structure of projects. Today, hydrogen is more expensive than natural gas. We should set a goal for the price of hydrogen and work to determine measures to bring that cost down for consumers. Third, tell our story; both government and industry alike. We have the best natural gas industry in the world. That same industry, including the people, the product, the capital and the infrastructure, will deliver on Canada’s hydrogen future.
Thank you kindly for allowing me the opportunity to sit in front of you and present to your committee. I appreciate it, and I look forward to questions.
The Chair: Thank you. Mr. Pollet, the floor is yours.
Bruno G. Pollet, Professor and Deputy Director, Institute for Hydrogen Research: Thank you for the opportunity to present and interact with you tonight. I will try to be brief.
I have been working in the hydrogen energy sector for more than 20 years, both in the academic and industry sectors in the UK, Japan, South Africa, Norway and now in Canada. I must say that I have never seen such a great interest in hydrogen.
Since the announcement of European Union hydrogen strategy in July 2020, many countries worldwide have announced their own hydrogen strategies, some of them ambitious and some weak. For example, since 2020, over 80 countries in the world, representing over 80% of the global GDP, have recently adopted a hydrogen strategy or are about to do so.
What about Canada? As you all know, Canada is blessed with vast territories and an abundance of water, minerals, natural resources, abundant renewable electricity generation and, of course, natural gas and oil. These are perfect ingredients for building a strong hydrogen value chain from mineral extraction to low carbon hydrogen production, electrolyzer and fuel-cell manufacturing, hydrogen distribution and utilization. Moreover, Canada is already very well placed. It is one of the top leading producers of hydrogen technologies. It is certain that Canada should benefit from growing global demand for hydrogen.
Like in all the regions of the world, to reach net-zero carbon by 2050, the primary focus is on targeting industries and sectors difficult to decarbonize, the “no regret sectors” or the hard-to-decarbonize sectors, especially the energy-intensive industries and heavy-duty transportation. However, there is a great need for more investment at the federal and private sector levels on par with the current ongoing investment in the European Union and the United States for constructing and implementing hydrogen infrastructure across the whole hydrogen value chain.
For example, very recently, the European Commission approved US$5.2 billion in funding for hydrogen projects across the region. This investment should be expected to attract a further $6.8 billion in private funding.
We also need to invest in large R&D programs on state-of-the-art R&D infrastructure to validate the technology, to generate innovation, IP and new industries, as well as investing in training programs to train the next generations of hydrogen engineers, scientists, technologists and economists.
Additionally, Canada needs to strategically create and implement the so-called hydrogen valleys, such as in Europe, or hydrogen hubs to cluster several research institutions and government-funded initiatives to carry out industrial small to large pilot projects, technology demonstrations across the complete hydrogen value chain. These hubs would also attract light and heavy-duty transportation manufacturers, power to gas manufacturers, to name but a few.
Canada needs to have a policy that would put Canadian hydrogen technology companies on a global platform like France and the EU have been doing so far. In the U.S., the Inflation Reduction Act of 2022 provides plenty of options for projects in the U.S. to become very attractive. They are CAPEX on production incentives.
Already, companies in Canada are experiencing the consequences of this U.S. Inflation Reduction Act of 2022. To make sure that we do not lose investment and potential to the U.S. and other regions of the world, Canada must develop very quickly a supportive ecosystem, incentivize hydrogen production, hydrogen technology and hydrogen demand.
In my opinion, Canada no longer needs to support foreign companies with foreign technologies to do hydrogen projects in Canada with Canadian resources. Barriers to electrolyzer and fuel cell industrialization is simply a lack of funding to help Canadian companies move from an early stage to full commercialization. Canada already has a history of exceptional support of technology development, but historically, strong technology has then been acquired by international companies as Canada has lacked the funding required to industrialize. New strategies such as the Strategic Innovation Fund, the Clean Fuels Funds and Net-Zero Accelerator fund are beginning to address this gap, but many countries are moving more aggressively than Canada, such as the U.S., the EU and China, and there continues to be a great risk that Canada is relegated to the status of a technology exporter rather than a product exporter.
At present, Canada needs courageous decision making and needs to go all-in. Canada also needs sound, long-term, not politicized policies to enable hydrogen implementation.
Thank you very much.
The Chair: Thank you very much.
Senator Arnot: Thank you, witnesses. My question is to both of you. Mr. Larmer, you alluded to it.
Last week, our committee heard that carbon capture sequestration, blue hydrogen and initiative or projects were actually an abject failure, and it would be foolish for the government to make any investment in those technologies any further.
I ask from the perspective of Saskatchewan, because the Saskatchewan government has made a major investment in carbon capture sequestration. Under the rubric of telling your story, I want you to tell your story now, because I think you probably have an opposite view, and I would like to hear, with some articulation, why you feel the witnesses that we have heard in the past were not as informed on it as you think they should be.
Mr. Larmer: Thank you for your question. I was expecting that.
I do work for the Canadian Gas Association. Our industry is the natural gas distributors across Canada. CCUS is not what we typically deal with, but I did pull a few notes, and I think I can help point you in the right direction for some of those answers.
We are aware of the Quest project and what is taking place there, and we are aware that it has, to this point, captured over 4 million tonnes of CO2 successfully. They’re regulated. All of this can be found through their proceedings. This is all public information you can see.
I would suggest that you speak with the CCS Knowledge Centre. They would have all of the information that you would be looking for. They are a non-profit as well, so they are someone I think you could have in front of your committee.
We also see people, like the IEA, do look at carbon capture as being one of the many options that is needed for us to reach net zero, and an important option for us to do that.
As I said before, there isn’t a silver bullet for meeting net zero. We need all options on the table, and carbon capture, utilization and sequestration is one of those that we need to work on in Canada. In particular, we have geology that allows us to capture this carbon. We need to utilize that geology in Canada. Again, we are blessed with natural resources in Canada and the geology to be able to do this, and we should be using it.
Senator Arnot: Basically, you are both saying Canada is at a precipice, and we need to make an investment to support continuation. Maintaining Canada on a global stage is a real opportunity here, but the opportunity is waning, and we need to act fast.
Could you be more specific about the kinds of funds and incentives you think would be appropriate to perhaps see that Canada would be one of the leaders in the world on hydrogen development?
Mr. Larmer: I mentioned some of the challenges in our industry right now, those challenges around codes and standards. We need to expedite that process. We need to have codes and standards to catch up with industry. Our fear right now is that industry is moving faster than the codes authorities are able to keep up with what we are doing. As I said, in 2025, we plan to have our first 100% hydrogen community built out in Alberta. So codes and standards is one area we need funding to.
As well, we have to think about the cost of hydrogen. Everything that we talk about when we talk net zero and what that means is there is a cost to this. We need to ensure that technologies are innovative and that we are driving those costs down for Canadians, because they are the ones who will be paying for this.
Mr. Pollet: I completely agree with this. We need to strongly support the Canadian industry. That is the complete supply chain from extracting the minerals to the system, and system integration of hydrogen-producing technologies. That is very important. We have the know-how — we have expertise in this area in Canada for many years. Obviously, the big companies like Ballard, et cetera, have.
I think we are now at a sticky point — at a crossroad — where we need to implement the tools in order to get into an area where we can produce hydrogen quickly and really have those hubs producing hydrogen, not only for domestic usage but also potentially for export to other markets.
This is very crucial. Obviously, regulation is important. Those tools need to be implemented as soon as possible.
Senator Arnot: Thank you.
[Translation]
Senator Miville-Dechêne: The American professor Robert Howarth, who has a good reputation, said before this committee that it is a terrible idea to produce blue hydrogen. There was no nuance, it was what he called a “terrible idea” because it is a high-emission fuel. So, under these conditions, you are asking the government for subsidies, you are asking for help, but we are not even sure that all this — I am thinking of carbon capture — is going to help our society. Obviously, we remain a bit skeptical.
Mr. Pollet: I honestly thought we should look at green hydrogen production directly. Mr. Howarth has pretty strong thoughts about blue hydrogen. I think that pushing for green hydrogen and pushing for this independence from natural gas and oil is crucial.
It takes a lot of investment to get to a point where you can produce green hydrogen in fairly large quantities, but also at fairly competitive prices. So, we need mechanisms to get to that point and be in a pretty positive situation for Canada.
Blue hydrogen may be a more natural transition, but indeed, given the demands we have for green hydrogen, I think we should look at it directly. It would be a possibility.
Senator Miville-Dechêne: Green hydrogen also requires a lot of water and a lot of energy. I don’t feel like it’s okay, either. Is it going to remain a fringe product, intended for very, very limited use?
Mr. Pollet: I think we must consider two things. In terms of implementing renewable energy in Canada, incentives should be provided for the sector, but also, at the same time, electrolyzer plants should be created. At the moment, I don’t hear much about large electrolyzer plants or even fuel cells. We are very far from that. We’re not talking about it at all, unlike what’s being done in Europe.
In Europe, you have heard that there’s really a big push for production of these electrolyzers — gigafactories and even more than that, if you count the annual amounts. We need to look at how to increase capacity on the renewable side in Canada and at the same time also increase electrolyzer capacity.
Senator Miville-Dechêne: Thank you.
[English]
Mr. Larmer: Thank you. I disagree on just one point. [Technical difficulties] both green and blue hydrogen.
We need to build the hydrogen economy. We need to work at bringing costs down. We need to work at lowering the carbon emissions from blue hydrogen. That is the way we will achieve something.
Aiming for perfection isn’t the way to start off on doing this. As we see with the hydrogen strategy for Canada, and the work that NRCan and the working groups are doing, this is the view they are taking as well.
I also want to put out that, as I noted in my remarks, Canada has some of the lowest-emissions natural gas in the world. Those are organizations who are pointing that out. We would be remiss if we didn’t use that natural resource for our own domestic use but also with a thought toward exports and those countries that are looking for our clean energy here in Canada.
We also need to be allowed to innovate. If we are given a goal and target to meet, our industry can meet that target. We have innovated for decades and decades, and that is often an overlooked fact from our industry. Allow us to innovate.
Allow technologies to grow. As was mentioned before, Canada is currently known for having those hydrogen technologies, so let’s grow that. Let’s not export those technologies; let’s use them here in Canada for our own purposes.
Senator Seidman: Thank you for being with us this evening. I was just going to ask Dr. Pollet about what I thought I heard him say and that you have just contradicted, so now I’m going to try to figure it out.
Dr. Pollet, I thought I heard you say that we should be a technology exporter rather than a hydrogen exporter. Did I mishear?
Mr. Pollet: It’s a product exporter that we should be. We have been a technology exporter in the past, so I think we need to really create our industries around hydrogen and fuel cells, around electrolyzers and fuel cells built from scratch — those technologies — and then use it in Canada but also export it to other markets. That’s what I’m trying to say here.
So we need to really help the industry; they need that push. At the moment, some of them are actually in that valley of death. They need to go into this low TRL to high TRL into commercialization. I think we need to have a mechanism to do that. We have some great companies in Canada.
I have been talking to those guys. They would say, “You know, Bruno, we are doing so well.” I have been in this area for 20 years or so. Canada was really at the top for fuel cell and hydrogen technologies, we have lost that edge over the years. Now, we need to retain that, because we have good stuff going on here.
We can be one of the top leaders again in producing those fuel cells and electrolyzers — putting those new types of low-cost systems for producing hydrogen. We are capable of doing that.
But I must also say that we need to ensure that we have the mechanisms — quick implementation. We need to all work together — industry, government and research institutions — hand in hand to make that happen. This is crucial; for me it’s very crucial.
Otherwise, I strongly believe we will be relegated. We will be left behind. We have big nations, not to mention the U.S. and the European Union, but China has just announced they will develop and manufacture very low-cost electrolyzers to produce hydrogen. The problem is that it’s highly probable that this technology can flood into our market. Then, once again, we are missing the boat; we are losing out.
That is one point.
The second point is that we need to train the next generation of scientists, engineers and economists in this area. We need to have that labour to help in that transition.
I’m not saying with all this that hydrogen is the silver bullet. It will be part of this portfolio of low-carbon energy, but it has specific uses in specific sectors, as I said before, the “no regret” sectors. This is the most important point of the bottlenecks is that we need help. The industry needs help in order to get into the next phase, the next level, in order to be super competitive in the market. This is very aggressive at the moment. Since the U.S. Inflation Reduction Act, I can see things bubbling on the surface and investors asking, should I really put my money in Canada or should I go straight into the U.S. or the European Union? These are critical moments.
Senator Seidman: It’s interesting because I think, for most of us, you’re telling us things that we’re quite familiar with and that we’ve heard a lot over the years, which is that Canada is very good in the research, in academia and in development, but a lot less good in the commercialization, and that we lose it to the United States pretty quickly. You’re making the point that we have a lot of innovation in Canada around hydrogen, but we need to really put our money into the small companies that are maybe using some very innovative technologies. Is that what you’re saying?
Mr. Pollet: Absolutely. We need that.
Senator Seidman: Thank you. Mr. Larmer, we’re very preoccupied, as you can see if you followed our previous meetings, with the colours of hydrogen. We’ve been told that we should forget about the colours of hydrogen and not to focus so much on blue, grey and green. Everybody, as we’re discovering, has pretty distinct opinions about all that.
I’d like to change the subject a bit if I could. Your organization, if I’m correct, is doing a lot of work on Canada’s net-zero goals and has suggested that utility legislation in the provinces and territories is preventing utilities’ ability to deliver on net zero by 2050. Could you help us understand what those concerns are and what solutions you might suggest?
Mr. Larmer: Thank you, senator. Yes, our member utilities are regulated by an energy board. In Ontario, the Ontario Energy Board regulates the industry. They’re there to look after the customers, to make sure costs are kept in line. When we talk about hydrogen and renewable natural gas, these cost more than conventional natural gas. What we’re looking for is regulatory modernization across Canada in each of our provinces that would allow for the utilities to bring on these gaseous fuels and put them into their rates.
We already see this is happening. This happens in British Columbia and in Quebec. Both of those provinces have mandates to meet renewable content in their pipelines by certain dates. This allows them to have that regulatory approval to be able to bring these gases on and put it into their rate basis.
What we’re working with right now is speaking with our utilities because they’re the ones who deal with their provincial regulators. But our message to the federal government is that in order for us to help with pathways towards net zero, our utilities need this regulatory reform to be completed. It’s a long process. It takes years to open up the legislative acts and do this work. But I think that we’re at the point where, as our utilities are growing in their renewable space — so with hydrogen, renewable natural gases — that at this point, almost all of our provinces are starting to think about this and hear that message. What we’d like to hear from the federal government is an acknowledgement to the provinces that this is something that we all need to work on in order for us to help with net zero.
Senator Seidman: Obviously, as you say, this is a very long process. Changing the regulations is never easy.
Mr. Larmer: Never easy.
Senator Seidman: Do you have particular ideas about how to speed the process up if it’s so critical? You talked a lot about standards also. We’re in a huge transition here and obviously there’s some groundwork that needs to be done. Did you have some particular ideas about how to speed up that process?
Mr. Larmer: I think the conversations need to be had. I know that utilities are having those conversations with their provincial regulators. Everyone knows what we’re talking about when we talk about net zero, and they know what this means, but they’re there to protect the consumers from rising costs. I think that, as with everything we’re doing with net zero, we’re looking at raising costs. This needs to be kept in mind, and the regulators are doing their jobs in doing this. I think they’re cognizant and aware. These conversations are happening and they’re moving in the right direction.
On codes and standards, there is quite a lot of work taking place right now. Again, it’s a long process. The CSA, whom we work closely with, have a number of committees that are looking at the proper codes that we need to have changed. There’s a pipeline code, Z662, which looks at the safety of our pipelines. There are areas they’re looking at on our hydrogen can be inserted into those codes so that hydrogen blending can occur. For end-use appliances, we’re having the same conversations. CSA is working with many groups across North America because we share appliances across the border. We’re looking at this with the manufacturers of these appliances, and we’re also talking globally to appliance manufacturers because this work is being done in other countries and codes and standards have been developed in other countries. We don’t need to reinvent the wheel; we need to reach out to and speak with our colleagues about how they’ve done this and how ours can be made the same.
Senator Seidman: Are there international models we can draw from that would help speed us along in the process?
Mr. Larmer: Yes.
Senator Harder: Thanks to the committee for this work. I’m not a permanent member of this committee, but I am keenly interested in the work that it is doing.
I welcome the statement from Mr. Larmer about all options needing to be on the table. I think part of the problem with the debate in Canada is that we have been focused on certain sectors without seeing the broad contribution that other aspects of the energy sector can contribute. The other is that we become a little overfocused on CO2 emissions and not decarbonization. The objective is to decarbonize our energy sources, and that means a broader set of products, in my view. All options need to be on the table, obviously, including hydrogen.
I am a bit concerned, Professor Pollet, with the references you’ve made to the IRA in the United States and what the EU is doing. We are such a small player in comparison to them or even China. How do we pick our spot, given that we are not part of a North American energy play with the United States, nor a part of the European or Chinese space? Where do we find our niche? Because our domestic market alone will not justify the investment that we’re asking from the private sector. It seems to me that the export market is where we need to focus, and we need to identify who our export partners are in this. I’d like your comments on that.
In particular, I was part of the visit of Chancellor Scholz, during which the German chancellor signed a very significant agreement — at least I believe it has potential; I’d be interested in your view. How do you identify and what priorities would you give to the export market that the private sector can then leverage for investment purposes, given the resources that we have here? I think that would be very helpful to me and my understanding, anyway.
Mr. Pollet: We are very good technology developers and we have also been doing very good product development over the years. Obviously, Ballard in the fuel cell market. This is our strength. We’ve been very good at that. We’ve been pushing the boundaries in those technologies, and we should be focusing on that and trying to nurture that sector, once again, to get into the next level. That is where we need to do that by not only exporting a technology, but exporting electrolyzers, fuel cells and so forth.
Also, we have some really good ways of producing low-carbon hydrogen — those technologies. This is something that we should also nurture and push forward. In order to do that, we need to look at the mechanisms and try to focus on having those hydrogen hubs implemented in different areas of Canada with specific objectives in terms of their hydrogen ecosystem.
We have something here that is unique. If we wanted to, we could have a complete electrolyzer supply chain, from the extraction of our minerals, to the production of those electrolyzers, to the implementation of those giga-factories to export those big electrolyzer systems to different markets in the world. Likewise with fuel cells.
That is something we could do. We have the land — the vast territories — and we have an abundance of the minerals, some of them are critical and some are strategic to that supply chain.
For me, those are the major points for in the area for Canada.
Not only can we produce this hydrogen — it could be blue or green. I know there’s a lot of emphasis on that colour coding. I completely agree with you that we should focus on decarbonizing. That is our main objective in all of this. In the bigger scheme, we need to decarbonize [Technical difficulties] to 100% by 2050.
To the point on that, we need to have a kind of a mid-term target here — a very aggressive mid-term by 2030 — the next seven years or so.
We have all the ingredients to have strong leadership, not only for producing hydrogen domestically but also to produce the technology that can be exported to other markets.
The Chair: We’ll let Mr. Larmer join the conversation now.
Mr. Pollet: Sorry.
Mr. Larmer: Thank you. And thank you, Dr. Pollet.
My focus is the domestic market. That’s what our gas utilities supply energy for. I think with the export market that there is an eye on exports. I know the EU is here; we’ve spoken to a number of EU ambassadors over the last few months as they’re looking for green hydrogen, low-emission hydrogen as well.
I do agree that hydrogen hubs — or, in our industry, we look at hydrogen islands in the way they need to be built out. If I look at the Markham project that’s happening in the Toronto area, we have an electrolyzer that’s supplying a low blend of hydrogen — it’s a pilot project — into a neighbourhood. The goal is to build out from it. Can there be an industrial uptaker? Can there be a transportation uptaker for vehicles? Those can slowly build out across Canada.
I think they have a place, and for our domestic market, we can find ways to make those economical over time.
Again, I go back to the fact that we need to continue to innovate and to develop and use our technologies here in Canada. That export market will follow.
Mr. Pollet: I completely agree.
Senator Harder: I would also like your view as to where the international investors will come from for developing the export market here. We have all the resources you’ve talked about; we just don’t have the capital. The government cannot fill that alone. How do we get private sector capital stimulated and see the export advantage for that capital being deployed here?
The Chair: Mr. Pollet, do you want to comment — maybe short and sweet?
Mr. Pollet: We need to have a user of this hydrogen — a user, domestically. That way we can say there’s a market and then grow the market from that.
You need to have customers. It’s very good to say we’re going to produce hydrogen, but you need to have customers to use that hydrogen. That is what we need. We have industries that want that hydrogen, because they need to decarbonize their sectors. Also, we have a transport sector that is actually a big thing, especially in Canada.
Senator Sorensen: My question is for Mr. Larmer. I have a very limited education on this topic. All I’ve learned is from a few one-on-one meetings, the witnesses we’ve seen here as well as a bit of a Google search once in a while.
Logically, I tend to agree with the concept that we need to use all the tools that we have access to in order to move forward as quickly as we possibly can.
That all said, at your best kindergarten teacher level, can you explain to me about this blend of hydrogen with gas? I know we’re supposed to stop talking about colours, but now something else has been thrown at us. What colour is this one?
It’s different than green hydrogen and blue hydrogen. Is it another product, or is it more around moving it?
Mr. Larmer: It’s more around moving it. The colour of that hydrogen molecule doesn’t matter. We can mix that hydrogen molecule in with our natural gas molecules. Every time we put one hydrogen molecule in, we’re displacing one conventional natural gas molecule. That’s where our emissions are lowering.
Our infrastructure across Canada is largely built out of polyethylene pipes — yellow plastic pipes is what we use. Our distribution systems are generally at a lower pressure, and they’re able to handle this hydrogen blend. What we’re working on right now is what percentage of blend we can put into those pipes, that the pipes can handle it and that the end-use appliances in your home can handle it. We’re looking at about a 20% blend of hydrogen into the natural gas; so it would be 20% hydrogen, 80% natural gas.
Senator Sorensen: That makes it usable for the consumer, and movable.
Mr. Larmer: Exactly. On top of that, we can also put renewable natural gas in our pipelines as well. That is biomethane captured from landfill sites, manure and site-sourced organics. Methane is released as they digest. We can capture that methane, clean it and also put it into our pipeline.
Senator Sorensen: That’s part of that 80%?
Mr. Larmer: Yes, that’s part of the 80%. We can do 80% hydrogen and 5% or 10% RNG, and —
Senator Sorensen: Is this the first we’ve heard of this, or was I not listening to other witnesses?
The Chair: When we talk about blue hydrogen, it’s largely a combination with natural gas, is it not?
Mr. Larmer: It’s the source that the hydrogen is made from. Blue hydrogen is created from natural gas through steam methane reformation and then carbon capture.
Senator Sorensen: I kind of like taupe. Thank you. That has been helpful. That was new language to me.
Mr. Larmer: Senator, I’m happy to send any information over that might help with this. I can send that to the committee.
Senator Sorensen: With pictures.
Mr. Larmer: Pictures and colours.
[Translation]
Senator Audette: Look, I say this with as much humility as my colleagues: For me, this is a complex scientific world. So much the better, as we have experts who guide us through it, but at the same time, we also have relationships with territories, with communities, with nations — relationships with my annual camping trip. Once a year, I go away for four to five weeks in a tent away from everyone. I’m sure many companies and governments see economic potential in these beautiful territories.
In your work, in your association, to what extent have you engaged the First Peoples, the nations where extraction, development or collaboration will happen? I listened to the professor carefully. Maybe the First Peoples are also missing in your conversations or positions. There are things that need to be done with governments, with the private sector, internationally; reassure me and tell me that there is a dialogue with the First Peoples.
Then I will have a second question.
Mr. Pollet: Absolutely, in fact, we are trying to include First Nations in our vision and that is why we are trying to see if we can produce this renewable hydrogen so that it can be used locally or nationally. Of course, we are including First Nations in our vision of this hydrogen, I call it green hydrogen — excuse me, I’m going back to the code, well the colour of the hydrogen. Yes, absolutely, we have projects that are looking at the production of this green hydrogen using wind turbines, for example, and photovoltaic energy, but also other important compounds, such as ammonia, which is part of it, and fertilizers for the soil — absolutely, senator.
[English]
Mr. Larmer: Thank you for the question. Our member companies in CGA are forming the collaborative partnerships that are needed to move this forward. We do have deep concern about Northern communities in Canada and how do we decarbonize? How do we lower the emissions for these communities? They don’t have natural gas systems. They’re out of the reach of having many of the luxuries that we have in urban centres like this. So it’s those relationships, those partnerships, that need to continue to develop so that we can help decarbonize all of Canada.
The Chair: If I could, I have a couple of questions. Short answers, just to make sure I understand it correctly.
Mr. Larmer, I can appreciate from your sector you’re talking about natural gas, basically transporting via pipelines to the customer. As you know, most people look at natural gas as a mid-term solution, not as a long-term solution. As you know, we’re very concerned with the solution of 2050. Does natural gas have a future in that marketplace? Where does it go?
The other question I would ask is that if you look at what’s happening to wind and solar, the cost per kilowatt hour is around 3 cents, 4 cents, which is amazingly low. Why even deal with this stuff? Why not just concentrate fully in investing in solar and wind? It has been done, as you know, in China. The United States will be a major competitor shortly. Could you comment on those two things, if you don’t mind?
Mr. Larmer: First of all, look at the cost of natural gas. One of our challenges, natural gas is really cheap, 2 cents per kilowatt hour right now, so it is extremely low. When we look at renewable natural gas, as I talked about before, is about $25 a GJ. That’s about 8 cents a kilowatt hour, so it is still very cheap. Hydrogen will come down in price as well and can be competitive with renewable electricity.
I think the challenge of net zero is a tremendous, monumental challenge that we’re faced with. The amount of energy that the natural gas system supplies is immense, nearly twice that of what electricity supplies now. I’m not here to say that electrification is a bad thing and we shouldn’t pursue that. Absolutely not. Pipes and wires are what will get us there. As was said before, we need to focus on that decarbonization, lowering the emissions of the natural gas industry and the product that’s in the pipes.
Our members are natural gas distributors. So we have the yellow pipes that bring the gas to your house. The molecule that’s inside that gas is what we’re looking at changing. Now, do I think we’ll fully move away from natural gas by 2050? No, and I think the IEA is saying some of the same things as well. Natural gas will be used for many decades to come. However, I think that we need to concentrate and look at how do we lower the emissions from natural gas.
The Chair: Mr. Pollet, do you have any comments?
Mr. Pollet: Absolutely. Again, we need to look at diversification of the technologies here. Electrification will play a big role, and obviously hydrogen. But we have to realize that hydrogen will go to sectors which are hard to electrify. If you talk to the steel industry, for example, the aluminum industry, et cetera, it would be quite hard to have a kind of electricity system being fed there. So hydrogen makes sense. Likewise for heavy-duty transportation, those class 8 big lorries. I don’t foresee lithium-ion battery technology being a winner here. Hydrogen fuel cells make sense.
Again, I’ll come back to what I said earlier on. Hydrogen is not the silver bullet. It will be part of that portfolio in that decarbonization vision pathway.
[Translation]
The Chair: Mr. Pollet, in terms of the agreement signed with Germany for the export of hydrogen, can you explain it to me in more detail? What are we exporting? Why are the Germans so interested in our hydrogen? How mutual is it? Is hydrogen converted to a liquid before transport?
Mr. Pollet: That is a very good question. Germany has a pretty significant energy challenge, as we all know. At the moment, there are a lot of alliances with strategic countries, countries with a real potential for hydrogen production for export. So, I think right now, they’re trying to figure out who can really produce that hydrogen at a cost that’s attractive enough for the hydrogen to be used in their industrial sector and so on. So, on the one hand, there is the transportation, and first of all, there are different ways to transport it. Of course, there is liquefaction, which is very energy intensive and very expensive, but there is also the other option, which is ammonia. There are not only advantages, but also disadvantages: It is not easy to transport.
At the moment, there are discussions about the form in which this hydrogen could be transported across the Atlantic. The most important thing is that we have developed an agreement with Germany to produce 1 million or maybe 10 million tonnes of hydrogen; it’s a challenge. Right now, we don’t have enough infrastructure to supply that hydrogen in two, three or four years. We need to get all that infrastructure in place now — I would even say, we needed to do it yesterday. We are at a pretty critical point.
Indeed, it is possible that we could really produce this hydrogen on a massive scale and transport it to our German friends in the future. These mechanisms are necessary, but once again, for the moment, we have the ambition, we want to, but we don’t really have the mechanisms to support it all. When I say industry, that’s what they want.
The Chair: Thank you.
[English]
Mr. Larmer, if I can ask one last question, we talked about CCS earlier. CCS, as you know, is a fundamental, very important component of our position, all in, if you wish. But the information we get as to the cost or the subsidy we put into this thing — private player — what is it? Are we talking $150 per tonne? What is the cost of that CCS? Because if it doesn’t work, we have a big problem. I’m not aware of any that work extremely well. Could you comment on that?
Mr. Larmer: Again, CCUS is not my area of expertise. What I would suggest for the committee is the International CCS Knowledge Centre out of Saskatchewan. As well, BMO has done a tremendous amount of work on CCUS. I would be happy to put you in contact with some people over there who can probably speak to that better than I would be able to.
The Chair: Mr. Pollet, do you have any comments?
Mr. Pollet: I’m not familiar with this area, so no comments.
The Chair: Thank you very much for being with us this late afternoon/early evening. Much appreciated. We learned quite a bit and need to learn a lot more. Thank you to both of you for being with us. We appreciate it. Thank you very much.
(The committee adjourned).