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By Stefan Kaufmann and John Risley

August 15, 2023

The pace of climate change has increased significantly, and we see its impact in our daily lives. Taking urgent action to combat climate change is an imperative in Europe, Canada, and across the world. The European Union (EU) is the leader in green transition, investing heavily in greening its economy under the Green Deal framework.

The illegal Russian invasion of Ukraine in 2022 only accelerated these efforts and put Canada at the top of the political agenda in Brussels as a long-standing democratic partner of the EU. They share common fundamental values, pursue market economy, and work actively towards a green, climate-neutral future. Indeed, Canada is one of the very few resource-rich countries that has good governance, an experienced energy workforce, favorable conditions for doing business and a strong commitment to the green future. There are clear geopolitical advantages to a strong energy trade relationship between these two strategic partners.

Hydrogen plays a major role in the green transition. Its multiple uses attest to its versatility:

• Decarbonization of hard-to-abate sectors: Hydrogen can help to reduce emissions significantly in a range of sectors, including long-haul transport, air transport, chemicals, steel, and cement.
• Power generation: Hydrogen can be transformed into electricity and methane to power homes and feed industry, and into fuel for cars, trucks, ships, and planes.
• Energy storage: Hydrogen is one of the leading options for storing energy from renewables and has the potential to be the lowest-cost option for storing electricity over days, weeks or even months. It can also be transported as a gas by pipelines or in liquid form via carriers like ammonia by ships over long distances, from regions with abundant solar and wind resources.

There is already an existing collaboration between Canada and the EU on energy and hydrogen issues through the International Partnership for Hydrogen and Fuel Cells in the Economy (IPHE). The purpose of IPHE is to facilitate and accelerate the transition to clean and efficient energy and mobility systems using hydrogen and fuel-cell technologies across applications and sectors.

Canada is among the world leaders in the development of hydrogen technologies and currently also in the production of grey hydrogen. Therefore, it offers opportunities for EU technology providers for cooperation and commercialization along the whole hydrogen value chain. In December 2020, Canada’s federal government released its Hydrogen Strategy for Canada (The National Strategy), which sees hydrogen as a way to spur economic growth, achieve climate neutrality and diversify the oil and gas sector. The National Strategy sets an ambitious framework to make Canada one of the world’s top three producers of clean hydrogen by 2050 and a major hydrogen exporter. Hydrogen should then account for about one-third of final energy demand in Canada and be used primarily for space and process heating, as an industrial feedstock, in transportation and for electricity storage. In addition to the National Strategy, several Canadian provinces have published their own hydrogen strategies based on their specific energy resources, i.e. BC Hydrogen Strategy (July 2021), Alberta’s Hydrogen Roadmap (November 2021), Ontario’s Low-Carbon Hydrogen Strategy (April 2022), Quebec Green Hydrogen and Bioenergy Strategy (May 2022).

The Eastern and Atlantic provinces are focused on green hydrogen and have a strong interest in exporting it to Europe. They are on a comparatively short shipping distance compared to other potential export regions. There is a very good renewable potential for low-cost green hydrogen production, especially in Eastern Canada from onshore and offshore wind, as well as substantial hydropower capacities resulting in cheap electricity prices and extremely high shares of renewables. Some provinces stand out with more than 90% renewables in the power mix. The export potential for green hydrogen is estimated at 25 to 35 Mt H2 per year in the long-term. Three huge production projects worth billions of dollars were recently announced for Port of Belledune (New Brunswick), Port Tupper (Nova Scotia) and Stephenville (Newfoundland and Labrador).

With the Low Carbon Economy Fund, the Clean Fuels Fund and the Federal investment tax credit of up to 40% on clean hydrogen, Canada has published a clear funding framework to attract foreign capital and investment. More support can be found in the Canada Growth Fund, which has been allocated a $15B (CAD) envelope to support investments to decarbonize various industries, but also hydrogen production.

In the EU, however, cooperation with Canada on hydrogen has emerged as an absolute priority for both European policymakers and businesses. In January 2021, the EU launched the Hydrogen Valley Platform through Mission Innovation. The platform features comprehensive insights into the most advanced and ambitious hydrogen valleys and large-scale hydrogen flagship projects around the globe, including Canada. To date, 25 European hydrogen valleys at different stages of development are part of the platform. Canada is part of this platform through the Hydrogen valley project in Edmonton, Alberta. In January 2022, as part of another hydrogen initiative, the EU announced that the Clean Hydrogen Partnership will invest EUR 105.4 million to fund nine Hydrogen valleys across Europe.  Through a third initiative under the smart specialization platform, managed by the Joint Research Center’s (JRC) Growth and Innovation Directorate, the EU set up the European Hydrogen Valleys Partnership in May 2022 – with a focus more on research topics.  Hydrogen ecosystems in Europe and Canada should use this impetus to work together on a global green transition and global hydrogen economy, based on renewable (green) hydrogen.

In August 2022, the Canada-Germany Hydrogen Alliance was signed in Stephenville, Newfoundland and Labrador, boldly committing Canada to green hydrogen exports starting in 2025. This agreement has fueled momentum in Atlantic Canada to build-out a first of kind industry, with large investments in renewable power generation and electrolyzer capacity. These investments have the potential to change the face of the economy in Canada’s Atlantic provinces.

Despite these attractive conditions, however, cooperation between the EU and Canada in the hydrogen sector is still very limited. With the exception of a few member states such as Germany and France, the EU is not really the focus of Canadian politics and business. The open discussions at the Canada Growth Summit proved again that Canadian companies are not particularly interested in exporting to Europe. They’d rather focus on their southern neighbour, the United States, which provides a larger market with no major obstacles.

The Canada-EU hydrogen business faces important challenges.

First, the US and Canada are already connected via 37 energy transmission lines. Interest in further expansion is high on both sides. New cross-border transmission lines are being built. The largest expansion project is Champlain Hudson Power Express, a high-voltage direct-current transmission line with a capacity of 1,250 megawatts from Quebec to New York City.

• It is much easier to produce hydrogen across the border in common projects.
• It is much easier and cheaper to transport hydrogen to a neighbouring country by using (new) hydrogen pipelines then to ship it to Europe.

Second, the production of clean hydrogen in the US suffers from a great shortage of electrolyzer capacities. Europe faces the same issue. However, since the US will presumably attract substantial foreign capital and projects with the Inflation Reduction Act, the ramp-up of the electrolyzer industry may take place faster in the US than in Europe.

Third, the smaller internal energy market and a jigsaw puzzle of provincial jurisdictions create other obstacles keeping Canada from achieving its full potential. The responsibility for the energy industry is split among the individual provinces, and that makes the implementation of a national hydrogen strategy in Canada much more difficult. It also makes it harder to execute a national approach to hydrogen export. Moreover, the western Canadian provinces are heavily focused on blue hydrogen production and still on fossil fuels due to large natural gas deposits and potential CO2 storage sites. This blue hydrogen is to be exported primarily to the US and Asia.

In Quebec, on the other hand, the opportunities for clean hydrogen are well recognized on the industry side. However, there is still no political will to produce green hydrogen in large quantities and even less will to export it to the US or Europe. The hydropower giant Hydro Quebec plays a central role in this policy. Although an expansion potential of 36 GW has been identified, it is expensive and economically challenging to implement in remote parts of the province. The focus is therefore more on wind power and also biomass from wood waste – albeit with much lower expansion potential. As we see, Canada still has a lot to do to become one of the three big global suppliers of green hydrogen.

Canada is also interesting for Europe as a research and technology partner.

From the perspective of business cooperation, there are both challenges and opportunities. Business would benefit from EU-Canada reinforced collaboration; however, the following issues need to be properly addressed:

• Clear common regulatory framework
• Flexible and reliable supply chains from Canada to the EU
• Common skill recognition in the hydrogen sector

The path towards solving these issues is through closer collaboration between industry and policymakers in Canada and EU. Dialogues via roundtables focusing on stronger political cooperation, organization of EU-Canadian research days and a Canada-EU H2 Summit could significantly help to advance in addressing these gaps. In addition, launching a business capacity building program with Hydrogen Europe and a Canadian counterpart would be very beneficial. These efforts would facilitate cooperation between the two strategic partners in the area of hydrogen, allowing them to take advantage of the huge potential both in Canada and the EU.

As Gene Gebolys, CEO of World Energy Alternatives, said of the signature of the Canada-Germany Hydrogen Alliance: “There is a geopolitical and environmental imperative to accelerate the development and trade of clean energy among close committed democratic allies”. The time to act is now.

Dr. Stefan Kaufmann is former Hydrogen Commissioner at the German Federal Government and currently works as Hydrogen Executive Adviser to the thyssenkrupp board.

John Risley is Chairman and CEO of CFFI Ventures Inc, and chair of Canada’s Ocean Supercluster.

The authors would like to acknowledge the support of EU-CAN PDSF, a project funded by the European Union.