New hydrogen discussion paper first step in Ontario’s hydrogen strategy

The Government of Ontario has released a discussion paper on the development of a provincial hydrogen strategy. The paper outlines a vision for a low-carbon hydrogen economy that supports economic growth as well as greenhouse gas (GHG) emission reductions (in line with targets set by the Made-in-Ontario Environment Plan). The discussion paper is available on the Environment Registry of Ontario for public comment until January 18, 2021.

What you need to know

  • The Government of Ontario wants to hear from stakeholders regarding the development of its first-ever hydrogen strategy, which aims to lower GHG emissions, create jobs, attract investment and promote energy resilience.
  • According to the paper, hydrogen is expected to become a cost-competitive energy source around the world for industrial processes, transportation, electricity production and storage, and the heating of buildings and communities.
  • A 2020 report by the Green Ribbon Panel (consisting of Canadian nuclear and cleantech experts) estimates that hydrogen could generate $2.5 billion of spending per year and improve Ontario’s trade balance by $3.2 billion per year by displacing fossil fuel imports and making Ontario a leading technology exporter. The report also estimates the creation of 23,000 jobs in the hydrogen sector.

Overview of the discussion paper

Ontario released its Made-in-Ontario Environment Plan in November 2018, committing to reducing Ontario’s GHG emissions by 30% compared to 2005 levels by 2030, in line with the federal government’s 2030 target. The province hopes to achieve this target, in part, by encouraging the use of low-carbon hydrogen energy sources across key industries. According to the discussion paper, the development of Ontario’s hydrogen strategy will be guided by four additional principles:

  • generating economic development and jobs;
  • promoting energy resilience;
  • reducing barriers and enabling action; and
  • using hydrogen where its makes sense (i.e., where it is most likely to become cost-competitive).

Main end uses of hydrogen

Currently, the main uses for hydrogen in Ontario are in oil refineries and fertilizer production. However, between 2030-2050, hydrogen has the potential to become cost-competitive with certain fossil fuels (so as to complement or be an alternative to them) in the Ontario economy. In considering the future for hydrogen, the discussion paper considers 1) hydrogen made from relatively low-carbon sources such as biomass or electricity from Ontario’s grid and 2) hydrogen made from natural gas, including where this production is paired with carbon capture and storage technology. In Ontario today, most hydrogen is made from natural gas and distributed to end users by pipeline.

According to the discussion paper, hydrogen could become cost-competitive with traditional fossil fuels in four main areas:

  1. Industry. Low-carbon hydrogen could increasingly be used in fertilizer and oil refineries. Hydrogen is also expected to become cost-competitive in high temperature industrial applications such as steel and cement production.
  2. Transport. Hydrogen could increasingly be used by vehicles (particularly commercial vehicles, buses, commuter trains, ferries and forklifts).
  3. Electricity production and storage. Hydrogen could be produced from excess electricity during high electricity supply periods and stored for later use during high demand periods, allowing for increased energy efficiency.
  4. Buildings and communities. Low-carbon hydrogen could increasingly be blended into natural gas and distributed through pipelines to supply energy to buildings and communities.

International and domestic focus on hydrogen

In outlining a strategy for Ontario, the discussion paper looks to various countries and regions that have issued hydrogen strategies and are including hydrogen in their long-term commitments to reduce GHGs and fight climate change, such as Australia, the EU, Germany, Japan and Spain1. The tools used to support hydrogen growth vary by jurisdiction; common examples include setting targets, funding technology pilots, and implementing regulations to support production, distribution and use.

Domestically, several provinces are also planning to accelerate hydrogen use. British Columbia and Québec are currently implementing hydrogen strategies and Alberta has committed to developing a hydrogen roadmap by 2023. The federal government is expected to release a hydrogen strategy and will work with provinces to develop regional hydrogen blueprints.

Ontario’s advantages and opportunities

According to the discussion paper, there are several key factors that give Ontario a competitive advantage in adopting low-carbon hydrogen uses:

  • Low-carbon electricity supply. Ontario has a relatively low-carbon electricity supply mix, powered mainly by nuclear, hydroelectric, natural gas and renewables, which allows for a largely GHG emissions free electricity grid (94% GHG emissions free in 2019).
  • Existing manufacturers and users. Several hydrogen projects and businesses are already established or in development in Ontario, including hydrogen electrolyzers, fuel cell components, and low-carbon hydrogen blending with natural gas.
  • Regional opportunities. Geography is another advantage for the province in developing its hydrogen industry, including its proximity to the United States, with future opportunity for trading hydrogen and hydrogen technologies.

Next steps

The province is currently seeking public input to better understand the needs of the hydrogen sector (including consumers), the challenges of supporting a complex hydrogen market and opportunities to leverage the private sector to expand adoption of hydrogen and support regional growth. Comments can be submitted on the Environmental Registry or emailed to hydrogen@ontario.ca until January 18, 2021.

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1 The discussion paper provides a helpful Appendix that lays outs the timeline of the development of the hydrogen industry worldwide.

To discuss these issues, please contact the author(s).

This publication is a general discussion of certain legal and related developments and should not be relied upon as legal advice. If you require legal advice, we would be pleased to discuss the issues in this publication with you, in the context of your particular circumstances.

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