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The Canadian and German governments are pledging a combined $600 million to set up a first-ever transatlantic clean hydrogen auction. The move cements a 2020 on-paper trade deal between the two countries — and could potentially contribute to stabilizing currently volatile global hydrogen markets.
The funding, divided 50:50 between Canada and Germany, will underwrite a so-called “double auction,” through which German industrial consumers would bid to buy clean hydrogen generation from Canadian developers, to be held later this year.
First cargoes of the e-fuel could be shipped to Europe as early as 2025, according to Wednesday’s announcement in Port Hawkesbury, N.S.
Minister for Energy and Natural Resources Jonathan Wilkinson, speaking with Canada's National Observer, called today's agreement "hugely significant" in advancing Canada’s nascent hydrogen sector and cementing the Canada–Germany Hydrogen Alliance set up to help domestic companies make inroads into German clean hydrogen and green ammonia markets.
"This auction will also allow us to make the early introductions [between hydrogen suppliers and buyers] on production that we know is going to come down on cost but at this stage do need some support to get built and to get the market going — just as Germany did with wind [power 20 years ago]."
The Canada-Germany deal, the first-ever transatlantic bilateral agreement on green hydrogen, is “going to help build an industry that is going to supply industrial demand,” Wilkinson said. "It reflects Canada's desire to be a clean energy supplier to the world."
The Port Hawkesbury announcement comes at a tumultuous time for the global hydrogen sector. Market sentiment has gone from seeing hydrogen as a “Swiss Army knife” of the energy transition - able to decarbonize all fossil fuel-dependent industrial uses - to more case-specific applications, chiefly in heavy-emitting sectors such as concrete and steel and possibly in fuel-cells for long-haul transport.
The Canadian government’s own progress report on its hydrogen strategy, published recently, downgraded its 2050 global market forecasts from $11.7 trillion to under $1.9 trillion, a precipitous 84 per cent drop.
The downward adjustment, Wilkinson attributed to "in some part of [early] exuberance in the broad scope of what hydrogen could do" for high-carbon industry in the energy transition.
"Hydrogen is a tool for decarbonization but it's not the only tool. And some of the pathways for the utilization of hydrogen have not materialized in the way some thought they would," he said.
"There is more perspective based on real-life learning as to where hydrogen is going to best fit."
Wilkinson noted there are “few options” for decarbonization of some industrial applications, particularly those in fossil fuel-reliant, heavy-emitting sectors.
"For these hydrogen is key because you are going to have to displace natural gas to get to a net-zero position," he said.
The auction will be run under the aegis of H2Global — a German initiative for green hydrogen imports that is part of a €2 billion (C$2.4 billion) strategy to support the international market’s development.
The double auction model is designed to "bridge the difference" between the 'higher' prices at which hydrogen is currently being traded globally and the 'lower' prices that it can be sold for to use in "economically viable ways" in industry.
"The $600 million will essentially be used to 'fill the gap' between those two price-points now, based on a competitive auction," said Wilkinson. "But over time we won't need to do this any longer" as the hydrogen market scales up and matures and generation costs come down.
Wilkinson admitted delivering the first hydrogen shipments to Germany by next year would be a "pretty aggressive" target, but added that the government hoped it would be "not too far off that" date.
Several of Atlantic Canada's front-running green hydrogen developments — including World Energy Group's Nujio'qonik project in Newfoundland and Everwind's Point Tupper project in Nova Scotia — would be in prime position for the upcoming auction.
"Certainly, Germany is looking at price and timeline for deliveries of this first [hydrogen] generation," said Wikinson.
Yesterday, the government invested almost $200 million in three wind farms and a like-number of energy storage facilities in Nova Scotia, future clean electricity capacity that will aid in decarbonizing the province's grid as it transitions to a renewables-led power network.
Comments
So just how green is green hydrogen after it has been transported across the Atlantic in a ship burning bunker oil?
This hydrogen boondoggle will go bust when public funds dry up. At least the wind farms left behind can be connected to the northeast grid where they can provide real value.
Is this really going to be "Green Hydrogen" or is it dirty, because they make it out of so-called natural gas? Which creates so much carbon output to make it, that it can hardly be called green. Wilkinson also mentioned increasing the federal support for Carbon Capture and Storage, which is certifiable nonsense, because it doesn't work and it costs billions of dollars!!