Ottawa announces $800 million in funds for clean-fuels companies


The first tranche of money distributed from the federal government’s $1.5 billion clean fuels fund

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Natural Resources Minister Jonathan Wilkinson travelled to Vancouver on Monday to announce that the federal government will distribute $800 million to 60 “cutting edge” Canadian companies in the clean fuels space, which notably includes hydrogen — a key part of its climate strategy — but also biodiesel, renewable natural gas, ethanol and renewable aviation fuel.

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It represents the first tranche of funding distributed from the federal government’s $1.5 billion clean fuels fund, and Wilkinson said a second tranche of funding would be announced in December.

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No details of which companies will receive funding were released as the government said it is still in the process of negotiations with certain companies. The government did say that the money would be distributed to companies located in seven provinces and territories.

The announcement shows Orttawa is looking beyond renewables — such as solar power, wind turbines, hydropower and nuclear energy — to reduce Canada’s greenhouse gas emissions. Although many environmental advocates have argued that investing in electrification is the fastest, most efficient means to limit climate change, the federal government has consistently maintained that clean fuels will also be needed for certain sectors, such as heavy industry, that currently use diesel and may be hard to decarbonize.

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“Clean Fuels are an essential part of the clean technology mix in a net-zero world,” Wilkinson told reporters. “While electrification will be a chosen route in some sectors, clean fuels will play a very significant role in many areas going forward.”

Separately, he announced his department would distribute $9 million to six organizations that would build 10 hydrogen and natural gas refueling stations, located in Alberta, British Columbia and Ontario.

Although Wilkinson said the clean fuel funds would be directed towards research and development in five different fuel types, the vast majority of the discussion on Monday revolved around hydrogen: He drives a hydrogen-powered car, previously worked in the hydrogen sector and hydrogen remains a key pillar in the federal Liberals’ strategy to limit climate change.

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Hydrogen can be used as a fuel and releases no emissions at the point of use, and for that reason has been eyed as a potential alternative fuel for heavy duty trucks and buses, trains and ships, or as a potential replacement energy for heavy industries that rely on coal.

Still, the high cost of producing clean hydrogen, questions about how to safely transport it, inefficiencies in storage and production, and the lack of fuelling infrastructure have helped prevent the scaled adoption of hydrogen, either as an alternative energy or as a fuel.

Momentum for hydrogen shifting

But with NRCAN’s announcements on Monday, as well as the U.S. Inflation Reduction Act, which provides production tax credits of up to US$3 per kilogram, momentum may be shifting for hydrogen.

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Last week, the federal government announced it would invest $300 million for a clean hydrogen facility outside Edmonton that Pennsylvania-based Air Products plans to build at a cost of $1.6 billion. The company plans to use natural gas to produce hydrogen, but install carbon capture technology to capture 95 per cent of the emissions.

The federal government released its hydrogen strategy in December 2020, which noted Canada is already a top 10 global hydrogen producer.

“Hydrogen is essential to decarbonizing the top third of Canada’s most energy intensive and hard-to-abate end-use applications, and there is much work to do to roll out hydrogen at scale domestically,” the strategy states.

One proposal is that heavy duty trucks and buses, trains and marine vessels could switch from diesel to hydrogen. Another idea is that Canada could export hydrogen as a fuel as the transition away from fossil fuels progresses.

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Indeed, both Germany and the Netherlands have expressed interest in buying hydrogen from Canada.

But today, much of the hydrogen produced in Canada, and indeed around the world, is made from fossil fuels, and used as a petrochemical or to make fertilizer, which releases greenhouse gases into the atmosphere.

For that reason, some environmentalists look skeptically at hydrogen as a potential climate solution and note that because building out infrastructure such as charging stations, and distribution channels, as well as a clean supply, will require large capital expenditures.

But Wilkinson said on Monday that he believes using natural gas to produce hydrogen is an important way to reduce Canada’s emissions.

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“You just have to be very thoughtful about how you actually address the natural gas,” he said. “If in fact, you are looking at natural gas as a source of hydrogen, carbon capture and sequestration is one option. But there are other technologies also that we’re looking out.”

Colin Armstrong, chief executive of HTEC, which builds hydrogen fuelling stations, spoke immediately after Wilkinson and put the challenges for hydrogen-based transportation into context: While battery-powered electric vehicles can be plugged into the grid to recharge, hydrogen fuel cell vehicles need to find a supply of hydrogen, in addition to a charging station.

Armstrong said his company has built charging stations in B.C., Quebec and California, but it still working out the kinks in the technology.

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“We’re looking at how do we train the technicians so they can operate these things in the middle of the night, during rain and snow and cold?” said Armstrong. “I’m not sure if you’ve noticed Mr. Wilkinson, sometimes the nozzles freeze onto the cars here if the temperatures are not exactly quite right … so we have to have come up with creative ways and safe ways. Everything has to be validated.”

Despite those setbacks, with the federal governments in Canada and the U.S. investing billions of dollars into hydrogen, the outlook appeared bright and the mood was triumphant on Monday.

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Roger Dall’Antonia, chief executive of FortisBC, a utility, said his company envisions building a multi-fuel station that will service vehicles powered by compressed natural gas, hydrogen or batteries alone.

“The development of a dynamic hydrogen production industry will be critical to decarbonizing our gas system and for the province to meet its climate action goals,” said Dall’Antonia. “We’re looking forward to being part of this exciting new direction.”

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