Realizing the Potential: The Role of Hydrogen in Canadian Transportation
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1 November, 2021 Realizing the Potential: The Role of Hydrogen in Canadian Transportation
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November 2021
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November 1, 2021

The Empire Club of Canada Presents

Realizing the Potential: The Role of Hydrogen in Canadian Transportation

Chairman: Kelly Jackson, President, The Empire Club of Canada; Associate Vice-President, Humber College

Moderator
Shawn McCarthy, Senior Counsel, Sussex Strategy

Panelists
Colin Armstrong, President & CEO, HTEC
Mark Kirby, President & CEO, Canadian Hydrogen and Fuel Cell Association
Wayne Leighty, Manager, Hydrogen Commercial, North America, Shell

Distinguished Guest Speaker
Bob Larocque, President and CEO, Canadian Fuels Association

Introduction
It is a great honour for me to be here at the Empire Club of Canada today, which is arguably the most famous and historically relevant speaker’s podium to have ever existed in Canada. It has offered its podium to such international luminaries as Winston Churchill, Ronald Reagan, Audrey Hepburn, the Dalai Lama, Indira Gandhi, and closer to home, from Pierre Trudeau to Justin Trudeau. Literally generations of our great nation's leaders, alongside with those of the world's top international diplomats, heads of state, and business and thought leaders.

It is a real honour and distinct privilege to be invited to speak to the Empire Club of Canada, which has been welcoming international diplomats, leaders in business, and in science, and in politics. When they stand at that podium, they speak not only to the entire country, but they can speak to the entire world.

Welcome Address by Kelly Jackson, President, The Empire Club of Canada
Good afternoon fellow directors, past presidents, members, and guests. Welcome to the 118th season of the Empire Club of Canada. My name is Kelly Jackson. I am the President of the Board of Directors of the Empire Club of Canada, and Associate Vice-President at Humber College. I'm your host for today’s virtual event, “Realizing the Potential: The Role of Hydrogen in Canadian Transportation.” This event is part of the “Fuel for Thought” virtual events series, a collaboration between the Empire Club of Canada and the Canadian Fuels Association.

I'd like to begin this afternoon with an acknowledgement that I'm hosting this event within the Traditional and Treaty Lands of the Mississaugas of the Credit, and the homelands of the Anishinaabe, the Haudenosaunee, and the Wyandot Peoples. In acknowledging Traditional Territories, I do so from a place of understanding the privilege my ancestors and I have had in this country, since they first arrived here in the 1830’s. I want to recognize that just over a month ago, across Canada, many dedicated time on the first National Day of Truth and Reconciliation to learn more about the experiences of Indigenous children, who were forced to attend Residential Schools. Many of those individual stories are untold, buried with them in the land, and many survivors who tried to tell their stories were not believed. I hope we continue to find ways throughout the year, to honour these survivors, and to hear their stories. As we connect past actions to present realities, listening and learning from each other is so important. We encourage everyone tuning in today to learn more about the Traditional Territory in which you work and live.

The Empire Club of Canada is a non-profit organization. And I'd like to take a moment to recognize our sponsors, who generously support the Empire Club, and make these events possible, and complimentary, for our supporters to attend. Thank you to our partner in the “Fuel for Thought” virtual event series, the Canadian Fuels Association. And thank you, also, to our season sponsors, Bruce Power, Canadian Bankers Association, LiUNA and Waste Connections of Canada.

I want to take a minute to remind everybody who's participating today, that this is an interactive event. And that means that those attending live are encouraged to engage with our speakers, by taking advantage of the question box by scrolling down below your on-screen video player. We will try to incorporate as many questions as possible throughout the discussion. If you require technical assistance, please start a conversation with our team, using the chat button on the right-hand side of your screen. And we also invite you to share your thoughts on social media throughout the event, using the hashtags you will see displayed on the screen. To those watching on demand at a later date, and to those tuning in on the podcast, welcome.

It is now my pleasure to call this virtual meeting to order. I am delighted to welcome Sean McCarthy, Senior Counsel at Sussex Strategy, and former National Business Correspondent covering global energy for The Globe and Mail; Mark Kirby, President and CEO, Canadian Hydrogen and Fuel Cell Association; Colin Armstrong, President and CEO, HTEC; and Wayne Leighty, Manager, Hydrogen Commercial, North America, Shell. If you'd like to learn more about our guests today, please scroll down below the viewer and you can find their full bios. Achieving Canada's goal of reaching net-zero by 2050 will require a range of solutions. And to get there, we will need a variety of clean fuel types and alternatives, as well as significant investment in new technologies, and upgrades to existing infrastructure. Today's panel will discuss what role hydrogen and fuel cells can play in low-carbon solutions, with a focus on our national transportation network needs. I'd like to turn it over now to Shawn, to get today's discussion started. Shawn, over to you.

Opening Remarks by Shawn McCarthy, Senior Counsel, Sussex Strategy
Thank you very much, Kelly, and thank you to the Empire Club for the invitation to me to moderate this panel. I'm always fascinated to hear how the how the hydrogen economy is rolling out, and what role it might play in our commitments around GHG reduction and transition, so I'm looking forward to this conversation. To start off with, just a reminder that about a year ago, the Canadian government released a hydrogen strategy that detailed a lot of the challenges, but also the opportunities that hydrogen can play in the Canadian economy. And that really covered the gamut, you know, from production through distribution, to end use. We're going to be focused today, really, on the transportation side of that story. There is a much bigger story—we could talk all day about it—but this panel is really focused on the transportation side, in all of its different elements that will go into it. So, without further ado, let's jump in with the panel, and a year into the hydrogen strategy, gentlemen, where does that impact your outfit, and how do you see your organization fitting into the strategy? And let's start with you, Colin, and then we'll work our way down.

Colin Armstrong, President & CEO, HTEC
Yeah, thanks, Shawn, and very pleased to be here. So, HTEC is a hydrogen energy developer and operator, so we're involved in the production, distribution and the fueling stations. In working with the federal government on the strategy, we wanted to make sure all the elements were involved, so there’s a lot of gluing things together, and that's what we actually see HTEC is doing; there's the users it's all very new for, there's the fueling station hosts such as Shell, who’s on the line, or other groups that we work with, and then there's the production side of it. So, the strategy has been great, it's laid the foundation for us to think about our strategy and opportunities, as well as work with a fair number of the provincial governments to get their strategies in place. And from that, we go out and look for investors to attract financing to the sector, and to ourselves; we've actually been quite successful in that, and the strategy came up a lot of times in those discussions. We recently attracted a little over $200 million to the company, and there was a lot of discussion around the federal strategy, as well as the state of the provincial, so outside investors looking in felt a lot more confident knowing that the foundation was in place. And it seemed to transcend a bit beyond the political parties’ time in office, so that was that was important as well.

Shawn McCarthy
Good. And let’s have Wayne, and then we'll go to you, Mark.

Wayne Leighty, Manager, Hydrogen Commercial, North America, Shell
Sure. Hey, Shawn, it's great to be with you today, and really, I enjoy talking about hydrogen fuel in Canada. My main message today, is that it's happening; hydrogen fuel is really starting to happen. And from our perspective, that creates some great choice for customers in their freedom to move, whether it's individuals in their private vehicles, or commercial operations moving around freight. And that choice is really needed to realize the kind of widespread adoption that that policy is calling for. I think Canada's hydrogen strategy, as Colin articulated, is great, and can be a really great foundation for Canada to realize its climate and economic ambitions through low-carbon solutions, and perhaps to be a world leader in that regard. Implementation is really key. Maybe as a bit of context about Shell, we've been developing hydrogen fuel since the late ‘60s, technologies, codes and standards think, you know, rocket fuel and spacecraft. Since the late ‘90s, for us, was the demonstration phase; several different hydrogen fueling stations serving the prototype vehicles kind of showing that it could be done. Since the early 2010’s, for us, it's been the pre-commercial phase, and that is really driving the cost and performance improvements that enable the more widespread launch. We're operating about 50 hydrogen stations globally now; we've just begun a program of developing 50 in California, and as Colin alluded to, we're happy to host stations in Vancouver. We've also been the first three of stations fueling heavy-duty trucks, freight from the play in Long Beach, where about 40% of all the imports to the US land. And in all of that, we've doubled the capacity of the fueling stations while cutting the cost twice now. So, it's that pace of progress that really opens the opportunities. So, I think it's all good context. There's a growing range of vehicles, there's a growing range of fueling stations and improvements there. This progress is really what we've seen happen elsewhere, in solar panels, and wind turbines, and batteries. So, hydrogen is on a similar journey.

Shawn McCarthy
Mark?

Mark Kirby, President & CEO, Canadian Hydrogen and Fuel Cell Association
Thanks, Shawn, I appreciate the opportunity to speak here with Empire Club, and I appreciate to joining the other two panelists here. I'm Mark Kirby, I'm President, CEO of the Canadian Hydrogen and Fuel Cell Association. So, we're an industry and academic NGO, we have over 200 members, including some of the world's leading sector companies and research organizations, including both Shell and HTEC. And Canada has been, and remains for now, a world leader. And now prior to joining the CHFC a couple years ago, I have been personally involved in hydrogen and hydrogen-related companies in the private sector for close to 40 years. So, producing, distributing, building equipment, using it for hydrogen and a range of applications and industries. But in the past two years, and particularly in the past year, since the launch of the strategy, it really has been remarkable, growing interest and excitement about the sector. So, it really has changed from a question, you know, will hydrogen play a role in achieving net-zero 2050, clearly will, and a large role, and nor is it a question anymore of, you know, is this an economic opportunity? It absolutely is. And I think there's half a trillion in announced projects through 2030, and that's growing every day.

So, really, the question now is, you know, how much of our energy will be supplied as clean hydrogen? The strategy says 30%, and very pertinent here is, you know, how much of that share will Canada have of that economic opportunity? Will we continue to be a leader with access to low-cost and clean hydrogen, or will we actually be disadvantaged versus our competitors? And I think those questions really come down to the private sector. You know, we know the economics is going to be there, there's a growing market demand for low-carbon products and the governments—in spite of some of the stumbles in the recent G20—I think we're gonna see governments globally, including Canada, putting in place policy and funding to underpin the economics, you know, obviously more needed, but that's coming. The products to use hydrogen will be there, including, you know, very cost-effective and high-performing fuel cell electric vehicles. And that, where my member companies and leading OEMs around the world are seeing to that, again, more needed, but you can sort of count on those coming. So really, it's now up to the private sector. It's up to them to evaluate the fit of hydrogen products in their in their operations, and I guarantee that for many, hydrogen will be the most economical and efficient means to decarbonize. And secondly, for those companies to demand more choice from their suppliers, and to help bring those products to market with demonstrations and early deployments. And third, it's really to demand that clean hydrogen infrastructure, the production, the pipelines, the distribution filling stations, in the same way that we'd expect a clean power grid. And if you're an energy company, such as Shell, an oil and gas company utility, a power producer, to start investing now in that clean hydrogen infrastructure. And by the way, just as a conversation starter, the starting point, I think, for that is hydrogen hubs. So, it's a huge opportunity and I really look forward to discussing it further.

Shawn McCarthy
Good. So, how then, we talked, you mentioned, Mark, the infrastructure that is being developed. There is a massive infrastructure in place, fossil fuel infrastructure, oil and gas, but also increasingly electric infrastructure, that is being rolled out. How does hydrogen fit into the existing and the future, as you look forward to what needs to be rolled out, the future infrastructure needs, and at what cost is going to be to gear up, to get the infrastructure required? So, let's go back in reverse order here, and feel free to jump in anytime, gentleman, if somebody says something that provokes you.

Mark Kirby
Well, okay. It is gonna be a big investment, and it's going to have to start very quickly. I will say, in the case of hydrogen, one of the nice things about it is that investment can have a positive payback, we can talk further about that. But certainly, clearly, I mean, we need as we move from, you know, in Canada to 75% of our energy now is supplied as fossil fuels without management of the of the CO2 emissions. And we've got, you know, a few pathways that we can follow, to shift that away; we can electrify, we can go to biofuels, we can go to hydrogen, we can go to capture and sequestration, and we can do direct air capture, all of those are going to be needed, and all of them are going to have to scale up enormously. And when you look at hydrogen, you know, we're a leading clean hydrogen producer already in Canada, but we need to scale up by an order of magnitude in our production capacity. And that's just part of it, that's just producing it, and we know we can do that. We also need to move it to market, so we need pipelines, and we need to have the dispensing and fueling systems all across the country, which is what Colin’s company builds—and Shell—so that we can have the fueling stations that we need. Now, that's going to take investment, but again, as I'll say, the nice thing about it is there's a huge economic opportunity to supply those billions of dollars of hydrogen fuel that are going to be needed. And that is an economic opportunity that can provide a payback on that on that equipment if things are done correctly.

Shawn McCarthy
Wayne, how does Shell see that?

Wayne Leighty
Yeah, well, I mean, I would start with the basic benefit here, which is hydrogen fuel is nearly a one-for-one replacement to our hydrocarbon-based fuels, gasoline and diesel, that much of this infrastructure is built around. So, whether you're thinking about the kind of footprint density to fuel a large number of vehicles at stations, refuelling stations, or a commercial fleet operation, wondering how do I continue to have the sales of freight movement deficiencies that I have with diesel as a prime mover, hydrogen offers that kind of direct replacement. Now, the challenge has often been referred to as chicken or egg. Indeed, we have the difficulty of needing some new infrastructure for hydrogen, and really, in order to sell the first vehicle, it needs to be able to find fuel. The benefit, of course, is we get to build entirely new infrastructure, and so we can do that in a decarbonized, renewable way from the start. And we start to see in other markets’ success in doing this, the role of policy seems to be to overcome that low initial utilization, the initial amount of infrastructure realized on day one, and then ramping up over time. And also, by the way, to overcome this early mover, disadvantage. The flip side of this tremendous progress is that doing this tomorrow will be better, and lower cost, than doing it today. Yet, we have policy that asks us to go very fast, and so, a good bridge there. So, some evidence, some proof points, you know, in California, Shell was able to sell 100% renewable hydrogen last year, and we’ll get to zero-carbon intensity this year. So, with the right kind of policy structures and signals, this challenge becomes a big opportunity.

Shawn McCarthy
Colin?

Colin Armstrong
Yeah, and Shawn, I think that was actually a really good question, but I think it's actually broader than most people are thinking. You know, when you suggest infrastructure, you're actually thinking of the assets. But there's the challenge as well, as well as I think the business models. So, when we say that the infrastructure, we think of it much more holistically, and it's super valuable, we have to be very smart, I personally think, on how do we use the existing assets. And in our case, you know, we went to Shell and put their equipment at their site, right? So, it's the same business model, the same consumer usage patterns. We tried to build on that knowledge base that’s around the fueling station, for the people driving their cars. So, I think it's beyond just the physical assets, but in whole, we need to be very smart, to use the existing as much as we can, to lessen the amount of investment that's needed at the same time. Find those sweet opportunities for new companies and for existing companies. So, you know, when we hire people, most of those are coming out of oil and gas, so there's that whole knowledge base that is a is an infrastructure asset in our minds, that we're using and transitioning to think about hydrogen, and how they can apply their skills on the engineering side, or even the operations side. So, two points, yeah, it's think a little bit broader when you think about the existing infrastructure to business and people skills, as well as the assets themselves, of pipelines or stations, and then let's be smart about how we use them. So, kind of putting that challenge out to people, how do you think about the easiest path forward, and using hydrogen to manage your carbon to get to the net-zero?

Shawn McCarthy
We've heard about that HUB concept. Anybody want to jump in on that? You've mentioned how important it is. What is it, and why is it important?

Mark Kirby
I'll jump in on that one, it’s near and dear to my heart. And just to mention, I'm co-chairing the HUB's working group that is under the conscious strategy for Canada, and we invite people to join and participate in that working group. But there was a lot to unpack in what Wayne and Colin said, in terms of policy, in terms of training. But I think that that chicken-and-egg question that was mentioned by Wayne is really key. You know, when you look to California, where they've got over 10,000 cars being deployed, they're kind of getting past that, they’ve got those chickens on the road, and they've also got the buses being deployed at their transit agencies. But in Canada, we haven't got that many yet. We're starting to see them, but we need to see a lot more, to provide that business case for that hydrogen infrastructure. And so, one of the ways that we think is good—and this is looking around the world at what has worked effectively in other jurisdictions—is to start thinking about clustering together the production of low-cost hydrogen, with a number of applications. So, low-cost hydrogen is going to be needed for industrial processing, it's needed in refineries, it’s needed in chemical plants, it’s needed in steel mills; that's a nice baseload to produce industrial hydrogen. If you can capitalize that in areas, and attract to that the deployments of trucks, of transit agencies, buses, of cars, then what you can get is scale, and what you can get is the cost needed to give you long-term sustainable economics. So, what we're trying to do now is look to see where and how do you put in place HUBs? And it's not an easy task, because, you know, it's hard to ask, you know, a big industrial user to say, look, we want some of your hydrogen to provide a fueling station. That's a challenging, you know, effort for them to take on. But it's something we need to do. We're seeing that happening now in Edmonton, and there's a number of locations across the country where there's similar activities underway. And that is, we think, a good way to try and tackle that chicken and egg challenge.

Shawn McCarthy
The chicken and egg is also, as you say, where do you get the product, how do you break that? I've seen, I know that the federal government is supporting some urban transit authorities to purchase hydrogen buses. Is that the kind of thing that's required, or can this be a business-led model that, especially around the HUBs, is does it require a government to be an active player, I suppose?

Mark Kirby
Well, I'd say I agree with Wayne on this one, is that yes, government is going to have a role to play in enabling those early purchases, de-risking those early adopters, and in supporting and stimulating those early infrastructure needs. But the key thing is that—again, I'll go back to my starting point—it starts with industry. What we need to do is say is, hey, start having some discussions around locations, pulling together parties that don't typically talk, so transit agencies and steel mills, and start saying, what are the needs in this area? And then there's a strong interest in a lot of areas, there's interest in transit companies, there’s an interest in trucking companies, and others, to start doing these deployments. So, how do we pull those together, and get that concentration, that economy of scale that's needed, to make sure that those aren't just one-off demonstrations that go away as soon as the government funding is done, but actually have sustainable economics and continue operating? And then that forms a, you know, a backbone, across the country, of deployments that we can build on as we move forward to more broad commercialization.

Shawn McCarthy
Colin, are you seeing that happen?

Colin Armstrong
Yeah, definitely. There's a lot of conversations going on, and I think Mark’s right, you've got different groups starting to go okay, you know, my demand is not big enough to really get to the price of hydrogen where it needed to be, so if my neighbour per se also has a demand for hydrogen, then my price might drop in half. So, we do need to think in those terms on the supply side for sure. And I think also on the application side, I think Wayne suggested, you know, that the heavy-duty trucks are coming, they're not necessarily here yet. But you get a whole group of users, you start to put in that supply chain that's needed, as well as the service chain. So yeah, I think the insights in the federal strategy around HUBs absolutely needs to be built on, and promote those conversations. And I mean, everyone's trying to figure it out, but the fundamental idea that there's, it's a pretty integrated solution, going forward, that we need to start out thinking that way as we go.

Shawn McCarthy
So, one of the areas that I think has been discussed broadly is where hydrogen fits, vis-à-vis electric vehicles. And the rule of thumb, I guess, that I always hear, is that yeah, electric vehicles work better for the light vehicle fleet, and hydrogen, you're gonna need hydrogen for the for the larger buses, trucks, and even trains. Is that right? Mark talked about 20,000—I think it was 20,000, was that the figure? — light vehicles in California, being on the road now. So, is that a competition? How do we figure that out, and can we afford to build both infrastructures so to speak,

Wayne Leighty
Shawn, maybe I could start on that one. We at Shell, we're developing all manner of decarbonized fuels. So, developing charging for battery electric vehicles, and fueling of advanced biofuels, and renewable natural gas into CNG vehicles, and hydrogen. And so, we take a pretty objective view on all those things. My job is to make hydrogen as good as it can possibly be, so that it competes well, and then it will compete with those other options. From that lens, we see the basic value proposition with a hydrogen fuel cell vehicle of being all the benefits of an electric vehicle, with all the convenience of fast refuelling, and then battery electric vehicles and fuel cell electric vehicles, from our view are very complementary; important customer segments for both probably co-exist in all vehicle classes. One way to understand that is to translate from a light-duty, medium-duty, heavy-duty kind of framing, into the use case, generally high output, high kind of use of the vehicle. And then to customers, some of us choose to purchase vehicles with that capability; we use it all the time. The other interesting thing to think about is of the market, so in your household vehicle fleet, you might have two vehicles. And as we look at markets like California, where there's going on a million plug-in vehicles on the road, most of those are still one of the household vehicles, and the other is still an internal combustion engine of some kind. So, full adoption in households of electric vehicles might also have some diversity, both for its strengths, and a hydrogen vehicle for its strengths. And then, of course, the commercial fleet world is wonderfully rich in its complexity, the kind of use case, and duty cycles, and route planning, and tethered fleets, and, you know, back to Mark's good points around HUBs. So, for all these reasons, very complementary. Last thing I'd say is, you know, complementary in the vehicle components, a large number of these components onboard the vehicle, electric motors and power electronics, etc, are shared. And then also, complementary and energy systems. I know we're talking about fuels and transportation primarily today, but as an energy company, thinking about advertising our reliable and affordable energy systems, having this molecule is very beneficial.

Mark Kirby
Yeah, I'd like to build on that. I just want to make the point that, when you say electric vehicles, fuel cell vehicles are electric vehicles, they have electric drive, they have regenerative braking, they have batteries on them; the battery is smaller, and it's that smaller amount of battery is replaced with a fuel cell, and hydrogen storage tank. And as Wayne said, that thing gives you the fast fuel capability, and additional range, and because the that's lighter than the battery, it gives you additional payload. So, the two of them really work together. We're not, you know, fuel cells are not competing with batteries; they're working together with batteries, to provide a complete solution for electric vehicles, to all internal combustion engine applications, whether that's on the road whether that's in the air, whether that's marine, whether that’s in rail. By combining fuel cell and battery technology, you can get mobility solutions in all applications. And then as Wayne says, where are you going to choose to add in a fuel cell option, is where you're going to want that productivity. Because, you know, the cost of keeping your truck drivers on the road, of keeping that, maximizing that payload in your vehicles, of having that ability to, and that flexibility, that resilience—we've learned a lot about resilience in the past year-and-a-half, two years—you know, having that resilience that you can move trucks to different routes, or adjust your operations, is really important. And that's where combining that battery technology and fuel cell technology together gives you the benefit. And then the other part of it is that, when you look at the cost of your charging/fueling infrastructure, as you start getting more and more vehicles, and trying to charge them, you know, together in maybe a limited time, and a limited space, that's where having an ability to fuel rapidly with hydrogen can be an advantage; and it can be a very significant advantage at times. So, you know, in case of transit agencies, many of them now are seeing that, yeah, I can do one or two buses, I can do few buses with batteries, but if I really want to do my full fleet, then it's going to be more convenient for me, and much cheaper to have a small, compact, hydrogen fueling system, able to handle all my hundreds of buses in a fairly short time, versus trying to have a multitudinous charging system, which takes a long time and ties my buses up, and then ONroute charging systems, and so on. So, they're finding that, again, that that mix is the best way to decarbonize our operations.

Shawn McCarthy
Colin?

Colin Armstrong
Yeah, I think I'm echoing everything, but in my mind, there's two sides of it; one is the supply side of the energy, there's reasons to have both from that side, there's also reasons on the consumer side. Yeah, I drive a hydrogen car fuel cell vehicle from Hyundai. I had to do about 550 kilometres the other the day for a work trip, and came home, my wife said, “oh, can I take the vehicle to go out this evening?” I said, “yeah, give me about 10 minutes, I just got to fill it up on my way home,” and off she went to her evening event. So, I think there's 25%, probably, of people that it's better for, there's 25% that electrically it’s better for, and then there's that 50% in the middle that's going to be dependent on what you sell them, what they like, or what their neighbour does, very more influential than I say, the static side of things. So, super important to have both, and we find that, as we talk to all the different consumers out there.

Mark Kirby
Yeah, just, I’ll add in to your point, I think we have to tell the government and others that we don't have a choice there. There is no choice between electric and, you know, and fuel cells, and batteries and fuel cells; is one going to be the entire solution? It’s going to be a mix, and they need to make sure we're getting the infrastructure in for both; we need charging infrastructure, we need hydrogen fueling infrastructure. The nice thing about hydrogen filling infrastructure, again, is that he can pay for itself. You know, you only need one fueling system to service, you know, 100 or 1000 cars, and that can that means that citation can make it a positive payback, which is a nice feature of hydrogen as we move forward.

Shawn McCarthy
So, let me ask one more, and then we're gonna go, they're starting to get some questions from the audience. But Prime Minister Trudeau is in Glasgow as we speak, they're opening the COP26 where, you know, we're all looking to see greater ambition—greater action, not just ambition, but action—towards a net-zero commitment from Canada and others. And he is reconfirming, I suppose, all of the pieces of the Liberal strategy, you know, the increase of carbon price to to $170 by 2030, the low fuel standard, the commitments on ZEV vehicles by 2035. I know this is not an either or, but what policy drivers do you see as being the most critical, I suppose, in establishing the market, and drawing that investment that is required to build out the infrastructure?

Wayne Leighty
Well, I....

Colin Armstrong
Wayne, do you want to jump in?

Wayne Leighty
Sure, sorry, Colin. I'll just start with a few quick things. But I know all these topics are so big and rich, and we’ve run out of time today to really do them justice. At the top of our house earlier this year, Shell announced our new, our energy transition strategy called “powering progress,” which essentially sets out how we intend to accelerate the transition of our business to net-zero by 2050, and step with it. And so, from that perspective, I think all of these movements are very well aligned, and I find that tremendously enabling as we try to grow hydrogen sector, which, you know, is not easy; all of what we are doing is not easy. We generally see market-based mechanisms as the most simple. We find those that separate the transportation market as particularly strong for hydrogen, because it is a harder to abate sector. And so, clean fuel standards, low-carbon fuel standards, create potentially a market with a somewhat higher carbon price for this hard to bait sector. A lot of it is the interplay between the policies on the vehicle side, demand, pull and push kinds of supportive and creating those kinds of policies on the fuel side, because it goes back to chickens and eggs all at the same time. And so, I think those are the main policies. The good news, also, is that I think a lot of the trial and error, or early innovation has been done. And so, a lot of effective policy mechanisms are now proven, and can be transferred to the next jurisdiction. One of the things that California did in its Low-Carbon Fuel Standard, was create a capacity-crediting mechanism; and it has proven to be policy magic, it has basically broken the stalemate of chickens and eggs. So, the stations are being built, and they're being built larger in capacity, and it has made that just at the moment when new hydrogen production is needed, that it should be renewable and organized. And so in fact, this is activating the market here in California.

Mark Kirby
I could not agree more. I think that the, you know, the policies have been shown around the world to actually lead to deployments. One is the, you know, following the lead on what California has done is the is the zero-emission requirements. And that's been shown in other countries as well, that you need that driver for people to say, “okay, I really do need to get a zero-emission vehicle on the road, whether that's a battery electric vehicle, or a fuel cell electric vehicle.” And that means that, to start looking hard at those choices, means that the OEMs make those vehicles available. But the other thing is the fuelling side of it, and it's been really impressive to see what's been done in California. Now, in Canada, we have a Clean Fuel Standard that is coming to play—and the government should be credited and congratulated for that—it's coming in, it's going to provide some of that incentive to decarbonize our fuel pool, and there are credits available for using hydrogen, and for using batteries. We do have a concern, though, in that Clean Fuel Standard as is currently being put forward, may not give as much credit, or those credits may not be necessary for the oil companies, and obligated parties, due to the way it's structured. And so, we think there's a real need to ensure that there is, that those clean fuel credits are required to come from other fuel-switching applications, as well as from upstream modifications in the refineries. So, we really think there's a need to have some obligations on the obligated parties to get credits, or to support the fuel switching process. That's one area. The other area, as we mentioned, is the capacity-based credits. Sounds very technical, but it really is enabling that companies like HTEC can then look forward and say, “I know I'm gonna get a certain amount of credits flowing in from the station when I build, it may not be a great return, but I can get a return,” and then as the load builds on it, that return will get better. But that is a key thing—you know, because if you’re private sector company, you’ve got to put money out there—having some certainty that you're going to get those revenues coming in is key. And a Clean Fuel Standard can do that, if worded correctly; today Canada's is not. And so, our two things to say to that to the federal government is, keep going with Clean Fuel Standard, but look at mechanisms to make sure that some of those credits have to come from fuel switching, and make those credits capacity-based.

Shawn McCarthy
Okay.

Colin Armstrong
And then real quick on that, yeah, the ZEV mandates, and the low-carbon fuel regulations, are what drive the hydrogen transportation to move into place. And I think, just as people are thinking longer-term in other mandates, you need to think a little bit shorter-term like they've done in California. How do you get to that end state, what they've done, and they just tweaked the policy—very minor tweak, but it has huge ramifications if you think about it. Yeah, we want to be here with this policy in 5 or 10 years, but there’s this bill, that phase, how can we tweak things. And that's where the capacity thoughts have come in, and similar in British Columbia, and in California, but we need to continue to think across the nation how those two standards can help.

Mark Kirby
Now, I will say, I’m interested to hear Wayne’s comment on this. California has done a great job of moving forward, and getting stations starting to be built, getting fuel cars deployed; but they've run into a problem now with supply. And there has been a shortage of hydrogen, which has really limited some of the growth in the past years; and now, industry is struggling and moving fast to get that to backfill, that clean hydrogen supply. But one of the things that we're trying to avoid, is getting into that same situation as we ramp up deployments in Canada. And again, we think that planning this out is HUBs, where you, you know, start thinking about your supply end of it, tied to the applications end of it, tied to the fueling stations, might be a way to help us avoid getting into that problem, where we all of a sudden find ourselves being very successful in deployments, and then having to scramble to backfill the hydrogen supply. I want to try see if we can move those forward in lockstep, so we really provide that excellent transition, and products value to the to the end users.

Shawn McCarthy
So we hear a lot about colour-coding the supply, you talked about the clean hydrogen supply, we hear a lot about the colour-coding of it, green hydrogen, and grey hydrogen, and blue hydrogen, which essentially is using existing fossil fuel production of hydrogen, which can create emissions, but then capturing and sequestering the emissions. Is that useful; how do we think about decarbonizing the transportation system, with a hydrogen supply that might come from various sources?

Mark Kirby
Again, we'll, you know, we talk of clean hydrogen supply, the colour codes are useful for people to understand the different production pathways. So, blue is where you start with fossil fuel, and you take that to hydrogen, and then you manage the carbon emissions by either, you know, capturing and sequestering it, or by not allowing that CO2 to be emitted in the first place, producing elemental carbon, let's say, or a chemical. So, there's you know, that's a way to produce the hydrogen from fossil fuels. The saying is blue says that you're capturing CO2, it doesn't specifically say what its carbon intensity is, though. You still haven't got anything in place that says, well, what is the carbon intensity of that hydrogen? Same thing for green. You have a situation with green, refers to where you have, you're using renewable energy to create your hydrogen. Now, everybody would love to use renewable energy, but we have a crisis, and we and there's limited amounts of renewable energy available. So, you know, we're going to need both, we're going to need clean hydrogen from fossil fuels, we're going to clean hydrogen from renewables. What we really need to make sure, is we have standards in place that are global, and that are well-understood, that measure and certify what is the carbon intensity—whatever the production pathway, blue, red, green, purple, orange, whatever, what is that carbon intensity? And then the policy backing to make sure that it is just not economical to produce high-carbon intensity hydrogen, whatever way you use, and that you need to be moving, you're producing and moving that hydrogen with low-carbon intensity. We need that to provide public confidence that, yes, hydrogen is indeed going to result in GHG emission reductions, and we need that to make sure that we can capitalize on all the potential sources of hydrogen, because we're going a lot of hydrogen, we want it to be very cost effective, and so, we need to capitalize on every available pathway.

Shawn McCarthy
Colin, are you seeing in the market, a distinction at all, in terms of the carbon intensity of the hydrogen? And I suppose one place where it might show up, particularly as the price starts rising, is in a carbon price.

Colin Armstrong
Yeah, exactly. I mean, I think when we talk to the end consumers, yes, some want green, some want blue, to be honest, and some don't really care. I think the pricing mechanisms at the end of the day, is, you know, I don't think we necessarily need the end users to really drive that much on the supply side. I think we just have to decide it has to be decarbonized. So, they've done their part; they've invested in the application, or the vehicle, that's going to have zero-emissions coming out of their tailpipe. We need to have the policies, like Mark says, that we’ve got to go to lower carbon. Colours? I'm fine with colours; they're a great communication tool. You know, we talked to so many different people in so many different levels, it's for a lot of them. It's a great communication tool. So, I'm okay with that. But ultimately, yeah, we’ve got to drive, to driving that carbon down, and for whatever pathway we choose, and there's so many colours, and they're getting mixed together more and more every day. So

QUESTION & ANSWER

Shawn McCarthy
Wayne, I want to move on to some of the questions we're getting from the audience, and here's a basic one that I think probably doesn't get asked that often anymore, but for a general audience, it's an important one, is hydrogen safe? Is it safer than, say, using petroleum products?

Wayne Leighty
Yeah, thanks. And good question to even start the conversation with—as we develop fuel, we make sure that it is safe, that's a core aspect for us. The hazards with hydrogen are a bit different, and so we handle it, and approach safety a little bit differently. On the positive side, hydrogen is benign, and it's buoyant; these are good things that we want to take advantage of. If there's an accidental leak of hydrogen, it dissipates very quickly into the atmosphere, and does not create any environmental harm in doing so. So, we want that to happen, and at production facilities and refuelling stations, so that release of hydrogen can dissipate upwards. The hydrogen is a compressed gas, so we make sure that if it releases, and it's coming out under pressure, there's a barrier that would block that from hitting a person or property. So, yeah, hydrogen, as it's being done, it’s being done well, in a safe manner.

Shawn McCarthy
Good. Another question, then, from the audience—and jump in, whoever wants to take this—can the existing natural gas infrastructure, particularly pipelines, be utilized for hydrogen, and if so, to what extent? And what are the hurdles? Maybe some additional investment might be required or not?

Mark Kirby
I'll start on that and just say that that's an excellent question, and I think it's one of the things we really want to try and do, is take advantage of existing assets. And the answer to that is yes and no, there's certainly, you can start blending hydrogen into natural gas to decarbonize it, up to a certain point. Beyond that, you'll have start making changes. In some natural gas systems, those changes will be relatively minor; in other natural gas systems, no, it's fairly significant change, the materials are maybe not compatible. So, it'll be very interesting to see as we move forward, whether we, as you move to needing more and more hydrogen, whether we convert pipelines, or whether we build entirely new pipelines. We're going to need pipelines for hydrogen; we're going to need to move large quantities of hydrogen from low-cost production points to major urban centres, and to Tidewater for export. So, we're going to need pipelines at some point. We can start with HUBs initially, but we're going to have to start connecting those eventually. So, we need to start thinking that whole process through; how do we move large quantities of hydrogen cost effectively? Theoretically, you can do it in pipelines, almost as efficiently as you can move natural gas, you can also convert it to carriers, to ammonia, to methanol, to liquid organic hydrogen carriers. So, there's a lot of different ways as to how you move large quantities of hydrogen. And I'd be very interested to hear Wayne's comments, and where Shell sees some of these questions going.

Wayne Leighty
Yeah, thanks. I mean, big picture, molecules and pipes, to complement electrons and wires, are probably needed in our energy systems. Certainly, we have today, molecular energy systems and electricity, and so, it's hard to see how the complete system works without both. Lots of good things happening from pipe companies, gas utilities and others toward the answer, and I think some encouraging early kinds of indications. But indeed, one of the basic decisions is whether to blend hydrogen into a natural gas system, and/or it might be both, to develop some hydrogen systems.

Shawn McCarthy
My understanding is the stationary market does allow for a certain amount of blending of natural gas, and in some of the power plants, especially, and turbines that typically run on natural gas, are now able to run on hydrogen, and that presumably has an impact on the distribution system. Is that right?

Colin Armstrong
Yeah, I can jump in on that. We're doing both; we're putting in our production facilities, looking at supplying to the natural gas market, as well as the transportation. And again, it goes back to that, the bigger the volumes, the more integrated, the better solution, because there's always so much balancing going on, and lots of opportunities. So, I think as Mark alluded, the question on how much we can use the whole natural gas assets as a matter percentage, you know, we're certainly not going to take 100% of all the hydrogen down existing pipelines, but some can take quite a bit; some can’t take as much, but it's a huge asset that we need to think through, utilize.

Mark Kirby
I think when you look to the combustion applications, whether that's in kilns, or in turbines, or whatever, there's no fundamental technical barrier that I'm aware of, to moving to 100% hydrogen. Obviously, it requires quite specialized equipment for that, and so on, but turbines running on hydrogen are being built; ou can you can have 100% hydrogen burners. So, there is a path to get to 100% hydrogen gaseous heating system, but it will take a significant investment in that end use equipment, whether it be a home furnace, whether it be—and that’s also in the pipelines to move that—you know, I think one of the, as mentioned by Wayne, the Canadian utilities are doing quite a bit of work. There's a project starting up in Markham, any time now, to start blending hydrogen into the local gas grid, as Colin mentioned, he's working on one here in BC. So, there's a lot of work being done to start laying the pathway for it, and I'm an optimist; and that’s not easy, but I think if you look forward, there is a pathway to a 100% net-zero, gaseous heating system, and I would encourage that we need to be doing lots of testing and lots of developments start moving that way. Because that will be a very cost-effective and viable solution, for many people looking to have a net-zero heating system.

Shawn McCarthy
That segues into another question from the audience, and it's a good one, because we often don't think of standard setting as being such a critical part of the market, but in fact, we know that it is. And so, who is setting the standards, how far down the road in terms of the required standards that are that are going to be that are going to be needed? Are we in getting them out there? And is there an overarching watchdog on this? Who's making sure that all this is being done safely? And that the standards are both consumer-oriented and public-oriented, but also efficient?

Colin Armstrong
Yeah, I can maybe answer that, I mean, we're heavily involved in a lot of the codes and standards on a daily basis, similar to Wayne's crew. So, there's a variety of different bodies that deal with the gas. And I think, yeah, it's progressing very rapidly and very well. You know, we're now more of this side of having to educate all the authorities, having jurisdiction of what the standards, are in which ones should be applied, and how they should be applied and interpreted. Because they don't really get the opportunity as much as, say, companies like ourselves, that dive deep into these things. So, it did take a while to translate the, you know, the 100 years of experience in hydrogen and the industrial world to the consumer side of things, and that was sort of the—you know, partly why I took so long, was we had to go through those cycles, but they're now there, my engineers can rely on, and they can communicate with the authorities for the basis of design. So, I wouldn't say there's one watchdog, there's different groups coming together. But it's, I don’t know if it’s a barrier; it’s maybe just an area that we need capacity to move ,now that we know what has to be done. Wayne, is that right?

Wayne Leighty
I think that's right. Yeah, I think that's right. It's an allocation of some capacity to some very important work. I would say we stand on the shoulders of those who came before us, so, fuelling a light-duty vehicle at 700 bar pressure with J2601 protocol, these are global standards, and easy to standardize the supply chain of nozzles and fittings, and that's all good news. It's unfinished business. The high flow fuelling of heavy-duty trucks is continuing to improve as the standards get figured out. How will we fuel ships and aeroplanes and so it and, you know, in the previous conversation about hydrogen and pipelines, dedicated or blended. So, clearly a lot of work that is ongoing still, and I think in good bodies as Colin mentioned. So, others will stand on our shoulders several decades from now.

Shawn McCarthy
With that, we're gonna have to wrap it up, I want to thank the audience for their questions. And I know there were there were a few that we didn't get to, but as I said at the outset, we can be here, this is a massive area, we could be here all day on peeling away the layers of the onion. So, thanks very much to the panelists for keeping it going, and over to you, Kelly.

Kelly Jackson
Thank you, Shawn, and Mark and Colin and Wayne. I'd now like to introduce Bob Larocque, President and CEO of the Canadian Fuels Association, our partner in delivering this event ,to share some observations and appreciation your remarks.

Note of Appreciation by Bob Larocque, President and CEO, Canadian Fuels Association
Thank you, Kelly. Welcome, everyone, and on the first day of COP26, very topical and insightful discussion today, and I'm really glad to have the opportunity to listen in. The Canadian Fuels Association created the “Fuel for Thought,” speaker series, so that conversation like this one today could take place. And this is very important topic for the future and of our economy, and also our country. I enjoyed listening in to the discussion today, and I've got a couple of takeaways. Canada's hydrogen strategy has laid the foundation, and will receive across the value chain. The key though, is how quickly we can implement it, so Canada can be a leading producer and user of hydrogen and help reach our goals of net-zero. Number two, is Canada's existing infrastructure and expertise are her talent assets today, are very strategic that can be leveraged to harness the potential that hydrogen has to offer. And three, we also need to be strategic and thoughtful. Thanks, Mark for the concept of HUBs, we heard a lot about it today, and I'm sure we'll hear about more, and integrate our transportation systems and policies to create the maximum benefit. A couple of great quotes I heard today, it's not electric vehicle or hydrogen. It's both. We need all options, such as hydrogen, electric, biofuels. Hydrogen provides the GHG reduction needed, and fast fueling capability. Thanks to our moderator, Shawn, for keeping the conversation flowing, and to our panelists, Wayne, Colin and Mark, for your insights. I think that all our viewers learned something today, and we all walk away from this conversation with a better understanding of the potential of hydrogen for Canada's transportation sector. Thanks also to the Empire Club of Canada, our presenting partner and our hosts for “Fuel for Thought” series. We look forward to working together on other important topics and issues in the future. And finally, thanks to all the viewers that took the time to join the event today; I hope that you enjoyed the conversation as much as I did. Back to you, Kelly.

Concluding Remarks by Kelly Jackson
Thanks, Bob, and thanks again to the panelists, and everybody joining us today, or participating at a later date. Our next event is on November 10th, at noon Eastern time; it's a special event in honour of Remembrance Day. We will be diving into the fascinating story of Canadians who became secret underground agents during WWII. Find out more about the Special Operations Executive, and the Canadian connection to this team of spies, that became the model for the CIA, and inspired many post-war authors, including Ian Fleming, the creator of James Bond. More details, and complimentary registration, are available at empireclubofcanada.com. This meeting is now adjourned. Have yourself a great day stay safe and take care.

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Realizing the Potential: The Role of Hydrogen in Canadian Transportation


1 November, 2021 Realizing the Potential: The Role of Hydrogen in Canadian Transportation