Analysis: Race to ship clean Canadian hydrogen to Europe navigates choppy water

Brookfield Renewable Partners LP

03/11/2022 17:23

By Rod Nickel and Nia Williams
       WINNIPEG, Manitoba, Nov 3 (Reuters) - On Canada's
tranquil Atlantic coast, a dozen companies are racing to ship
Canada's first green hydrogen to Europe by 2025, aiding the
continent's worldwide search to replace Russian natural gas.
    Hydrogen is viewed as critical to Europe's efforts to
transition to lower-emissions energy sources, and investment has
accelerated in countries such as Australia and Chile since
Russia invaded Ukraine and cut off Europe's natural gas supply.
Eastern Canada, with its strong electricity-generating winds and
short shipping distance, is a prime potential source for green
hydrogen. 
    Several companies are moving ahead with regulatory plans and
eventually construction, including Brookfield Renewable Partners
 BEP.N  and World Energy, but they face big obstacles, such as
equipment shortages and local opposition. 
    Pipeline and utility giant Enbridge Inc  ENB.TO  told
Reuters that it too is considering hydrogen development in the
region. 
    Enbridge CEO Al Monaco cautioned that the 2025 target for
exports is aggressive. 
    "Obviously it's very hard to do. But I think East Coast
Canada's positioned well," he said.  
    Most hydrogen output uses natural gas or coal, called gray
hydrogen, but companies want to produce green hydrogen without
emissions by separating hydrogen from oxygen in water using
wind-powered electrolyzers.
    Green hydrogen is typically more expensive, but soaring
natural gas prices have elevated gray hydrogen production costs
above those of green hydrogen, according to an October report.
    The world produces just 3.5 million tonnes of clean hydrogen
but output may rise to 31 million tonnes annually by 2030, said
Minh Khoi Le, head of hydrogen research at consultancy Rystad
Energy. 
    Hydrogen generated hype decades ago, however, without
amounting to much.
    "I've seen this movie before," said Peter Tertzakian, deputy
director of ARC Energy Research Institute. He questioned the
efficiency of using wind-generated electricity to produce
hydrogen that is then shipped for use as electricity.
    Hydrogen may play only a niche role in global energy, he
said. 
    "I would characterize what's going on as lab experiments on
an industrial scale."
    GERMANY-CANADA HYDROGEN PARTNERSHIP
    Germany and Canada signed a non-binding agreement in August
to ship clean Canadian hydrogen to Germany by 2025. Their
leaders met in the Canadian province of Newfoundland and
Labrador, where World Energy is planning a $12-billion project
to export ammonia starting in late 2024. Ammonia is one form to
transport hydrogen.
    A World Energy subsidiary wants to build 164 wind turbines
on Newfoundland's Port au Port Peninsula to power a new hydrogen
plant. But that project would dramatically change life on the
peninsula, where just 4,000 people live, said Marilyn Rowe, a
resident who helps lead an opposition group.
    "We believe in green energy, but we don’t believe in
destroying nature for a profit or supplying Germany," Rowe said.
    World Energy will not proceed without a provincial
environmental permit for turbines and is considering community
input for turbine locations, said CEO Gene Gebolys. 
    He noted that others in the community support the project
for its jobs.
    German energy companies E.ON Group  EONGn.DE  and Uniper SE
 UN01.DE  signed non-binding agreements with EverWind Fuels,
based in the Canadian province of Nova Scotia, for EverWind to
ship them a combined 1 million tonnes annually of green ammonia.
    EverWind aims to start by shipping 200,000 tonnes in 2025. 
    The company plans to start building its project at an
existing port next year, said Trent Vichie, owner of Everwind
and co-founder of U.S. private equity firm Stonepeak
Infrastructure Partners. 
    Vichie has already spent $100 million on the $6-billion
project and said he has strong interest from strategic and
institutional investors to help pay for the rest.
    Citibank and CIBC are advising EverWind.
    Supply chains are developing faster than was expected before
Russia's invasion of Ukraine, but green hydrogen is not yet
economic at scale, said Teresa Jaschke, spokesperson for E.ON
Group. She compared hydrogen with solar modules, now a growing
energy source, that were also once considered uneconomic.
    "We are certain that hydrogen technologies will also
continue to develop enormously," she said.
    Global hydrogen development has left manufacturers of
turbines and electrolyzers unable to keep up with high demand,
however.
    In Newfoundland, a subsidiary of Toronto-based Brookfield is
planning a C$2-billion ($1.46 billion) wind farm and plant to
make 200,000 tonnes of ammonia annually. Scarce equipment may go
to first movers, so the pressure is on, said Geoff Wright,
Brookfield's senior vice-president of strategic partnerships. 
    "There's a race to get to the starting line," Wright said. 
($1 = 1.3735 Canadian dollars)
 (Reporting by Rod Nickel in Winnipeg and Nia Williams;
Additional reporting by Sonali Paul in Melbourne and Christoph
Steitz in Frankfurt; Editing by Josie Kao)
 ((rod.nickel@tr.com; Twitter: @RodNickel_Rtrs;
1-204-230-6043;))