Study says Calgary region has the "right stuff" for a hydrogen hub

Mark Lowey
March 1, 2023

The Calgary region is “superbly positioned” to become a hydrogen fuel hub anchoring major transportation corridors as Alberta develops a hydrogen-based economy, says the lead author of a new feasibility study

“Calgary has the real assets needed to make it work,” Dr. David Layzell, PhD, energy systems architect at the Transition Accelerator, told Research Money. “There is significant demand for fuel hydrogen from industry and municipalities that are engaged and want to see this happen.”

Initially, Layzell says, creating a hub will require government funding and supportive policies and regulations for everything from hydrogen-fuelled vehicles and re-fuelling stations, to training people how to build, operate, and maintain a hydrogen fuel-based infrastructure.

But once the infrastructure reaches a large enough scale, the re-fuelling stations will pay for themselves and start turning a profit, so government help will no longer be necessary, he said. “This is not ongoing incentives, this is helping to get [the hub] off the ground.”

Layzell is lead author, with co-authors Dinara Millington and Robert Lee, of the new study, Towards a Fuel Hydrogen Economy in the Calgary Region, produced by the not-for-profit Transition Accelerator. The pan-Canadian organization works to identify and advance viable pathways to Canada’s 2050 climate targets.

The Calgary region is expected to have a total estimated hydrogen demand in a net-zero emissions future of 5,043 tonnes of hydrogen per day, according to the study. At a wholesale price of $2.50 per kilogram of hydrogen, this represents a market potential of $4.6 billion a year.

Potential large industrial customers in the region for hydrogen fuel include the Canadian Pacific Railway, Calgary Transit (for the municipal bus fleet), and the Calgary International Airport (for ground vehicles and eventually airplanes), the study says.

Layzell says a cost-effective supply of low-carbon hydrogen could be supplied to the Calgary region by companies in Edmonton now making hydrogen from natural gas for use as an industrial feedstock. Or the hydrogen could be produced by gas and chemical plants in the Calgary region, or by using solar- and wind-generated power largely based in southern Alberta to produce “green” hydrogen.

The Calgary region is well-suited for producing low-carbon “blue” hydrogen from natural gas, Layzell says, because the region’s subsurface geology could be used to sequester, or permanently store, the carbon dioxide resulting from production — keeping the greenhouse gas out of the atmosphere.

The study recommends that the Calgary region develop a carbon capture utilization and storage strategy, which Layzell says should be led by an industry consortium.

TC Energy Corp. and Nikola Corp., based in Phoenix, Arizona, are considering building a 60-tonnes-per-day hydrogen production hub, incorporating carbon capture and storage, at Crossfield, just east of Calgary, where TC Energy operates a natural gas storge facility.

Nikola would be the hub’s anchor customer for the company’s long-haul fuel cell electric heavy-duty trucks. TC Energy expects a final investment decision by the end of this year.

ATCO Group, through its investment in Canadian Utilities Limited, is working with Canadian Pacific to build two hydrogen production and re-fuelling stations, providing hydrogen for CP’s hydrogen locomotive program. The program, aimed at building North America’s first line-haul hydrogen-powered freight locomotive, has $15 million from Emissions Reduction Alberta.

The hydrogen production and re-fueling facilities are being built at Canadian Pacific’s Calgary and Edmonton railyards, with hydrogen expected to be supplied to locomotives this year.

Both hydrogen hubs and transportation corridors needed

The Transition Accelerator’s study recommends funding and empowering a consortium to work on building a Calgary hydrogen hub.

The study also recommends that the Calgary hub partner with the Edmonton Region Hydrogen HUB, launched in April 2021 with $2.25 million in government funding.

Read more: Three levels of government provide more than $2 million to launch Canada's first hydrogen hub in Alberta

According to Layzell, Edmonton’s HUB  would like to work closely with Calgary and companies in the region, to establish a hydrogen fuel-based transportation corridor between the two cities. Some 5,000 heavy-duty trucks per day move between the two cities.

“This isn’t a competition, this is a cooperative [endeavour]," he said. "There’s real benefit to both cities from collaborating."

A separate report by the Transition Accelerator concluded that the southeast Alberta region, which includes Medicine Hat, has the energy sources and demand, transportation infrastructure, and industrial complex necessary to become a hydrogen fuel hub.

The key to establishing a viable hydrogen economy in Alberta," Layzell explained, is to build regional hydrogen hubs that anchor hydrogen transportation corridors. Hubs and corridors can then support the provincial network, as well as link with other hubs across western Canada.

“The most important thing is to coordinate activities across the entire value chain, with attention and resources going in to each link in the chain,” he added.

Heavy-duty trucks, along with trains — including a possible hydrogen-fueled train from Calgary to Banff — will be the early adopters of hydrogen fuel in Alberta. Layzell pointed out that battery-electric vehicles are not suitable for those types of long, continuous, heavy-load hauling applications.

There are about 6,000 heavy-duty, Class 8 trucks purchased in Alberta every year — and an estimated 35,000 annually bought across Canada — but nearly all are diesel-fueled. The new generation of hydrogen-fueled trucks are currently built only a few at a time, compared with the thousands of diesel versions still being produced in large manufacturing plants.

To Layzell, that uneven playing field calls for government subsidies, at least initially, to buy the hydrogen-fueled trucks until market demand grows and the cost of these trucks becomes more competitive.

The federal government recently announced the Incentives, Medium- and Heavy-Duty Zero-Emissions Vehicle program, providing carriers with a maximum $1 million in cash-back incentives for early adoption of zero-emissions commercial vehicle technology.

Layzell envisioned smaller, personally-owned vehicles being used for relatively short trips, where they can return to base for overnight charging. In contrast, the separate hydrogen market will initially serve heavy-duty trucks and trains, then later address space heating in residential and commercial buildings, as well as industrial heat and power generation.

By the end of this summer, he said, two hydrogen-fuelled, 63-tonne tractor trailers will be moving freight between Calgary and Edmonton. The Alberta Motor Transport Association is leading the pilot project, which includes $7.3 million in funding from Emissions Reduction Alberta.

Government support needed for re-fuelling stations

Government funding and supportive policies and regulations also will be required to build a network of hydrogen re-fuelling stations, which are considered the most complex component of the supply chain. To be economic, such stations will need to be able to supply a minimum four tonnes per day of hydrogen; that feasibility becomes more attractive as the station's size increases.

"Eventually, once these stations are operational, they should actually be profit centres," said Layzell.

The Transition Accelerator study estimates the potential re-fuelling station demand for hydrogen in the Calgary region would be an estimated 122 tonnes of hydrogen per day. Since the study assumes a typical station could deliver about seven tonnes of hydrogen per day, the regional network would consist of about 18 stations.

The estimate did not include capital cost figures for building various-sized hydrogen re-fuelling stations. However, a report in 2021 by the U.S. Department of Energy found capital equipment cost estimates for 111 planned new hydrogen re-fuelling stations in California varied between approximately US$1,2000 and US$3,000 per kilogram of hydrogen dispensed per day, depending on daily fuelling capacity and hydrogen delivery method.

Based on those cost estimates, a four-tonnes-per-day station in Alberta would cost between US$4.8 million (or about Cdn $5.4 million) and US$12 million (or about Cdn $16 million).

Hydra Energy, based in Delta, B.C., is building a 3.2 tonnes-per-day hydrogen re-fuelling station in Prince George, B.C., producing “green” hydrogen with two five-megawatt electrolyzers powered by hydroelectricity. It would be the largest such facility in the world, scheduled to be operational in early 2024.

The cost of Hydra’s entire project, which includes the re-fuelling station, the hydrogen production facility, and converting 65 trucks to run on hydrogen fuel , is estimated to be about $62 million. The project received funding from various federal and provincial government organizations, including the B.C. Centre for Innovation and Clean Energy.

The re-fuelling station is the first in Hydra’s western Canadian hydrogen corridor, to serve B.C- and Alberta-based heavy-duty trucks. The station will serve Hydra-contracted fleets, and can fill up to 24 trucks per hour with 50 kilograms of hydrogen each.

Hydra also is partnering with the Edmonton International Airport (EIA) to build a similar hydrogen re-fuelling station on EIA land, to service heavy-duty trucks in the Edmonton region.

Layzell says the federal carbon tax, which is scheduled to increase to $170 per tonne of greenhouse gas emissions by 2030, could provide a pot of money to help fund incentives to build hydrogen re-fuelling stations and purchase hydrogen-fueled heavy-duty trucks.

“We need both carrots, or incentives, and some disincentives for business-as-usual [activities],” Layzell said.                       

“Blue” or “green” hydrogen?

The federal government plans to introduce a refundable tax credit for clean hydrogen investments in Budget 2023. But 110 academics and 55 civil society groups sent a letter on February 8 to Finance Minister Chrystia Freeland, Natural Resources Minister Jonathan Wilkinson, Environment Minister Steven Guilbeault, and Innovation, Science and Economic Development Minister François-Philippe Champagne, arguing against any subsidies for so-called blue hydrogen.

Blue hydrogen is made by chemically reforming natural gas and capturing and sequestering up to 95 percent of the carbon dioxide that would otherwise escape to the atmosphere.

Critics opposed to using a fossil fuel to produce hydrogen say it should be produced instead using only renewable energy sources such as wind and solar — so-called “green” hydrogen.

But Layzell argued that a massive amount of new electricity production would be required to produce enough green hydrogen to meet Canada’s expected demand, which could be 10,000-60,000 tonnes per day just for the domestic market.

“The way you get really low-cost hydrogen is you have very cheap electricity,” he noted.

However, every 10 cents per kilowatt-hour cost of building new electricity generation to meet the demand for hydrogen adds $5 per kilogram of hydrogen — without including the cost of the electrolyzer equipment to convert that electricity to green hydrogen.

“We’re going to need both blue and green hydrogen,” Layzell concluded. But initially, and especially in Alberta, it will be less expensive to produce blue hydrogen from natural gas, while storing the carbon dioxide permanently underground.


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