Study on Cost of Hydrogen Production for Power Generation in Canada

The Electricity and Combustion Division (ECD) of the Environment and Climate Change Canada (ECCC) functions as a departmental center of expertise in electricity and combustion and is the lead for the electricity sector in the Department's Environmental Protection Branch. ECD is responsible for developing policies, regulations and other instruments to reduce emissions and to manage the environmental effects of air pollutants, greenhouse gases and toxic chemical substances from the electricity sector and from industrial combustion. Specifically, ECD: • Provides strategic technical, economic, business and policy analyses and advice; • Develops regulatory approaches and instruments which consider existing and emerging advanced technologies; and, • Implements regulatory instruments designed to reduce emissions.

Through the development of these instruments, ECD seeks to reduce risks to Canadians, their health and environment by promoting an environmentally sustainable electricity sector. Canada chose electrification as a major decarbonization strategy to transform the country’s energy economy. For this, Canada needs to increase the electricity generation and supply capacity while at the same time ensure that our electricity generation fleet is emission free. The Government of Canada (GoC) is introducing the Clean Electricity Regulations (CER) to enable a net-zero electricity grid by 2035, which is key to achieving a net-zero economy by 2050. Focus on GHG emission cuts from power generation calls for substitution of fossil fuel sources by other non-emitting fuels/energy sources including hydrogen. GoC is duly considering the prospects of enhanced production and future use of hydrogen for power production in the Canadian provinces. Of particular relevance are the provinces with significant fossil fuel based thermal power capacity particularly in Western Canada (Alberta and Saskatchewan), Ontario, and in the Maritime (New Brunswick and Nova Scotia). Hydrogen-fired power production assumes special relevance in the context of reliability of power supply particularly during the peak load hours and at other times when variable renewable energy (VRE) sources see drops in their generation levels (including total potential lull days in summer or winter). GoC is considering a definite supporting role for hydrogen in derisking power output from intermittent/variable renewable sources, such as wind and solar. Use of hydrogen in place of natural gas for power production in simple cycle gas turbines (SCGTs) or in combined cycle gas turbines (CCGTs) might be a possible strategy in this regard. There are several pathways for non-emitting hydrogen production, such as green hydrogen (produced via electrolysis based on renewable electricity), or pink hydrogen (from electrolysis assisted by electricity or waste heat from nuclear power plants) – of special relevance here are small modular reactors (SMRs). In addition, there is blue hydrogen (from natural gas supported by carbon capture and storage (CCS) generated through potential thermochemical pathways, for example, steam methane reformation (SMR), and auto-thermal reforming (ATR). However, it is not clear to ECD, which generation pathway or a combination of pathways will emerge as the technology frontrunner in a time horizon beyond 2035 considering factors, such as geographical conditions of the region where the hydrogen is produced and the availability of geology suitable for CO2 storage. ECD intends to assess the future cost of hydrogen production estimated at hydrogen production facility gate for power production. To this end, ECD solicits the service of a qualified Contractor to develop a quantification framework that duly considers the regional and other relevant factors to estimate the cost of producing hydrogen at the province level.