By Lance Mortlock,
Energy Leader at EY Canada

Ten years ago, much of the conversation in energy boardrooms was centred around the great potential of Canada’s liquefied natural gas (LNG) export market to attract increased foreign investment, support the transition to cleaner energy and build the nation’s competitive advantage on the global stage. Fast forward to today — and several proposed export facilities later — Canada has just one major facility that has managed to navigate the lengthy and exhaustive regulatory process to fruition.

Taking stock of lessons learned from LNG will be critical as we start to see resemblances with the hydrogen market. Similar to LNG, Canada is in an optimal position to capitalize on the growing potential of hydrogen as countries and businesses actively review their clean-fuel energy mix to meet growing energy demands. Between the technical expertise, feedstock, existing infrastructure and partnerships, Canada has massive potential to become a global leader in hydrogen production and distribution.

Currently, hydrogen makes up less than 1% of Canadian energy demand but is projected to reach 27% by 2050. Meeting this will not only allow Canada to build a more sustainable and competitive advantage, but will aid in accelerating our own decarbonization efforts to achieve a net-zero economy.

It’s estimated that hydrogen can reduce greenhouse gas (GHG) emissions by 26% by 2050, while reaching $100 billion in annual market potential and adding 350,000 jobs to the economy. We cannot let this opportunity go to waste. Federal and provincial governments are recognizing the potential, making investments and building out roadmaps to foster a hydrogen economy and access global markets. A step in the right direction, but it’s going to take a village to address the challenges and barriers presented by innovation and regulation to reach mass adoption.

Leaders across public and private sectors must work collaboratively to assess the size of the opportunity and how their respective organizations can help enable the hydrogen future. New research in Canada’s hydrogen future — risks and rewards report by EY Canada, in collaboration with The Canadian Energy and Climate Nexus, identifies how leaders can work together to address three key pillars to support development across the value chain.

1. Driving policy and regulation: Canada currently lacks a long-term policy and regulatory framework that includes hydrogen. Driving a regulatory regime that encourages production of low-carbon energy will be required to boost greater investment, research and innovation. But this must be coupled with government incentives and subsidies to support upstream production of hydrogen technologies and investment into development of suitable low-carbon market applications.
    
2. Securing partnerships: Collaboration between federal, provincial and municipal governments, thought leadership groups, corporations and institutions can help accelerate the research and development needed to transition and build a hydrogen ecosystem. Additionally, building on existing partnerships such as the International Partnership for Hydrogen and Fuel Cells in the Economy and IEA Hydrogen and Advanced Fuel Cell Initiatives can help grow the potential export market and encourage upstream investment.
    
3. Encouraging investments: Expanded awareness into the economic opportunity of hydrogen can help attract new domestic and foreign capital. Support for potential manufacturers with investment incentives, funding programs, subsidies and long-term policies can go a long way in encouraging the private sector to pursue development of the required market applications.

The sea change is happening as governments, regulators and businesses become much more conscious of the global impact they can have in meeting carbon ambitions. There’s no doubt the level of activity, discussion and investment will go up over the next decade — the question remains, will it be enough?

Canada has a tremendous opportunity to integrate existing energy infrastructure into the evolving hydrogen value chain to become a global leader in hydrogen production, distribution and market use. But we cannot repeat previous LNG mistakes by letting regulatory uncertainty, lack of market access and environmental pressures stunt our ability to secure global market share as competitors embrace growth. Now is the time to secure the investment, innovation, government subsidies and incentives required to accelerate the transition to less carbon-intensive and more cost-competitive options like hydrogen.

Lance Mortlock is the EY Canada Oil and Gas Leader, based in Calgary. For more insights on automation in the Canadian energy sector, visit www.ey.com/en_ca/energy-resources.