Hydrogen 101: Basics of Hydrogen Supply Chains

Bennett Jones LLP[co-author: Kenryo Mizutani - Articling Student]

In June, the Canadian government announced that it would be unveiling a national hydrogen strategy, which is now expected to be released this fall. Alberta's Industrial Heartland Hydrogen Task Force, a group of business, energy, academic, and government officials organized by several municipalities northeast of Edmonton, is expected to release this fall a hydrogen framework for the region as well. The Alberta government also addressed hydrogen development in its October 6, 2020, Natural Gas Vision and Strategy, announcing hydrogen production and exportation goals for 2030 and 2040, respectively, and the development of a Hydrogen Roadmap for Alberta beginning next year. These announcements follow an international trend with many countries recently putting forward hydrogen strategies of their own. In prior posts we have explored the hydrogen strategies of Australia, Japan and South Korea, and Germany and the European Union.

But why is hydrogen so popular? And, what does a hydrogen economy look like? This post explores the basics of the emerging hydrogen economy, from production, to transportation, to end-use, and is a precursor to our next posts, which will delve into the soon to be released Canada and Alberta Industrial Heartland hydrogen strategies.

Why Hydrogen?

Hydrogen is increasingly considered a vital fuel of the future, predominantly because of its high-energy density and zero-carbon emissions at the point of consumption. According to a report from the U.S. Department of Energy, hydrogen stores roughly three times more energy by weight than other common fuels, such as gasoline, diesel, or natural gas, and produces no carbon emissions when consumed to produce energy.

How is Hydrogen Produced?

There are three common processes for producing hydrogen:

Grey hydrogen is produced from fossil fuels, primarily natural gas. The most common production method is referred to as steam methane reforming, which creates carbon dioxide and hydrogen. Grey hydrogen makes up about 95% of current global hydrogen production and is a starting point for a future hydrogen economy.

Blue hydrogen is produced from natural gas by the same process as grey hydrogen, but is paired with carbon capture and storage (CCS) technologies to reduce carbon intensity, in many cases by up to 80 to 90 percent as compared to grey hydrogen.

Green hydrogen is produced by electrolysis, a process whereby electrodes are inserted into water on separate sides of an electrolyte membrane, breaking water molecules into hydrogen and oxygen when an electric current is run through the water. To be considered green hydrogen, the electricity for electrolysis comes from renewable sources, such as wind, hydro, or solar, making the production process carbon free.

According to a report from Alberta's Transition Accelerator, of the three common processes, grey hydrogen is the least expensive to produce (roughly $1.00/kg), with green hydrogen being the most expensive (from $2.24/kg up to $5.36/kg) and blue hydrogen falling in between ($1.52/kg to $3.32/kg).

There are also other ways to produce hydrogen. For example, electricity needed for electrolysis can be drawn from nuclear, or a non-renewable source such as natural gas. Hydrogen can be created from synthetic gas produced in coal gasification, a process whereby a deep coal deposit is reacted with oxygen and steam under high pressure. This latter method releases carbon dioxide, but can be paired with CCS technology to produce blue hydrogen.

New technologies and processes are being developed as well. For example, Proton Technologies Canada Inc. has patented a process that superheats an oil reservoir, breaking apart the hydrocarbon and water molecules in the subsurface, and extracting produced hydrogen. This method produces green hydrogen, as no carbon emissions are released.

How Can Hydrogen be Transported?

Once hydrogen is produced, there are several options for transportation to market, including:

  1. Pipelines, requiring compression of hydrogen;
  2. Trucks or rail, requiring compression or liquefaction of hydrogen;
  3. Liquid hydrogen marine tankers, transporting liquefied hydrogen at very low temperatures; and
  4. Chemical tanker ships, requiring conversion of hydrogen into more stable hydrogen-carrying chemicals such as methyl cyclohexane (C7H14) or ammonia (NH3).

Lower concentrations of hydrogen can be blended with natural gas and transported using existing natural gas pipeline infrastructure, and separated at its final destination. To transport higher concentrations of hydrogen, or pure hydrogen, purpose-made pipelines are necessary.

Transportation by pipeline, as well as by marine tanker, truck or rail, generally requires that the hydrogen be compressed or liquefied. Compression or liquefaction requires power, which, depending on the power generation source, may affect the overall carbon intensity of the hydrogen. While transportation by pipeline and tanker offer higher economies of scale, transportation by trucks and rail increase flexibility in delivery and receipt points, and are less constrained by potential infrastructure challenges.

Some companies are exploring the conversion of hydrogen into more stable hydrogen-carrying chemicals that can be transported by conventional chemical tankers. Converting hydrogen requires specialized facilities and technologies.

How Can Hydrogen be Used?

Using hydrogen to power vehicles, heat buildings, and generate electricity has the potential to drastically reduce carbon emissions.

Fuel cell technology is currently powering vehicles around the globe. While the cost of such vehicles remains high, and there are only four hydrogen fueling stations in Canada (one in Quebec City and three in Metro Vancouver), the development of fuel cell electric vehicle (FCEV) infrastructure is progressing in Canada, notably in BC where policy supports the rollout of hydrogen fueling stations.

The infrastructure and technology to use pure hydrogen as the sole source for heating buildings or generating electricity is in the nascent stage and considered a longer term goal, but one with a high potential for carbon emissions reduction.

Pilot projects are forging ahead. For example, in Leeds, UK, a residential home heating project converting the town's natural gas infrastructure to carry 100 percent hydrogen has been proposed. The pilot project is exploring the impacts of converting existing infrastructure for hydrogen use with the aim of supporting a long-term national conversion of natural gas networks to carry hydrogen. Similarly, in the Netherlands, there is a pilot project in Rotterdam for residential heating using hydrogen that is produced as part of a power-to-gas, or P2G, project (discussed below).

A more immediately technically feasible use of hydrogen is blending it with existing fuels to lower carbon emissions, notably where de-carbonization may otherwise be difficult, such as heating buildings. Hydrogen can be blended with natural gas at low concentrations and deployed throughout the existing natural gas grid, lowering carbon emissions in all current uses, from large-scale commercial uses to household appliances.

Injecting hydrogen into existing gas grids is a notable feature of the Dutch national hydrogen strategy, which aims to create a European regional transportation network for hydrogen using existing natural gas infrastructure. In Canada, ATCO Ltd. recently announced a project slated to be built next year in Alberta's Industrial Heartland region, which will blend hydrogen into a section of the existing natural gas network, primarily for building heating.

Hydrogen can also be used to store electricity through P2G. A drawback of wind and solar power is that generation does not always coincide with peak demand. However, by connecting renewable power generation to electrolyzers, excess electricity could be converted into hydrogen, which can then be consumed to produce electricity when it is needed. While using hydrogen as a storage mechanism for electricity is in the early stages, P2G is illustrative of the broad potential of the hydrogen economy.

As noted above, P2G is currently being pursued in the Netherlands. A partnership between Gasunie (a Dutch gas network operator), Shell, and Groningen Seaports (a port operator), is planning to use an off-shore wind platform paired with an electrolyzer to produce green hydrogen off-shore, which it hopes to then use for residential heating. The production of hydrogen off-shore reduces expensive costs of constructing underwater electric cables and eliminates transmission losses.

Producing grey hydrogen from natural gas is currently the least expensive method of producing hydrogen, while the production of green hydrogen is expected to decrease in cost and form an increasing percentage of hydrogen production moving forward. Canada has abundant opportunities for hydrogen production in either case, and significant existing infrastructure that could be adapted to the hydrogen economy. Alberta's Industrial Heartland region is already producing grey hydrogen from natural gas and has a hydrogen pipeline network in the ground. As the global race to develop hydrogen economies begins in earnest, the export of hydrogen may also prove to be valuable to Canada as the global economy transitions to lower carbon intense energy sources and international hydrogen supply chains are established. Japan, South Korea, and Germany, for example, have indicated in their national strategies a need for hydrogen importation.

Takeaways

Canada and Alberta's Industrial Heartland Hydrogen Task Force will soon release their strategies for developing hydrogen economies, which comprise production, transportation, and end-use (or upstream, midstream, and downstream). Canada is well-situated to develop domestic hydrogen supply chains, reducing carbon emissions at home, while also exploring international export opportunities. In the short term, existing infrastructure and grey hydrogen production can kick start Canada's hydrogen economy. Infrastructure expansion, and legislative and regulatory developments, can further support this new energy economy.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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