Hydrogen Horizons: Powering a Green Path Forward

Speaker 1 [00:00:01] Hi, it’s John here. Before the holidays, I was in Dubai for the climate conference known as COP28. And whether you’ve been to Dubai or not, when you think of that great cosmopolitan hub of the Persian Gulf, well, you may think of a tropical desert climate or that iconic skyscraper that Tom cruise scaled down in one of the Mission Impossible movies. One morning when I was there to catch the sunrise, I went up the Burj Khalifa and was awestruck to see the sun come over the horizon and light up the desert. And with that, so many different energy sources. Of course, there were the oil rigs and gas facilities, but there were also solar fields and wind fields. And that’s the ambition of the Middle East and the ambition of so many countries in the world today, to diversify through innovation, the kind of energies that we need to power our lives. Hydrogen was the talk of the town in Dubai and maybe, just maybe, the climate tech of the 2020s. As I met people from all around the world at COP, everyone seemed to have an eye on hydrogen. I met some Saudi business leaders who were actually moving to China to help advance green hydrogen. And Americans are all over this. In fact, they’re talking about Texas, the great oil state becoming a green energy hub and exporter of hydrogen for the world. Countries big and small are seeing hydrogen as an opportunity to convert wind and solar and gas and even nuclear into molecules that they can ship to people and to industries all around the world. As hydrogen, and especially green hydrogen, continues to be a hot topic in 2024, Canada is at the centre of many of these conversations, and we’re eyeing a piece of that pie. So can green hydrogen be the next great Canadian energy export? Will it be the tech innovation of the decade? And if so, how can Canada, a country filled with vast renewable resources, navigate the complexities of the technology as well as the economics and politics? This is Disruptors, an RBC podcast. I’m John Stackhouse. The green hydrogen race is on. A report released by Deloitte suggests there’s an investment of $9 trillion needed over the next 25 years — that’s globally — that could create $1.4 trillion per year in exports. How we power our ships, factories and perhaps even our cities is at stake. And sustainable innovation is needed as a vehicle for change. Whether it’s funding, research, infrastructure development or technology advancements across the energy sector, capital markets have a critical role to play in scale and adoption. In Canada, we’re seeing massive commitments to hydrogen projects along the Atlantic coast and up the Saint Lawrence Valley in Quebec that could become a major source of energy exports. But before we hear from some hydrogen innovators, I, for one, wouldn’t mind a hydrogen for dummies. So, we called up Ivette Vera-Perez. She’s president and CEO of the Canadian Hydrogen and Fuel Cell Association. Ivette, welcome to Disruptors.
Speaker 2 [00:03:12] Thank you very much, John.
Speaker 1 [00:03:13] It’s great to have you on the podcast. And if you don’t mind, I want to start with the basic, question what is hydrogen?
Speaker 2 [00:03:19] Hydrogen is an element arguably the most common element on Earth, it’s the lightest element as well. It can combust as well. So that’s what makes it attractive as a fuel source.
Speaker 1 [00:03:31] And we all been hearing about hydrogen in all sorts of places, especially over the last few years. Why is there so much excitement?
Speaker 2 [00:03:37] So hydrogen can be used to displace pretty much any fossil fuel. It is very evident that one of the biggest challenges we’re facing is climate change. And that is where hydrogen can come in, because it’s a valuable vehicle in decarbonizing a number of sectors. The steel industry, for example, one of the highest emitters. You can also decarbonize buildings etc.. So, it is a very versatile vehicle when it comes to decarbonization.
Speaker 1 [00:04:04] There’s an old saying that hydrogen is the energy source of tomorrow and has been for 40 years. Why do you think we’re going to see hydrogen at scale in this decade when we haven’t seen it in previous decades?
Speaker 2 [00:04:17] So the role of hydrogen in decarbonization is a current need, is not a need that we had in the past. The whole world has now embraced hydrogen. So, you’re about to see the economies of scale and a massive number of projects get into final investment decisions. That was not something that you saw a couple of decades ago.
Speaker 1 [00:04:36] We hear a lot about the colors of hydrogen in the so-called hydrogen rainbow. There’s blue hydrogen, grey hydrogen, even pink hydrogen. Can you walk us through the key colors and what’s different about them?
Speaker 2 [00:04:47] Yes. Green hydrogen is hydrogen produced by electrolysis from renewable energy sources, for example, wind or solar. Blue hydrogen is produced from fossil fuels. There’s also, like you said, purple or pink that can be produced from nuclear sources. There is also turquoise and that is hydrogen that is produced by thermally splitting methane. There is yellow hydrogen that is produced from by electrolysis. But using the grid, there is also white hydrogen that occurs in natural form that can be extracted. And the typical hydrogen that we know off from fossil fuels without capturing that would be grey or brown or black if it is from coal. So many, many colors.
Speaker 1 [00:05:49] And how do you make hydrogen from all those different materials and elements?
Speaker 2 [00:05:53] Electrolysis is one process. And by the way, Canada has been since 1905 a leader in electrolysis, the way in which you produce green hydrogen from renewable electricity. The idea is that you basically split water into hydrogen and oxygen. Now, if you did blue, that would be steam methane reforming or auto thermal reforming. And then you capture that CO2.
Speaker 1 [00:06:25] Finally of that as you look into 2024, what are you most excited about?
Speaker 2 [00:06:29] 2024 is going to be a crucial year. I really want to get to the day when, instead of saying hydrogen has the potential to decarbonize in steel, hydrogen has the potential to decarbonize transport that I can say hydrogen is decarbonizing steel, hydrogen is decarbonizing transport. So it’s very much an action year, right?
Speaker 1 [00:06:48] That’s a great message. It’s an action year. Ivette, thanks for explaining hydrogen and making the case for hydrogen.
Speaker 2 [00:06:53] Thank you very much for having me.
Speaker 1 [00:06:56] That really helps set the foundation for our conversation. Now we’ll hear from Gene Gebolys. He’s the CEO of World Energy. Gene and I actually met at that climate conference in Dubai, where we shared a taxi and had a great and really animated conversation. He’s played a leading role in building today’s global biofuels industry. Way back in 1998, he launched World Energy to accelerate the commercialization a viable alternatives to fossil fuels. And today, a quarter century later, World Energy provides a wide range of low carbon solutions focused on helping make net-zero commitments real, including a huge investment in Atlantic Canada. Jean, welcome to Disruptors.
Speaker 3 [00:07:38] Great to be here, John. Thanks for having me.
Speaker 1 [00:07:40] It’s wonderful to have you on the podcast. I wonder if you can give us a bit of a sense, first of all, of World Energy. Tell us about the company and where it’s come from, but also what attracts you to green hydrogen?
Speaker 3 [00:07:51] So, World Energy has been around for a quarter century, and we’re an advanced biofuels company. We started to accumulate assets to produce a biodiesel, one of them being in Hamilton, Ontario. And then about six years ago, we acquired a refinery in Los Angeles, and we became the first commercial scale producer of sustainable aviation fuel. And that led us to, well, we’re making this product out of grey hydrogen. How do we improve the carbon characteristics of the hydrogen? And we started World Energy Gh2 to really focus on Atlantic Canada as a super promising place for the production of hydrogen. That’s kind of the genesis of how we got from a quarter century of advanced biofuels production into focus on Atlantic Canada and green hydrogen production.
Speaker 1 [00:08:41] So one thing has led to another to another, what’s the appeal? You’re talking to us from Boston, where you’re based. What caught your eye in Atlantic Canada?
Speaker 3 [00:08:52] Well, one, you have to have an exceptional renewable resource. Two, you’ve got to be able to build the project in a place where people want the project to be built. And three, you’ve got to do it in a place where the host country is going to support the development of the project. If you can’t answer all three of those to the affirmative, don’t do it. The province has been extremely thorough and very supportive. We were out talking to the local First Nations’ leaders about what their thoughts would be about this. So it’s been really a team effort out there. I couldn’t believe it when I think it was in November, there was a rally in Stephenville in a town of, I think 1500 people. They had about 2000 people there rallying in favour of the project, uh, which is pretty unusual. We’re doing a big project in Los Angeles. I don’t think anybody’s ever held a rally for us in LA. We get good local support, but not like we get in Stephenville.
Speaker 1 [00:09:52] Stephenville, for those folks who haven’t been there, is pretty different from LA. It’s an old mill town for those who aren’t familiar. But when the wind picks up on that coast, boy, it’s a force.
Speaker 3 [00:10:02] Yeah, the project name is Nujio’qonik, which means “where the sand blows” in the native tongue. And this is one of the best wind locations on planet Earth. I don’t know if it’s fortuitous or just flat out lucky that we kind of focus in on this area, but it is, without question, one of the greatest places on planet Earth to be working on a project like this.
Speaker 1 [00:10:30] Geve, I wonder if you can tell us a bit about the tech model, and then we’ll get into the business model. So, you’ve got all this wind around Stephenville, but obviously there’s not a lot of demand for that electricity. So, you got to turn it into something and ship it. So walk us in lay terms if you don’t mind through how that happens.
Speaker 3 [00:10:47] Yeah. So, hydrogen’s a very small molecule. And so the way you move hydrogen long distances is usually to convert it into something else. So, as you said currently there’s not a lot of hydrogen use in around the West Coast in Newfoundland. And so, the fundamental concept is you take the wind resource that would otherwise just blow and not be captured, capture that wind, convert that wind and water into hydrogen, and shipping it to where you need to ship it to — Europe being the most likely target. The interesting thing that’s emerging is the opportunity to potentially keep the hydrogen local in Newfoundland. So that’s something that we’re developing now. But it’s got really tremendous promise in terms of a longer term view for how can you take the resources of the province, upgrade those resources in the province, and then the reduction in carbon intensity in that conversion process right there, can be sold into the marketplace for its carbon reduction characteristics.
Speaker 1 [00:11:57] All of this is going to require huge amounts of capital, billions and billions of dollars. How are you thinking about de-risking that investment?
Speaker 3 [00:12:08] This is an enormous endeavor. As you know, this is scoped out at about a $12 billion project. You’ve got to put together partnerships. It’s host country, destination country, the supplier, the off taker. These are highly integrated endeavors in which you’re satisfying a whole range of objectives as you try to produce a commodity in a lower carbon way. Most importantly, you have to answer the question about how are we going to pay for that carbon difference? You can do it through government regulation. You can do it through subsidy. But most importantly, you’ve ultimately got to do it based on market dynamics and the service gets monetized separately. We’re in the early days of looking at all hard to abate sectors in this manner, where this is really an economic problem as much as anything, right? You need to be able to connect customers who want something with the supply of that something. The problem in these hard to abate sectors, whether it’s cement or steel or aviation, is the moving the molecules around to create the lower carbon products. So you’ve got to make the differential as cheap as it can possibly be, and then make up the difference in a way that you can count on monetizing the spread to the higher carbon alternatives.
Speaker 1 [00:13:36] We’ve been talking a lot about what you’re doing in Stephenville, and that’s impressive. There’s also incredibly impressive things going on around the world in hydrogen generally and green hydrogen specifically. You’re a global investor, as I mentioned earlier, based in Boston. What if you can give us a sense of what Canada’s got, what our strengths are in eyes of an investor and operator like you, and also maybe what some of our weaknesses are that we need to come to grips with as global competition heats up.
Speaker 3 [00:14:07] Hmm. Well, Canada is just an ideal place to do the kind of work that we’re doing. The work we’re doing is very land intensive. So in a place with very low population density, like where we’re operating in Newfoundland, where you’ve got very supportive local communities, uh, you’ve got the land. Canada being a G7 country in a world in which we’re increasingly sensitive to geopolitical risk — super helpful. There are places in northern Africa, for example, that have really good wind resources, but a lot more geopolitical risk than does Canada. So, Canada has an immense amount of natural benefit to be arguably the leading player globally in the emergence of clean hydrogen.
Speaker 1 [00:14:57] What are we lacking or what do we need to come to grips with to be that?
Speaker 3 [00:15:02] Look, I think, I think the jury’s still out on whether Canada can muster the national will to do really big things. And the global stage, Canada is sometimes seen as mired in process, can’t do things that are obviously in its own interest and sometimes lack political will. And I think that’s a big, sweeping assessment. I hope it doesn’t come across from an American like an indictment, but I think that is the question, uh.
Speaker 1 [00:15:30] Because a lot of Canadians would share that view.
Speaker 2 [00:15:32] Yeah, I don’t think I’m going out on a limb, I’m not making it up.
Speaker 1 [00:15:35] It’s important to hear that from others, too.
Speaker 2 [00:15:37] Yeah. But I think that that’s the real question mark. Can Canada come together at the provincial level, at the local level, at the national level and say, look, this is going to be something we’re going to do?
Speaker 1 [00:15:49] I wonder, Gene, if I can wrap up with a final question about 2024 and what excites you most and what concerns you as we look at the year ahead?
Speaker 1 [00:15:58] Well, what excites me most is this, uh, potential to move beyond just government action. And what really excites me is private sector first movers, who are looking to create a low carbon solutions for consumers. That really allows tremendous economic power to get unleashed. You know, it’s hard for me to describe effectively how much economic power there comes from being able to sell decarbonization separate from the physical molecule that enables that. This is called insetting many people familiar with offsets. These are insets because they’re in sector displacement of carbon. That’s a super powerful force. And in 2024, that really starts to move beyond its infancy.
Speaker 1 [00:16:49] What a great message to wrap up with, Gene. Thank you so much for being on Disruptors.
Speaker 2 [00:16:53] John, it’s been a blast, I appreciate it.
Speaker 1 [00:17:06] Our next guest is Marco Alvera. He’s the CEO of Tree Energy Solutions (TES), which is one of the world’s leading hydrogen players. TES operates globally and has ambitious plans in Quebec, where it’s aiming to build a massive green hydrogen plant. Marco, welcome to Disruptors.
Speaker 2 [00:17:23] Thanks, John. Good to be here.
Speaker 1 [00:17:25] Let’s start with the name TES. Where did that come from?
Speaker 2 [00:17:28] So the idea is that we are inspired by nature. And when you look at a tree, the tree grows by absorbing carbon in the trunk. And the wood is actually made of carbon. So there’s this whole notion that carbon is bad. Of course, it’s very bad if it’s in the atmosphere because it causes global warming, but it can be very useful in nature. And so what the whole premise is that we use carbon as a means of moving renewable energy from where it’s abundant and cheap to where it’s needed. And the whole idea is to make it as natural as possible and to make it as cheap as possible.
Speaker 1 [00:17:59] And this fits into your model, even philosophy of, if I can put it that way around a circular carbon economy. We’re talking about green hydrogen in this episode. Where does green hydrogen and how does green hydrogen fit into that circular carbon economy?
Speaker 2 [00:18:14] So let’s start off with some key facts. Green hydrogen has been prohibitively expensive. I used to hate hydrogen. I loved it as a molecule, but never thought it would work just because of costs. To put it into perspective, when oil was at $20 per megawatt hour. Green hydrogen was about $1,000 per megawatt hour. Now we have oil that went up to about 60, 50, $60 a megawatt hour. The cost of the cheapest solar and hydro and wind is way down to about 20, 30, $40 a megawatt hour. So cheaper than oil. So what hydrogen is, is a means of turning that solar and wind and hydropower into a molecule, into a fuel that we can use. So hydrogen is not a source of energy. It’s a way of moving electric energy into fuels. So this is a new market. It’s going to be a big market. It’s going to be a market, you know bigger than the market for oil today. It’s all going to happen in the next 20-30 years. So it’s very exciting opportunity a. To save the world and and try to stay within two or as close to two degrees as possible. But also it’s a huge business opportunity. We’re going to be building a new energy system which is more resilient, cheaper geopolitically, more spread out and really exciting.
Speaker 1 [00:19:32] What attracted you to Canada and also to Quebec?
Speaker 2 [00:19:36] Canada is just a terrific country when it comes to the opportunity for green hydrogen, and it’s a country that has significant gas demand, significant space, significant renewable potential in Quebec and elsewhere, and could potentially and will become a big export centre as well for green energy. The opportunity specifically is to take hydropower and take biogenic CO2 and come and create this hydrogen. So we create synthetic methane and we serve that locally to a utility. And this is very circular. So it’s this idea that you can use what’s otherwise maybe far away or maybe hard to store. And you kind of turn what is a renewable energy source into a fuel that you can use in today’s infrastructure.
Speaker 1 [00:20:39] Walk us through the hydrogen component of this and what your vision is for Project Mauricie and Quebec.
Speaker 2 [00:20:46] So the idea is rather simple. You take, uh, hydro power and you use those electrons. You run them through what is called an electrolyzer. And the electrolyzer has the ability to separate in water the oxygen from the hydrogen. The hydrogen will then be used for two separate purposes. One as pure hydrogen for local demand. So that’s a market that you serve directly with hydrogen. There’s other markets which are now served by natural gas where if you were to serve them with hydrogen you would need to change some infrastructure, the burners, some pipes, some valves. And so instead of changing the infrastructure to accept hydrogen as a fuel, you turn hydrogen into synthetic methane, which is a fuel that you can use immediately. So that’s the business case is to build two products. One is a byproduct of the other. So hydrogen is call it the base product. And ENG is a byproduct of hydrogen.
Speaker 1 [00:21:50] What do you anticipate will be the most significant and uses for this hydrogen?
Speaker 2 [00:21:55] So if I look at hydrogen in general, it’s best applied to so-called hard to abate sectors. So it’s uh ships, it’s long distance trucks, it’s, uh steel. And, and also, uh, wherever you need storage, which is beyond a few hours. So the uses for hydrogen is essentially wherever you can’t use the batteries or direct electrification. The other benefit of hydrogen is that you can move it around much cheaper than electricity, because you don’t have to build the high voltage grids. You use the existing gas system. This is where countries like Canada have a starting advantage, because there’s a lot of natural gas infrastructure in the country, built over decades and decades, worth billions and billions of dollars, that can be used immediately and seamlessly to move the renewable energy around.
Speaker 1 :22:43] Marco, I’d like to ask about a couple of challenges. One is geography and the other is the risk horizon for hydrogen. So first, on geography. For those who aren’t familiar with the Mauricie area around Shawinigan, it’s one of the most beautiful parts of the country. It’s also far from a lot of the industrial centres that are going to need a lot of that clean power that you’re talking about. Is that a factor at all in how you’ve been thinking about the project?
Speaker 2 [00:23:08] So, the opportunity for hydrogen is just that, you can move it invisibly because it’s in an existing, uh, pipeline system. So you don’t need to touch anything with the environment. The footprint of the Electrolyzer is very, very small. The visual impact is negligible, and it allows you to move renewable energy from where it’s available. And in Canada, it’s at least in the same state. You know, what we’re doing in Texas is moving it from Texas to Germany. We’re taking solar and wind from Texas and moving it into a factory in Germany by converting that solar and wind into hydrogen. So the distance is actually the opportunity, because it allows you to go and tap into the cheapest renewable energy in the world. And that’s the only way we’re going to make renewable energy cheaper than oil.
Speaker 1 [00:23:53] Talk to us a bit, Macro, about the financial risk questions around hydrogen. You referred to a 20 to 30 year time horizon. It’s great to have investors who have that long view. But, uh, sometimes those investors can be few and far between. How are you managing the risk outlook around hydrogen as well as business models that are evolving?
Speaker 2 [00:24:15] So I spent 20 years working in oil and gas. And, uh, these are some of the lowest risk projects I’ve ever seen. First of all, everything you’re building is above the ground. You don’t have any geological risk. It is a capital intensive business, but it’s very financeable because we’re using existing technologies to transform what could be stranded assets. If I think of a solar and wind. I was yesterday in, in Saudi Arabia, uh, if you if you think about some of the massive solar potential you have in the deserts, you turn that stranded solar into something that you can sell, uh, for a fixed price in a different part of the world for the long term. So the risk adjusted returns are very attractive. You don’t have the volatility you have when you’re investing in oil and gas, and you don’t have the unpredictability when you’re drilling below the ground. And you may encounter some different geology than what you were expecting above the ground. And it’s all tried and tested. So, technologies will evolve, prices will come down. But my key message, as we have today, all the technologies we need to really scale this up, uh, gradually, uh, but very significant.
Speaker 1 [00:25:29] What do you see as the key obstacles that you and others are going to need to overcome in the coming years?
Speaker 2 [00:25:35] So the biggest challenge is to make the cost of electrolyzers lower. I’ve been writing about this for the last 5 or 6 years. I’ve been investing in electrolyzer companies. I really see the trend going down, but I think it’s up to us as an industry to help accelerate that cost curve and avoid what happened with solar. Solar went from 1000 to 10 over 15 years period, and China built all the manufacturing for those panels. Hopefully when it comes to Electrolyzer, there’s going to be electrolyzers in Canada and the US and Europe as well as in China, and we can have more of a global competition and really help drive those costs down.
Speaker 1 [00:26:10] Before we move to close, Marco, I wonder if I can ask you a final question about the year ahead. You’re an optimistic person. You’re an entrepreneur. You’re a builder. You’ve shared with us some of the concerns and challenges. I’m curious what gives you the most hope in 2024 and what you’re looking to see in the coming year when it comes to green hydrogen?
Speaker 2 [00:26:28] So we had a very important COP, the last COP, which is the UN climate conference that was held in Dubai. It was critically important because the world agreed to start phasing away from fossil fuels gradually, constructively. But the direction of travel is set. I hope that the next COP, which is going to be in Azerbaijan, will be finally a COP, where we go from talk to action. There’s a big gap between the ambition and the reality. If 24′ is the year of the FIDs, which means the final investment decision, which means the project has moved from paperwork essentially in contracts and negotiations to steel, that will be very, very good news for climate, for business. And I’m very optimistic, but I’m also very pragmatic. And so I know the limits of what can be done and what cannot be done. And we’re very focused on executing on these projects because they absolutely can and will be done.
Speaker 1 [00:27:24] What a great note to wrap up on. This can be the year of FIDs of final investment decisions. Marco, thank you so much for being on Disruptors.
Speaker 2 [00:27:31] Thank you. Great to be with you.
Speaker 1 [00:27:37] It’s hard not to be excited about the potential of green hydrogen. But of course, hydrogen has always had more potential than payoff. Maybe that’s changing. Maybe this will be the year of accelerated change. There are certainly extraordinary things underway around the world, and Canada can be at the front of the pack. We have an abundance of renewable energy, the solar and wind power that hydrogen relies on. And we have the infrastructure. Think of the hydro lines and pipelines that are the backbone of a hydrogen economy, that can make us a global player. Of course, the hydrogen promise is about more than our carbon footprint and developing cleaner sources of energy. It’s about thinking of a new industrial model for our economy. Green hydrogen can be about our future energy mix. It can open avenues for economic growth and job creation. And by addressing the challenges head on, Canada can be a global hydrogen leader. Until next time. I’m John Stackhouse and this is disruptors, an RBC podcast. Talk to you soon.
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