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Jan 21, 2022
Canadian exports of low-carbon hydrogen could drive a new wave of renewable development
As countries transition away from using carbon-intensive energy resources, low-carbon hydrogen is expected to be an important energy source for difficult-to-electrify industries.
An ongoing trend over the past several years has been for governments around the world to set targets for low-carbon hydrogen use throughout the energy sector. In 2017, Japan became the first country to adopt a national hydrogen strategy, which estimates demand for hydrogen to reach between 5-35 million metric tons per year (MMt/y) by 2050. Since then, several countries across Asia, Europe and North America have released their own targets for low-carbon hydrogen-use.
In many of the largest markets, especially those that are resource and space constrained, demand for low-carbon hydrogen is likely to exceed the local production capability and create a market for low-carbon hydrogen imports that is expected to pick up in the 2030s (see figure 1).
Figure 1: Global hydrogen imports
Canada is one of the largest global producers of hydrogen and is expected to be able to produce enough low-carbon hydrogen to supply domestic needs and export to international markets. Though Canada faces competition from several energy exporting nations, capturing even a modest share of the expected market for low-carbon hydrogen imports would drive a significant expansion in domestic hydrogen production levels. Our long-term planning case for North America has Canadian production of low-carbon hydrogen for export ramping up in the mid-2030s through 2050.
Canada's future electricity demand will be highly sensitive to the mix of green versus blue hydrogen exports. Producing green hydrogen from water electrolysis is a highly electricity-intensive process whereas blue hydrogen production methods are not.
In our long-term planning case for North America, the composition of Canada's low-carbon hydrogen exports evolves over time, shifting from blue to green hydrogen. In the 2030s, blue hydrogen will be the lowest-cost source of low-carbon hydrogen in many markets. Over time, improvements in the cost and performance of electrolyzers and renewables and increased stringency of carbon intensity requirements will improve the competitiveness of green hydrogen exports. By 2040, green hydrogen will rise to become the primary source of Canada's low-carbon hydrogen exports and rise to account for two-thirds of all low carbon hydrogen exports by 2050.
Green hydrogen exports, while highly uncertain, could drive a wave of renewable development in Canada. Onshore wind will account for most of the renewable additions to support green hydrogen production. The need for wind resources will constitute a significant wind building boom in Canada starting in the mid-2030s.
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This article was published by S&P Global Commodity Insights and not by S&P Global Ratings, which is a separately managed division of S&P Global.
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