The Quebec Energy Transition: A Preview of The Emerging Green Hydrogen Sector

Hydrogen is regaining interest worldwide, including in the province of Quebec where several small and large hydrogen-related initiatives and projects have been launched in the last few years. Aiming to capitalize on the province’s abundant hydroelectric resources, the Quebec government has demonstrated its support for the emerging hydrogen sector by making green hydrogen a key component of the province’s economy and energy transition, and positioning the province as a leader of green hydrogen production.
 
The emphasis on “green” hydrogen in Quebec government’s policies refers to the production of hydrogen from renewable energy sources, such as water by electrolysis using hydroelectricity, which is bountiful in Quebec. The green hydrogen production process differs from the way that “grey” or “blue” hydrogen is produced, both of which rely on the use of non-renewable feedstock such as natural gas or coal. Grey hydrogen is produced by steam methane reformation (SMR) without carbon capture sequestration (CCS). Blue hydrogen, on the other hand, is produced from fossil fuels by SMR or other processes but with CCS.
 
In our recent bulletin entitled Canada’s Hydrogen Strategy: An Ambitious Framework for a Strong Hydrogen Economy we presented the Hydrogen Strategy for Canada, which outlines the federal government’s vision for the development of the hydrogen sector in Canada. The Hydrogen Strategy for Canada complements the actions taken by various Canadian provinces in recent years to integrate hydrogen production and use into their economies.
 
In this bulletin, we focus on related developments in the province of Quebec. What follows is a preview of the Quebec government’s policy initiatives in support of the province’s nascent green hydrogen sector and a snapshot of the potential increase of green hydrogen production and use in Quebec.
 

ANTICIPATED GREEN HYDROGEN POLICY

The formal release of Quebec’s green hydrogen and bioenergy strategy is expected in the fall of 2021. Nevertheless, the Quebec government’s Plan for a Green Economy 2030 (Green Plan) and associated action plan for the years 2021 to 2026 (Action Plan) released in November 2020, already place green hydrogen, along with bioenergy, front and center as complementary sources of clean energy for the future of Quebec’s green economy. The Action Plan is reviewable annually. Development of the green hydrogen sector is seen as a key component in helping to achieve the province’s target of reducing its green house gas emissions by 37.5 per cent by 2030, as compared to the 1990 level.

The Green Plan sets forth the principles that will guide the actions of the Quebec government over the next ten years in laying the foundations for a green and prosperous economy. The focus of the government’s plan is the electrification of the economy. While Quebec’s abundant and affordable hydroelectric resources are the primary source of power to support the government’s electrification and climate change strategy, the Green Plan also provides for the deployment of renewable energy sources, such as bioenergy and green hydrogen, to complement the transition of the economy from fossil fuel sources to green energy sources produced in Quebec. Moreover, the government has identified the development of the green hydrogen and bioenergy sectors as one of the four pillars for building the green economy of the future. The government intends to position the province as a leader in the production of green hydrogen and bioenergy by leveraging its hydropower capacities, developing existing expertise, supporting the implementation of technology showcases and, generally, by creating a stable and predictable economic environment to support investments from the private sector.  

The Action Plan identifies the principal actions proposed by the government for the implementation of the Green Plan for the 2021-2026 period. In reference to the development of the hydrogen sector, the government will focus on finalizing and releasing Quebec’s green hydrogen and bioenergy strategy by fall of 2021. The Action Plan signals that its main objectives will be to remove obstacles to consumption and local production of hydrogen, and to set conditions favorable to the development of the green hydrogen sector in Quebec. Additionally, in the Action Plan, the government commits a sum of C$15-million dollars to stimulate innovation and the development of the hydrogen sector, notably by supporting pilot projects for the industrial and heavy haulage sectors.

LEGISLATIVE INITIATIVES

To facilitate the implementation of the policies outlined in the Green Plan, the Quebec government has enacted legislation having the purpose of supporting the coordination of policies and programs relating to climate change. Bill 44, An Act mainly to ensure effective governance of the fight against climate change and to promote electrification is in effect as of November 1, 2020. Bill 44 grants the Minister of Energy and Natural Resources the responsibility for ensuring integrated governance regarding the energy transition, innovation and efficiency. In addition, Bill 44 abolishes Transition énergétique Québec (TAQ) and allows the Minister to establish an advisory committee to assist with preparing an energy transition, innovation and efficiency master plan. We anticipate that additional legislative and regulatory initiatives will follow.

“GREEN” HYDROGEN IN QUEBEC

Currently, only a small fraction of hydrogen produced in Quebec is “green”. A report on the state of the energy sector in Quebec prepared by HEC Montréal (HEC Report) published in January 2021, references four hydrogen production sites in operation in Quebec. The hydrogen is primarily produced for local industry use and the global production capacity totals 120,563 kg per day.  According to the HEC Report, only 0.2 per cent of hydrogen in Quebec is produced using renewable energy sources.

Quebec is well placed to become a leader in “green” hydrogen production given its existing and growing production of electricity from renewable energy sources, and in particular, from hydropower. According to the HEC Report, 94 per cent of electricity produced in the province comes from hydropower, 5.3 per cent is generated by wind farms and the balance is produced from biomass and solar sources. Additional data in the HEC Report shows that Quebec’s electricity supply infrastructure has a total installed capacity, per resource type, as follows:

1. 40 730 MW from hydroelectric power plants

2. 3 632 MW from wind farms

3. 797 MW from biomass installations

4. 531 MW from combustion sources (natural gas or fuel oil)

5. 191 MW from internal combustion (diesel)

The installed capacity of solar power production is not provided. The HEC Report also highlights that renewable energy sources make up 46 per cent of the energy sources in Quebec^. This high proportion of local energy production from renewable energy sources sets Quebec apart from other regions in the world and supports the potential of the province to leverage its developed renewable energy sector by adding green hydrogen to the energy mix.

Incidentally, several green hydrogen projects in Quebec have recently been announced by domestic and foreign utility companies. The projects range from the inauguration of a 20-megawatt proton exchange membrane electrolyzer for the production of green hydrogen for  supply on the North-American East market, the announcement of the construction of an 80-megawatt green hydrogen production plant for the supply of a future biofuel plant and the announcement of a pioneering partnership to build a 20-megawatt green hydrogen production plant powered by hydroelectricity for injection into the local gas distribution network, thus creating a regional network for the consumption of greener natural gas. 

Besides the production of green hydrogen, Quebec has been, and remains, an active jurisdiction for pilot projects in the transportation sector. Most recently, certain automakers have joined forces in a hydrogen refueling infrastructure project aimed at adding additional fueling stations in the major centers in Quebec. For its part, the government of Quebec is also leading by example, having leased the first fleet of fuel cell vehicles for its operations.

A LOOK AHEAD

We will continue to monitor developments in Quebec’s hydrogen sector, and in particular, the release of the province’s own hydrogen-specific policy in the fall of 2021. According to the Action Plan, consultations with stakeholders are expected to begin in the spring of 2021.

If you have any questions regarding the impact of the Green Plan or the Action Plan on your business, or regarding business opportunities in the hydrogen sector, please contact:

Viorelia Guzun            514-982-4087
Anne Drost                  514-982-4033
Paulina Balabuch       514-982-5035

or any other member of our Energy Group.