Green Hydrogen Revisited

There have been big developments on the green hydrogen file since last we spoke—and by big developments, I don’t mean actual, physical, developments.  I mean big plans (and incentives) announced by big, important people.

I’ve dealt with the Nova Scotian aspect of these developments in a separate article, but I wanted to look at what’s happening elsewhere in Atlantic Canada because it is helpful in understanding the forces at work in this corner of the renewables world (and it involves some Nova Scotians). So let’s talk about the two—count ’em—two billionaires looking to turn Newfoundland and Labrador into a green hydrogen hub.

I’ve decided a good way to discuss this subject is by comparing and contrasting a pair of news articles outlining their respective plans. The first, from the ABC (as in Australian Broadcasting Commission), is dated October 2021 and focuses on iron ore magnate Andrew Forrest, “one of the world’s richest men” who was on:

…a whirlwind global tour to drum up support for a hydrogen-led future, to rid the world of fossil fuels and save the planet for future generations.

Forrest seems always to couch his plans in terms of saving the planet so it’s up to the reporter, Ian Verrender, to suggest he might have another motive:

And along the way, if it’s all structured correctly, he may just end up making yet another fortune.

Verrender drives this point home again in his conclusion:

As [Forrest] sees it, the world is rushing towards decarbonisation, a process that will only accelerate in the next few years. It is where the money is to be made.

Given he will be offloading much of the risk to governments, the chances are he will make a tidy sum.

Honestly, I could just end this article here. That last line is everything you need to know about the green hydrogen plans floating around Atlantic Canada these days.

 

Next stop, Newfoundland

At the time the ABC piece was published, Forrest was signing up potential suppliers of wind and solar and hydro power. His “whistlestop tour” of the previous year had included “Europe, Asia, Latin America, Russia, Kyrgyzstan and even Afghanistan” and his Fortescue Future Industries (FFI, part of Fortescue Metals Group) had struck deals with “Papua New Guinea and the Democratic Republic of Congo (DRC), along with Kenya and Ethiopia.”

ABC didn’t mention it, but Forrest also had his sights set on Newfoundland and Labrador. As the CBC reported in June 2021, FFI began reaching out to provincial government officials there in the fall of 2020:

…asking a series of questions about hydro assets and green energy opportunities in general, and Gull Island in particular.

Gull Island, as MUN Professor Lori Lee Oates explained in a subsequent CBC opinion piece, is the “undeveloped and long-proposed megaproject on the lower Churchill River.” (Oates’ article, questioning the wisdom of a second hydroelectric dam project in a province that has yet to reap any benefit from the first—Muskrat Falls—is worth a read.)

In August 2021, Canada Fortescue Future Industries (CFFI), a Calgary-based “indirect subsidiary” of FFI, engaged former Nova Scotia Premier Darrell Dexter in his new guise as vice chair of Global Public Affairs to lobby the Newfoundland government on its behalf. (The relationship with Dexter was apparently short lived. The relevant entry in the Newfoundland and Labrador Lobbyist Registry says he was engaged on 16 August 2021 and “terminated” on 2 November 2021.)

By 20 August 2022, though, the Canadian Press was reporting that FFI had:

…filed paperwork with the province for a hydrogen and green ammonia production plant, a liquid ammonia marine export terminal and wind power facilities.

As of press time, the paperwork had not been made public.

 

Heeeeeeeere’s Johnny!

So, on the one hand we have an Australian iron ore billionaire (nickname “Twiggy”) planning a green hydrogen facility for Newfoundland as part of a master plan to save the planet, and on the other, we have a homegrown billionaire with his own green hydrogen project, as explained in this article by Globe and Mail energy reporter Emma Graney.

At this point, I’m afraid I have to introduce a second CFFI— CFFI Ventures Inc, an investment group led by Risley. CFFI invested US$345 million in World Energy, a US-based biodiesel producer, in 2018 with Risley becoming World Energy’s chairman.

Now World Energy has formed a consortium, World Energy GH2, that is proposing its own Newfoundland green hydrogen project—Project Nujio’qonik—the first phase to consist of a 164-turbine, one-gigawatt wind farm “on the Port au Port Peninsula, on the province’s west coast. The installation would power a hydrogen/ammonia production facility at the site of the old Abitibi-Consolidated pulp mill in Stephenville.” Ultimately, the wind farm is to triple in size.

World Energy GH2 lists its various “team members” on its website but its directors, according to the federal business registry, are Risley, Gene Gebolys (CEO of World Energy) and Brendan Paddick.

Paddick is the former chair of Nalcor Energy, a former director of Clearwater Seafoods, CEO of Columbus Capital, resident of the Bahamas, personal friend of Newfoundland and Labrador Premier Andrew Furey and—until July when allNewfoundlandLabrador.com found out about it and reported on it—chair of the Churchill River energy analysis team, a “secretly formed”committee “tasked with analyzing the Churchill River’s potential for hydro energy.”

Speaking to the Globe and Mail on behalf of this group Risley, bless his cold, capitalist heart, doesn’t greenwash their ambitions. He’s open about the fact that his goal is to “build successful businesses,” saving the planet seems entirely incidental. Nor does he shy away from indicating there is money to be made in green hydrogen and he expects the government to help him make it:

Nova Scotia-based billionaire businessman John Risley, a co-founder of Clearwater Seafoods and a director at World Energy, believes the project could be a catalyst for a booming hydrogen sector in Atlantic Canada. But he said governments must “show some courage” and move swiftly to develop appropriate policies.

“I love my country, it’s been good to me. I want to invest here, I want to build successful businesses here, but we can be our own worst enemy,” he said in a recent interview.

“We just cannot get out of our own way sometimes. And I just worry that we cannot make people understand that this is a global opportunity. The wind blows in a whole bunch of other places around the world, and we are in a race with those jurisdictions.”

Got that? It’s not that all these “jurisdictions” share the same planet and have a mutual interest in fighting climate change, it’s that climate change represents a business opportunity for John Risley and nothing must stand in his way.

But what are these “appropriate policies” our political leaders must have the courage to develop? Graney (who seems incurious to the point of journalistic malpractice) doesn’t ask, but Verrender’s article holds a likely answer:

For the world to get to a hydrogen future, governments globally need to sign up to a program of massive taxpayer support in the same way they supported the rise of renewable energy.

That could explain why Paddick was recruited. And why, as the Canadian Press reported, “Paddick, CFFI and World Energy GH2 partner Horizon Maritime Services together donated $46,800 to Furey’s Liberals during the 2021 provincial election year.” And why the Australian billionaire, Forrest, has been “furiously cozying up to governments.”

 

Subsidies galore

According to Recharge, a publication focused on the transition to renewables, that “massive taxpayer support” may well mean matching the green hydrogen incentives contained in the Inflation Reduction Act passed by the US Senate earlier this month:

Not only will the act’s generous tax credits of up to $3/kg…for ten years make the renewable H₂ produced in the US the cheapest form of hydrogen in the world — but it will also light a fire under the many countries that aim to become major players in the nascent green hydrogen space.

…The dozen or so countries that have publicly stated their ambitions to become world leaders in green hydrogen — including India, China, Australia, Chile, Egypt, the UAE, Oman and Namibia — will not want to lose out on clean hydrogen investment to the US and will therefore be carefully recalibrating how to lure investors, including equipment makers, with their own ambitious green H₂ programmes.

While pitting countries against each other to see who will eventually corner the green hydrogen market sounds like a perfectly efficient way to stave off climate catastrophe (as does taking all your advice on green hydrogen from people with money riding on it), Recharge warns there may be downsides to this subsidy approach:

The tax credits will make the cost of green hydrogen production low — and, in a competitive US market, this would also mean that purchase price of the H₂ would be lower than an unsubsidised product.

This might lead some developers to conclude that they could make more money by exporting it to places of high prices and high demand, such as Europe, Japan or South Korea.

In other words, the private companies lured into producing green hydrogen might behave like private companies.

Another potential problem is that the Inflation Reduction Act apparently puts no limit on how much money the US government could spend on green hydrogen subsidies:

A similar situation occurred in Spain in the 2000s, when its unlimited, generous feed-in tariff for solar energy was launched in 2004 by a Socialist government, but proved to be far more popular than envisaged, leaving Madrid with ten times as much PV power as it had envisaged by 2010, and a €3bn annual subsidy bill. This led to a successor right-wing government scrapping all solar subsidies in 2014 and even retroactively withdrawing the FIT from older projects, despite those having been installed on the basis of the promised 20-year tariff. The move decimated the Spanish solar industry and led to thousands of bankruptcies, while also denting international trust in Spain as a reliable place for private investment.

And if the Americans (and any countries that follow their example) dodge those bullets, there’s still the problem of depending on “unrelated” third-parties to “verify the lifecycle emissions of each project,” which is what the US legislation envisions. As Recharge notes:

If these third-party companies are paid by each developer, they may be put under pressure to give favourable opinions that would save their clients millions of dollars, or some unscrupulous executives could even resort to bribery or blackmail to get them.

Heaven forfend!

 

Not so fast…

Listen closely and beneath all the “rah-rah-green-hydrogen” rhetoric you’ll hear some more skeptical voices, including one that has featured previously here in the Spectator.

I was pleased to see the Canadian Press turn to Paul Martin, the retired chemical engineer and co-founder of the Hydrogen Science Coalition, for its coverage of the Canada-Germany accord. Martin told reporter Laura Osman that the infrastructure costs of producing and transporting green hydrogen don’t add up:

“Honestly looking at it the green hydrogen pitch in Canada for export, it’s disingenuous,” he said.

And Amit Kumar, the industrial research chair of the Natural Sciences and Engineering Research Council, provided some equally sobering analysis:

Canada has been talking up plans to help Germany with new natural gas projects in Atlantic Canada that could one day be converted to blue hydrogen facilities.

But Germany is looking mainly for “green hydrogen,” which is made through splitting water molecules using renewable energy like wind or solar power. That comes at a much higher price.

“You’re looking at anywhere between three- to fourfold increase in costs,” said Kumar, a faculty of engineering professor at the University of Alberta who was consulted on the drafting of Alberta’s hydrogen strategy.

He said the technology needs to improve and more investment needs to be made before the cost is even relatively comparable with its natural gas-derived alternative.

Energy experts, says Osman, believe green hydrogen will “serve as only a small, far-off and expensive part of the solution to Europe’s energy crisis.”

Another source of fact-based information has been Nick Mercer, a researcher with the school for Resource and Environmental Studies at Dalhousie University, who told The Independent‘s Abby Cole that, in his opinion, producing hydrogen is “innately a wasteful process, just converting wind directly to electricity is way more efficient.”

I’ve read a paper recently that suggested that if we’re going to produce hydrogen, ship it off to Europe, convert it to a usable form, such as in a household furnace for instance, [it] would take 6 to 14 times more the amount of energy than [would] be required if you just stuck up a wind turbine, and then use the electricity directly in an electric space heater. I question why would we pursue this when we could just focus directly on electrification at home and the build-out of electric vehicles and conversion to electric heating.

This echoes what Paul Martin told me, namely, that talk of using hydrogen as a fuel is a “dumb distraction” on the road to decarbonization.

Even those bullish on green hydrogen, like Tim Buckley, an energy market analyst from the Institute for Energy Economics and Financial Analysis (IEFA), who told ABC he believes the price will drop 70% in the next decade, is very clear about why (and where) this will happen:

“Where green hydrogen is almost inevitably going to work is where green energy is going to be almost free,” he said.

“Places like Rajasthan in India or the Pilbara in Australia.”

Not, apparently, Point Tupper, Nova Scotia or Stephenville, Newfoundland.