By Dave Wilkin
PM Justin Trudeau recently signed a green hydrogen “joint declaration of intent” with Germany’s PM, to much media fanfare. He positioned it as an important event in the battle against the climate crisis and as a win for our NATO ally and Europe generally, helping them to reduce their dependency on Russian energy. But is this in fact true?
Europe desperately needs reliable suppliers of energy to replace Russian energy. When asked if Europe wanted Canada to provide them with liquefied natural gas (LNG), Germany’s Scholz responded very clearly that he did. Yet Trudeau questioned if there is a “business case” for Canada to provide it. Why would he say that?
Let’s look closer at some key facts to help answer the question. My attached figure highlights the scope of Europe’s energy crisis today and why their need for fossil fuels will continue for decades.
The EU has been energy insecure for decades, and despite their green energy investment of well over a trillion US dollars and possessing the world’s toughest emissions regulations and highest carbon taxes, fossil fuels still represent over 70% of their Primary Energy mix, a modest 10% decline over the past two decades.
As shown, Russia supplied about 15 exajoules of energy to Europe in 2021, representing a quarter of their fossil fuels and just under a fifth of all energy consumed. That amount is almost equal to all their renewables and hydropower combined. Just replacing Russian natural gas with LNG would take almost 40% of the world’s 2021 LNG exports. Most countries that rely on LNG imports, largely in Asia, have long-term contracts in place and are already being impacted by far higher prices. Most of Europe’s LNG increase this year came from ramped-up US production, which is now forecast to fall in the second half of the year. A recent Rystad energy report forecasts global LNG demand rising through to 2034.
So far, Russian energy restrictions have rocketed up European energy prices, especially for natural gas and electricity, with their futures exceeding an increase of 1000%, leading to energy bills doubling from last year. Europe has been forced to introduce energy rationing and to fire up closed coal power plants to compensate. All of this has pushed the Euro to lows against the US dollar not seen in decades, and is now likely to cause a recession. Although unlikely to happen, a total Russian energy cut-off would push European economies into tailspins and bring on severe hardship as winter sets in.
So in fact there is a very strong business case for Canadian LNG exports to Europe.
Now turning to the case for green hydrogen. Due to the high costs of shipping liquefied hydrogen (at -253˚C), it is planned to be turned into ammonia first. Ammonia as a fuel is not without issues, as it has low flammability & radiation intensity and high NOx emissions, meaning more study is needed prior to broad adoption. Additionally, its round-trip energy loss ranges from 65% to 90%, depending on the application, and scant infrastructure exists today to support it.
The agreement with Germany for a 2025 deployment target is overly optimistic given the technology maturity and high capital costs expected (around $12 billion when completed). Stephenville Newfoundland, where it is to be built, has a population just a third of Huntsville’s, further increasing the challenges.
The initial project phase requires about 1 GW of wind power (roughly 400 large windmills), putting its annual energy output at about 0.004 exajoules, which would replace under half a day’s worth of Germany’s 2021 Russian imports, and for all of Europe, just a few hours. It’s not even a rounding error compared to the 500 exajoules of global fossil fuel consumption.
Lastly, why would Europe, a global leader in wind and solar power generation today, purchase hydrogen from Canada at what will certainly be higher costs due to transport? Perhaps they don’t want to pack their countryside with thousands more windmills? It is noteworthy that the document signed with Germany has no price or volume commitments. No surprise there, so Canadian investors are taking a significant risk, because if Europe doesn’t pan out, Newfoundland is a long way from the large domestic energy markets and US markets are even less certain. Let’s hope Canadian taxpayers don’t end up on the hook to bail out this kind of project. The hard lesson learned from the massively overbudget Newfoundland Muskrat Falls hydro project debacle should be a stark reminder for caution.
The reality is that green hydrogen is a costly energy form today, with almost no market share. Its future role will be confined to uses that are difficult or impossible to electrify, such as shipping or air transport or as a longer-duration energy storage alternative for intermittent wind/solar power. It’s not going to have much impact in the near term.
As for missed opportunities, two jump out. An LNG commitment would make a material difference for Germany’s and Europe’s energy security while reducing the need to burn more and dirtier coal and oil. It could be done just as fast or faster than green hydrogen if were made a serious government priority. The other miss was for Canadian nuclear technology, especially Small Modular Reactors. As pointed out in a previous article I co-authored, nuclear power is key to achieving a viable/sustainable clean energy transition and Germany appears to be rethinking its phaseout of nuclear power.
So in summary, this green hydrogen deal does nothing to solve Europe’s energy crisis, nor move the needle on reducing global emissions. So why was it so highly promoted by Justin Trudeau? Most likely because it was another photo-op for him meant to bolster his government’s sagging climate change credentials while appeasing Quebec voters who reject any new pipelines. Again the Trudeau government misses the big opportunities for Canada’s world-class energy sector, placing politics and ideology ahead of our country’s best interests.
Dave Wilkin is a Professional Engineer, with a master’s degree in Electrical Engineering from the University of Toronto. His career spans over 40 years in Information Technology, banking, and energy. He is currently a co-owner in a small energy consulting company and lives in Huntsville, Ontario.
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