The B.C. government’s recently released hydrogen strategy—a thoughtful plan to create and use clean hydrogen—contains an implicit acknowledgement: the world is moving away from fossil fuels and toward low-carbon alternatives.
B.C. isn’t the only jurisdiction to see clean hydrogen as the new natural gas. A number of European Union nations, Western Australia, Oman and Saudi Arabia have together committed tens of billions of dollars to produce clean hydrogen to replace natural gas for domestic use and export.
The writing is already on the wall. Or more literally, in the pages of the International Energy Agency’s recent net-zero report, which concluded that no new oil and gas fields should be approved for development if we’re to limit climate change to 1.5°C.
Other models also forecast marginal or negative growth in natural gas production globally and domestically if nations follow through on their climate pledges. The Canada Energy Regulator, for example, finds that if no more liquefied natural gas (LNG) export terminals beyond LNG Canada’s Phase 1 and 2 are built, growth in Canadian natural gas production between 2019 and 2050 will be negative.
As for the competition, it’s not just hydrogen eating away at natural gas’ future market share. Since 2010, the cost of renewable energy has declined 82% for solar photovoltaics and 40% for onshore wind. Globally, new renewable power generation was cheaper than the cheapest new fossil fuel option 62% of the time last year.
And if you’re inclined to point out that wind and solar are weather-dependent, battery costs to store renewable energy around the clock have dropped 70% since 2015 – with storage capacities up to 1,200 megawatts currently under development, a scale that’s roughly equal to the Site C dam.
Where does this all leave B.C.’s natural gas industry? Fortunately, the baby does not need to be thrown out with the bathwater. There are two ways the industry can manage through an inevitable global transition away from fossil fuels by 2050.
While B.C.’s long-term hydrogen future will likely be “green,” meaning made with clean electricity and water, in the short term, B.C. has an opportunity to also produce “blue” hydrogen. Blue hydrogen involves capturing CO2 from hydrogen production and storing it permanently underground. B.C. is ideally positioned to produce blue hydrogen from its natural gas reserves for use in industrial processes (such as refining and manufacturing). It can also be blended with natural gas in the nation’s gas grid or converted into ammonia or methanol for export to Asia, California and Europe.
Blue hydrogen comes with a caveat, however. Recent forecasts suggest that emissions-free green hydrogen will out-compete blue hydrogen on price as early as 2030, not to mention cleanliness. While blue hydrogen can help build up supply and demand for clean hydrogen in general and the technologies that use it, its long-term future is uncertain. An effective hydrogen strategy must thus plan for every timeline.
Secondly, B.C.’s natural gas industry already has the infrastructure in place and the workforce needed to repurpose depleted oil and gas reservoirs (or use other geological formations) to permanently store CO2. Basically, the industry that pulled natural gas out of the ground can become the industry that puts CO2 back into the ground.
B.C. is already a global leader in the direct air capture of CO2 through companies such as Squamish-based Carbon Engineering. Combining B.C.’s skilled natural gas workforce, the province’s innovative companies working on storing CO2 and our abundant clean electricity could be a recipe for success.
The reality is that B.C. gas producers are both price and policy takers from export markets with increasingly ambitious climate agendas. Innovation is natural gas’ other strong headwind, as renewable power generation and storage costs continue their competitive decline.
Thankfully, we can see what’s coming, and we have the resources to not only prepare for it – but to seize it. The choice is ours to make.
This post originally appeared in Business in Vancouver.
