The Role of Hydrogen in Decarbonizing Alberta’s Electricity System

Abstract

In roughly two years, and well ahead of schedule, Alberta is expected to have completely transformed its electrical grid from being largely powered by coal to instead being powered by natural gas, hydroelectricity, wind and solar. By 2030, however, it is likely that another fuel source will compete with natural gas as a major part of Alberta’s power grid: namely hydrogen.

Fully decarbonizing Alberta’s electric power sector as Canada works to achieve its goal of net-zero greenhouse gas emissions will be challenging due to the lack of significant hydroelectric or any nuclear power in the province. However, Alberta has many advantages that make hydrogen feasible as a pathway to decarbonizing its power grid. First, the steam and combustion turbines that are powered by natural gas today to produce electricity in Alberta can be adapted to use hydrogen. Second, Alberta has vast amounts of natural gas that can be used to produce hydrogen, and ample geology for underground carbon capture and storage for the greenhouse gases emitted in producing hydrogen. And third, in periods where the province’s renewable energy sources produce excess electricity, that power can be used to produce hydrogen, which can be stored for later use when renewable energy is less available.

These advantages, combined with certain federal and provincial policies, position hydrogen to play a significant role, providing low-emission firm power when variable solar and wind power are unable to meet the province’s power demands. Given the limits of battery storage capacity, cost, and technology beyond hourly & possibly overnight use, storing hydrogen for multi-hour, -day and seasonal storage in underground, salt caverns appears to be a practical alternative for Alberta. Absent government policy, hydrogen-based power costs would likely remain uncompetitive in Western Canada, where natural gas is abundant and cheap. However, Alberta’s climate policy, with its output-based allocations regime, is set to combine with the federal government’s plan to raise the carbon price to $170 per tonne to make all forms of hydrogen-based power production more cost-effective than natural gas in the province after 2030.

The potential for Alberta to transition to a reliable, low-carbon electricity grid will require that any future adjustments to the output-based allocations regime consider the impact on the economics of hydrogen investment and production. The government should also ensure that Alberta reserves its salt caverns for eventual use as hydrogen storage and that any newly installed turbines are capable of being easily retrofitted to use hydrogen as fuel. Hydrogen is an opportunity to bridge today’s system, based on fossil fuels, to tomorrow’s net-zero fuels and technologies. It is an opportunity that Alberta is well-positioned to seize.