I was against green hydrogen projects in Quebec.
I was against it because, firstly, promoters often intended to export their production. The big deal: they would have taken our very cheap electricity to transform it and resell it in the form of green hydrogen at a good price elsewhere. The promoters would have enriched themselves on our backs, under the pretext of defending the environment.
I was against it, too, because our energy needs are immense. However, the conversion from hydroelectricity to green hydrogen, with water electrolysis, results in an energy loss of around 30%. Only a few very specific users – and few in number – would benefit from it. Better to supply customers with hydroelectricity directly.
I was against it, well, because of the dynamics of our energy system. Such green hydrogen projects are viable in countries where renewable energy, at times, is produced in vain, as is the case when wind turbines run idle at night and there is no batteries to store this energy. Converting it into green hydrogen then becomes interesting.
However, this is not the case for Hydro-Québec, which can make its dam reservoirs act as batteries by varying the water level.
I was against it, therefore, but I voted for it on one condition: that the promoters of such projects produce their own green energy to do so – typically between 7 and 9 cents per kilowatt hour – rather than siphoning off the energy. cheap energy from Hydro-Québec, at 5.3 cents per kilowatt hour.
I actually suggested exactly that a year ago in a column entitled “Energy reflection for Pierre Fitzgibbon”, when he was appointed Minister of Energy1.
The developers would never accept such a thing, I told myself, even if Hydro-Québec law allows it, according to my understanding. Too expensive, not profitable2.
Now, the 4 billion project in Mauricie presented on Friday by TES Canada avoids almost all of these pitfalls.
First, all its production will be intended for local needs. And the company will power its electrolyzer by producing its own renewable energy.
Yes, okay, Hydro-Québec will provide 150 megawatts, or a third of the needs, but two-thirds of the power will come from TES’s own wind turbines and solar panels, which appears to be an acceptable compromise.
It is even more so since the company will use its own electricity transmission network, which it wants to bury underground, and which it is committed to completely offloading Hydro-Québec’s 150 MW block. during very costly winter peak periods.
Will the project be profitable? Good question. To know this, we must base ourselves on the main use of the product, namely its conversion into synthetic natural gas for the customer, Énergir, which is negotiating to purchase two-thirds of the production.
TES will have an average input cost of approximately 7 cents per kilowatt hour, if we combine the likely price of its own energy (approximately 8 cents per kilowatt hour) with that of Hydro (5.3 cents).
Once electrolyzed and converted into natural gas, this energy would cost around $34 per gigajoule, according to parameters from the Trottier Energy Institute. However, natural gas currently sells for around $7 per gigajoule in Quebec, carbon fees included.
In short, green gas would sell for almost five times the price of dirty gas. At this price, who will want it?
Phone call to Renaud Lortie, from Énergir. The vice-president of procurement explains to me that he currently buys renewable natural gas, made with biomass, for $19.12 per gigajoule. This renewable gas represents around 2% of its sales in 2023, 75% of which are sold to industrial customers.
But the price of clean gas, like most renewable energies, will increase over the coming years. And Énergir is required, by regulation, to increase the share of its clean gas sales to 5% in 2025 and to 10% in 2030.
Another aspect: standards are being prepared to assign a quality index to clean gas sold on the markets. TES green gas is likely to fetch a high price, given its inputs, which will increase its value.
Finally, the price of GHGs, which currently represents a third of the price of gas, is expected to triple within five years, which will increase the price of dirty gas.
In short, the price gap between green gas and dirty gas and other clean gases is likely to gradually decrease within a few years. And after all, it is up to the company, entirely private and without subsidies – apart from tax credits – to deal with this issue.
By the way, why do manufacturers want to buy such green gas? Because environmental requirements are tightening and 25% of the industrial sector is not “electrifiable”, and is therefore impossible to decarbonize with Hydro-Québec energy.
To achieve its decarbonization targets, Quebec must therefore offer an alternative solution to such customers, which include steel mills and cement plants, for example.
I was against green hydrogen projects. I am not for such a project, at least if it respects its promises.
Will there be wind and solar farms acceptable to the population? Will it manage to build its network and its electrolyzer within the expected costs? Will it avoid begging for energy from Hydro-Québec if its network is not as reliable as expected? Will he offer a competitive price to Énergir?
Looking forward to seeing what happens next…
2. None has ever done it, in fact, except the aluminum smelters (especially Rio Tinto), but that’s because its electricity network was built ages ago, at low cost, thanks to gifts from governments .