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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Jean Bagshaw says
I am wondering what Dave Wilkin thinks about these new “tulip” shaped wind turbines and their potential to provide electricity to the system? It seems that they are much smaller and more compact whilst at the same time providing a lot more power with less wind than the current model of wind turbine. They don’t require huge fields or ocean space, and are relatively quiet and dependable (if you can believe the video I watched on you-tube).
Nancy Long says
I am under the impression that LNG is very plentiful and there is enough of it to service the world’s population for over 100 years. Surely this is enough time for people and countries to figure out the next step in energy usage.
Dave Wilkin says
Hi jean. Regarding the interesting, innovative tulip windmill design you asked about, from what I recall they are meant for households or small businesses, as I think they are about 5KW today. For comparison, the big grid scale windmills, like the ones likely planned for in this hydrogen project are 2.5 MW, meaning 500 times larger. For a comparison of scale to the CANDU nucs, the Bruce Nuclear plant is rated at 6,550 MW, with a capacity factor of close to 90%. In a year it produces 50TWhrs, more power output than from all of Canada’s current green renewable sources combined. It’s also more than all of Germany’s current solar power output.
These windmills could help reduce emissions, but note that ALL wind and solar has to be backed up by on-demand equivalent power sources due to their intermittency.. those costs are seldom included in comparisons.
Bill Beatty says
Great article Dave….The PM’s due date is past !
Dave Wilkin says
Hi Nancy, your basic point is correct, there is sufficient natural gas to help us transition, if we get on with it, but it’s not 100 years worth today.
Current proven global nat gas reserves will last about 50 years at current consumption levels. LNG takes about 13% of current nat gas production, but it is much more costly than gas delivery via pipelines.
Every year additional discoveries add to reserves, but consumption also rises, leaving the R/P ratio ( reserves to production) roughly flat at 50 yrs over the past decade or so.
If we replace more coal with nat gas, which makes lots of sense to reduce emissions quickly, we will need to accelerate new discoveries and development. How much? To replace all coal used today, nat gas production would need to more than double, which would cut the current R/P ratio in half. 25 yrs of supply is too tight and would drive costs too high to succeed in replacing cheaper coal.
These numbers all come from BP’s excellent energy stats review.
Hope this helps.
Bill Long says
Great article Dave. Thank you for the clarity in assessing PM Trudeau’s efforts to help the EU energy problems. It seems that they will have to continue relying on coal and any other energy source to get them over this crisis. The war in Ukraine can’t last forever, hopefully the pipelines will open up before Europe freezes, making Canada’s contribution a moot point, though it certainly focuses our attention on the global energy situation.
Bob Braan says
Canada can just increase natural gas shipments to the US using existing pipelines where it can be turned into LNG at one of their existing ports. Canada doesn’t currently have LNG capability for Germany but the US does.
Erin Jones says
Thanks Dave, good article. Why isn’t Trudeau pushing Canada’s much safer, Candu reactors? It is proven technology.
Thorium reactors are even better, as thorium is widely available, relatively safe and cheap to mine. In addition thorium reactors almost completely eliminate the problem of radioactive waste (and the waste that is produced is even low level–not requiring secure waste facilities (unlike uranium). Uranium reactors have proven to be dangerous, create high level radioactive waste, and is often mined in currently, unstable areas (Kazakhstan for example). Yet, building thorium reactors have been on the back burner for three decades already. We likely wouldn’t have an energy crisis today, had we begun building thorium reactors back then. They could have bridged the gap between burning fossil fuels and the yet future fusion energy, which would be unlimited in supply.
Hugh Holland says
Dave, the Newfoundland hydrogen project was proposed by the World Energy Corporation of Boston with 20 years of experience specializing in breakthrough carbon reduction projects. They are prepared to arrange $12 billion of financing based on their confidence in its potential to address long term global needs as well as short-term needs in Germany. When the Chancellor of Germany makes the effort to fly across the ocean to show support for this important project, tell me which PM from which party would not also make every effort to show support by attending. Your characterization of Trudeau’s visit as a mere photo op shows political bias that distracts from the credibility of your technical analysis. In fact our PM’s lack of attendance in his own country would have been seen as a major slight of an important ally.
Dave Wilkin says
Canada certainly could ship more gas to the US, as Bob pointed out. However, they have been near LNG capacity recently. I am not certain how much excess pipe capacity to the US currently exists, but there is likely some. We should be exploring all options, including potentially moving it through Manitoba ports on the Bays.
The demand will be there for decades, and Canada is a proven dependable partner, and unlike much of the US energy that flows through the hurricane prone Golf, Canada’s coasts are less storm risky.
Dave Wilkin says
Thanks for the compliment on my technical analysis Hugh.
For readers interested in who World Energy LLC is, they are an advanced biofuel company, around since 1998. In the energy business, dominated by giants, tiny by comparison. They have a couple of small private capital partners listed on this deal to help raise the $12 billion anticipated. This is their 1st move into hydrogen, and it’s big one.
Given this and my other points raised, I still see the project as risky and unlikely to complete as currently planned. So why was it promoted with such fanfare? My opinion to that question remains the same.
Anna-Lise Kear says
Thank you Hugh Holland for some balance.
What do others think of PP Conservatives, his view of climate change, and any viable action plan for all of Canada – not just Alberta?