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Home Home - Americas
Wilkinson hydrogen

Canada’s Hydrogen Strategy Faces Shrinking Market Prospects

Anela DoksoBy Anela Dokso09/07/20243 Mins Read
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Canada embarked on a bold hydrogen strategy four years ago, envisioning a share in a global market anticipated to be worth up to $11.7 trillion by 2050. This ambitious plan attracted billions in public funding aimed at positioning Canada as a key player in the hydrogen sector.

Natural Resources Canada’s recent progress report reveals a drastic revision of the global hydrogen market forecast. The updated estimate suggests the market will now be worth $1.9 trillion by mid-century, an 84% decrease from the original projection. This new figure, derived from a 2023 Deloitte report, starkly contrasts the initial estimate based on Goldman Sachs data. The ministry acknowledges the inherent uncertainties in forecasting nascent industries, indicating that further revisions are likely as assumptions evolve.

Despite the downward adjustment in market expectations, Canadian government support for the hydrogen sector remains robust. Federal Energy and Natural Resources Minister Jonathan Wilkinson announced an additional $8.5 million in funding at a recent energy and mines ministers meeting. This follows substantial financial commitments, including a $5.7 billion clean hydrogen investment tax credit and various funds exceeding $300 million for hydrogen projects.

Canada’s strategy focuses on green and blue hydrogen production. Green hydrogen, produced using renewable energy sources like wind power in Atlantic Canada, and blue hydrogen, derived from natural gas with carbon capture in Western Canada, are seen as key export products. The geographical advantages of these regions are expected to facilitate exports to European and Asian markets, respectively.

Critics argue that the foundational assumptions of Canada’s hydrogen strategy are flawed. Adam Scott, executive director of Shift: Action for Pension Wealth and Planet Health, contends that the strategy prioritizes protecting the legacy gas industry over addressing the broader energy transition. He highlights the lack of substantial evidence supporting the rapid growth of the hydrogen sector, describing the current approach as driven by hype rather than grounded in practical realities.

The anticipated decline in demand for hydrogen stems from the rapid advancement and cost-efficiency of electric alternatives. Electric vehicles and renewable energy sources are outpacing hydrogen in key sectors such as transportation and residential heating. Scott points out that hydrogen-powered vehicles and heating systems face significant logistical and economic challenges compared to their electric counterparts.

Documents obtained through federal access to information requests reveal that Natural Resources Canada collaborated with major fossil fuel companies to shape the country’s hydrogen priorities. This alignment raises questions about the strategic direction and motivations behind Canada’s hydrogen investments. Wilkinson acknowledges the need for emission reductions in the oil and gas sector to maintain competitiveness in an increasingly low-carbon market.

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