The green hydrogen production project in Shawinigan, proposed by TES Canada, has been controversial since its announcement. The debate mainly concerns the threat it could present to the Hydro-Québec monopoly. But beyond this debate, does the project offer the best use of our energy resources to ensure a “greener and more prosperous Quebec”? We try to answer it.
Producing green hydrogen is an energy-intensive and expensive process. Depending on the end use, electricity production needs can be 3 to 14 times higher compared to direct electrification solutions.
For this reason, numerous studies emphasize that care must be taken to maximize its exploitation by focusing on “no regrets” sectors, that is to say those that do not lend themselves to direct use of electricity, such as energy-intensive industries (e.g. steelmaking), fertilizer production and the maritime sector.
The TES Canada project proposes to combine 66% of its green hydrogen production with carbon (CO2) to produce “synthetic” natural gas (also called e-gas) for injection into the Énergir gas network. The project targets production of 115 million cubic meters of e-gas in 2030, or only 1.5% of natural gas consumption in Quebec in 2022. So that e-gas does not worsen the climate crisis , this CO2 must come from a carbon-neutral source.
Adding a transformation step towards the production of e-gas for injection into the gas network will only exacerbate energy losses. From a scientific point of view, this process is an energy aberration, because it is contrary to the search for efficiency in the transformation of energy between different forms until its final use.
According to our “optimistic” calculations, using e-gas for building heating would result in an overall energy loss of around 70%, due to losses through the electricity to hydrogen conversion chain , from hydrogen to e-gas and from e-gas to heat production. In other words, heating a building with e-gas would require almost eight times more electricity than if it were used directly for heating from an efficient heat pump.
In the case of use in low temperature industrial processes (e.g. 200oC), which represents the majority of gas needs in the industrial sector, the use of e-gas would require almost five times more electricity than direct use.
Due to the huge electricity requirements and energy losses in its production, e-gas will be expensive not only to produce, but also to consume. We estimate this cost to be around $90 per gigajoule (GJ). By comparison, natural gas currently sells for around $7 per gigajoule in Quebec, including carbon fees, and renewable natural gas for $20 per gigajoule. We excluded several costs from our estimate, such as that of biogenic CO2, for which there is little information. The real cost could therefore be higher.
TES Canada says it can carry out its $4 billion project without subsidies. Its financial package is confidential, but it is reasonable to believe that the project will benefit from various tax credits, tax advantages and other measures available to large companies.
The project also plans to “be part of Hydro-Québec’s peak management programs,” such as the Power Demand Management Option. Just the 150 MW block granted to TES could earn it more than 8 million. If we take into account the self-production of wind and solar energy (1000 MW) and the increasing value of these credits by 2032, this source of income, paid by the state company, will be much higher.
Other investments from public funds (for example, the Business Development Bank of Canada, Investissement Québec or the Caisse de dépôt et placement du Québec) could also potentially contribute to the project. “Subsidies” can therefore be indirect.
As part of its consultations, TES Canada indicates that its project is “essential to the decarbonization of Quebec”. Our analysis, however, suggests that the e-gas chain promises to be complicated, inefficient and costly.
Green hydrogen will play a role in the energy transition, but for its contribution to decarbonization to be optimal, the premises of the TES Canada project must be transparent and supported by evidence made public.