Construction and Infrastructure Law in Canada Blog

Canada’s Hydrogen Strategy: Key considerations for infrastructure players

Jan 13, 2021 4 MIN READ
Joel Heard

Partner, Commercial, Toronto

On December 16, 2020, Canada’s federal government released its Hydrogen Strategy for Canada (the “Strategy”). In a previous Osler Update we provided an overview of the key elements of the Strategy. In this post, we identify some steps infrastructure players should consider to capitalize on new opportunities in the hydrogen economy in the context of the Strategy.

As we noted in our previous Osler Update, the Strategy includes 32 recommendations organized under eight pillars, with the goals of harnessing hydrogen as a pathway to reducing Canada’s greenhouse gas emissions and creating economic opportunities over the near (2020-2025), mid (2025-2030) and long-term (2030-2050) future. Those recommendations provide a roadmap for government priorities and potential opportunities, particularly in the early stages of the Strategy, which may include government funding and other incentives. In addition, many longer-term opportunities may be realized by scaling successful technologies, applications and capabilities developed in the early stages. This means that timely and proactive action to identify opportunities and pursue creative solutions may outperform a “wait and see” approach.

While it remains difficult to predict exactly how each of the Strategy’s recommendations and similar provincial strategies will be implemented, parties seeking to position themselves for long term success in Canada’s emerging hydrogen economy could consider planning with the following goals in mind.

Optimizing capacity for partnerships, including public-private and international partnerships

Shifting a significant portion of Canada’s energy system to low-carbon hydrogen will require technological advancements and massive capital investments. Therefore, private-sector players who are willing to partner with government and international entities will be best positioned to succeed. Companies should consider identifying and maximizing core innovations while maintaining flexibility to work with other players. Especially in the near-term, this may include general teaming agreements to pursue opportunities, pilot projects or multi-site development agreements. These partnering strategies may be especially productive if they are focussed within targeted areas or clusters with extensive opportunities for innovation and expertise in a certain sector (referred to in the Strategy as “HUBs”).

The Strategy also contemplates bringing Canadian hydrogen innovation and supply to market globally. This may further underscore the benefits of seeking out international partnerships, where appropriate, to leverage funding, research and development, competitive advantages and other synergies.

Laying the groundwork for innovation

Organizations should develop their credentials to demonstrate a track record of creative problem solving in the energy infrastructure space and related industries. Products and technologies that interface well with those of other players across multiple applications and contexts are likely to scale well.

Preparing for compliance in an updated regulatory environment

The Strategy proposes modernized codes and standards, as well as new policies and regulations that will be proposed by all levels of government, for the purpose of integrating hydrogen into clean energy roadmaps and strategies across Canada. Leaders should therefore ensure that contracts reflect the likelihood of changes in law and assign responsibility for compliance with the anticipated regulatory shifts.

Understanding regional blueprints

The Strategy calls for tailor-made blueprints for HUBs in different geographic areas of the country. Companies should consider aligning their capabilities, activities and investments to tie in with these blueprints.

Planning and monitoring in order to take advantage of government funding opportunities

Companies should closely monitor how the Strategy is implemented in the coming months to take advantage of government funding which may become available under the federal government’s $1.5 billion Low-carbon and Zero-emissions Fuels Fund (which was previously announced as part of its strengthened climate plan, A Healthy Environment and a Healthy Economy) [PDF], or other federal or provincial incentives for hydrogen projects. Ensuring that business plans align with the federal government’s (and applicable provincial governments’) stated objectives should assist companies to position themselves to qualify for such support when it is announced.

The road ahead

Although skeptics may point out that the Strategy is aspirational in nature, it is clear that hydrogen enjoys broad support from Canadian policy makers and industry as a potentially critical component of Canada’s transition to a low-carbon economy. The Strategy, together with provincial and regional hydrogen initiatives, sets the stage for significant actions and investments to come. Osler is already working with clients on new hydrogen infrastructure projects and applications, and we expect to see accelerated activity in this sector.