Canada signs non-binding agreement with Germany to export hydrogen to Europe by 2025

Prime Minister Justin Trudeau, left, shakes hands with German Chancellor Olaf Scholz during the Canadian-German Business Forum in Toronto on Aug. 23, 2022.COLE BURSTON/AFP/Getty Images

The Canadian and German governments have signed a deal to co-operate on exporting hydrogen fuel to Europe, setting an ambitious target of 2025 to begin shipments from Eastern Canada – where a single hydrogen production plant has yet to be built.

Prime Minister Justin Trudeau and German Chancellor Olaf Scholz signed the agreement in the western Newfoundland town of Stephenville, near the site of a proposed wind farm project that would power the production of hydrogen from electrolysis.

The joint declaration of intent makes clear the agreement is not legally binding and stipulates it will be up to Canada’s Minister of Natural Resources and Germany’s Ministry of Economic Affairs and Climate Action to keep track of whether it’s making progress on its goals.

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“The participants aim to closely collaborate on all aspects necessary to kick-start the hydrogen economy and to create a transatlantic supply chain for hydrogen well before 2030, with first deliveries aiming for 2025,” the agreement says.

The agreement is part of the German government’s effort to become less dependent on Russian fuel supplies by deepening energy partnerships with Canada and other countries. In recent months, as tensions over Russia’s invasion of Ukraine have mounted, Moscow has reduced flows of natural gas to Europe, forcing Germany to brace for gas rationing.

Canada currently produces about three million tons of hydrogen from natural gas a year, according to the federal government’s 2020 Hydrogen Strategy, which puts this country among the top 10 producers of the fuel in the world today. The Germans, however, want hydrogen made from renewable energy and a raft of projects are under way in Canada to meet this demand.

The Canadian-German agreement sets no targets for volumes of hydrogen produced and contains no commitments of new money to help begin exports to Europe by 2025.

Instead, the Canadian government said existing programs, such as the $1.5-billion Clean Fuels Fund, and the $8-billion Strategic Innovation Fund’s Net Zero Accelerator Initiative, are being used to help spur hydrogen production.

The German government did not put a figure on funding for this agreement, but said in the declaration Berlin “will support domestic importers and consumers of hydrogen and its derivatives.”

Natural Resources Minister Jonathan Wilkinson acknowledged the targeted start date for exports is very aggressive. “It’s very ambitious, but it reflects the fact that Germany sees how this can help them in their current context,” the minister said.

He said he expects the volumes of exports in 2025 “are probably going to be modest.”

Mr. Wilkinson said he is aware of about 15 hydrogen production projects at different stages of development that would be powered by renewable energy such as wind or water. “Our hope is that at least one or two of them would be producing by 2025,” he said.

Dozens of protesters demonstrated outside Tuesday’s announcement, many of them with signs opposing the proliferation of wind turbines that will accompany a green hydrogen industry in the region.

Most hydrogen export proponents are looking at transporting it to Europe by converting it to liquid ammonia before shipping, Mr. Wilkinson said. The liquid would be converted back to hydrogen after crossing the Atlantic.

Asked how Ottawa and Berlin would keep this agreement on track and progressing, Mr. Wilkinson said a primary driver of this effort is Germany’s desire to end its reliance on Russian energy. “Part of this is being driven by the desire to displace Russian gas,” he said.

Mark Agnew, senior vice-president of policy and government relations at the Canadian Chamber of Commerce, said the hydrogen pact is merely the beginning of a rigorous effort needed to begin exports. “There is still a lot of work to undertake between now and 2025, such as permitting approvals and building infrastructure before the first shipments can occur,” Mr. Agnew said.

The challenge with joint declarations, such as the one Canada and Germany have made, is “they risk being filed away and ultimately forgotten after a few follow-up meetings,” Mr. Agnew said. He said it will be vital for regular and transparent reporting on progress.

Canadian efforts to help Germany wean itself off Russian energy do not include any funding to construct infrastructure that might ship liquefied natural gas to Europe – even though Canada is the fifth-largest natural gas producer in the world.

Mr. Trudeau, who wants to reduce the use of fossil fuels, on Monday cast doubt on the business case for exporting natural gas directly from the East Coast or Quebec to Europe, saying locations for plants to convert the fuel to liquefied natural gas are too far from Western Canadian sources to be economical.

But the Canadian Gas Association, which represents the natural gas delivery industry, said this week that the biggest obstacle to building LNG facilities on the East Coast is regulatory uncertainty. The association said investors can’t be sure when or if the federal government will approve the necessary pipeline infrastructure.

The agreement also says Ottawa and Berlin will set rules that define the carbon intensity of hydrogen so producers can determine what can be called clean, low carbon or renewable hydrogen.

“The transformation is moving forward. Our industry is investing to produce in a climate-neutral way in the future,” Mr. Scholz said.

Klaus-Dieter Maubach, the chief executive of German utility Uniper SE, who accompanied Mr. Scholz on the German leader’s visit to Canada, said a co-operation agreement signed with a Nova Scotia green hydrogen and ammonia producer represents a “great starting point for us to develop hydrogen businesses in Canada.”

Uniper signed a memorandum of understanding with Nova Scotia-based EverWind Fuels LLC to purchase green ammonia from the company’s planned Point Tupper, NS, production facility. The German company would buy 500,000 tons per year of green ammonia, which can be turned into hydrogen.

“It has to start somewhere,” he said.

He said 70 to 80 percent of the hydrogen Germany will need as it transitions to a greener economy will have to be imported.

The Flensburg shipbuilding company FSG-Nobiskrug and the Canadian transport company Oceanex were also expected to sign an agreement Tuesday for the construction of a transport ship to supply Newfoundland and Labrador. Oceanex currently uses three transport ships to deliver goods to the island every day, from food to raw materials to cars. One of them already comes from the FSG-Nobiskrug plant.

Mineral deals with Volkswagen, Mercedes

In view of impending shortages of important raw materials for battery production, Volkswagen wants to rely more on Canada. The automaker and the Canadian government signed a memorandum of understanding on Tuesday to secure access to Canadian raw materials for batteries in electric vehicles. The letter of intent was signed on Tuesday by outgoing VW CEO Herbert Diess and Canadian Industry Minister François-Philippe Champagne.

“We are not opening our own mines, but we want to acquire stakes in Canadian mines and mine operators,” VW chief technology officer Thomas Schmall told The Globe and Mail. The aim, he says, is to secure volumes and prices through long-term supply agreements. Canada has virtually all the raw materials we need for battery production,” Mr. Schmall says.

VW is investing €20-billion worldwide in the battery value chain. The company will invest a single-digit billion amount in Canada, as Mr. Schmall said.

The company is currently planning six battery cell factories in Europe and another in North America. Mr. Schmall is not yet revealing whether this will be in Canada or the United States.

It’s not the only company with big plans in Canada. The Stuttgart-based car manufacturer Mercedes-Benz AG also signed a declaration of intent on Tuesday to purchase raw materials. Chief technology officer Markus Schaefer, responsible for Development and Purchasing, was part of the delegation led by Mr. Scholz and Economics Minister Robert Habeck.

Mr. Schaefer explained said Mercedes is in the process of drastically increasing the production of electric vehicles. “That’s why we’re also exploring new ways to responsibly obtain the raw materials needed for this.” Canada, he said, is a “powerful partner for this.”

Mercedes wants to tap “potential in the mining and refinery segment in Canada, as well as in the area of ​​active cathode precursors.” To this end, Mercedes wants to build relationships with the Canadian mining sector – and work closely with the German-Canadian company Rock Tech Lithium Inc.

Rock Tech says it plans to supply Mercedes with 10,000 metric tons of lithium hydroxide annually starting in 2026. The two companies have signed an agreement to this effect.

However, Rock Tech’s lithium mine in Canada is still in the approval process, according to CEO Markus Brügmann. The raw material from which the battery-grade lithium hydroxide will be extracted will initially come from Australia, among other countries, until the Canadian mine comes on stream, and will be refined in Germany.

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