Canadian hydrogen companies seek rigid regulations

Canadian hydrogen companies seek rigid regulations

January 3, 2024 0 By Alicia Moore

The Newfoundland H2 businesses are seeking to avoid allowing competitors access to subsidies.

Canadian hydrogen companies are waiting to hear about the regulations that will be applied to billions of federal government dollars regarding which ones will qualify for a substantial tax credit.

Newfoundland firms are hoping the rules will be quite strict to keep competitors out.

The country’s Liberal government announced over a year ago that hydrogen companies would be eligible for tax credits that range from 15 to 40 percent. That said, the details regarding eligibility have yet to be released. Once released, they will define how green a clean H2 project is required to be in order to qualify for the largest end of the tax credit scale.

We’ve been promised them now for some time and of course they’re working their way through the bureaucracy, and we understand that,” said World Energy GH2 chair John Risley. World Energy GH2 is the largest project proposed in Canada’s easternmost province. “We would have hoped to see them in October, but we were told that we can expect to see them very soon and I’m not sure I could define ‘very soon’ for you.”

Hydrogen companies are concerned with time-matching, deliverability and additionality.

If those categories are defined strictly, it would mean that projects would be required to ensure that they are only using renewable, emission-free electricity sources to power their H2 production. This would be the only way to qualify for the highest, 40 percent, tax credit.

Hydrogen companies - Tax Credit 40%

That said, it would also mean that projects receiving the highest tax credit would be subject to variable factors such as wind strength and cloud cover. After all, those projects would not be able to rely on fossil fuel-based energy as a supplement to powering production plants if they want that highest tax credit.

Competitive advantage

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According to Risley, those strict rules would be beneficial to Newfoundland-based hydrogen companies because they would likely use the provincial electricity grid as their backup power source. Since that province’s grid already comes from 80 percent renewable energy, it would barely harm their qualifications for higher tax credits.

Moreover, that would also provide hydrogen companies in the province with a competitive advantage over those operating in other provinces, including those nearby, which use far more fossil fuel for their grids. Nova Scotia, for instance, has a grid with 51 percent power from coal and coke.

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