Plans have fallen down in the face of familiar headwinds, but Canada was the second-largest low-carbon H2 producer in 2024 and its potential is undimmed, writes Jasmina Kelemen
Canadian hydrogen proponents all agree on one thing — 2026 is a make-or-break year, when the sector will need to show that it can turn strategies and incentives into more shovels in the ground.
Canada's hydrogen industry was rattled by setbacks last year, as several developers withdrew from project plans.
But the country's low-carbon hydrogen potential remains enormous and Canada has enjoyed more progress than many peers. It has the second-largest "committed" low-carbon hydrogen production capacity — taking into account projects that are operational, under construction or that have reached a final investment decision — trailing only China, Paris-based energy watchdog the International Energy Agency (IEA) said earlier this month. It was also the second-largest low-carbon hydrogen producer in 2024, with 200,000t, and is among the top-five countries for announced capacity, the IEA said.
Yet announced capacity of 2mn t/yr for 2030 is lower than the projection set out in 2021, when the IEA first published its outlook. Since then, developers have cancelled or delayed projects as demand has grown more slowly than anticipated and costs have remained high. Logistical bottlenecks have also derailed initiatives.
Some government bodies have consequently questioned hydrogen's role in clean energy ambitions. In British Columbia, stakeholders have suggested "revisiting" the province's hydrogen strategy from 2021 as "technology and market prospects for domestic hydrogen production and use — and potential exports — have significantly dimmed", the provincial government said late last year.
But hydrogen proponents hope that the sector can rebuild momentum this year. Derek Estabrook, executive director of industry group the Atlantic Hydrogen Alliance, says he expects 2026 "to be a defining year".
This is partly because the prospect of more government funding could propel projects forward. Germany and Canada are together making roughly C$600mn available for Canadian renewable hydrogen and ammonia projects through the H2Global scheme. "Developers that want to be early movers are advancing their projects so that they will be ready to submit bids" in the auction, Estabrook said.
The coming months will also bring more clarity on regulations and future demand in key offtake markets, especially through national transpositions of the EU's revised renewable energy directive (RED III) in Europe. Some developers, such as Atco, have pinned their hopes on subsidy schemes in northeast Asia, but South Korea has effectively scrapped its ammonia cofiring plans and no Canadian project has been selected under Japan's contract-for-difference scheme to date.
Most projects for domestic offtake have also faced delays, but some could progress this year. Chemicals firm Dow last month settled on a late-2029 start-up date for its Fort Saskatchewan Path2Zero project, for which industrial gas firm Linde is to provide gas-based hydrogen produced with carbon capture and storage from a new facility. Dow had announced an indefinite delay to the project last year after initially targeting a 2027 start.
Low-carbon hydrogen projects stand to benefit from investment tax credits that can cover up to 40pc of capital costs. The credits are a "huge tailwind" for projects and can play a key role in driving the sector forward, developer Evrec's founder and president, J Colter Eadie, says.
