Hon. Jeff Yurek Minister of…

Hon. Jeff Yurek
Minister of the Environment, Conservation and Parks
6th Floor, 135 St Clair Ave W Toronto, ON
M4V 1P5

RE: Ontario Power Generation Response to the Ontario Low-Carbon Hydrogen Strategy Discussion Paper

Dear Minister Yurek,

Ontario Power Generation (OPG) supports the Ontario Government’s efforts to establish a low carbon hydrogen strategy as outlined in the November 19, 2020 discussion paper. Ontario’s low-carbon hydrogen strategy will be a key element of the Made-in-Ontario Environment Plan to reduce greenhouse gas emissions 30% by 2030.

OPG’s Hydrogen Strategy and Net-Zero Climate Change Commitments

OPG is a catalyst for efficient, economy-wide decarbonisation and we have a critical role to play in establishing Ontario’s economically viable hydrogen economy. Our corporate hydrogen strategy provides a framework for scalable, reliable electrolysis based low-carbon hydrogen production across Ontario by leveraging OPG’s distributed electricity assets and low-carbon off-peak electricity. OPG has committed to be a net-zero carbon company by 2040 and to be a catalyst for a net-zero carbon economy by 2050. Low-carbon hydrogen is complimentary to our electrification program and is essential to meeting OPG’s climate goals and the Made-in-Ontario climate goals.

Ontario Low-carbon Hydrogen Vision

We are fully aligned with the vision that Ontario’s low-carbon hydrogen strategy should leverage our province’s existing strengths, create local jobs and attract investment while reducing greenhouse gas emissions. Ontario’s low-carbon electricity system is a strength to be leveraged for electrolysis production of low-carbon hydrogen. We recommend that the vision include the ultimate goal of a self sustaining and economically viable hydrogen economy that can be realized in the long term, with the right policy and investment today.

Ontario’s Low-carbon Hydrogen Strategy: Outcomes and Results

The success of Ontario’s low-carbon hydrogen strategy requires government policy, support and alignment on outcomes and results. OPG’s detailed responses to 18 Discussion Paper questions on Hydrogen are enclosed and the key outcomes and results of the Ontario low-carbon hydrogen are highlighted below:

1. Stimulate Low-carbon Hydrogen Demand – Low-carbon hydrogen currently has a premium cost and limited market demand in Ontario. Anchor customers are required at “hydrogen hubs” to be off-takers of large quantities of low-carbon hydrogen to stimulate market demand and facilitate economical low-carbon hydrogen production at scale. Several large anchor customers in hubs distributed around the province will expedite the hydrogen economy and allow smaller consumers to adopt low-carbon hydrogen at economical prices. Industries well suited to be hub anchor customers include: natural gas electricity generation plants, industrial processes (e.g., steel, cement, chemical), transit agencies with long distance service routes, and return-to-base fleets (e.g., airport taxi). These industries can utilize low-carbon hydrogen, where and when it makes sense, while respecting the rate payer and tax payer of Ontario. With Ontario Government support, OPG can be both a low cost producer of hydrogen and anchor customer, stimulating market demand for low-carbon hydrogen and expediting the arrival of the low-carbon hydrogen economy.

2. Provide Electricity Cost Certainty – Electricity cost makes up the majority of ongoing operations and maintenance costs of an electolyzer operating budget. As a result, economic electricity prices with cost certainty is required for economic low-carbon hydrogen with price certainty. Electrolyzers are well suited to hydrogen production during lower demand electricity hours, when the carbon intensity of the grid is lower. In addition, operating during lower demand does not increase the generation capacity requirements of the grid. The Ontario Government has a policy role to play in ensuring electricity cost certainty for the success of electrolyzer projects. Electricity cost certainty can be achieved by implementing policies such as an interruptible industrial electricity rate or through providing long term certainty on electricity rates. Surplus Baseload Generation (SBG) of electricity has been historically high from 2013-2020, however, it is expected to be significantly reduced going forward. OPG is well-positioned to leverage available SBG at hydro electric facilities for hydrogen production.

3. Enable Scalable and Distributed Production – Transporting large quantities of low-carbon hydrogen can be expensive and logistically challenging. Scalable and distributed low-carbon hydrogen production across Ontario can support wide adoption of low-carbon hydrogen (particularly for heavy duty trucking). OPG has real estate, electricity infrastructure and potential consumption needs for low-carbon hydrogen across the province of Ontario. The distributed production of low-carbon hydrogen should take a phased approach, starting in Southern Ontario and graduating to Northern Ontario as markets are established. OPG has sufficient coverage of highway 401 to enable regular hydrogen fueling stops along from Windsor to Cornwall. In addition, we have assets at the ends of highway 407 for which reduced tolls could be an incentive for clean heavy trucking (both hydrogen of battery electric).

4. Expedite Regulations – Storage and transportation of hydrogen is complex and costly. Regulations regarding blending of low-carbon hydrogen in the natural gas pipeline will help facilitate and expedite industrial customer adoption and reduce capital costs incurred for large quantity storage and transport. Government policy supporting financial transactions where hydrogen is produced, injected into the natural gas pipeline and credit given to industrial consumers willing to pay a premium, will facilitate broader industrial adoption and greater GHG reduction, while minimizing near term costs.

We look forward to supporting the Ontario Government in the development and implementation of Ontario’s low carbon hydrogen strategy.

Sincerely,

Ken Hartwick
President and CEO
Ontario Power Generation