Canada: The State of the Hydrogen Economy & Hydrogen Strategy

Production Capacities and Costs 

Although Canada ranks among the countries with the greatest potential for green hydrogen production, electrolysis capacity so far remains very small, limited to pilot and demonstration projects. Current hydrogen production is still almost entirely dominated by fossil-based grey hydrogen. Canada currently produces around 4 million tonnes of hydrogen per year, predominantly via steam methane reforming from natural gas, in some cases with CO₂ capture (blue hydrogen). 

This is partly due to the still significant gap in production costs. Grey hydrogen from natural gas currently costs around 1.50 to 2.50 Canadian dollars per kilogram (CAD/kg) in Canada. By comparison, the cost of green hydrogen is currently estimated at 4 to 8 CAD/kg, depending on region, electricity procurement costs and plant size. Cost parity between green and grey hydrogen is expected for Canada – under optimistic assumptions – in the 2030–2035 timeframe. 

Canada's Ambitions on the Global Market 

A central element of Canada's hydrogen strategy is its positioning as an exporter. The country has considerable potential to establish itself as a relevant player in the global hydrogen economy. The adelphi study 'Executive Summary: Hydrogen in Canada – Status Quo, Debates and Potential' estimates the long-term export potential at around 25–35 million tonnes of hydrogen per year. 

Canada could become a strategic partner for Europe in particular. Against the backdrop of the energy crisis triggered by Russia's war of aggression against Ukraine, the European Union has initiated the development of a transatlantic hydrogen supply chain with Canada. In August 2022, Canada and Germany signed a bilateral 'Hydrogen Alliance' agreement, which envisages deliveries of hydrogen and ammonia to Germany and has since been given concrete form through a joint H2Global funding programme of 400 million euros for Canadian export projects.

Key Projects

Canada's hydrogen landscape is in motion. While the political framework is in place, the real ramp-up is happening at project level. Several flagship projects are currently under development. Here is a snapshot of Canada's H₂ project landscape: 

Air Products' Net Zero Hydrogen Energy Complex (Alberta): One of the most ambitious blue hydrogen projects in the world: the facility uses Auto-Thermal Reforming (ATR) combined with CCS technology (Carbon Capture and Storage refers to the capture of fossil CO₂ emissions directly at the source). The company aims to produce up to 1,500 tonnes of near-zero-emission hydrogen per day. The investment volume amounts to 1.6 billion CAD. 

HTEC – Hydrogen Technology & Energy Corporation (British Columbia): HTEC is driving the development of a hydrogen refuelling network for commercial vehicles. The H2 Gateway Programme is a key building block for decarbonising heavy-duty transport on the West Coast. By the end of 2025, 17 stations (6 already operational) are planned in British Columbia, with plans for 55 by 2030. 

Énergir & Gazière (Québec): In test zones, the company is already feeding green hydrogen into the existing natural gas grid – with a blending rate of up to 5–10 percent by volume. The pilot project aims to demonstrate how the existing gas infrastructure can gradually be made available for hydrogen. 

EverWind Fuels (Nova Scotia): An offshore hydrogen project: wind power is set to drive several GW of electrolysis capacity to produce up to 240,000 tonnes of ammonia per year for export to Europe. The investment volume amounts to around 8 billion CAD. The project is supported by H2Global funding. 

Hydro-Québec / thyssenkrupp nucera (Varennes, Québec): An 88 MW PEM electrolyser powered by hydropower is set to produce approximately 11,000 tonnes of green hydrogen per year, to be used for biofuel production from residual waste. 

TES Canada – Projet Mauricie (Québec): A green hydrogen project that, from 2028, will use 1 GW of wind and solar power (800 MW wind, 200 MW solar) to produce around 70,000 tonnes of hydrogen per year through electrolysis. The investment volume amounts to around 4 billion CAD. 

Simply Blue Energy – E-Fuel Hub Goldboro (Nova Scotia): A former LNG site is to be converted into a SAF hub, where offshore wind, solar and biomass energy will be used to produce 150,000 tonnes of sustainable aviation fuel (SAF) per year. 

Green Hydrogen and DAC – A Powerful Combination

Alongside the wide range of activities around hydrogen production, transport and use, Canada is increasingly focusing on how to offset unavoidable residual emissions. While CCS is already used in the production of blue hydrogen, another approach goes a step further. Direct Air Capture (DAC) draws CO₂ directly from the ambient air. The technology pairs well with hydrogen production, showing how climate technologies can be combined synergistically. The hydrogen produced and the CO₂ captured can together serve as feedstocks for renewable products – such as the production of synthetic fuels. 

DAC is gaining significant momentum in Canada. The federal government is working on a dedicated protocol for Direct Air Carbon Dioxide Capture and Storage (DACCS) and has earmarked 135 million CAD for the procurement of permanent carbon removal services. The combination of a clear policy framework and geological suitability for CO₂ storage makes Canada a central testing ground for whether DAC can become a key pillar of climate policy at industrial scale – a potential that Canadian company Deep Sky Climate is determined to turn into reality. 

DAC and Hydrogen Production in One Plant 

In January 2024, Deep Sky announced the conclusion of a contract with German start-up Greenlyte Carbon Technologies (GCT). The aim of the collaboration is to install a facility using GCT technology in the so-called 'Alpha Lab' – a test site for various CO₂ capture systems – in the province of Québec. 

The Greenlyte Carbon Technologies process works in three main steps: 

• Absorption: CO₂ from the ambient air is absorbed into a liquid sorbent solution. 

• Precipitation: The absorbed CO₂ is precipitated as bicarbonate and concentrated. 

• Desorption via electrolysis: In an electrochemical process, the bicarbonate is decomposed, simultaneously producing concentrated CO₂ streams and hydrogen. 

According to the companies, the planned facility will be able to capture up to 100 tonnes of CO₂ per year from the atmosphere. Deep Sky's long-term vision goes far beyond this: the Alpha Lab is intended to eventually be scaled – together with additional systems – to a capacity of up to one gigatonne of CO₂ per year, a volume comparable to the total greenhouse gas emissions of Germany. 

For the operation of the facility, Deep Sky intends to use the vast hydropower capacities and wind potential of the Québec region. The site was also selected based on geological criteria: it has suitable subsurface formations for long-term CO₂ storage. 

Conclusion 

Canada has the natural resources, the industrial base and the political will to become one of the world's most significant production and export hubs for hydrogen. The strategy is in place, the first major projects are under construction, and the first international supply chains are taking shape. 

But the road ahead remains demanding. The critical question will be whether Canada can make the transition from pilot project to industrial scale in time. The example of Deep Sky Climate and Greenlyte points to where the journey could lead: away from isolated individual technologies, towards integrated approaches – conceived across both technologies and borders. If that succeeds, Canada has the potential to become not just an exporter of hydrogen – but of climate technology.