A new budget passed in Canada will provide much-anticipated details about the future of the country’s clean hydrogen production.
Helping kickstart the green energy transition outlined in the Fall Economic Statement, the budget will enable Canada to compete globally against other countries that are accelerating clean hydrogen production.
This critical investment in a growing source of energy will help create good middle class careers, ensure that Canadian companies can remain globally competitive, and encourage the use of clean energy to reduce pollution.
As part of the budget, the Government will invest CAD$1.5bn into the Clean Fuels Fund to encourage investment into the production of clean fuels, including hydrogen and biofuels. It will also introduce a significant tax credit for hydrogen production in Canada – at least 40% if all conditions are met.
The Clean Hydrogen Investment Tax Credit (ITC) aims to be a direct competitor with the US Inflation Reduction Act and place Canada as a world leader in renewable energies. The ITC must be coupled with contracts for difference (CfDs) as part of the Canada Growth Fund to make the country genuinely competitive with the US’ proposals.
The ITC is expected to cost CAD$5.6bn over five years, beginning in 2023-24. Between 2028-29 and 2034-35, it is expected to cost an additional CAD$12.1bn.
The importance of CfDs in attracting clean energy investments
CfDs are not just about de-risking investments for project developers; they are also an investment vehicle which can return funds to the Canada Growth Fund as the global market for clean hydrogen production develops.
With many of the ITC details confirmed and a broad framework set for the launch of the Canada Growth Fund, efficient implementation of CfDs will be crucial to ensuring that Canada attracts clean energy investments, such as World Energy GH2’s CAD 16B Project Nujio’qonik on the west coast of Newfoundland and Labrador.
World Energy GH2 commits to remaining engaged with Finance Canada as it finalises the details of the eligible capital costs under the Clean Hydrogen and the Clean Technologies ITCs.
Canada’s place in the renewable energy sector
As a longstanding exporter of energy, it is crucial for the Canadian economy to be at the forefront of new solutions, such as clean hydrogen production, as the world transitions towards net zero.
John Risley, a Director at World Energy GH2, stated: “All of Canada wins when clean energy wins. Budget23 sets the right conditions for establishing a multi-billion-dollar clean hydrogen production sector in Atlantic Canada.
“Our project will be one of the largest private-sector investments in the region’s history, and there is still more to come.”
He continued: “Canada has committed to helping our European allies transition to cleaner energy supplied by stable countries. This commitment was reflected in German Chancellor Olaf Scholz’ and European Commission President Ursula von der Leyen’s visits to Canada.
“Now, it is time to make good on that promise and deliver our first shipments of clean hydrogen in 2025. Budget23 sends a signal across the Atlantic that our allies can count on Canada,” Risley concluded.