Calgary-based ATCO Ltd. and the Kansai Electric Power Co., Inc. (KEPCO) are collaborating to develop an integrated blue hydrogen fuels supply chain between Canada and Japan to provide low-carbon energy for the Japanese utility.
ATCO (ACO-X-T) would work through its subsidiary Canadian Utilities Limited, and a planned Alberta production facility. A pre-feasibility study has already been completed.
Blue hydrogen is hydrogen produced using natural gas. By combining its production with carbon capture and storage, as with this project, the hydrogen becomes a low-carbon fuel.
“We got into dialogue about two years ago around looking at, ‘Can we jointly develop the entire integrated supply chain of clean hydrogen or derivative products from Western Canada to deliver their needs in Japan?’ We completed a pre-feasibility study last year to make sure, ‘Does this make sense? Does it work?’ ” James Powell, ATCO’s vice-president of energy infrastructure and clean fuels, told SustainableBiz.
Canadian Utilities, a diversified global energy infrastructure corporation, has approximately 5,000 employees. ATCO employs 7,600 people worldwide and operates $25 billion in assets, including 64,000 kilometres of natural gas pipelines.
ATCO and KEPCO
KEPCO is an electrical utility in the Kansai region, Japan’s second-largest industrial area. It is just over 10 per cent owned by the Japanese government. By the end of 2022, it had approximately 29.4 gigawatts of capacity. The utility has a 2050 net-zero commitment, complementing Japan's goal of achieving carbon neutrality by 2050.
In a 2022 report, KEPCO stated it is aiming for a 30 per cent share of the hydrogen being handled in Japan by 2050.
ATCO is a global company with assets around the world. However, Powell did say the scale involved in shipping this amount of hydrogen around the world is “somewhat of a step up for us.”
ATCO’s supply chain will utilize auto thermal reforming and carbon capture in Alberta's industrial heartland to develop low-carbon-intensity blue hydrogen or ammonia derivatives. That product would be transported to Canada's West Coast before being shipped overseas to Japan.
The companies have yet to finalize estimates of production volume or the scale of the eventual facility. They are exploring two avenues for transportation – liquid hydrogen or utilizing ammonia as a carrier. Once that is finalized, interior design work for the facility can begin, which Powell says is likely several months away.
It is expected to begin commercial operations by late 2027.
“Hydrogen is not a low-cost commodity. However, as you can create scale and size, you get the scale of economies, and you can start pushing down the cost. So we're really going through an exercise right now,” Powell said.
“What is the forecasted demand? What's the total demand? Where does that logical break point come into optimizing capital against volume to obtain that sweet spot, if you will, to have the lowest cost per kilogram or per trip.”
Powell said ATCO is on "the tail end" of a feasibility study that will move into concept slides later this year. It will examine challenges such as the supply chain, economics and regulatory requirements of a project of this scale.
ATCO and hydrogen
While there could be several avenues for other supply-chain developments of this scale, for now, ATCO is focusing on KEPCO and Japan.
"Our folks in Alberta have done a lot of global impact analysis and we believe Alberta in Western Canada is strategically positioned and should be competitive on the world-scale basis,” Powell said. “What I mean by this, I don't think there's a company that's going to win out of Western Canada, I think there is going to be a basin that's going to win to meet the demand.”
The company has other hydrogen developments in Canada and Australia.
Last year, ATCO began delivering a blend of natural gas containing five per cent hydrogen by volume into a subsection of the Fort Saskatchewan natural gas distribution system. As of Oct. 26, 2022, about 2,100 customers were using the hydrogen-blended natural gas.
In January, ATCO was awarded $800,000 from the Australian government to support development of a renewable hydrogen export chain from Australia's New South Wales state to Germany. Those funds will go towards a feasibility study for a one-gigawatt hydrogen production facility and an 800 kilotonne-per-year ammonia facility in the Illawarra region.
The Australian project is not as far along as the Kansai venture.
“I think right now cost economic wise, utilizing export-scale volumes of electrolyzers is going to be more expensive . . . than natural gas with carbon capture,” Powell said. “However, ATCO is also very aggressively pursuing export strategies out of Australia.”