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Charbone ramps up green hydrogen production in Canada, U.S.

Quebec firm building modular facilities to meet local demand as part of growth strategy

Charbone COO Daniel Charette. (Courtesy Charbone)
Charbone COO Daniel Charette. (Courtesy Charbone)

Quebec-based Charbone Hydrogen (CH-X) is ramping up its efforts to become a major player in green hydrogen production, and will soon launch its flagship Sorel-Tracy modular plant along the province's "Steel Highway" corridor.

In addition, Charbone has just announced it will build a similar facility in Oakland County, Mich., the next stage in an "aggressive" expansion strategy that seeks to roll out 16 scalable, turn-key green hydrogen production plants across Canada and the U.S. by 2030.

"We plan to be online and operating in both the U.S. and Canada this year," Daniel Charette, chief operating officer of Charbone Hydrogen, said in a release. "We are engaged with all suppliers for electrolyzer deliveries within these time frames, and our scalable approach to project plant construction gives our teams the flexibility and agility to mobilize quickly."

The Sorel operation will proceed according to what Charbone describes as a "phased approach" that will initially produce 200 kilograms of green hydrogen per day, then increase to over a tonne per day by Phase 3 and eight tonnes per day at full build-out.

Meanwhile, the Michigan plant is to become the cornerstone of a larger American Midwest hub initiative with an initial production capacity of one tonne per day of green hydrogen that will scale up with future market growth. 

Accelerating the transition from grey to green hydrogen

Environmental critics have long complained that "grey" hydrogen, still the most common form of hydrogen fuel, is a dubious alternative energy source since it is generated by a natural gas-intensive "steam methane reforming" (SMR) process.

Green energy offers the promise of a carbon-neutral fuel and energy storage mechanism that relies on renewable power for its production. Moreover, green hydrogen is also capable of transforming energy supply networks by shifting away from large-scale, fossil fuel-fired power plants to local, decentralized energy systems that rely on renewable energy sources such as hydro, solar and wind.

Today, demand for green hydrogen is poised for long-term growth as industries look to replace "dirty" grey hydrogen. However, green hydrogen is a slow-developing sector owing to obstacles including the lack of availability of renewable energy, limits in transmission capacity and the higher production costs.

"We have spoken to many companies which are using thousands of tonnes per day of grey hydrogen and would like to shift to green hydrogen but the supply isn't there - there is no way of sourcing thousands of tonnes of green hydrogen per day," Charette said.

"So our strategy is to begin with small-scale production facilities that will be addressed to a very, very specific niche market . . . In North America right now we need to focus on small quantities to (begin the transition). That will be very important.

There is cause for optimism, however, particularly south of the border as the Biden administration's Inflation Reduction Act offers a tax credit of up to US$3 per kilogram for clean hydrogen production according to the level of carbon intensity, thereby lowering production costs significantly. 

This has given a boost to green hydrogen producers such as Charbone as it improves its cost competitiveness relative to carbon-intensive grey hydrogen. 

Market for green hydrogen poised for substantial growth

Char-bone will gradually increase production at its Sorel-Tracy facility in Quebec from 200 kilograms per day of green hydrogen to eight tonnes per day. (Courtesy Charbone)
Char-bone will gradually increase production at its Sorel-Tracy facility in Quebec from 200 kilograms per day of green hydrogen to eight tonnes per day. (Courtesy Charbone)

As more companies respond to government and investor-mandated sustainability requirements, the market for green hydrogen is poised for substantial growth across both the highly polluting industrial and transportation sectors. 

Charbone Hydrogen foresees a vast potential market for green hydrogen including fossil fuel refiners, fertilizer producers, flat glass producers, semiconductor companies and cement producers.

The company will also target the enormous transportation sector where public buses and heavy mobility vehicles - which leave a major carbon footprint - can more easily be converted to run on green hydrogen. 

The company also intends to play an active role in converting steel and cement plants to green hydrogen further down the road as production costs decline and supply scales up to meet demand.

"The cost of using grey hydrogen is so low that it does not make sense, at least not in North America at least, to switch to green hydrogen. It's much cheaper to use SMR and natural gas, which is very cheap, to continue relying on grey hydrogen," Charette explained.

The future cost of green hydrogen will largely be determined by whether capital expenditures can be substantially lowered via technological advances to make the electrolyzers more efficient.

The promise of modular green hydrogen production plants

A critical aspect to Charbone Hydrogen's strategy involves scaling up its green hydrogen production facilities according to evolving market conditions. The company is poised to take advantage of future price declines, increased availability of renewable energy, and necessary upgrades to electric grids.

"Across the U.S. in particular, the public utilities have not properly modernized or upgraded their electric grids in many areas, which places limitations on how much electricity a new customer can connect to," Charette said.

This "interconnection" obstacle may well serve to hinder major green hydrogen projects that require a significant amount of electricity.

Accordingly, Charbone's modular strategy intends to capture a niche market in the short term that affords the company the possibility of future expansion.

"Our aim is to create a network of smaller green hydrogen production plants that are capable of interconnecting with existing grids without any upgrades to them," said Charette. "The way that we are developing our projects is that we lease or purchase enough land that will enable us to grow our plants year after year, as the market expands. So, we can just keep adding more modular units."

Ultimately, scaling up will be feasible and cost-effective by increasing the size and capacity of each plant based on demand where the plants are connected to the grid via power purchase agreements. The goal is to reach a point where green hydrogen becomes the norm, replacing grey hydrogen.

"Once we reach a certain level of growth, we can start building permanent electrolyzers on rooftops to generate higher rates of production," Charette said. "In the next three or four years the market for green hydrogen will begin growing exponentially."

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