TD's Take on SU / ATCO Hydrogen Project Partners with ATCO on Hydrogen; Operational as Early as 2028
Event
Announced a partnership on a potential Alberta-based blue hydrogen project.
Impact: POTENTIALLY POSITIVE
Could produce >300,000 tonnes/annum of blue hydrogen with >90% of
emissions captured: Both parties are bringing their respective expertise to
the table, with Suncor constructing/operating the hydrogen/CO2 sequestration
facilities, and ATCO constructing/operating the associated pipeline/storage. The
project would be located at ATCO's Heartland Energy Centre which is close
to Suncor's Edmonton Refinery. The Edmonton refinery would consume ~65%
of produced blue hydrogen in its refining process and cogeneration of steam/
electricity. This would cut the refinery's emissions by up to 60%, the equivalent of
taking 450,000 cars off the road each year. Another ~20% of produced hydrogen
could be used in the Alberta natural gas grid.
Suncor is already the single-largest hydrogen producer and consumer in
Canada, accounting for ~10% of production and 15% of consumption.
However, it is all grey hydrogen (i.e. without a CCUS back-end). We are not
surprised by this announcement as Suncor had indicated that it was exploring
multiple blue hydrogen opportunities. For details, we refer you to the note on
our recently hosted Hydrogen Conference.
Suncor made it very clear that further government support will be required
to trigger project sanctioning: The parties hope to make an FID by 2024, but this
will undoubtedly require further regulatory certainty and fiscal support, including
the availability of carbon sequestration rights, emissions credits, regulations
allowing for blending hydrogen into natural gas and investment tax credits for
CCUS projects.
We highlight that this news follows the federal government's recent budget
announcement (note) which referenced tax incentives for CCUS projects, but
was very short on details. The government is currently in the midst of a 90-day
consultation spanning multiple industries.
Recall that Suncor recently made an equity investment in Svante Inc., a
private pure-play carbon capture technology company: We can reasonably
assume that Svante's technology will be used for the capture component of the
project if it proceeds. Svante has stated that its technology has the potential to
capture CO2 at <US$50/tonne. We recently hosted Svante on a panel and refer
you to our note for details.