How Vancouver could lose the global hydrogen race

For years, Metro Vancouver has been recognized as a global hub for innovation in hydrogen fuel cells. The ability to harness hydrogen, rather than gasoline, to power cars, buses, and other forms of transportation was revolutionary. Yet for decades, Metro Vancouver’s hydrogen fuel cell companies had yet to make a profit, while other parts of the world ramped up industrial policy and infrastructure to compete in the arena of hydrogen scale-up.

Today, nearly every region on Earth feels the urgency to decarbonize. The low-carbon potential of hydrogen technology seems to be perfect grounds for the local ecosystem to capture a global market looking for alternatives to fossil fuels. But signs are pointing that it could instead be Vancouver’s race to lose.

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The history of hydrogen

Hydrogen functions as an energy carrier to generate electricity, power, and heat. In the world of decarbonization, the element has emerged as a means of fuelling the world’s hard-to-abate sectors, offering a pathway to lower emissions through supply chains similar to those of fossil fuels when transported via pipeline or tanker trucks.

“[Hydrogen] is most suitable in sectors and applications where it's difficult to decarbonize in other ways, where alternatives are limited,” said Stefan Pauer, manager of technology and economic analysis at Clean Energy Canada, a climate and clean energy think tank based out of Simon Fraser University. “Sometimes these sectors are referred to as the toughest third of emissions, and they include trucking, marine shipping, and heavy industry, for example — steel, fertilizer, cement, and, one day, perhaps long-haul aviation as well.”

Nearly every entrepreneur in the local hydrogen tech scene credits the ecosystem to Ballard Power Systems. Geoffrey Ballard, a geophysicist, founded the company in Burnaby in 1979. The venture continues to be recognized as ground zero for the hydrogen fuel cell, said Matthew Klippenstein, regional director for Western Canada at the Canadian Hydrogen and Fuel Cell Association, a non-profit industry association.

“Ballard was kind of the Grand Central Station of all sorts of people, myself included, who are interested in hydrogen, interested in fuel cells,” said Klippenstein. “There's this constellation of spin-offs or related companies started by people who worked at Ballard at various points.”

While Ballard specialized in fuel cells, the businesses it inspired have also focused on other parts of the supply chain. For example, Ekona Power, also based in Burnaby, works on producing low-carbon hydrogen from natural gas through methane pyrolysis.

But the industry has struggled to achieve profitability, with Ballard on its fourth decade without turning a profit. Coupled with this is the fact that most local hydrogen companies — other than Ballard — have yet to break past the point of startup and into scale-up territory (defined by the BC Tech Association as being over $10 million in revenue).

“It’s a challenge for everyone who wants to make hydrogen a reality,” said Laura de Guzman, director of government affairs and partnerships at Hydra Energy at a panel during Vancouver Startup Week, where she discussed customer adoption of her company’s hydrogen-as-a-service for commercial trucking fleets. “Prices are still high [...] A fleet operator will not buy a hydrogen solution, except if they are spending at least the same of what they are spending currently [on diesel].”

Go deeper: Cheatsheet: B.C.’s hydrogen production pathways

Challenges to scale

In Vancouver, the region’s hydrogen innovators have largely focused on the transportation industry, developing fuel cells to power ground transport from passenger vehicles to medium- and heavy-duty trucks. But a key piece of solving the customer puzzle is in supplying the hydrogen to power these fuel cells.

“Whenever we talk to transit operators, [...] they understand what a [hydrogen] fuel cell bus does, the advantage over [alternatives when it comes to] range, and refuelling,” said Nicolas Pocard, vice president of marketing and strategic partnerships at Ballard. “But the next question is — ‘Where do I get hydrogen? What is the price of hydrogen?’”

In recent years, Metro Vancouver’s hydrogen fuel cell companies have evolved from solely supplying the fuel cells to full-stack provision of hydrogen production and refuelling stations. For example, HTEC recently broke ground on the province’s first at-scale hydrogen production plant in the lower mainland, powered using local electricity. In northern B.C., Hydra Energy began construction last year on what it claims to be the worlds’ largest hydrogen refuelling station.

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But while these measures towards a comprehensive customer adoption of technology could accelerate the path to sustainable scale-up, it still may not be sufficient.

“You have to have product-market fit in a large enough market that is structurally profitable,” said Jill Tipping — president and CEO of BC Tech Association, a non-profit industry organization — speaking to what it means to become a scale-up company. “In cleantech, there will be pockets of markets that have the right setup — whether it’s regulatory incentives, tax-incentive-type schemes, funding schemes, or dominant customers who are taking the approach very seriously. The world is a patchy world for cleantech, and you’ve got to identify what your patch is for your product.”

To date, Metro Vancouver’s hydrogen fuel cell tech companies have found these pockets in different places. Ballard and Loop Energy sell to customers in China and Europe, while HTEC and Hydra Energy have settled in different parts of B.C., for example. Whether these are customer patches that will allow companies to thrive, attain profitability, and scale up remains to be seen — and global competition alongside changing tides could offer local tech companies a unique challenge.

Global competition

The customer market for hydrogen continues to evolve, and it’s a dynamic that threatens the path to any successful scale-up. Tipping believes that one of the strongest contributors to achieving growth is finding good customers, no matter where in the world they may be.

“Whereas government is always, all the time, very interested in local companies selling to local customers, I am very interested in my members selling to good customers, wherever they are in the world,” said Tipping. “I want great customers that have the capacity to grow with good money, solid commitments, and ambition.”

Yet the market for these customers remains competitive and, in some regards, is getting smaller. Many consumers are increasingly opting for electric passenger vehicles rather than hydrogen vehicles; a pattern that could make its way up the chain of transportation. In the first four months of 2023, the global hydrogen vehicle market shrunk by 11.5 percent, according to market research consultancy SNE Research.

“I think for transportation, hydrogen kind of lost the battle on the LDV [light-duty vehicle] side,” said Pauer. “And it's probably also losing the battle on the medium-duty vehicle side. But hydrogen looks to be a climate solution for heavy-duty vehicles.”

But there are other avenues where Metro Vancouver can capture aspects of the hydrogen market. For starters is the opportunity to harness data, says Klippenstein.

“There is still a very high value to have the brains — or one of the core knowledge centres — be in B.C., in Vancouver,” he added. “We can't be cheaper than many other regions in terms of manufacturing. But if everyone's feeding the data back to us, or we're one of the places where all this data is being collected to make better, cheaper products, there's still a huge upside for us.”

Perhaps the most lucrative aspect of the market up for grabs is in producing hydrogen for export. Asian countries such as Japan, China, and South Korea are predicted to account for almost 50 percent of total global demand for hydrogen by 2050, with a combined market size of $305 billion — and B.C.’s hydrogen strategy released in 2021 vaguely sets the groundwork for this export.

Go deeper: British Columbia commits to a climate-friendly future through hydrogen energy

“There is an opportunity for us to export clean energy,” said Klippenstein. “We export a decent amount of oil. One day we'll export natural gas. Both of those are fossil fuels. One day, we can export clean energy across oceans as well. That would probably be hydrogen converted into ammonia, as we do today for fertilizer, and then shipped as liquid ammonia across the Pacific Ocean.”

It’s arguably in Canada’s strategic interest to keep up with the global hydrogen race, adds Pauer. The country’s biggest trading partners — the U.S., the E.U., and China — are already making strides, and participation in a globalized hydrogen market can offer a generous volume of local clean energy jobs.

“In B.C., we found that in our net-zero scenario, the fastest-growing industry by far is hydrogen fuel cell production — set to grow to 25 percent per year and employ around 10,000 people in 2050,” said Pauer. “When you look at all of Canada, we found that clean hydrogen production is one of the fastest growing industries within clean energy supply. We saw that jobs grow about 30 percent per year between 2025 and 2050, employing over 13,000 people in all of Canada.”

Today, it’s clear that while Metro Vancouver’s hydrogen tech companies lean heavily towards transportation solutions, the ecosystem has evolved to cover most aspects of the supply chain and are determined to fuel this transition. But the success of their scale-up isn’t necessarily dependent on their initiative alone — the delicate and intersectional dynamics between public policy, global macroeconomics, and the urgency of climate change will dictate how exactly the local hydrogen tech ecosystem could sink or swim.