New Alberta bill allows hydrogen home heating, electricity market remodelling

Alberta's government is looking to give the green light to hydrogen as a home and commercial heating fuel in a move it says will boost demand and reduce emissions.

If passed, legislation tabled by Utilities Minister Nathan Neudorf will allow utility companies to blend hydrogen into their supply of natural gas — provided customers sign off on receiving the blended heat source.

"Hydrogen presents an enormous opportunity and we want to ensure our province can remain a global leader," Neudorf said at a legislature news conference Thursday.

Neudorf says safety is top of mind and the province will work with regulators to set an acceptable blending rate, as hydrogen is easily ignitable and more explosive than methane.

The Energy and Utilities Statues Amendment Act also sets the stage for Alberta to make changes to its electricity market as part of a substantial system overhaul.

Market changes

Among those proposed changes is empowering the Alberta Electric System Operator (AESO) to determine who should pay for the costs of building new transmission infrastructure or bolstering the capacity of the existing system.

"We've heard Albertans and their frustration with rising transmission costs on their bills," Neudorf said.

He wants AESO to encourage power producers to build generators where lines already exist to manage rising transmission costs.

It's a policy that critics say would disadvantage renewable energy installations such as solar and wind, many of which need to be built in southern Alberta, where there is less transmission capacity.

AESO is in the midst of a multi-year consultation period called the Restructured Energy Market (REM) process. 

The new bill would enable the AESO to bring in a "day-ahead electricity market," which requires companies to set power prices a day in advance to prevent cost spikes.

But on a website updating electricity market participants, AESO said last week that feedback has prompted them to abandon some initial plans for day-ahead pricing. Instead, the operator plans to keep and expand day-ahead pricing for power sources that can easily be adjusted, such as natural gas, nuclear or hydroelectricity.

Neudorf says the changes, which should take effect in 2027, ought to make electricity less expensive and more reliable.

His staff handed out quotations of support for the restructuring plans attributed to electricity sector corporate leaders.

But the feedback those same companies gave to the AESO earlier this year during consultations was more critical, raising concerns about affordability, reliability, and a design that was too theoretical.

"The market design is overprotective, limits competition and introduces unhedgeable risks which ultimately will make it uninvestible, negatively affect electricity reliability and affordability for Albertans in the long-term," reads a submission to AESO from ATCO Renewables.

Neudorf said the province has made changes since then that take industry feedback into account.

Critics see uncertain future

Jason Wang, senior electricity analyst at the Pembina Institute, says the evolving potential rules are creating uncertainty in the electricity market. That's a problem because the province's deregulated industry needs continual investment to ensure suppliers are generating enough power for the province, he said.

Wang said while the government is planning for options that could be available in the future, such as carbon capture, utilization and storage, and hydrogen power plants, it isn't adapting to use technology available now, like solar and wind power, energy storage, provincial interties, and devices that allow consumers to purchase power when it's cheaper.

"Alberta needs to be accelerating the use of solutions that are already available to us," Wang said.

He's also concerned to see the Alberta Utilities Commission, the industry regulator, won't have to approve any changes before they take effect to determine if they're in the public interest.

The government has said a new market will be in place in 2027.

However, NDP affordability and utilities critic Sharif Haji says the government has yet to show how the proposed changes will reduce power prices that have ballooned during the past few years. 

Allowing energy companies to blend hydrogen with natural gas is an overdue step that has no clear timeline for implementation, Haji said.

ATCO has a hydrogen blending pilot project in Fort Saskatchewan, where around 2,100 customers receive between 0 and 5 per cent hydrogen in their natural gas. 

Should the bill pass, suppliers could blend up to 20 per cent of natural gas with hydrogen, should customers support this move, and only those who are consuming the hydrogen would pay for the equipment needed to supply it.

Skeptics of the technique say the upstream emissions required to generate hydrogen gas put its emissions reduction credibility into question, and that hydrogen gas has higher safety and explosion risks.

In an email statement, ATCO spokesperson Kurt Kadatz said the bill is an "important first step" to expand hydrogen's use in the heat market. The company is still analyzing how it could affect future investment, he said.