Canada’s E-Fuels Competitiveness with StormFisher Hydrogen
This week on the podcast, our guest is Brandon Moffatt, Chief Development Officer at StormFisher Hydrogen. StormFisher Hydrogen develops projects that repurpose energy, water, and power, with a focus on green hydrogen and e-fuels across the North American market. The company is currently advancing a low-carbon methanol project in Varennes, Quebec.
The conversation begins with an overview of green hydrogen–derived products, including e-methane, e-methanol, and green ammonia. Brandon explains why e-methanol is emerging as a leading end-use for green-hydrogen-derived fuels, particularly for marine shipping and aviation.
The discussion then turns to Canada’s competitive advantages in producing e-fuels, including access to low-carbon grid electricity in Quebec, Manitoba, and British Columbia, as well as the Canadian Investment Tax Credits (ITCs). With the United States rolling back support for green hydrogen in the One Big Beautiful Bill Act (OBBBA) last summer, Brandon notes that Canada currently holds a policy advantage in North America. However, global competition remains strong, particularly from India, China, and the Middle East, where cost structures are advantaged.
For Canada to remain globally competitive in green hydrogen-derived products, Brandon outlines several changes he believes are needed to Canada’s existing ITC framework. These include:
- Allowing access to the full green hydrogen ITC when grid power is more than 90% non-emitting
- Extending eligibility to downstream equipment, including e-methanol and sustainable aviation fuel (SAF) production, consistent with how ammonia is treated
- Allowing the use of carbon dioxide in fuel production to qualify for the carbon capture, utilization, and storage (CCUS) ITC
The episode concludes with a deeper dive into the Varennes project, including the potential for local job creation and the anticipated timing for a final investment decision and first production.
Content referenced in this podcast:
- S&P Canadian Electric Car Insights to Q3 2025 (Dec 2025)
- StormFisher Hydrogen’s website
- Learn more about StormFisher’s low-carbon methanol project in Varennes, Quebec
Note, the ARC Energy Funds are an investor in StormFisher Hydrogen. Please review our disclaimer at: https://www.arcenergyinstitute.com/disclaimer/
Check us out on social media:
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LinkedIn: @ARC Energy Research Institute
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Episode 313 transcript
Disclosure:
The information and opinions presented in this ARC Energy Ideas podcast are provided for informational purposes only and are subject to the disclaimer link in the show notes.
Announcer:
This is the ARC Energy Ideas podcast, with Peter Tertzakian and Jackie Forrest, exploring trends that influence the energy business.
Jackie Forrest:
Welcome to the ARC Energy Ideas Podcast. I’m Jackie Forrest.
Peter Tertzakian:
And I’m Peter Tertzakian. Welcome back. Jackie, I’m always very intrigued by the ever-changing energy circumstance. How society gets its energy and where they get it from and how it changes over time. You can call it transition, you can call it substitution, you call it diversification, call it whatever you want. It’s the way a source of energy flows through to, say, turning wheels, turning the lights on, turning your heater or cooler or whatever. Intrigued with the recent news from our federal government about the changing EV mandates. You saw that.
Jackie Forrest:
I did, yeah. That made news last week. Government’s announced that they’re going to scrap these EV mandates, which were not achievable. I love electric cars, but they’re just not achievable. They needed, in 2026, to have 20% of the new car sales in Canada be electric vehicles. By 2030, 60%. And by 2035, 100%. That’s just not going to happen. This year, we’re half of where we need to be. We’re probably going to be… If you look at-
Peter Tertzakian:
Four, 4%.
Jackie Forrest:
In 2025, 10% of the car sales were what they’re calling zero emission vehicles. So that’s really what the target is. And about 6% of that is pure electric, and 4% is those plugin electrics, those ones that go 70 kilometers or something like that on the battery before the combustion engine kicks in. Those are being counted in that goal. We’re half of where we need to be for 2026.
Peter Tertzakian:
They’re in the zero emission vehicle category because if you plug it in, you can go do most of your daily commute on a charge.
Jackie Forrest:
Yeah. And most people don’t drive more than 70 or 80 kilometers a day. They’re counting them as zero emission. But if we go back in 2024, looking at the numbers, they really haven’t changed. We were about 10% in that category. One thing that has changed though is we are seeing a greater share of those plugin electrics. The actual sales of pure electric vehicles have been declining in Canada. And I think there’s a number of reasons for that. I think one is early in 2025, those incentives went away, $5,000 incentive that the federal government offered.
Peter Tertzakian:
And by the way, those incentives were only for vehicles that were below $55,000.
Jackie Forrest:
That’s right, as their base price. There’s a whole bunch of electric vehicles sold in this country that didn’t qualify, but maybe that was one of it. Another reason I think the sales fell off in 2025 is now these plugins were available. More and more models were available that weren’t available in 2024.
Peter Tertzakian:
But they do qualify as zero emission vehicle.
Jackie Forrest:
They do, but you don’t get the same incentive.
Peter Tertzakian:
Right.
Jackie Forrest:
Yeah.
Peter Tertzakian:
And they are expensive still. People are price sensitive, especially these days. There’s no question that electric vehicles and plugin electric vehicles have a certain feature set that are attractive. But if the infrastructure is immature or perceived to be immature and the price point is high in the absence of a subsidization, then yeah, I’m not surprised in 2025, the numbers started to go down. And then on top of that, there was a whole anti-Tesla, anti-Elon Musk thing, given his DOGE antics and everything else that were going on.
Jackie Forrest:
Yeah, that’s when people had the bumper stickers. I bought this car before Elon went crazy. And Teslas was a big part of pure electric car sales in Canada. Overall, Tesla, they don’t report their Canadian numbers, but they were down ’25 compared to 2024. So all that together, I think the government made a good choice. I think emission standards are the way to go. Let the automakers figure out how they’re going to meet them. And that will push more of these plugins, I think, into the fleet. I think having the incentives come back is good, although there aren’t that many electric cars in Canada that will qualify. But maybe it will force the manufacturers to offer some lower cost electric vehicles.
Peter Tertzakian:
Yeah. That means they, I’ll call it the diversity of models in the lower end, in the sub $55,000 are probably the Chinese vehicles, of which in China there are many. But those aren’t in Canada. And if they do come in, they’ve got 100% tariff or something.
Jackie Forrest:
That’s changing though, right? Now we’re going to get 50,000 or something.
Peter Tertzakian:
We’re going to 49,999 or something coming in. But still, I think that it’s going to take time for those sorts of vehicles to get absorption into the market because there’s no dealerships and servicing and all that stuff has to be established. But yeah, five years from now, I can see those vehicles being quite significant in the lower end of the market potentially, as well as other models. This is what it is today in 2025, and I’m certainly not one to say one data point that goes down is indicative of a longer term trend.
I actually think electric vehicles, if you get the maturity of the infrastructure put into place, I’ve driven one since 2014. By the way, I bought and buy electric vehicle, first of all, because I like to test out the novelty of when such things come out, but also they are incredibly fast, which is why I bought it. The acceleration is off the charts. And it’s a very satisfying drive.
Jackie Forrest:
But I want to talk, that infrastructure is a big point. That is an issue here in Canada, such as a big country. But there was some money put into more national charging infrastructure from the government, which I think is needed to foster that adoption too.
Peter Tertzakian:
That’s okay. If you’re going down the Number 1, Trans-Canada highway, but the minute you go off the beaten path into parts of rural Alberta, Saskatchewan, Ontario, wherever, you have to think more about where you’re going to get your charge, right?
Jackie Forrest:
Exactly. No, it’s not as easy. We need to get that infrastructure. It’s the thing you need, you need that before a lot of people will adopt it.
Peter Tertzakian:
Plug-in hybrids make a lot of sense, but plug-in hybrids, it’s two systems in one car. So by definition, it’s going to be a little more expensive. People are price sensitive and in the absence of subsidies, they’re not going to buy it.
Jackie Forrest:
And again, there’s limited options both for pure electric and plugin. There’re not that many models available. Anyway, I think the government’s doing the right thing. These emission standards will force the automakers to create more options and that’s what we need and we need more infrastructure. We need to delay this mandate and make it more a goal. Automakers will put out things that hopefully people will buy and start reducing emissions that way.
Peter Tertzakian:
Okay. Speaking of alternative ways of getting your energy, let’s explore something that we’ve talked about in the past, in our podcasts of several years. We want to explore the various pathways of going from primary energy to end use, and we haven’t talked about hydrogen in a while, have we?
Jackie Forrest:
No, it’s been a while. So we’re really excited to welcome our special guest, Brandon Moffatt, Chief Development Officer of StormFisher Hydrogen. Welcome, Brandon.
Brandon Moffatt:
Thank you both for the invite. It’s a pleasure to be here. I listen on a regular basis and appreciate your thoughts and the broad spectrum of guests that you bring on. So thank you.
Jackie Forrest:
Good. We’re excited to learn a bit more about green hydrogen and how it’s evolved. But before we begin, we want to note that the ARC Energy funds are an investor in StormFisher. And so we will also put a note about that in our disclaimer. Okay. Let’s start off, Brandon. We want to welcome you, but tell us a little bit about your career. You’ve had a successful career as a clean energy entrepreneur. Tell us a bit about your journey and what brought you today to be working on green hydrogen with StormFisher.
Brandon Moffatt:
Thanks, Jackie. Yeah. I grew up on a farm in Southwestern Ontario, went to the University of Waterloo for environmental engineering, and that led me into consulting. And when I got into consulting, I started working with production agriculture on the challenges that they faced, and one of them was manure management. Next thing you know, I’m dealing with renewable natural gas, be it using manure and food waste to be able to make low carbon fuels.
And customers keep asking us to make more low carbon fuels. And we’re trying to find ways to be able to do that. And that has led us to green hydrogen and e-fuels, both for domestic use as well as international. And yeah, glad to be here today. And right now we’re primarily focused in Quebec on one of a large scale green hydrogen and e-methanol project that we acquired last year. And so really excited to be here. Thank you.
Peter Tertzakian:
I always like to start out with some level setting ground setting definitions like e-fuels, renewable fuels, and maybe just talk about bucketing some of the things, whether it’s methanol, ammonia, green hydrogen. Can you just give us a little taxonomy of how all this stuff fits into the definitions?
Brandon Moffatt:
For sure. So I mentioned earlier renewable natural gas. And so that’s what we used to make from anaerobic digestion of food waste and manures. It’s essentially the same as natural gas. It’s just a lower carbon intensity of the product that we would make. And we were selling that product to natural gas utilities, large industry, the transportation sector.
The challenges is there’s only so much cattle manure and banana peels for you to get your hands on, and so you’re trying to find other ways to be able to do that. And so what we really like was the idea of taking renewable power off the grid at off-peak hours to be able to convert that to make green hydrogen. You could sell green hydrogen as a gaseous or liquid fuel. The challenge is it’s really, really hard to be able to move. And so what you could do is react that with nitrogen to be able to make ammonia, and see that with some of the projects that are proposed in Atlantic Canada, or you could put an existing ammonia plant to be able to make green ammonia. Really what we mean is just a lower carbon intensity.
Peter Tertzakian:
Let’s just back up the chemistry lesson here, taking the excess renewable power to make green hydrogen. Basically the electricity goes into an electrolyzer and water, H2O, hydrogen, two hydrogen atoms, one oxygen atoms, and the electricity is used to split H and O, and you get hydrogen.
Brandon Moffatt:
That’s correct.
Peter Tertzakian:
Right. Electricity is the energy input, and in some ways you can consider water to be the fuel because you’re splitting it out. Now you’ve got the hydrogen. And then as you say, you can then reassemble the hydrogen with nitrogen to make ammonia so you can transport it easier. And then somebody at the other end disassembles it or burns the ammonia directly in an engine.
Brandon Moffatt:
Yep, that’s correct. If you’re making ammonia. And then in our case, what we’re using is the carbon molecule, from carbon dioxide, to be able to react to make methanol or methane. In the case of a project in Quebec, it’s methanol as the primary output, but you could make e-methane, which is the same as renewable natural gas, and it’s really about carbon intensity for the product. But you’re using the methane or the methanol as a carrier or a derivative product to be able to allow customers who formally buy those products, be able to use them versus hydrogen, which people sometimes don’t know how to be able to handle.
Peter Tertzakian:
Right. And just for one more point of clarification, because I remember, Jackie, we had a guest a couple of years ago on that big project off the Atlantic coast for the green hydrogen. It was pointed out that these processes to make ammonia or methanol or what have you don’t necessarily end up being used in fuels to be combustion, but there’s other industrial uses for these chemicals as inputs into other manufacturing processes of materials.
Brandon Moffatt:
Yeah, that’s correct. In the case of methanol, one of the top traded commodities globally, I was at a facility today in the Netherlands where they take the methanol to be able to make formaldehyde to go into the wood product sector. And so there’s an enormous existing methanol industry that could look to buy a lower carbon-intense product. But you’re having new uses of methanol, one being in maritime space as a dual fuel ship that can run on a low carbon product, or you could go into the aviation sector to make SAF, or sustainable aviation fuel, using methanol as the input feedstock. And so there’s new markets and then there’s existing markets. And that’s frankly why we really like the idea of methanol because this is a commodity that has traded globally.
Jackie Forrest:
Okay. And it’s interesting that you can also make methane. To start your career, you were making methane from organic waste. Now some people are proposing to make it from electricity. I guess the advantage of that would be, you said it’s hard to find all the banana peels and waste products, but here there’s no shortage of water. And if you have a source of electricity, scale is no longer an issue the way it is in renewable fuels. Is that the advantage of e-methane?
Brandon Moffatt:
Yeah, that’s correct. Having been in the waste space for as long as we were, what we found is that you have to have your waste within 100 miles and you’re having these waste sheds that were getting smaller and the feedstocks were a bit more tricky to be able to handle, Jackie. And so the problem was is the scale and complexity of the facilities was staying the same. Our costs to produce is going up and customers keep coming to us saying, “I’d love for you to make more of this product.” And so we had to look at different technological ways to be able to increase the scale and the quantity of product that we could make for our customers.
Jackie Forrest:
Okay. Let’s come back. Peter, you reminded me. We had Frank talk about their Newfoundland project at the time, and we’ve talked about those since because there’s about five projects proposed in Newfoundland. None of them have had a final investment decision. But at that time, there was still a lot of debate about what the product is. Some people were ammonia, some people were talking about green hydrogen.
Actually, methanol wasn’t really something that was talked about too much if you go back three years ago. Maybe, Brandon, you can tell us, is it starting to be clear what e-fuel is going to dominate here? Because I think that’s been part of the issue is people want to put these projects forward, but they’re not sure where is the demand and what do people really want? Is that starting to become clear?
Brandon Moffatt:
In our mind, it is. You’ve got both voluntary customers and compliance customers. Compliance customers are typically willing to pay more for the product. We’re seeing the European market as being a primary market from a compliance perspective. It’s called the fuel EU maritime and fuel EU aviation. And so for those markets, they can use methanol as a feedstock both to make aviation fuel, as I mentioned earlier, or they can use it as a direct energy source in the ships that would call to EU ports.
It’s not to say ammonia won’t be there. It’s just a function of the time and the infrastructure that’s there. Most ammonia today is used in agriculture, which has very, very small margins to be able to work from. And so the idea of a low carbon intense ammonia is really tricky. Whereas cracking ammonia back to hydrogen at a European port, they’re just not happening at scale.
And so we think that’s going to take some more time to develop. We didn’t focus on ammonia because we saw the incumbent ammonia players that had this infrastructure already in the ground and we’re like, “These guys could eat our lunch if they decided to be able to make green hydrogen and then feed it to their Haber-Bosch process.” And so that’s why we focused on methanol and methane as our primary outputs from our facilities.
Jackie Forrest:
And are the ships already existing that can just use methanol or is it that the ships have to be built to be able to consume this methanol?
Brandon Moffatt:
In the container space, you have a number of the large ship liners or container ships that are able to run on methanol today as a dual fuel. Maersk, CMA, CGM, Hapag-Lloyd, they already have methanol dual fuel ships on the water, so they can be able to use the product today. Others are continuing to adopt more. And so the question is, what happens if say our product’s not available? They can run on gray methanol as an option. It’s a higher carbon intensity, but the product is available in the market for them to buy. But those big container ships, you’re seeing adoption in the passenger, think of a cruise lines and ferries. Those are already on the water today with more ships on order.
Jackie Forrest:
Okay. That’s helpful because I think that’s been one of the barriers here with this whole green hydrogen area is, where is the demand? The fact that there’s already ships out there that can use the product is a big advantage.
Peter Tertzakian:
Yeah. Yeah. And just for clarification, I know you just said you’re not on the ammonia side of the branch, but there’s not a lot of ammonia tankers out there. Ammonia is very toxic and hard to handle, which is probably another reason why you’re not in that business.
Brandon Moffatt:
That’s correct. We will continue to watch it, but we’ve never tried to be the first mover of new technology, Peter. Our view is that methanol’s traded globally, it’s stable at ambient temperatures and pressures. It’s just a much safer product. And so for us, we’re like, let’s start there and then we’ll work with the existing supply chain. If somebody starts commanding ammonia out of us, we’ll work with the incumbents to be able to make that product.
Peter Tertzakian:
Yeah. I personally don’t see this ammonia supply chain. It’s expensive. And last I checked, there was one ammonia tanker in the entire world. How do you create a supply chain? And also you need ports, special ports to be able to load and unload it. I don’t know. Am I wrong?
Brandon Moffatt:
No, not saying it won’t get there, but it’s just going to take some time. I was at a terminal operator in Rotterdam today, and they are all set up for ethanol and methanol as sustainable fuels. The infrastructure’s already there, so we’re not creating entirely new infrastructure on the other end. And so our view is to be as complementary with existing supply chains as we can.
Jackie Forrest:
Yeah, that’s a huge advantage. We’ve talked about that a lot, Peter. You want to plug-and-play into the existing .. Actually, we started talking about electric cars. That’s why electric cars have been so successful is there was already electric infrastructure everywhere that they could use. You didn’t have to build that from scratch. Let’s get to the big question, which is the cost. The cost of e-fuels compared to hydrocarbons derived from petroleum. So you could have methanol that came from petroleum. How would your product compare to that? And are customers willing to pay a green premium, pay more for your product?
Brandon Moffatt:
Good question. We get this quite regularly. Our view is it’s no different than you going to a gas station. You can pick fill up on regular and there’s premium available. Not everybody’s going to fill up on premium. But there are people, whether they do it by choice, which is voluntary, or they do it by requirement because the engine manufacturer told them they need to run on premium.
And so for us, that’s a compliance market that we’re trying to be able to provide the product to. At the end of the day, we’re not going to be displacing fossil fuels anytime soon, but there are customers that are willing to pay that premium price for our product. And the view is that over time, as you get adoption, you will see that price come down over the overall equipment and the risk capital associated with developing this infrastructure. And so we are providing the premium product to the customers that are looking for that fuel.
Jackie Forrest:
But the premium is, I don’t know, I never really checked too much, but it’s maybe 30% more, at the most, from the regular at the gas station. I would think there’s a bigger gap between your product and the gray methanol.
Brandon Moffatt:
You’re correct. It is definitely more. And for us, whether it’s out of our project in Canada, we are trying to compete globally for the customers that are willing to do that. And so we have to be very cost conscious because the customers, at the end of the day, have a certain tolerance they’re willing to pay and there’s other markets that could produce this product. And so our goal is to be able to make this for as cost-effective as we can in Canada for both domestic use and international wherever we can.
Peter Tertzakian:
Okay. Cost-effectiveness implies competition. Before we get to your project, which is intriguing, let’s talk about Canada versus the US and that competition in terms of e-fuel production and facilities, especially in light of the new policy and regulatory arbitrage between Canada and the United States that’s emerging or emerged.
Brandon Moffatt:
Yeah. So for the past few years, we were very focused in the United States. A combination of their natural resources in the form of wind and solar, in Texas and Kansas as an example, Peter, and also the availability of carbon dioxide was very intriguing from a fundamental’s perspective for the production of e-fuels. The Inflation Reduction Act policy measures were also of interest to us as well.
We thought we can be able to definitely be able to produce these products at a very cost competitive price. Challenge with the change in the administration is you’ve seen changes in terms of those policy drivers that allow for the development of that infrastructure. And so we’ve been pivoting back to Canada over the past 12 months or so, and we have been focused in Canada because you’ve got a much more stable policy predictability that we enjoy. And so that’s where we think the US will come back. But right now for all intents and purposes, we put it on the back burner.
Jackie Forrest:
Okay. We talked about this a little bit in last week’s podcast, but the investment tax credits, and we’ll get into more of the details of that, Brandon, because I know they could be better. But in general, they’re giving Canada an advantage now over the US. So for a good part of the last three years, before this last summer, it was hard for Canada to compete for these projects because it was, like you say, better in the US. But now the US has got rid of those incentives and now Canada is looking to be in the pole position in terms of supplier from North America.
That is certainly a good development. I did want to ask, one of the reasons that the clients will want to pay that extra money, you talk about it, the compliance market, is because there’s regulations that require that, but there has been some changes there too. The international maritime organization was expected to require ships to use more of this type of fuel, but they delayed their plans on that. Is there still policies in place that require customers to have to buy these higher priced green products?
Brandon Moffatt:
Yeah. The IMO policy that you’re speaking about was not the primary driver of our business when we started to focus on this several years ago. What we were interested in was, first, the customers that were trying to find more e-methane at the time. And then we got an inbound from Maersk asking if we could make e-methanol instead of e-methane for their fleet.
And that was all due to fuel EU compliance, which really goes out of the European’s renewable energy directive. That’s a policy that underpins that. IMO was a cherry on top and would open up more markets. But for us, the fuel EU program is the one of interest. And that’s not just we need to bring the product to ports like Rotterdam or Hamburg or others, but if a ship is going to leave, say the Port of Montreal and go to the Port of Rotterdam, 50% of their voyage needs to be run on FuelEU compliant product, which we can make in Quebec.
And so what that did is it opens up the domestic ports to be able to attract those methanol-ready ships to Canadian ports, as an example. That’s intriguing because it’s less cost to be able to move the product and allows you to have a lower carbon intensity product. And so FuelEU was the primary driver when we got into this. And so we’ll continue to follow IMO, but it wasn’t the premise for the business.
Jackie Forrest:
Okay. There’s a requirement for European ships to use this and actually it’s great. Instead of just transporting the fuel, you’re actually burning it. That makes a lot more sense.
Peter Tertzakian:
How strong would you say those policies are? And what I mean is, we’ve seen what happened with the IRA from one administration to the next gets shredded and a lot of companies relied on that kind of policy. What’s the probability of the handicapping that the EU relaxes these kind of mandates? Because there’s a trend toward this kind of thing in the world that we’re living in. Do you become concerned about that kind of thing?
Brandon Moffatt:
Yeah, we’re always concerned about policy change. Both we advocate for positive policy change, but we need to be aware of negative kind of impacts of policy change. As an organization for the past 20 years, we’ve been very engaged, whether it be through associations or direct engagement with government around these types of policies. In terms of the EU, what we’ve seen is that the FuelEU is a live policy. There is compliance that occurred in 2025 and going forward.
And from the renewable energy directive that I mentioned earlier, countries need to approve it. Italy, last week, approved the RED III directive for industry and transport as written by the EU, but that policy is complimentary to the FuelEU, which is the broad block of EU countries. We expect some tweaking around the edges as there’s more adoption, but not wholesale walk back from that scenario.
Now in the case of SAF, or sustainable aviation fuel, we’re seeing a request from the airlines to tweak to be able to lower the cost down. How we source our carbon dioxide? Does it need to be net new renewables? And so that’s where we’re having conversations with customers to find practical solutions to be able to allow more adoption and the continued investment in the industry. It’s not always a bad thing, but there’s also positive change that can occur across the entire supply chain.
Jackie Forrest:
How many countries have now adopted that RED III directive? It’s been quite a few, I think, right?
Brandon Moffatt:
Yeah, several. Netherlands and Germany have not yet, but several have, and have in some cases have doubled down on the policy. So they’ve actually gone beyond the EU to have in country specifics that are even higher. And so you’ve got several countries that have adopted it.
Jackie Forrest:
Okay. We’ve established that the Europeans need to buy this stuff. We’ve established that Canada looks very good in terms of cost competitiveness for producing these products thanks to the investment tax credits, but we can improve on them, which we’ll talk about. But how about other suppliers. Can Canada compete with other countries that might want to develop this? I know I’ve heard in the Middle East, they’re developing these types of projects and in Asia as well.
Brandon Moffatt:
Yeah. In EU themselves, they want to be able to produce these products. The challenge is just their cost to produce is higher than other countries, including in Canada. And so that means that they are open to imports because they will not meet their volume obligations just by doing it domestically.
And so that’s why we in Canada can be a supplier. China is probably one of the largest players in adoption of this, both for what we call biomethanol and e-methanol. They are trying to do those projects, but not only for export, but they’re actually trying to be able to use it just domestically for themselves.
India has been active. You’ve got the Middle East that’s been active. When I was with a terminal operator today, they said, “Where else are you seeing interest?” And they said “China, India, the Middle East, and a little bit out of South America.” Our goal is to be able to make as much of that for use out of Canada. And so that’s where we’re focused as a business.
Peter Tertzakian:
Yeah. One of the prerequisites to be in this game, to be competitive obviously is the primary energy sources have to be renewable or non-emitting. This is where we have an advantage and you’re projecting Quebec because Quebec is dominantly hydro. Talk about that in terms of where we sit competitively.
Brandon Moffatt:
Competitively, in the case of Quebec, the grid is almost entirely clean hydro with some supplemental resources, wind and solar that’s there. And so the Quebec grid is fantastic from a production of these types of products for any use. You do see lots of interest out of Manitoba, British Columbia, where you’ve got lots of non-emitting power that can be used. And in our case, we’ve got over a 100 megawatts allocated from Hydro-Quebec for the production of our hydrogen and our downstream e-fuel. That is something that can be very competitive on a global scale in location and the provinces. The friendly business atmosphere that we’ve been receiving for the project that we acquired in October has been fantastic.
Jackie Forrest:
And that’s a good point because a lot of these other projects, like the Newfoundland ones, they only can produce when the wind is blowing and they have issues with intermittency. But off the grid, you can run your plant at much higher utilization, steady. But there is an issue, Brandon, because I understand that the investment tax credits, which I think are very important to giving us this competitive advantage for delivering, which provide refundable tax credit. Tell us the issue there. Apparently they’re not that great when you’re using grid electricity.
Brandon Moffatt:
The upper end of the investment tax credit in Canada for clean hydrogen is 40% of your CapEx. However, there’s declining percentages as a function of the carbon intensity of the grid of where you operate. And so 40% is all new renewables, where the Quebec grid, though it’s entirely renewable, only is able to access a 25% investment tax credit, even though the grid is clean.
The only province right now that can actually get the 40% would be PEI. Otherwise, you need to build all net new renewables to be able to unlock that 40%. One of the things that we’re trying to advocate for is it makes logical sense to be able to unlock more investments in Quebec, Manitoba, and BC where those grids are very clean by following a European definition where if a grid is greater than 90% renewable, then you automatically get access to those upper ends of the tax credits available. And so that’s an area that we think will ultimately drive the cost of the end product down for customers domestically as well as is for export.
Jackie Forrest:
It makes a lot of sense if we’re thinking about fostering this new industry because we have an advantage of clean grid that nobody else has. Certainly from a developer’s perspective, not only do you avoid the intermittency and low utilizations depending on wind, but also you avoid all that capital you need to build a wind farm, which is very substantial.
Brandon Moffatt:
Yeah, absolutely. And one of the things that we do as a part of our agreements with Hydro-Quebec is there’s a demand response provision. So when they actually need to call on the power, which can be in the wintertime, they can call on and shut us off for periods of time. We are a very large, flexible load that allows us to come off the grid when they need the power. That’s the give-and-take of being able to work in these jurisdictions where they want the investment, they want the jobs, we’re happy to make the products. But we can also give back by being able to turn off majority of the plant in a very short period of time.
Peter Tertzakian:
Okay. The key to competitiveness in this global game is obviously a clean grid or renewable source advantage. Then there’s policy with various jurisdictions giving all sorts of policy and, I’ll call it, policy gymnastics that have to be done to understand exactly how it all fits together. Then there’s, in the case of this chemistry set, you split apart the hydrogen and the oxygen using the clean electricity, then you need the carbon molecules to create the methanol. You get that from carbon dioxide. Where do you get the carbon dioxide in Quebec?
Brandon Moffatt:
Our primary sources are biogenic sources of CO2, Peter. This could be landfills, ethanol plants, biomethane facilities, pulp and paper. However, we also are interested in anthropogenic sources, which are fossil derived sources, so they’re steamed methane reformers. So that might be an ammonia plant or refinery. In the case of our project in Varennes, we’re very focused on landfill gas where they will separate the methane from the CO2. And the pure CO2 is biogenic CO2 that we can capture and truck to our facility in a liquified form. And so that’d be the primary source that we’re focused on.
Jackie Forrest:
Okay. And that’s a form of carbon capture, isn’t it? Because you’re taking CO2 that would’ve went into the atmosphere and you’re binding it into this molecule. Do you get investment tax credit for that portion? Because I think it’s 60% for investment tax credit for carbon capture storage projects. Would you be considered that?
Brandon Moffatt:
We don’t right now. We’ve engaged with the federal government on this. And at the CO2 source, because it’s not sequestration either on the ground or in concrete, you can’t be able to get it even though when you say CCUS tax credit, the U is utilization. For us in provinces such as Quebec where there’s really not the geology to be able to sequester, the utilization of the CO2 to be able to make and unlock these hydrogen or e-fuels to us seems totally relevant for it to qualify.
It would take on a similar direction around policy that we’ve seen of the US for their 45Q credit, which allows for utilization to be able to make e-fuels. And so we’ve always tried to be able to advocate for a balanced approach, both on the upstream CO2 as well as on the downstream derivative as we convert the hydrogen and CO2 to methanol.
Jackie Forrest:
Would getting that tax credit, I think I’m right on this one, up to 60% depending on the equipment, would that make a material difference in terms of the economics for the project?
Brandon Moffatt:
It would. You’d almost cut the inbound CO2 cost in half because you’ve got the new infrastructure and the investment at that CO2 plant, which otherwise would be vented to the atmosphere. And you would allow that to knock the overall cost of capital down by that tax credit.
Jackie Forrest:
First of all, I’m excited by this opportunity because I think Canada does have an opportunity here. But I think we do need some more tweaks here, whether it be to the renewable electricity threshold to get your investment tax credit or the carbon dioxide CCS credit. But there’s one other thing. Talk about the investment tax credit that supports the actual development of the project, the green hydrogen portion and the methanol. My understanding is that also needs some tweaks here to really support the project.
Brandon Moffatt:
Yeah. When the clean hydrogen ITC was contemplated, it was very focused on the Atlantic Canada ammonia projects. And they viewed the downstream derivative equipment, which got a 15% ITC as a hydrogen carrier to allow that energy to end up in Europe. It did not allow that tax credit to occur on methanol, methane, or say aviation fuel. And so we would love to be able to see that balanced out so that you’re not picking winners and losers around the downstream derivative equipment and allow the market to develop and say, “Hey, if you’re making low carbon hydrogen and you’re making it into e-fuels, all of you are eligible for the 15%.” It’s actually interesting because Canada and Germany signed their H2Global, which is a program to be able to foster the movement of hydrogen derived fuels to Germany. It gives an unfair advantage to the ammonia projects versus someone like ourselves that’s making methanol.
And so we’re trying to balance it out so that we can be able to be on a level playing field with some of the ammonia projects in Eastern Canada.
Jackie Forrest:
Yeah. It just makes a lot of sense because we talked about it earlier. Four years ago was uncertain what the end product would be and a lot of people believed it was going to be ammonia. But that’s changed quite a bit. Now it seems like the emerging big market’s going to be the methanol, so of course we should support that.
Peter Tertzakian:
Yeah. Okay. Now, three quarters of the way into our podcast, Brandon, I think we have enough information to talk about your project, which is in Quebec, the Varennes project, which is V-A-R-E-N-N-E-S. Tell us where it is, inputs, outputs, what its markets you’re serving and so on. I think we got that picture, but just give us the specifics.
Brandon Moffatt:
We acquired a half constructed project in Varennes, Quebec, which is on the south shore of Montreal. It was originally a gasification to methanol project that we’re converting to a e-fuel or e-methanol project where we take hydrogen and regional CO2 sources to be able to make that methanol for both domestic use and international. Right now we’re in the redesign phase of this and plan to take our FID later this year and ultimately bring on about 70,000 tons, expandable to about 100,000 tons in 2029.
Peter Tertzakian:
You’re like the second restaurant owner. The first one didn’t make a go of it and you’ve just taken the kitchen to make a different menu. Is that the…
Brandon Moffatt:
Yeah, you could say that. That’s not our first time doing that, Peter. We are very good at taking the fundamentals of what the industry wants and putting them together in unique ways. And this is the second time that us as StormFisher have done that. And when we looked at this opportunity last year, what we saw was the core fundamentals. You had a very clean grid on a high capacity factor. You had the bones of that with the water and wastewater infrastructure. You were nearby the ports. You had regional CO2 sources. You had all of the permits. And so for us, this was very intriguing for us to be able to come back home given that we’re Canadian based and develop this infrastructure.
Jackie Forrest:
Good. Good for Canada too. Got you back from the US where you were spending all your time. Just to put in perspective, you talked about 70,000 tons is what you think you could get to. How many ships a day could be fueled with that? Just to give our listeners an idea of that.
Brandon Moffatt:
It’s a very good question. A methanol ready ship or a methanol ship, say Maersk or one of the other major shipping companies, they could consume 70 to 100,000 tons a year if they ran it entirely on methanol that’s there. That ship today would give them compliance across their FuelEU for about 16 ships because they can pool the low carbon fuels. But by 2035, it only covers six ships. And so for us, this leads to more investment as the carbon intensity declines over time. But essentially one ship could consume our entire production of the plant. And so that’s where my earlier comment about we’re not displacing fossil fuels anytime soon is a reality, but there are customers that are willing to pay that premium.
Jackie Forrest:
Okay. 100%, but you’re saying mostly they’ll be using partial amounts of your fuel, so that’s why it could support more.
Brandon Moffatt:
You’re about 18 tons of use to go from Montreal to Rotterdam to comply with that 50% usage. The question is, do you run just a little bit or do you just dedicate a route and then have a pool of ships that’s covered? Because as an example, Maersk has 750 ships in their fleet.
Peter Tertzakian:
Yeah. Without abusing the metaphor here, I mean, how many cooks are in this kitchen? How many people is this project going to employ? And when do you expect it to have first delivery of methanol?
Brandon Moffatt:
Yeah. First delivery of methanol, we’re expecting in early 2029, Peter. In terms of staff today, we’re about 40 people, over half in Varennes at the facility there. So we have a very significant local component. Within the plant proper, you’re probably going to have 35 to 45 operators that are directly employed, managing that facility, but then you have a multiplier effect for indirect to support the daily operation, the logistics, and the other infrastructure, the CO2 and the ports.
It’s meaningful both locally in the grand scheme of things, which is great. And we’ve seen this in other spots where people view this as rather than being wind and solar and other power that’s just leaving their jurisdiction. And they’re actually putting very sticky jobs in these locations because this infrastructures will be there for a long period.
Jackie Forrest:
And what about the construction? Is it all modular, doesn’t require a huge construction workforce? You get these electrolyzers, I imagine they’re already created somewhere else and you’re just plugging them together.
Brandon Moffatt:
Yeah. So the electrolyzers, whether they’re fabricated in Canada, the US, or overseas, yes, they’re fabricated and shipped in. The rest of the equipment does look like modules, but you still have a significant construction base. You’re going to be talking three to 400 FTEs working on the construction for two and a half to three and a half year period, Jackie. And so we’re engaged right now with both the constructors and the various trades in the region to be able to support the going back to construction for this project.
Peter Tertzakian:
Yeah. What are the critical path points between now and 2029? What needs to happen, if anything, or what are the potential barriers to getting this thing done?
Brandon Moffatt:
Yeah. Right now we’re doing the redesign of the facility. This is us working with our local engineering firms in the Montreal area to make sure the design fits with the revised structure that we’ve laid out. That’s a big one. The other one is working with our off-take customers. Whether that’s with the shipping companies directly, the aviation companies in Europe, or through that H2Global program that I mentioned earlier that we’re actively looking at. That’s another factor. Everybody needs off-take and you need to make sure it’s long-term. And then for us, we’re actively engaged with the federal government right now on the policy changes that we mentioned earlier about the clean hydrogen ITC and some of the CCUS credits that ultimately will allow us to be able to out-compete other jurisdictions for the supply of this product.
Jackie Forrest:
And how important are those policies to making the finances work and getting to a cost point that customers are willing to pay for the product?
Brandon Moffatt:
They’re very important. When you think about us competing with China and India, as examples, to be able to provide this product to Europe. Both their construction, labor force, as well as their operating costs are just a different scale than what we’re going to achieve in Quebec. That’s something we need to be fully aware of. And so for us, the changes on the ITCs allowed us to be able to make sure we’re ultra competitive with those other markets to be able to supply this product to our customers. It doesn’t mean that we wouldn’t be successful. It’s just it makes sure that we can sharpen our pen as we do that. I think the analogy a year or so ago was getting our elbows up. This is us getting our elbows up to make sure that we can now compete other jurisdictions for the supply to our customers.
Peter Tertzakian:
Right. And ultimately in any energy system, the upstream scale matters, right?
Brandon Moffatt:
It does.
Peter Tertzakian:
And this is something that China and India and places like that, that’s the way they think. They think big. Is your facility scalable bigger so you can get the economies of scale to drive your costs down and therefore be ultimately less dependent upon these policy implementations?
Brandon Moffatt:
Absolutely. Right now we’re projecting about 70,000 tons of output. The infrastructure on site would allow us to probably raise that by another third, Peter. And then from there, we’ve got to be able to engage further with the province and permits. And so 100,000 tons is probably our top end right now on the facility.
Jackie Forrest:
Brandon, this has been great. I do think that Canada has an opportunity here with the Americans rolling back all their incentives. If you talked to me a year ago, I’d be like, It’ll be tough for green hydrogen because the Americans had that $3 per kilogram incentive and it made it tough for us to compete.” But things have changed and I think there’s an opportunity.
Peter Tertzakian:
Yeah. I’ve certainly learned a lot. We started out the conversation by talking about alternative energy systems. Certainly the electric vehicles and the alternatives to combustion ways of turning wheels. And with Brandon, we’ve talked about alternative ways of turning propellers and ships and other applications of methanol, which are many. Thanks for educating us and also telling us about your exciting all Canadian project that can compete on an international scale. So Brandon Moffat, Chief Development Officer at StormFisher Hydrogen. Thanks, thanks for joining us.
Brandon Moffatt:
Thank you to both. Appreciate it.
Jackie Forrest:
And thanks to our listeners. If you enjoyed this podcast, please rate us on the app that you listen to and tell someone else about us.
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