Energy Innovation: How Canada is preparing for a low carbon future

Dentons' energy team details the future of Canadian energy production, and how we will get there

The global energy industry is undergoing rapid innovation, transforming at a pace never before seen. In Canada, federal, provincial and municipal governments are developing policies that will guide us toward a low carbon future. Consumers are commanding a larger say in where their energy is sourced, and environmental, social and corporate governance (ESG) continues to play an increasingly important role in shaping corporate strategy and development. 

Innovating our energy sources is one way that government, industry (energy producers and manufacturers) and consumers are aligned in responding to environmental challenges and finding new opportunities for profitability.  This article explores why these energy sources are important to driving toward a low-carbon future and the future economic promise of leveraging these into our energy mix.

A pan-Canadian approach to hydrogen innovation

The Canadian government recently released its “Hydrogen Strategy for Canada” (the “Strategy”), signalling that it, like many other governments worldwide, have designated the growth of the hydrogen economy to be a priority. While hydrogen production and its use as a feedstock in many key industries is not a recent innovation, the reasons why it is receiving so much renewed attention are worth examining.

Hydrogen is seen as a key step in the transition towards a low-carbon economy, which will necessarily drive investment in innovative low-carbon technologies. The main obstacles that remain to be overcome include changing how hydrogen is produced and what it is used for – in short, developments that will be transformative to hydrogen’s current place in the energy mix.

Hydrogen can be used to store excess power, in fuel cells to power vehicles and as a direct substitute for hydrocarbons. However, the key to its place in a low-carbon economy is that unlike hydrocarbons, when combusted or catalysed, hydrogen does not release carbon dioxide. Unfortunately, most production of hydrogen presently is carbon intensive and continuing to produce hydrogen in this way is not aligned to the low-carbon economy of the future. Climate friendly production methods will need to scale up, bringing “low carbon” or “blue” hydrogen and “zero carbon” or “green” hydrogen into the energy mix.

Hydrogen remaining part of the energy mix will depend on cost parity, with reduction of supply side costs being necessary.  Perhaps the greater challenge for policy makers will be to ensure through emissions charges that the cost of hydrocarbon consumption properly reflects the costs of greenhouse gas emissions, in order to provide a more level playing field for end users to make price driven choices between continued use of fossil fuels and adoption of hydrogen.

Pursuing a hydrogen economy needs to be viewed as a pan-Canadian initiative — there is something in it for everyone, the fossil fuel industry and renewable power generators alike. It is no coincidence that the Canadian government calls the Strategy, “A Call to Action”.

The electrification of vehicles with lithium-ion technology

The ongoing response to climate change involves many sectors of our economy and rests largely on the electrification of transport, more specifically of the powertrain of vehicles. Although fuel cells will play a role, the majority of this transition will involve the combination of electric motors with lithium-ion batteries. The current and projected increase in the demand for electric vehicles also means an increasing demand for batteries and their components.

This rapid growth of demand may produce a significant shortfall in the supply of lithium-ion batteries, which have a complex, global supply chain. From raw materials (constituting the majority of the costs of batteries) to the final products (battery cells, modules and packs) it has historically been largely concentrated in Asia. There is a movement towards re-localization of this supply chain, to be in closer proximity to the automobile manufacturing industry in North America and Europe. The raw materials used to create lithium-ion batteries include nickel, manganese, cobalt, graphite and lithium itself. Canada is fortunate to have an abundance of these mineral resources and wants to move “up” in the supply chain “from the mine to the vehicle” and beyond, to include recycling. The automotive industry of Southern Ontario has already started its transformation from internal combustion to electric motors.

Biofuels go green by leveraging residuals

Biofuels are derived from organic matter and comprised of any fuel whose energy is obtained through a process of biological carbon fixation. Three key categories of biofuels include: ethanol, which is derived from wheat and corn and used as an additive to gasoline; biodiesel, which is derived from plant oils and animal fats and used as a substitute for, or additive to, diesel fuel; and solid biofuels, which are most often derived from residuals of the forestry industry, and used to produce heat and fuel power plants.

Canada’s current regulatory regime aimed at reducing greenhouse gas emissions, mandates a certain minimum renewable content in both gasoline and diesel. Our domestic agriculture sector has consequently benefitted from regulatory requirements and the resulting demand for ethanol and biodiesel. Despite the increasing demand for electric vehicles, a significant portion of vehicles in North America continue to be powered by internal combustion engines, and therefore the requirements for the manufacturing and supply of ethanol and biodiesel will likely remain strong.

Canada’s forestry sector has benefitted from an increased demand for solid biofuels, which can be generated from residuals produced by the forestry industry, including from the manufacturing of lumber. This form of biofuel, which can take the form of wood pellets can be used to produce heat and electricity, and in Canada may provide a sustainable option for diversifying our current supply of renewable energy, which is currently dominated by hydroelectric power. As a global leader in the production of forest products, Canada is well positioned to meet a growing demand for solid biofuels both domestically and internationally.

Learn more about Forest and Range Practices Act (FRPA) and the activities regulated this act.

Firing up for a biomass future

Renewable natural gas (RNG) is an emerging power source that converts decomposing biomass into a clean energy source – biogas. RNG can be produced from landfill sites, agricultural waste, and organic waste from commercial and residential sources and its generation is growing rapidly.  The resulting biogas can be processed or "upgraded" to get rid of impurities, so that it is nearly pure methane.  This upgraded methane is often high enough quality that it is appropriate for pipeline injection and vehicle fueling.

At present, RNG is most often used as a transportation fuel, particularly as a substitute for diesel in heavy-duty vehicles.  Greenhouse gas emissions benefits associated with RNG production and use primarily stem from:

  1. voiding greenhouse gas emissions that otherwise would occur under typical waste management practices (for example, methane emissions from animal manure in uncovered lagoons or municipal landfills); and
  2. displacing traditionally used fossil fuels.Many Canadian provinces and municipalities are seeing the environmental and financial benefits of incorporating RNG into their energy portfolios and many industry participants in the biomass-to-power sector are seeing opportunities to capitalize on growing interest in RNG and “closed-loop” technologies.

The growing utilization of biogas can help lower greenhouse gas emissions from traditionally carbon intensive sectors (transportation, agriculture and waste management) and concurrently act to reduce heat-trapping methane emissions, keep organic waste out of landfills, and prevent manure runoff.

Harnessing the heat of the earth in geothermal energy

Geothermal energy is naturally occurring heat energy generated in the sub-surface of the earth and transferred to the surface by water and/or steam. It is a clean and reliable source of renewable energy that can be harnessed to generate electricity and/or directly heat infrastructure. Conventional geothermal resources require specific geological formations that are geographically concentrated and generally difficult to locate. Recent developments in enhanced and advanced geothermal systems show promise to unlock the vast potential of geothermal energy by making it scalable to a larger consumer base.

Geothermal energy, and in particular geothermal power, has a number of key attributes which provide promise that it will be an important player in a low carbon energy mix. This sub-surface energy source provides constant, predictable and reliable baseload power which satisfies a capacity gap inherent in wind and solar power projects. After construction, geothermal energy emits low to zero greenhouse gases. Geothermal power generation facilities are primarily contained underground resulting in a small surface footprint compared to alternate power generation facilities. These facilities can be developed on a small or large scale in close proximity to power consumers (industrial facilities and/or communities).

Canada is uniquely positioned to develop commercial geothermal resources. While the geothermal industry in Canada is still in its infancy, there are a number of promising projects under development. In addition, compiled oil and gas subsurface data should enable Canada to map and understand the potential for geothermal energy and reduce exploration risks. Canada’s sophisticated oil and gas industry can provide a significant portion of the required expertise (fracking, horizontal drilling, seismic) and infrastructure necessary to establish a booming geothermal industry. In turn, the geothermal industry could create opportunities for drilling and service companies and oil and gas producers looking to pivot or generate offset credits.

Full speed ahead to a low carbon future?

Like any new venture, these energies require significant capital investment in the innovation and exploration stages. Legislation and the regulatory schemes required to attract investment in Canada have not kept pace with development – government approval processes, royalty arrangements, and resource ownership issues are common points of concern. In addition, careful attention will be required to properly allocate the risks set out in standard joint venture, operating and services arrangements and to ensure that the rights required to secure project financing and insurance are clearly established.

The Canadian energy industry has successfully navigated similar challenges in the past and we are confident that these hurdles will be creatively addressed by engineering, legal and other professionals in Canada. 


Vivek Bakshi is a Partner in Dentons’ Energy Innovation and Transition group. He represents clients in the energy, natural resources and infrastructure sector. He specializes in the structuring, negotiation and documentation of natural resource projects and related financings and in domestic and cross-border mergers and acquisitions in the oil, gas, water and power sectors. Vivek has considerable experience in regulated electricity markets and has acted for numerous clients in the development, operation and acquisition of independent power projects, including those involving renewable energy sources. Vivek has also led transactions involving on and offshore petroleum development and has many years of experience in each link in the LNG value chain, having acted for developers of liquefaction facilities, LNG buyers, sellers and in connection with regasification terminals.


Courtney Burton is a partner in Dentons’ Energy Innovation and Transition group, where she practices in the corporate/commercial group and is the co-lead of the Energy department. She regularly advises clients on transactions and commercial matters, including asset share transactions and the provision of advice on governance matters. Courtney has extensive experience negotiating and drafting commercial and energy-related agreements as well as implementing corporate reorganizations. She advises a variety of public and private companies on derivatives matters, including negotiating physical and financial commodity trading transactions, providing advice on Canadian derivatives regulation and compliance matters, and assisting with cross-border energy derivatives compliance issues. 


The Honorable Philippe Couillard is a Senior Business Advisor and member of the Energy Innovation and Transition group. The experience and knowledge developed through his private and public service career, particularly in the health sector, and in the management of complex and strategic issues at the national and international level, assists clients working in the new technologies, biotechnology, pharmaceutical, financial, energy and infrastructure sectors.



Robin Longe is a partner in Dentons’ Energy Innovation and Transition group, and a member of the Firm’s Corporate group. Robin is a natural resources lawyer whose practice focuses on forestry, mining, environmental and aboriginal law. He has extensive experience in all aspects of corporate transactions in the mining and forestry sectors, and is regularly involved in the purchase and sale of timber and mining rights, sawmills, pulpmills, mines, and related equipment and infrastructure. In addition, Robin regularly advises clients on logging contracts, mining option agreements, joint ventures, and other agreements specific to the mining and forestry industries, as well as negotiating arrangements with First Nations in British Columbia, including impact and benefit agreements, negotiation protocols and limited partnership arrangements.


Byron Reynolds is a senior associate in Dentons’ Energy Innovation and Transition, Infrastructure and PPP, and Corporate groups. His practice focuses on mergers and acquisitions and project development which includes the structuring and negotiation of complex commercial arrangements relating to: the purchase and sale of assets and shares; the formation of partnerships and joint ventures; engineering, procurement and construction contracts; operation and maintenance agreements; long-term service agreements; commodity transportation and sale arrangements; and debt and equity financings. In addition, Byron regularly provides advice and services respecting corporate governance, reorganizations and general corporate and commercial matters. A significant portion of his practice involves representing clients in the energy, infrastructure, construction and hospitality sectors.