Thank you very much, Madam Chair and members of the committee, for this invitation to discuss the impact of the U.S. Inflation Reduction Act.
As it has been said, I'm John Risley. I'm the director of World Energy GH2, which is developing Project Nujio’qonik, a $12-billion U.S. investment in Newfoundland and Labrador.
This project will generate energy by way of a three-gigawatt wind farm on the west coast of Newfoundland. Electrolyzers in nearby Stephenville will then convert that electricity to hydrogen and ultimately to ammonia. Both hydrogen and ammonia have been safely generated and shipped globally for decades.
As members of this committee are aware, Canada has signed an MOU with Germany to supply green hydrogen, beginning in 2025. This project is uniquely positioned to fulfill that commitment and so much more, including bringing well-paid jobs to local communities in Newfoundland and Labrador. Ensuring that Canada can successfully transition from conventional to low-carbon energy production and export.
World Energy has signed an MOU with the Qalipu First Nation, as well as all of the other local first nations communities in the area of our project. Chief Brendan Mitchell of the Qalipu has noted that this project will bring local opportunities through green energy training and jobs. The involvement of local communities is crucial. Without it, the project would not be able to advance.
A key question before the committee today is whether or not Canada will be able to compete in the clean energy space, given the strong tax credits for these kinds of projects included in the Inflation and Reduction Act. I'm here today to tell you that Canada is well positioned to compete in the green energy space, but to do so, we need to make decisions quickly and support the expedited rollout of this sector in our country.
The recent fall economic statement provides the beginnings of a response to the IRA. It provides for a tax credit of up to 40% on clean hydrogen production and up to 30% for clean technologies, such as power generation via wind turbines. This is an excellent place to start the discussion. However, projects like ours need certainty on the details of these announcements in order to be able to move forward.
Questions exist. For example, will the tax credit on clean energy generation apply to the cost of the wind turbine itself or include the integral components, such as the concrete foundation upon which the turbine is to be mounted? What about the new road infrastructure required to get the turbines to site?
With regard to the hydrogen investment tax credit, we assume that this would include the cost of electrolyzers, but what about costs associated with energy transmission from the wind turbines to those electrolyzers? What about the specialized storage facilities, steam generation and other water treatment infrastructure? They are all required as part of such a project.
This can be simplified by deciding where the dividing line is between the power generation assets and the hydrogen and ammonia production assets. One side of that line earns the up-to-30% credit and the other earns the up-to-40% credit. All of the capital assets on both sides need to be captured in order for these credits to make Canada competitive in light of the IRA.
The determination of what constitutes a capital asset should be left to either generally accepted accounting principles or international FRS accounting standards. Any project owner submitting an application for the credit would need an audit certificate from a recognized accounting firm, qualifying the assets on both sides of such a line.
The timing of these decisions is critical. Right now, every day that we delay ordering key components, such as turbines and electrolyzers, creates a potentially significant delay in when we will receive such equipment. This is due to the supply chain crunches and high demand being generated by policies such as the IRA.
Canada needs to act quickly and provide certainty around the announcements made in the fall economic statement, while making sure that all of the project assets needed for green hydrogen and green ammonia are captured by the investment tax credits.
This is not crying wolf. I literally, just two hours ago, got off a plane after spending a week in Europe to visit critical equipment suppliers. I can tell you that I had to beg for the attention of these suppliers, who are now focused on a huge number of developing projects in the United States.
Thank you for this opportunity, Madam Chair.