The Canada Infrastructure Bank is making its first investment in low-carbon fuels, committing $277 million to a biofuels facility under construction in Varennes, Que.
The facility — known as Varennes Carbon Recycling — has a total price tag of $1.2 billion and is a joint-venture project between Shell, Suncor Energy Inc., Swiss natural gas company Proman and the government of Quebec.
It is being built by Montreal-based Enerkem, whose proprietary technology will be used to produce biofuels and renewable chemicals out of landfill waste and wood waste. The plant will also incorporate one of the world’s largest electrolyzers, which will split water molecules into oxygen and green hydrogen for use in its biofuel-making process.
The project, which was first announced in 2020, will be the largest biofuels facility in the country once completed in 2025, said Canada Infrastructure Bank CEO Ehren Cory.
“What attracted us to the project was the scale and ambition of it, first of all,” Cory said.
“For us at the CIB, this is our first investment in an area that I believe has a ton of potential for our country.”
There has been an explosion of interest in biofuels — fuel derived from renewable biomass such as agriculture waste, food waste, even algae — recently as companies seek to lower their greenhouse gas emissions.
Other projects in the works in this country include Imperial Oil’s plans to build a renewable diesel complex at its Strathcona refinery near Edmonton, and Atco Energy’s plans to operate a renewable natural gas facility near Vegreville, Alta.
But concerns have also been raised about whether Canada is falling behind as other countries — particularly Europe and the U.S. — seek to promote growth in their clean fuels sectors.
Recently, Calgary-based Parkland Fuel Corp. announced it would not go ahead with its plan to build a stand-alone renewable diesel complex at its refinery in Burnaby, B.C.,arguing the company cannot compete with the financial incentives being offered in the U.S. for renewable fuel construction.
Enerkem CEO Dominique Boies said the risk that clean fuel investment will flow to other jurisdictions instead of Canada is real.
“The Inflation Reduction Act (in the U.S.) is quite ambitious. It’s hundreds of billions of dollars to attract investments that will enable decarbonization,” Boies said.
“I am afraid that we’re going to lag behind, and it’s going to be very difficult to do projects in Canada. (Enerkem’s) partners are multinationals and they can decide where they deploy capital.”
In last year’s federal budget, the Canada Infrastructure Bank — a federal Crown corporation — was given the mandate to include clean fuel production, carbon capture utilization and storage, and hydrogen production under its existing clean power and green infrastructure investment areas.
“I don’t think the private sector is lagging or reticent. We’ve actually seen a ton of interest from private sector players, big and small, across the country,” Cory said.
“The challenge that we see, and I think this is why the Canada Infrastructure Bank plays such an important role, is the level of risk and uncertainty these projects still bear.”
Cory said there is also market risk and uncertainty around what kind of premium customers will pay for low-carbon fuels, and how carbon pricing systems and carbon credits in different jurisdictions will influence that market.
“We all know what 2050 looks like, but getting there has a lot of uncertainty,” Cory said. “That’s where we can help.”
He said the CIB is seeking to finance up to $5 billion in green infrastructure projects, which should accelerate deployment of these technologies by helping private sector proponents reduce their risk.
The Varennes carbon recycling facility is expected to convert more than 200,000 tonnes of non-recyclable waste into biofuels annually, with a capacity of up to 130 million litres.
Project proponents say the facility will reduce greenhouse gas emissions by more than 170,000 tonnes annually, the equivalent to taking 50,000 passenger vehicles off the road.