By Sagar Kancharla, Elena Ezquerra Silva, Nathan Koshka

Remote and rural communities face a common challenge: access to reliable, affordable energy where traditional grids cannot reach. Canada’s extreme climates and vast distances make it a proving ground for solutions that are increasingly relevant to remote communities around the world.

As Canada moves toward its goal of net zero emissions by 2050, alternative energy solutions must be considered to reduce reliance on imported diesel in remote communities. Decarbonizing remote and northern communities requires a mix of solutions tailored to local conditions and priorities. Reducing reliance on diesel depends on combining energy efficiency, smart energy use, renewables, storage, and emerging technologies into integrated systems.

Within this transition, hydrogen is emerging as a complementary option, supporting seasonal storage, year-round reliability, and greater local energy autonomy alongside renewables and batteries.

A national study by WSP for Natural Resources Canada (NRCan) shows how hydrogen can strengthen resilience, reduce emissions, and support community-led energy transitions across technical, economic, and policy considerations.

Hydrogen matters for remote communities

Most remote northern communities have long depended on diesel to generate electricity as they are not connected to Canada’s main electricity grid or natural gas pipelines. Diesel has persisted because it is familiar, dispatchable, and historically reliable during long winters. However, deisel use poses some serious challenges including:

• Transportation costs - it must be transported over vast distances, by land, sea, or air, and for some communities only one shipment per year is feasible, greatly increasing costs for end users
• Uncertainty due to climate change - In communities that rely on winter ice roads, warming temperatures threaten seasonal access, potentially leading to emergency air deliveries or fuel rationing. In regions where diesel is delivered by marine tankers, spills risk contaminating local fishing areas and hunting grounds.
• Environmental impact and health risks -  Particulate emissions from diesel generators can damage local vegetation and cause serious health impacts for residents. As demonstrated in Iqaluit in 2021 (Nunatsiaq News, 2021), leaking fuel storage tanks can contaminate precious groundwater supplies, leading to additional challenges for communities.

The key challenge in replacing diesel is not electricity generation but seasonal energy storage. Renewable sources alone cannot meet winter energy demands, making storage essential. Two storage options have come to the forefront for remote communities: Battery Energy Storage Systems (BESS) and hydrogen.

Battery Energy Storage Systems (BESS) are designed to provide short-term grid stability for variable energy generators like wind and solar, and for back-up power when demand is high. However, batteries have limitations in extreme climates where their performance and efficiency decline significantly:

• Cold: Smaller EV batteries have shown 30-40% capacity loss, slower charging, freeze–thaw degradation (U.S. Department of Energy, Battery Performance in Extreme Cold, 2021) and studies show that BESS capacity sizing should be increased from anywhere between 40% - 300% to allow for the HVAC load (“Impact of heating and cooling loads on battery energy storage system sizing in extreme cold climates”, 2023).
• Heat: accelerated aging, derating, thermal-runaway risk (“Lithium ion battery energy storage systems (BESS) hazards”, 2023)

Hydrogen can effectively bridge the seasonal gap, as it can be produced locally using solar, wind, or hydro, stored for long periods and converted back into heat and electricity as needed. Hydrogen production connected to a renewable energy source, typically called green or electrolytic hydrogen, is produced in an electrolyzer by splitting water molecules into hydrogen and oxygen. The hydrogen can then be stored in normal gas cylinders and when power is required, used in a fuel cell that can produce electricity and water. This process produces zero CO2 and the byproducts are clean electricity and water.

Hydrogen directly addresses three structural challenges faced by remote communities:

The NRCan-WSP study found that hydrogen systems can be successfully designed for Arctic, coastal, sub-Arctic, and high-humidity environments using:

• Insulated/heat-traced enclosures for electrolyzers and fuel cells;
• Elevated foundations to protect against permafrost thaw; and
• Modular skids suitable for fly-in installation.

Hydrogen and batteries work best together, as batteries can manage fast fluctuations in energy demand while hydrogen can manage the demand for energy in all seasons. Other renewable solutions can offer generation at times, but not with the year-round consistency that hydrogen offers.

The real cost of hydrogen

The NRCan-WSP study modeled five representative community profiles across Canada and compared the cost of utilizing hydrogen delivering seasonal storage (storing surplus solar and wind energy in summer and using during times of little to no solar or wind energy) or dispatchable power (replacing other fuels at times of low renewable output). The analysis compared off-grid systems across multiple configurations to determine the levelized cost for electricity production with 80% diesel displacement and 100% diesel displacement. The configurations included:

• Renewables + Battery Energy Storage System (BESS)
• Renewables + BESS + Hydrogen System (Electrolyzer and Fuel Cells)
• Diesel-only (baseline)

For one modeled Arctic community profile, four scenarios produced the following results (NRCan–WSP Hydrogen Microgrid Feasibility Study, 2025, pp. 92–93):

While renewables with the BESS system can be the lowest cost option for 80% or less diesel displacement, a key finding was that hydrogen becomes economically competitive when communities aim for very high diesel displacement (90–100%) and face large seasonal variations in renewable output. Hydrogen-enabled microgrids that aim for very high diesel displacement or eliminate diesel entirely (+90%) can reach cost parity with diesel once transportation, volatility, and spill risk are included. Hydrogen also reduces the need to oversize solar and battery systems, lowering total system cost. Lastly, community-owned systems keep energy dollars local, reducing long-term economic leakage.

Overall, there is a potentially feasible business case that demonstrates the value that hydrogen can provide for remote communities across Canada.

Energy sovereignty and climate resilience

Energy transition in remote communities is not purely technical, it is deeply tied to governance, land rights, economic development, and self-determination.

When designed around local priorities, hydrogen systems can deliver tangible community benefits, including local training and employment, community ownership of energy assets, reduced environmental and supply-chain risk, and stronger local economies through lower reliance on imported fuels and vulnerable delivery routes. Hydrogen is not simply an energy source; it enables new models for ownership, economic development, and energy justice.

The NRCan-WSP study reinforced a central insight: hydrogen is valuable when communities, not technology vendors or governments, drive the transition. Successful adoption aligns with cultural, environmental, and economic priorities determined by the community.

Technology alone does not deliver energy sovereignty: Governance and partnerships do. Community-led requirements need (NRCan-WSP Study, Indigenous Engagement Annex, 2024):

• Co-development with Indigenous Nations.
• Planning based on local and traditional knowledge.
• Program structures enabling Indigenous-led ownership and operation.
• Funding models for non-taxable and community-corporate entities.

To move from feasibility to implementation, enabling policies are essential. These include expanding incentives to Indigenous development corporations, simplifying permitting for modular systems, integrating funding across energy and resilience programs, and supporting Indigenous-owned demonstration projects. Together, these measures can turn hydrogen from a pilot concept into a scalable, community-led solution.