Last August, the Russian Government adopted a concept for developing hydrogen energy. Under this program, hydrogen energy clusters will be developed and launched, simultaneously with pilot hydrogen production and export projects. Invest Foresight spoke about this project to Sergei Pikin, Director of the Energy Development Foundation, Deputy Chair of the Consumer Council of the Federal Grid Company of United Energy System, member of the Public Council at the Russian Ministry of Energy and the Expert Council of the Agency for Strategic Initiatives.
Multi-purpose gas turbine
— Based on the Government’s general strategy for hydrogen industrial use, it was announced that by 2027, Russia will develop a 65 MW hydrogen turbine. Hence a rhetorical question: what prevented them to do it before, considering that the Soviet Union had a history of successful hydrogen projects, even if created for military purposes?
— Ultimately, it’s not just about our readiness to develop a hydrogen turbine. Russia is actually in the process of launching of a gas turbine. It is a quite complicated piece of equipment. In Soviet times, the state developed steam power equipment and not gas turbines that were represented in a few low-power machines. There was no talk about manufacturing them on the industrial scale for large electric power plants.
Therefore, gas turbines are not only part of the development strategy now, but are also included in concrete construction plans; programs were developed that allow for procuring them. It is a working mechanism now. A gas turbine that works on hydrogen is the next step.
I would put it this way: the energy sector’s main objective is to create a contemporary gas turbine which will be able to work on hydrogen as well. Actually, it is not that irreplaceable.
— So what is it about? Hype?
— To some extent. But the EU countries have gone beyond hype and are currently testing gas-methane mixtures to use in turbines; we are also moving in that direction by trying to reduce carbon emissions. There is an opinion that electric energy is the main sector responsible for pollution. But one must keep in mind that most of these problems come from the use of coal. With the transition to hydrogen, the situation will change and Russia is feeling this trend and plans to take a significant share of the global hydrogen market.
It is easy to assume that if you don’t have a domestic hydrogen market, it would be unwise to try to multiply this sector abroad. The domestic market in Russia has been already established: in medicine, metallurgy and the aerospace industry. But there is a goal to transition it to “simpler” uses, which will greatly increase its volume.
In Russia, traditional energy has a minimal carbon footprint
— Figuratively speaking, Russia is trying to enter the green energy with hydrogen in its portfolio?
— Yes, our energy sector is not that polluting, even in comparison with European countries such as Poland, for instance. Poland is heavily reliant on coal power. Germany has only recently adopted green energy and was using coal as the main fuel in heating for a long time. By the way, it is going to phase out nuclear energy by the end of 2022.
In Russia, nuclear power plants, hydroelectric power plants and gas-fired power plants have a minimal carbon footprint. President of Russia Vladimir Putin said that the Russian energy sector has long been one of the world’s cleanest. European experts say our energy sector is not the greenest one, but in terms of lowering carbon emissions is not that harmful for the environment and human health as compared to the world’s leading countries, and especially the developing ones.
So hydrogen projects currently reflect both traditions and hype. How serious and long-term industrial solution and how popular it will become will depend on “external constraint” on the motivation to improve. Carbon taxes are the factor that forces to transition to a new kind of fuel in one way or another.
The carbon lobby is interested in a new fuel
— Can we already predict and prevent the conflict of interests between the energy players? How can the oil and gas lobby interfere in the transition process?
— I think that its potential representatives are interested in the novel technology. The recent meeting between Inter RAO CEO Boris Kovalchuk and Russian Prime Minister Mikhail Mishustin when the participants reviewed the company’s 2021 results showed how this large state company will be affected by carbon regulations. We should keep in mind that Inter RAO is the supplier of electric energy to the European Union whose standards demand that it must be greener than before and that end users did not bear additional costs when purchasing it, and it should be more competitive overall.
Another point regarding speculations over counteractions by oil and gas or Rosatom lobbyists is about hydrogen itself: this is a gas that cannot be found in open natural sources as pure hydrogen does not exist in nature. This substance can be produced by chemical reaction from coal, oil and methane gas; it can also be obtained from water through photolytic synthesis and in a number of other ways. In any case, as soon as domestic energy suppliers face a task of producing cheap hydrogen, they will have to use regular resources.
Europe will definitely begin to focus its efforts on green hydrogen, but fortunately, today we do not have such a specific classification into hydrogen types, such as green, blue, and others. So far, our essential strategy is based on the fact that Russia will produce hydrogen from methane, and the country’s transition to hydrogen-gas turbines should not to be expected to occur during this decade, only until after 2030s.
— Can we expect a bright future?
— I do not quite agree with this assessment: producing hydrogen requires a certain amount of energy. To put it another way, the process of obtaining an energy source is expensive in itself in a certain sense, primarily from an environmental point of view. As regards total costs of building a gas station or a nuclear power plant in the context of their hydrocarbon load, they appear to be more neutral than the use of windmills or solar panels — in particular, the disposal of the latter’s worn components, which is particularly illustrative.
For energy workers, hydrogen energy is the right path globally in the long term; yet, it is important to take it slow and do it basing on actual capabilities; this rule should also be pursued in the renewable energy sector in general. We are developing it to basically make it an individual industry, but we are currently lagging behind European countries, and I cannot compare our country with China.
Who will pay for introducing the innovations?
— As to monetization of the entire process of transition to hydrogen generation units and overall profitability of this energy production, is it too early to make forecasts in this regard? How will its development affect the growth — or reduction — of energy suppliers’ tariffs for citizens, among others?
— Any investments, be it in hydrocarbon energy or hydrogen sector, must naturally pay off, and this can take place solely though additional consumer payments. The government is not ready (at least, currently) to compensate them directly from the federal budget. They probably can compensate certain amounts, but certainly not the entire program. So we can assume that consumers will carry the monetary burden of several trillion rubles — which will definitely affect the costs of electricity as well as monthly housing and public utility bills in their total value.
— So, subsidies are not a solution to protect an average consumer…
— What are subsidies? After all, the money is paid from the federal budget, which is largely made from tax deductions. The pocket you have mentioned can be the left one or the right one, and it can also be a jacket’s inner pocket. (smiling) But it is at disposal of one and the same taxpayer.
Ultimately, the source of investments is not important; we can expect foreign investments as we are perfectly aware of the current investment climate in Russia, which is far from being favorable. What matters is that these investments are returnable. A few years back, plenty of German, Italian and Finnish partners were active in Russia’s energy industry; they invested over €10 bln, and currently their investments are paying off — some of them have been fully paid back — through payments for electricity at built facilities.
— Will it be too expensive for most citizens, if we compare amounts of investments in the energy industry and citizens’ paying capacity which has not shown any growth over the past seven years, to say the least?
— Here it would be reasonable to make an emphasis on balance: of course, one can simultaneously try to compensate all investments at once by doubling tariffs, or do it gradually by dividing the growth amount by year. We should also consider Russia’s economic and political environment, where the energy sector cannot develop independently of the national economy — particularly, we should consider the current possible restrictions, sanctions, and countersanctions. Indeed, this is a complex and multifactor task.
By Alexei Golyakov