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October 13, 2022

International Cooperation to Develop a Low-Carbon Hydrogen Sector: Alliances and Partnerships

KEY CONCLUSIONS

 

The emergence of global economic incentives for hydrogen energy

 

“Against the backdrop of the geopolitical crisis, an energy crisis has taken shape. All commodity prices – gas, oil – have skyrocketed, and now [these resources, – Ed.] are insanely expensive. Why is it important? The most popular technologies for producing hydrogen are one from gas, the other from water by electrolysis. What happened? Gas prices have risen sharply, making hydrogen from gas very expensive. At the same time, the cost of producing electricity from RES [renewable energy sources, – Ed.] keeps going down. A unique event took place: whereas previously the hydrogen energy was about the climate, but there was no money, now there are incentives to develop the hydrogen energy based on the green hydrogen. <...> Green hydrogen begins to compete with blue hydrogen, which has never happened before, i.e. there are economic incentives for investment,” Denis Deryushkin, Deputy General Director – Head of Analytical Center, Russian Energy Agency of the Ministry of Energy of the Russian Federation.

 

“Currently, a number of SCO member states, such as Russia, China, India and others, are actively developing their hydrogen industries. In this context, I consider it important to intensify energy dialogue and practical cooperation,” Sohail Khan, Deputy Secretary General, Shanghai Cooperation Organisation.

 

“Many speakers today pointed out that we are now living in a difficult and complex geopolitical environment, but we see the need to use hydrogen. <...> We need to overcome humanity’s long-term climate crisis. We need to get to a zero-carbon sustainable development. We all hope that Russian Federation will contribute to this programme and will take a part of it upon itself. <...> An economy that is based on hydrogen offers many opportunities for many countries. Russia can do a lot in this respect,” Olga Algayerova, Executive Secretary, United Nations Economic Commission for Europe (UNECE).

 

Russia begins to focus on technology and the domestic market to test it 

 

“We used to talk about promising applications for hydrogen, such as oil refining and fertilizers. Now the new areas are transport, energy, and metallurgy. <...> Transport and energy are becoming promising, and these are domestic market topics. We have isolated zones where electricity is expensive by default; we have northern delivery. Let’s avoid any illusions that hydrogen will compete with diesel tomorrow. No, diesel and petrol will still be the cheapest fuel. But where we want to replace diesel with electricity, we need to look for niches,” Denis Deryushkin, Deputy General Director – Head of Analytical Center, Russian Energy Agency of the Ministry of Energy of the Russian Federation.

 

 

PROBLEMS

 

High cost and long implementation period of hydrogen energy projects

 

“If there is economic efficiency, investments are collected and channeled. But the entry threshold into this market is very high – from USD 500–600 million. This is the first stop factor. The second is a very long project implementation period. Third, we are just forming the market, just forecasting economic efficiency,” Tatiana Zavyalova, Senior Vice President for ESG, Sberbank.

 

Insufficient incentives for investors and support from the state 

 

“Companies are saying that everyone has gone down Maslow’s pyramid: it’s about survival and basic needs. Companies are saying, ‘Show us more obvious incentives, why should we tear away resources and invest in such long-term [hydrogen energy, – Ed.] projects?’ The government should set the standards,” Andrey Sharonov, Chief Executive Officer, National ESG-Alliance.

 

“Powerful development is only possible with strong support from the state. If we do not invest in technology development, we will have no reason to work with this hydrogen. At the same time, we need to create incentives to develop demand for hydrogen. <...> We need to form incentives and motivation systems to develop production capacity,” Tatiana Zavyalova, Senior Vice President for ESG, Sberbank.

 

SOLUTIONS

 

Searching for new niches

 

“The example of St. Petersburg [where the first hydrogen-powered tram appeared in 2019, – Ed.] is a good example of how hydrogen energy in transport can compete with batteries or electric transport. In St. Petersburg, it is not so easy to install another charging station and get it connected to the grid in the city centre. There are a lot of bridges there, so the mileage of transport must be significantly higher from charge to charge. In this sense, hydrogen is more competitive than traditional batteries,” Denis Deryushkin, Deputy General Director – Head of Analytical Center, Russian Energy Agency of the Ministry of Energy of the Russian Federation

 

“Compared to commercial vehicles, electric vehicles will be more profitable than any other mode of transport. But in terms of cargo transport – long hauls, cold climate, lack of charging infrastructure – hydrogen is competitive. By 2030, we expect hydrogen to be quite competitive with electric cars,” Andrey Streltsov, Partner, Yakov and Partners.

 

Hydrogen energy needs investment solutions

 

“About investment: serious investment decisions should already be taking place in this area. There is such a movement. There are many multi-level projects at different stages. McKinsey estimates the current volume of investments at USD 240 billion. About 50% is going to countries outside the EU and the U.S.: Asia, Australia, Latin America. At the moment, the leader of hydrogen consumption is China – they consume 25 million tonnes of hydrogen per year, while the EU consumes only 10 million tonnes per year <...>. In China they are stimulating the consumption of hydrogen, they are carrying out projects to develop technological solutions in the field of hydrogen, and it is bearing fruit. <...> We need to think about this, otherwise it will be difficult for us to increase our market, because there is no motivation,” Tatiana Zavyalova, Senior Vice President for ESG, Sberbank.

 

Technological solutions and clear mechanisms for investors are needed

 

“We are at the point where a new energy market is emerging. Each country will try to take its lead in terms of technological solutions. <...> We need to form unified technological solutions so that either the technology can be exported or the hydrogen itself. We need to solve the issue of technological standardization, legal issues, we need clear mechanisms to attract investment in this industry,” Tatiana Zavyalova, Senior Vice President for ESG, Sberbank.

 

For more information, visit the Roscongress Foundation’s Information and Analytical System roscongress.org and the official Forum website rusenergyweek.com..