According to research released by Energy Monitor, certain Ukrainian lobbyists are pinning high hopes on hydrogen production in Ukraine to get out of the energy crisis, especially given the present Russian invasion and the country’s domestic gas industry’s failure to meet consumption needs.
Last August, the Ukrainian company Naftogaz and the German energy trading company “RWE” agreed to investigate opportunities for cooperation in the production and transportation of green hydrogen and its derivatives, including Ukrainian ammonia, and signed a memorandum of understanding on green hydrogen export to Europe.
Advocates of hydrogen in Ukraine regard it as a critical decarbonization agent, claiming that it would help Ukraine become a key source of clean energy for the European Union and that domestic hydrogen production will aid the country’s efforts to recast tense relations with Russia.
Oleksandr Rybkin, Head of the Ukrainian Hydrogen Council and Adviser of the Ukrainian Foreign Ministry on the Hydrogen Economy stated that green hydrogen may not only be a solution to climate change, but also a way to reduce Ukraine’s reliance on foreign energy and resources.
In reaction to Russia’s Gazprom’s extortion, Oleksandr Rybkin called for a hastening of the transition to green hydrogen.
He noted Ukraine’s geographic proximity to European markets, as well as the world’s largest gas transportation system (GTS), as grounds to believe that the country’s hydrogen production may play a key role in limiting what many perceive as Moscow’s destructive influence on Kyiv.
These same features, according to some analysts, are reasons to doubt Ukraine’s ability to become a major supplier of hydrogen to the European Union.
They said that Ukraine has a poor track record in energy exports, claiming that the country has neglected to develop its gas resources in favor of the lucrative business of delivering Russian gas to Europe.
Ukraine’s natural gas reserves
On the brink of Europe and within the boundaries of a friendly European Union country, Ukraine has unexplored natural gas reserves similar to Norway’s. Ukraine has one of the world’s largest gas transportation networks, which is linked to the European Union’s energy markets.
Ukraine has 38.5 trillion cubic feet of confirmed gas reserves and huge untapped potential, in addition to the natural resources, it needs to phase out gas imports and become a major gas supplier to the European Union.
These reserves, on the other hand, have been neglected for many years since their discovery, despite the fact that there are critical national security reasons for their development.
Since the fall of the Soviet Union, Ukraine has had numerous confrontations with Russia, most notably during the 2008-2009 gas wars, when a contractual dispute over unpaid payments caused supply disruptions that echoed throughout European gas markets.
Despite Russia’s 10-year effort to weaponize gas against Ukraine, Ukrainian gas production has remained steady at roughly 19 billion cubic meters per year for the past quarter-century.
This sum covers nearly two-thirds of Ukraine’s internal needs, with the remainder coming from Russia; however, Ukraine now imports all of its needs from its western neighbors.
These are the same Russian gas imports from surrounding countries that were delivered to Eastern Europe via different routes and then re-exported to Ukraine via reverse flows to the UGTS area.
The Ukrainian gas production crisis has many facets
After the demise of the Soviet Union, the emigration of gas development expertise to Russian Siberia, as well as the lucrative transfer fees received by government officials in Kyiv, create impediments to supporting the indigenous gas industry in order to challenge Russian export dominance.
Moscow would be uninterested in Ukraine’s producing and export-oriented gas industry, as well as hydrogen, which might become a new front in the gas wars between Russia and Ukraine.
It’s worth noting that Moscow has clean hydrogen export ambitions and is better positioned to achieve them than Ukraine, thanks to the Nord Stream 2 pipelines, which have demonstrated their ability to transport hydrogen in the future, despite the deterioration of the old methane-leaking gas transportation system pipelines.
According to the International Energy Agency, methane emissions in Ukraine are expected to reach 120,000 tons in 2020, accounting for nearly 13% of total methane emissions in Europe.
According to the Ukrainian Institute for the Future, a Kyiv-based think tank, improving the Ukrainian gas transportation system to carry local natural gas to Europe will be costly, with field development costing an estimated $3.5 billion (99.18 billion hryvnias).
Energy from renewable sources
The European Commission, for its part, has named Ukraine as a “key partner” in presenting its hydrogen plan in the Eastern and Southern Neighborhoods, which seeks to deploy 40 GW of electrolyzer by 2030.
Ukraine is expected to contribute 8 GW of electrolyzer capacity this decade, creating 738,000 tons of green hydrogen, according to the pressure group Europe Hydrogen.
Ukraine would need 17,455 gigawatts of solar PV or 8,324 gigawatts of wind to produce this quantity of hydrogen due to the inefficiency of electrolysis capacity.
This equates to a three-fold increase in solar energy installed in Ukraine or a five-fold increase in wind energy.
Despite the fact that Ukraine has a significant untapped renewable energy potential that considerably exceeds these estimates, it is thought that Ukraine is not an attractive destination for foreign direct investment.
According to the United Nations Conference on Trade and Development’s World Investment Report, FDI flows to Ukraine declined by roughly $7 billion in 2020, resulting in a net investment withdrawal of $868 million.
While the advent of the COVID-19 pandemic is to blame for much of this, the research also points to Ukraine’s financial issues and geopolitical tensions, which do not look to be abating.
Moreover, transferring additional renewable-energy capacity to fulfill Europe’s ambitious hydrogen goals, according to analysts, would require Ukraine to keep polluting coal-fired power plants operational and push back planned retirement dates.
