Russia in the Global Hydrogen Race

Gazprom

In light of the expected fall of future de­mand for natural gas in the EU, exports of low-carbon hydrogen – produced from natural gas – could be a potential lifeline for Gazprom’s business model. Gazprom is already a major producer of hydrogen – to the tune of some 360,000 tons annually – although most of it is “grey” hydrogen pro­duced by steam methane reforming (SMR), a process which releases large amounts of CO₂ into the atmosphere. The corporation has begun actively lobbying the EU to adopt a technologically neutral approach to hydrogen, focusing on total CO₂ emissions instead of prioritising renewable hydrogen.

A key challenge for Gazprom will be to find scalable and economical ways to re­duce the carbon footprint of its hydrogen production – be it by deploying carbon capture, utilisation and storage (CCUS, a technology that is not currently used in Russia), or methane pyrolysis (a promising novel method in which hydrogen and solid carbon, rather than CO₂, are produced from methane). Gazprom is cooperating with Tomsk Polytechnic University in refining the latter technology, yet its technology readiness level (TRL) remains low. However, several forms of methane pyrolysis are being developed internationally (e.g. by the Karlsruhe Institute of Technology in coop­eration with Wintershall Dea).

It is often argued that Russia’s vast net­work of gas export pipelines (which is ex­clusively controlled by Gazprom) gives it an advantage as a potential hydrogen exporter. In October 2019, Eurogas Secretary General James Watson said that the Nord Stream 2 gas pipeline, when completed, could poten­tially transport as much as 80% hydrogen. The reality is more complicated. Gazprom’s representatives have openly expressed scep­ticism regarding transporting hydrogen or hydrogen-methane blends through their gas pipelines, citing safety concerns. Ac­cording to Gazprom, no studies have been undertaken to determine to what extent and at what cost this gas infrastructure could be used to transport hydrogen and what share of blending is possible without risking hydrogen embrittlement. While the Minis­try of Economic Development sug­gested in April 2021 to provide all indepen­dent hydrogen producers access to the gas trans­portation system, this proposal is likely to face fierce opposition.

Instead, Gazprom’s leadership has re­peatedly expressed a clear preference for producing hydrogen on site in Europe, close to large industrial consumers. At the German-Russian Raw Materials Forum in December 2020, Gazprom’s Alexander Ishkov floated the idea of building a hydro­gen production facility in northern Ger­many, at the site of the landfall of Nord Stream 1 and (if completed) Nord Stream 2, where hydrogen would be produced from Russian gas using either SMR with CCUS, or methane pyrolysis. In late 2020, Gazprom announced the creation of a new company, “Gazprom Hydrogen”, that will be responsible for advancing Gazprom’s hydrogen business. On the whole, however, Gazprom is yet to go beyond declarative statements and undertake concrete efforts in clean hydrogen development.

Rosatom

Rosatom’s hydrogen plans have received limited media attention in Europe so far, even though it included hydrogen develop­ment as a priority in its corporate R&D policy in 2018 and is implementing several pilot projects. As the Russian state’s nuclear corporation and most technologically ad­vanced large company, Rosatom is inter­ested in the entire hydrogen supply chain. Over the next few years it plans to act as an investor and developer, with a longer-term goal of becoming a hydrogen technology provider – including launching the pro­duction of electrolysers (which, for now, Russia imports). In April 2021, Rosatom signed an agreement with the EDF Group to cooperate on low-carbon hydrogen projects in the area of transport and industrial de­carbonisation in Russia and Europe.

Nuclear-based hydrogen is an interesting proposition for Rosatom, which already produces some 4,200 tons of it annually. It would allow Rosatom to increase the load factor of its nuclear generation assets, some of which are operating below capacity (e.g. the Kola Nuclear Power Plant in Murmansk Oblast). Importantly, however, Rosatom maintains technological neutrality: its R&D programme encompasses a wide spectrum of hydrogen production methods, including electrolysis, SMR with CCS, and high-tem­perature gas-cooled reactors (HTGRs). As a major player in the Russian wind market, with a 360 MW portfolio of completed projects and much more in the pipeline, Rosatom is also open to exploring green hydrogen production.

Currently, Rosatom is conducting feasibility studies on two hydrogen projects on the far eastern island of Sakhalin, which is expected to become the first hydrogen clus­ter in Russia. The first project, on the use of hydrogen in rail transport, is being imple­mented in cooperation with Russian Rail­ways (RZD), Transmashholding (a machine-building holding) and the Sakhalin Oblast regional government. Seven suburban hydrogen trains are planned to be launched by 2025 and 13 more by 2030. Rosatom’s role in the project is to produce hydrogen and create hydrogen fuelling infrastructure on the island. The second project aims to export low-carbon hydrogen to Japan. In September 2019, Rusatom Overseas, a sub­sidiary of Rosatom, signed a cooperation agreement with Japan’s Ministry of Econo­my, Trade and Industry to conduct a feasi­bility study on exporting liquefied hydro­gen from Russia to Japan. The results of the study should be available by summer 2021. Building on this project, in April 2021, Rosatom signed a memorandum of under­standing (MoU) with France’s Air Liquide (a leading industrial gases company) and the Sakhalin regional government on conducting a feasibility study on large-scale blue hydrogen production (30,000-100,000 tons annually). If implemented, this would be­come Russia’s largest low-carbon hydrogen production project.

Novatek

Novatek is an independent gas company and a leading liquefied natural gas (LNG) producer in Russia. Although not explicitly mentioned in the Hydrogen Roadmap, the company has signalled its intentions to take part in hydrogen development in Russia. In January 2021, Novatek and Uniper signed an MoU on Novatek supplying blue and green hydrogen to Uniper’s power stations in Russia and Europe. Also, Novatek is mulling plans to produce some 2.2 million tons of low-carbon ammonia (either green or blue) at its Yamal LNG port in Sabetta; an investment decision is expected in early 2022. Moreover, Novatek is considering switching its planned Ob LNG plant to clean ammonia production. Ammonia, like LNG, can be transported by tanker, which means that Novatek would not need to depend on Gazprom’s pipeline system.

Hydrogen Technology Valley

Russia possesses a solid scientific background in hydrogen research dating back to the Soviet era. Several flagship universities are conducting research on hydrogen technologies ranging from energy storage systems and hydrogen-powered drones and automobiles to new hydrogen production methods like methane pyrolysis. However, much of this R&D is narrowly specialised and compartmentalised, the TRL is low, and commercialisation remains a challenge.

In November 2020, initiated by Tomsk Polytechnic University, six prestigious tech­nical universities in Russia came together to set up the so-called “Technological Hydro­gen Valley.” The goal of this research cluster is to create synergies in hydrogen research and to establish cooperation with key business actors interested in hydrogen development in Russia, including Rosatom, Gazprom, Severstal, Gazprom Neft and Sibur. The consortium also plans to expand international cooperation, which is where German and EU research centres can come into play.

In what could potentially be a game-changer, AFK Sistema, a leading private investor in the Russian economy, has an­nounced plans to launch an all-Russian hydrogen science and technology centre in Chernogolovka in partnership with the Institute of Problems of Chemical Physics. The centre would include a production facility for developing product prototypes (including hydrogen fuel cells and H₂ storage solutions) and promises to work towards the commercialisation of hydrogen research in Russia.

Regional Hydrogen Clusters

Drawing on the European examples of hydrogen valleys, the EnergyNet expert centre has proposed the creation of three unique regional hydrogen clusters in Russia: in the Far East (Sakhalin), the northwest (St. Petersburg) and the Arctic.

Of all three, the Sakhalin cluster project is the most developed. In April 2021, Ros­atom, the Sakhalin Government and Rus­sia’s Federal Ministry for the Development of the Far East and the Arctic signed an official cooperation agreement on the crea­tion and development of this cluster. This island, whose governor Valery Limarenko formerly held high-level positions in Rosatom, is the proposed site for Rosatom’s hydrogen projects described above, such as projects to explore exports of liquefied hydrogen to Japan, with the ambition of supplying up to 40% of Japan’s demand by 2030, and potentially to other Asian Pacific countries. Sakhalin is also expected to become a testing platform for the use of hydrogen and hydrogen-methane blends, such as in the fields of heavy-duty mining equipment, and passenger transport. In the future, Sakhalin may also produce green hydrogen from wind power. Finally, Sakha­lin is the first Russian region aiming at carbon neutrality (by 2025) and has been selected as a testing ground for carbon trading mechanisms that may be introduced in Russia in the coming years.

The northwestern cluster is expected to be centred in St. Petersburg. It will be oriented towards exporting hydrogen pro­duced by electrolysis at the Leningradskaya hydro power plant but will also aim to use hydrogen to decarbonise certain industrial processes and transportation. This includes direct hydrogen iron reduction in the steel industry, hydrogen use in cement production and the use of methane-hydrogen blends for vehicles.

The proposed Arctic cluster is expected to draw on the potential of hydrogen use for energy storage in remote and isolated areas. Much of Russia’s vast, sparsely populated Arctic territory is isolated from the national power grid and is supplied with environmentally polluting diesel at an exorbitant cost. This region stands to benefit most im­mediately from a switch to cleaner energy, as acknowledged by even the staunchest hydrocarbon supporters. Yakutia, Russia’s largest federal region, has already implemented a number of hybrid diesel-renew­able energy projects and is currently work­ing on a pilot project with Moscow Bauman Technical University to use renewable hydrogen for energy storage. Another pro­posed pilot platform exploring hydrogen-based solutions for energy storage and transportation is the projected zero-carbon international Arctic research station “Snezhinka” (Snowflake), whose opening is planned for 2023.

Hydrogen as Industrial Feedstock

Due to the lack of domestic carbon regula­tion, the idea of using clean hydrogen to decarbonise industry has not yet gained acceptance in Russia. The currently dis­cussed draft law on limiting GHG emissions has been rendered toothless by pressure from industry groups: it envisions only voluntary reporting of CO₂ emissions by large emitters and contains no restrictive measures such as emission caps or fines.

Nevertheless, the tightening of international climate policies is certain to affect Russia’s large export-oriented companies, and some of them, especially in the metals industry, are beginning to take steps to reduce their carbon footprint. Russia’s aluminium giant Rusal has introduced ALLOW, its own brand of “green alumin­i­um” with a carbon footprint of less than 4 tons of CO₂ per ton. Rusal’s “green alu­min­ium” is produced with energy from large Siberian hydropower plants and its demand is expected to grow in the coming years. Another promising example is NLMK, a leading steel producer in Russia, which is cooperating with Air Liquide in developing its hydrogen assets and reducing the carbon footprint of its steel. In January 2021, NLMK also signed a MoU with Novatek to cooper­ate on low-carbon technologies, CCUS and the use of hydrogen as a clean fuel in industrial processes.

Russian companies are closely watching developments around the EU’s Carbon Bor­der Adjustment Mechanism (CBAM), which is widely viewed in Russia as one of the most significant threats to its carbon inten­sive-economy. According to one oft-cited forecast by KPMG, Russia stands to lose up to €50.6 billion by 2030 as a result of the CBAM. Once the final design of the Mecha­nism becomes clear, Russian companies in the chemical, metals and petrochemical industries will intensify their efforts to reduce the carbon footprint of their pro­ducts, and hydrogen may become one of the solutions in this process, next to using renewable energy, CCUS and investing in forests as carbon sinks. This may also open a window of opportunity for German and EU companies to provide technologies and know-how to aid Russia in industrial decarbonisation.

Hydrogen in the Transport Sector

The transport sector is set to become the first hydrogen technology niche in Russia for a number of reasons: there are emerging Russian technology providers, concrete pilot projects (such as the Sakhalin hydro­gen train), and an interest on the part of investors. There is also a successful demon­stration project, the hydrogen-powered tram in St. Petersburg developed by the Krylov State Research Centre in 2020. Presi­dent Putin, too, has recently emphasized the importance of hydrogen-based public transport, calling to launch the production of hydrogen buses by 2023.

Today, Russia’s most advanced company specialising in hydrogen technologies such as fuel cells and energy storage solutions is InEnergy, a start-up established in 2015. InEnergy has received funding from the Russian Venture Fund and closely collaborates with the Institute of Problems of Chemical Physics. Its staff are actively involved in processes of hydrogen policy-making as well. Currently, InEnergy is partnering with Russia’s truckmaking giant, KAMAZ, to develop hydrogen bus prototypes, one of which is expected to be pres­ented this autumn. KAMAZ, which already produces lithium-ion electric buses, has included hydrogen-powered buses and trucks in its R&D programme for 2021.

Finally, the wealthy Moscow City Trans­port Department, which is investing heavily into an electric bus fleet, has shown interest in hydrogen-fuelled buses (which may be more suitable for Moscow’s frosty winters). Rosatom and Transmashholding, which are planning to create a joint venture to pro­mote hydrogen mobility solutions, are hoping to participate in implementing this vision.

What remains critical, however, is the creation of hydrogen fuelling infrastructure. Today, Russia is home to a single H₂ fuelling station located in Chernogolovka. When presenting hydrogen-powered bus and truck prototypes at a recent conference, a KAMAZ spokesman drove the point home by saying the prototypes are meant for export, as hydrogen infrastructure in Russia is still lacking. One positive initiative in this direction is the proposed Moscow-Kazan Hydrogen Highway.

Still, competition among technologies remains a concern. Hydrogen is a new en­trant to an area in which other forms of mobility have greater visibility and funding. One of them is Russia’s state programme to promote natural gas as a fuel for vehicles, which has received large amounts of funding and is run by Gazprom’s subsidiary Gazprom Gazomotornoye Toplivo.