European energy sector is changing at the most rapid pace ever

14/ 07/ 2021

. Speech by Oleg Nykonorov, CEO RGC at the 12th International Ukrainian Energy Forum of the Adam Smith Institute In 10 years from now, the energy sector will have a completely different landscape. The technological shift will be as huge as if we would try to compare Tesla and VW Golf. In my opinion, three major factors that pushing Energy to transformation are: #1 Growing energy consumption Transport, heating, households, industrial production are showing persistent growth of electricity consumption. #2 Decarbonization Europe has set a goal to reduce carbon emission by 50% within 10 years by 2030 and reach net-zero emission by 2050. That’s a binding target and the energy chapter is of paramount importance to meet the goal! #3 Renewables All of the future energy consumption will be covered by renewables and green gas such as hydrogen to meet decarbonization targets. Traditional fossil fuels will be losing their share, hydrogen will be playing a significant role in nearest future. All of that requires a very serious energy infrastructure makeover to make it happen. EUR 500 billion will be invested over a decade in Green Deal projects from both private and government sectors in Europe. Roughly 50% will be invested in the production of green energy, and 50% will be invested in infrastructure to bring green energy to the customer. This train is already moving forward! What is the role of Ukraine in the European Green Deal? Now many people wonder should Ukraine be part of it, is Ukraine capable of being part of the European Green Deal, and are there any benefits for Ukraine joining it? The answers to all questions are positive! Ukraine has a unique chance to be on the same train with the rest of Europe and not be left at the train station. To do so, Ukraine has to move in the same direction and play the same rules. What factors will drive Ukrainian energy: #1 Decarbonization Decarbonization is becoming the cornerstone of the new Energy Strategy for Ukraine and should include reachable goals for decarbonization and secure all of the resources required. Energy balance will be shifting from fossil fuels to renewables and syngas like biomethane and hydrogen. #2 Renewables Renewables should be replacing fossils (like coal). Investments will be allocated in renewables and regulation should stimulate and protect such investments. Ukraine has excessive capacities in the production of electric power: nuclear, hydro, and solar. Those could produce enough hydrogen to export it to the EU. Because this is the future of European energy. #3 Sustainable infrastructure Sustainable infrastructure is essential to bring new energy to the customer. Production of hydrogen will become more and more efficient and less expensive over time. Similar to solar panels that have become cheaper through the last decade. The question is what is the best way to deliver hydrogen to the customer. And the answer is – existing gas infrastructure! Of course, it needs a certain makeover. Ukrainian energy infrastructure has been heavily underfinanced last 30 years. Gas infrastructure has a monstrous technical capacity exciding current consumption 4 times. It needs a complete makeover. Pretty much the same process eastern European countries have been through over the last 10 years. Today our European colleagues are beginning to redesign and adapt their networks and equipment to hydrogen-ready standards. Which requires new significant investments. The good news for Ukraine is existing network can be redesigned into a hydrogen-ready network pretty much at the cost of makeover needed anyway. The bottom line is simple, to export hydrogen from Ukraine to the EU countries, the Ukrainian gas network – including transmission and distribution needs to be redesigned up to hydrogen-ready standards. We wanted to find out is that possible at all, how much will it cost and what exactly should be done. We find out that our European colleagues but were pretty much not far ahead, running some field tests and experimenting with gas blends. So, we decided to act to find answers. RGC launched the hydrogen research project in 2020. We build our test site, we provided research grants to universities and scientific laboratories. We invested in research and development of the future redesign of the gas network. And we’ve got the first results from our field tests and laboratories. There are more experiments to be done and a lot of work ahead to have all the answers, but preliminary results say “yes”, transporting hydrogen and methane blend is possible via the existing network. We keep our information open and share it with our European colleagues other members of the Hydrogen task force at MARCOGAZ technical association. And one more thing, last month Energy Community Secretariat admitted in their report that RGC is running the most significant R&D project to bring hydrogen on the Ukrainian market. We think that hydrogen and methane blends could be injected into redesigned gas networks in the nearest future. That will be a ticket for Ukraine to move on the Green Deal train with the whole of Europe.

Speech by Oleg Nykonorov, CEO RGC at the 12th International Ukrainian Energy Forum of the Adam Smith Institute

In 10 years from now, the energy sector will have a completely different landscape. The technological shift will be as huge as if we would try to compare Tesla and VW Golf.

In my opinion, three major factors that pushing Energy to transformation are:

#1 Growing energy consumption

Transport, heating, households, industrial production are showing persistent growth of electricity consumption.

#2 Decarbonization

Europe has set a goal to reduce carbon emission by 50% within 10 years by 2030 and reach net-zero emission by 2050. That’s a binding target and the energy chapter is of paramount importance to meet the goal!

#3 Renewables

All of the future energy consumption will be covered by renewables and green gas such as hydrogen to meet decarbonization targets. Traditional fossil fuels will be losing their share, hydrogen will be playing a significant role in nearest future.

All of that requires a very serious energy infrastructure makeover to make it happen. EUR 500 billion will be invested over a decade in Green Deal projects from both private and government sectors in Europe. Roughly 50% will be invested in the production of green energy, and 50% will be invested in infrastructure to bring green energy to the customer. This train is already moving forward!

What is the role of Ukraine in the European Green Deal? Now many people wonder should Ukraine be part of it, is Ukraine capable of being part of the European Green Deal, and are there any benefits for Ukraine joining it?

The answers to all questions are positive! Ukraine has a unique chance to be on the same train with the rest of Europe and not be left at the train station.

To do so, Ukraine has to move in the same direction and play the same rules. What factors will drive Ukrainian energy:

#1 Decarbonization

Decarbonization is becoming the cornerstone of the new Energy Strategy for Ukraine and should include reachable goals for decarbonization and secure all of the resources required. Energy balance will be shifting from fossil fuels to renewables and syngas like biomethane and hydrogen.

#2 Renewables

Renewables should be replacing fossils (like coal). Investments will be allocated in renewables and regulation should stimulate and protect such investments. Ukraine has excessive capacities in the production of electric power: nuclear, hydro, and solar. Those could produce enough hydrogen to export it to the EU. Because this is the future of European energy.

#3 Sustainable infrastructure

Sustainable infrastructure is essential to bring new energy to the customer. Production of hydrogen will become more and more efficient and less expensive over time. Similar to solar panels that have become cheaper through the last decade. The question is what is the best way to deliver hydrogen to the customer. And the answer is – existing gas infrastructure! Of course, it needs a certain makeover.

Ukrainian energy infrastructure has been heavily underfinanced last 30 years. Gas infrastructure has a monstrous technical capacity exciding current consumption 4 times. It needs a complete makeover. Pretty much the same process eastern European countries have been through over the last 10 years.

Today our European colleagues are beginning to redesign and adapt their networks and equipment to hydrogen-ready standards. Which requires new significant investments.

The good news for Ukraine is existing network can be redesigned into a hydrogen-ready network pretty much at the cost of makeover needed anyway.

The bottom line is simple, to export hydrogen from Ukraine to the EU countries, the Ukrainian gas network – including transmission and distribution needs to be redesigned up to hydrogen-ready standards.

We wanted to find out is that possible at all, how much will it cost and what exactly should be done. We find out that our European colleagues but were pretty much not far ahead, running some field tests and experimenting with gas blends. So, we decided to act to find answers.

RGC launched the hydrogen research project in 2020. We build our test site, we provided research grants to universities and scientific laboratories.

We invested in research and development of the future redesign of the gas network. And we’ve got the first results from our field tests and laboratories. There are more experiments to be done and a lot of work ahead to have all the answers, but preliminary results say “yes”, transporting hydrogen and methane blend is possible via the existing network.

We keep our information open and share it with our European colleagues’ other members of the Hydrogen task force at MARCOGAZ technical association.

And one more thing, last month Energy Community Secretariat admitted in their report that RGC is running the most significant R&D project to bring hydrogen on the Ukrainian market.

We think that hydrogen and methane blends could be injected into redesigned gas networks in the nearest future. That will be a ticket for Ukraine to move on the Green Deal train with the whole of Europe.