Trending in the Energy Sector: Hydrogen and Energy Storage

Author: Meri-Katriina Pyhäranta

During the past years, hydrogen has become the hottest trend in the energy sector. The expectations are high; hydrogen is to solve the energy crisis, decarbonise the economy, and replace fossil fuels even in the hard-to-abate sectors, like heavy transport, manufacturing, and aviation. Many countries have published their own hydrogen strategies, competing for the leading position in the global hydrogen economy. Besides climate benefits, the hydrogen economy means significant potential for national economies throughout the whole value chain.

The potential of hydrogen has also been recognised by the Finnish Government, which has set the objective of achieving carbon neutrality by 2035. Carbon neutrality within 15 years is a highly ambitious goal, as most countries and economies in the world, including the European Union, aim to achieve carbon neutrality by 2050. Achieving the goal requires accelerating emission reduction measures and strengthening carbon sinks. As nearly 80% of greenhouse gases originate from the energy sector in Finland, a big part of emission reduction comes from making electricity and heat production in Finland virtually emission-free by the end of the 2030s. This requires phasing out the use of fossil fuels in energy production and increasing electrification by connecting different energy systems (electricity, heat, and transport). None of this will happen without a significant increase in renewable energy production and efficient energy storage solutions that bring flexibility to the energy system and ensure the availability of electricity at all times irrespective of weather conditions.

Hydrogen and energy storage solutions were discussed in a webinar organised by the Real Assets Practice at Hannes Snellman at the beginning of March 2021. In the panel discussion, three experienced energy professionals, Helena Sarén from Business Finland, Herkko Plit from P2X Solutions, and Pasi Valasjärvi from Exilion, shared their views on how the hydrogen economy and battery solutions will shape the energy industry in Finland in the coming years. The key takeaways from the discussion can be summarised as follows:

1. The transition to a hydrogen economy will not happen overnight. However, there are strong drivers that push the development forward in this decade already. Replacing fossil fuels with renewable energy is not possible at a large scale without technological solutions to store energy. To some extent, batteries can already be used to store wind and solar energy, but in order to scale up the storage capacity, solutions are sought from hydrogen technology.
2. The hydrogen economy can only break through if hydrogen technology is made economically viable. In the beginning, some kind of a subsidy scheme is most probably needed, but in the long run, the price for hydrogen must become competitive. Setting a high enough price for carbon emissions would be one way to ensure competitiveness. Another equally important requirement to reach commercial feasibility is to allocate enough funding for research, development, and innovation.
3. Regulation plays a crucial role in enabling the hydrogen economy to develop. While regulation should provide enough long-term stability and clarity to investors, it should also enable an open innovation environment where new solutions can be tested. In other words, the industry needs an enabling, not a limiting, regulatory environment that enables and facilitates synthetic fuels’ entry into the market.

State-level policy measures to boost the Finnish hydrogen economy are expected to be published as part of the Finnish climate and energy strategy in the autumn of 2021. A promising sign is the fact that on 15 March 2021, the Finnish Government published its plan to use EUR 822 million of EU funding (the Sustainable Growth Programme for Finland) to boost investment in emission-reducing solutions, including hydrogen technology. There is no doubt that the potential of the hydrogen economy is significant both for the climate and for the overall economy. At best, it can turn into one of the greatest possibilities the Finnish economy has faced for a long time.