Over the coming years, Eesti Energia is already planning to build two hydrogen and gas power plants to cover peak times. However, this is only a small part of the group's plan for hydrogen.

Eesti Energia has big plans for green hydrogen, but when the new power plants are completed in a few years' time, they will still use industrial hydrogen during a so-called transition period. The reason is simple: there is currently no renewable energy left over to produce green hydrogen, which has therefore created high demand and high prices worldwide.

"However, further large-scale use of green hydrogen for electricity and heat generation will be delayed until the middle of the next decade, in line with similar plans for hydrogen power plants already in operation in Germany. After (the plants) are completed, we see the possibility of using industrial hydrogen which is carbon-neutral and has the same characteristics as green hydrogen, during the transition period, " Lauri Karp, head of chemical industry strategy and transformation at Eesti Energia, told ERR.

Industrial hydrogen, which is produced from fossil fuels but CO2 emissions are captured during the production process, is called blue hydrogen. If the CO2 produced is not captured, then it is known as grey hydrogen. Green hydrogen is produced when renewable energy is used in the electrolysis process.

"When we talk about the use of hydrogen in the chemical industry, the predominant use of hydrogen in the industry today and in the years to come will be hydrogen produced from fossil fuel sources, because it is significantly cheaper than green hydrogen. It makes sense to start gradually with blue hydrogen and, when there is enough renewable electricity generation capacity in the Baltic Sea region, to replace it with green hydrogen," said Karp.

According to Karp, hydrogen production makes sense where there is enough spare capacity on the grid, which means that, at present, Estonia is not the best place for it.

"We will not see large-scale hydrogen production in Estonia in the coming years. However, the emergence of large-scale green hydrogen production capacity is likely in the next decade," he added.

Transport also being explored, followed by the chemical industry

The new plants would begin using hydrogen in a hydrogen-capable combined cycle gas turbine. This is certainly one area of activity for the group. However, Eesti Energia has also already applied, along with its partners, for co-financing from the Estonian Environmental Investment Center (KIK) to set up a green hydrogen integrated circuit and start producing hydrogen for the transport sector, Karp said.

The green hydrogen value chain involves producing hydrogen from renewable electricity using electrolysis technology, as well as bringing it to the point of consumption and building a filling station with consumption capacity.

"In this pilot project, we are planning to start producing green hydrogen at one of Enefit Green's newer renewable power plants. From there, the hydrogen can be transported to consumers on trailers. The electrolyzer needs to be ready for operation by September 2025, according to the Environmental Investment Center's (KIK) requirements," said Karp.

In 2023, however, the use of green hydrogen in the transport sector does not make sense without state subsidies, Karp said.

However, Eesti Energia has even bigger plans for hydrogen in its chemical industry. "In future, it will play a much bigger and broader role in the development of our export-oriented chemical industry. At Eesti Energia, we are also exploring ways to use hydrogen in power generation - for example, a hydrogen-capable gas turbine to cover peak hours in the electricity market," he said.

According to Karp, the chemical industry, which Eesti Energia is strategically developing, will be a major end user of hydrogen. "Therefore, if possible, that we would use green hydrogen produced within the group from the power plant. Of course, there will always be the possibility of buying hydrogen on the market. If the price on the market is suitable, we would not rule out buying hydrogen from the market," he added.

Hydrogen prices will go down if there is more renewable energy

Eesti Energia's plans depend largely on the price of hydrogen. This in turn depends on the renewable energy projects currently under development in Estonia. Green hydrogen is a valuable commodity on world markets, as outline in the Estonian Hydrogen Road Map earlier this year.

The road map states that all the plans for hydrogen can only be realized if there is a significant surplus of affordable renewable energy.

The current situation is that the wholesale price of grey hydrogen is around €1 per kilogram (kg). Blue hydrogen is priced between €5 and €8 per kg, while green hydrogen costs €4- €8 per kilogram.

According to the roadmap, by 2030, it is predicted that the global price of green hydrogen could fall to between €1.2 and €4.1 per kg. However, this will depend significantly on the price of electrolyzers and renewable electricity.

This is cheaper than the projected price of blue hydrogen produced, but around five times more expensive than hydrogen currently produced from fossil fuels, and two to three times more expensive than the expected price of green hydrogen on world markets in 2030.

According to Karp, even if the price of green hydrogen is high now, Eesti Energia's plans focus on the long-term, and hydrogen prices should still start to fall in the near future.

"We can see, and also expect, that the price of hydrogen could fall, as renewable energy production increases and technologies develop. In essence, hydrogen acts as a form of long-term energy storage and could be produced at times when there is a surplus of wind power on the grid. We foresee that in the future, the price of generating electricity from hydrogen could be cheaper than from shale," he said.

Karp admitted that green hydrogen is currently significantly more expensive than hydrogen produced from fossil fuels such as natural gas, and that this is due to lack of supply. Necessary infrastructure would also have to be built, adding to the costs.

"At the moment and in the coming years, we are in a situation where there is a shortage of renewable electricity on the market. We also need to put in place the necessary infrastructure to create a liquid hydrogen market - to transport hydrogen via pipes. When building a hydrogen infrastructure from Northern towards Central Europe, it is important that it is also connected to Ida-Viru County, as an export center for liquid fuels produced in Estonia, and in the future to an export center for chemical products produced in Estonia," Karp said, adding that the new Eesti Energia chemical industry plans to start consuming significant amounts of hydrogen.

However, there is one more drawback. The efficiency of producing hydrogen by electrolysis, or green hydrogen, can vary widely. According to Estonia's Hydrogen Road Map, between 20 and 45 percent of the energy used is lost during electrolysis. To store and distribute hydrogen, it needs to be cooled and compressed. On average, this uses up 20 percent (5 to 35 percent) of the energy stored in hydrogen.

When hydrogen is used to generate electricity, approximately half of the energy is lost. Thus, in the case of electricity-hydrogen-electricity storage, only around a third of the initial energy remains available as electricity and half as heat. This means the quicker hydrogen is consumed following  production, the more sustainable it is, the road map states.

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