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The hydrocarbons price crisis proves diversification is critical for companies whose business is based on extraction. One of the alternatives to this state of affairs is hydrogen, so its development should be supported with a Polish hydrogen strategy. The current discussion in Germany is food for thought on this issue – writes Wojciech Jakóbik, editor in chief at BiznesAlert.pl.
Hydrocarbon producers turn to hydrogen
Recently, the hydrocarbon sector in Poland has been teeming with information on investments in hydrogen. In an interview with BiznesAlert.pl last March, PGNiG’s CEO Jerzy Kwieciński said that the company’s new strategy would include hydrogen. The hydrogen program revealed by PGNiG in May is an announcement about the upcoming revision of strategy. The first step is spending PLN 30 million in five years on five hydrogen projects whose goal is to verify the potential to produce this fuel with renewable energy sources that PGNiG wants to utilize. The company’s branch in Odolanów will be responsible. It is a mecca for innovators in the Polish gas sector which gave us the pioneers responsible for the Polish LNG terminal project. Kwieciński’s company also wants to investigate how hydrogen could be pumped into gas pipelines. The company’s Vice President of the Management Board for Development, Arkadiusz Sekściński elaborated on these plans in an interview with BiznesAlert.pl – “We are taking into consideration the fact that in the future natural gas will be replaced with hydrogen, which will solve the problem of uncontrollability renewable energy sources pose,” he argued. “PGNiG’s competitive advantage in comparison to other companies of the widely-understood energy sector is visible in the fact that we know how to handle hydrogen,” Sekściński said.
The Lotos Group has also shared some news. The company signed a letter of intent with Polskie Sieci Elektroenergetyczne on a research project to see how electrolyzers could be used to balance the Polish Power System. This boils down to using hydrogen as energy storage, i.e. the so-called Holy Grail of the energy sector I wrote about in a different article. Lotos wants to develop electrolyzers to produce green hydrogen. “Hydrogen projects are an important part of Lotos’ development strategy and diversifying our future revenue,” said the company’s CEO Paweł Jan Majewski. Lotos is already investing in constructing infrastructure to produce and purify hydrogen and fuelling stations in Gdansk and Warsaw. PKN Orlen has also announced plans to use hydrogen. The planned merger with Lotos will not only increase the potential of both companies. Orlen wants to build a hydrogen hub in Włocławek by the end of 2021. Similarly to Lotos, the company wants to build infrastructure to produce, purify, transport and fill up hydrogen.
This is how hydrocarbon companies in Poland that center their business on extracting and selling raw materials are looking for new foundations of growth. This is why PGNiG has suggested it was ready to cooperate with PKN Orlen and Lotos in the hydrogen sector. “This is where the symbiosis with our partners comes to light – Orlen and Lotos have a lot of gas stations across the country,” PGNiG CEO said. If this cooperation came into fruition it would mean the Polish giants copied the Saudi solutions we have written about previously at BiznesAlert.pl.
It remains to be seen how much money these tycoons will be able to spend on the projects considering the fact that they have been stripped from revenue because of the oil and gas prices crisis. Investments in future growth drivers are risky, so they need a safety net, which, as usual in such cases, should be guaranteed by the state. Green hydrogen is currently the most ambitious path to take, because it is the most expensive way of production via electrolysis. An mid-way solution is blue hydrogen produced with natural gas. The situation in Poland will most probably result in creating a sustainable hydrogen strategy that will make space for both technologies. Its architects have declared to BiznesAlert.pl they would aim for technological neutrality. However, in the long-term incorporating renewable energy sources in hydrogen technologies suggests green hydrogen will have the upper hand.
Conclusions on a hydrogen strategy
A European hydrogen strategy is also in the making. It may, or may not include blue hydrogen. I have previously written that Poland may contribute to it by raising the issue of security of supply, stressing the importance of not buying hydrogen from Russia via Nord Stream 2, an idea supported by the proponents of blue hydrogen in Germany.
Poles may should sure that the strategy is sustainable and that it will allow to tap into European financing to bankroll hydrogen technologies. We may play an important role in talks with leaders of the sector, i.e. Germans who are considering purchasing hydrogen from abroad. Apart from Russia, Germany may also import it from countries in Northern Africa where it is already investing in renewables, or from other EU states. German media are suggesting that the protracted works on Germany’s hydrogen strategy take into account the idea to import hydrogen produced with renewables under German control, but outside of the country, for instance on the Baltic Sea. This leaves room for speculation on building a Polish-German hydrogen hub with the participation of Polish companies (Orlen is engaged in offshore), but it may also produce fears that yet another revolution will be tailored by Germans to their needs and Poland will become its assembly line.
It needs to be decided whether Poland should try to steer this revolution so that it takes into account Poland’s specificity and blue hydrogen, or join the avant-garde by investing as much as possible in green hydrogen. This is a deja vu situation reminiscing of the discussion on the shape of energy transition in Poland – should we copy Germans and step on the renewables path, or look for a mid-way solution. In case of hydrogen the final say may depend on the shape of EU regulations that will support selected technologies, but these will be forged together by Poland and Germany. This is yet another battle that needs to be fought.
