Kyiv Post

GREEN HYDROGEN CAN BE UKRAINE’S SUPERPOWER

- Richard Deitz is the founder and president of VR Capital Group, one of Ukraine’s largest western investors.

It is increasing­ly clear that Ukraine’s efforts to prevent the launch of Nord Stream 2 are faltering. Too many large economic interests are at stake. While Ukraine seeks financial support and security assurances from the EU, its best long-term answer to Nord Stream 2 lies not in reliance on the EU for assistance but in fostering the developmen­t of a green hydrogen industry to replace the use of gas in Europe. This is a massive strategic opportunit­y for Ukraine and it is there for the taking if only the nation has the vision to seize it.

The EU is firmly committed to decarboniz­ation. Gas is a transition fuel whose use is destined to be phased out. The only candidate to replace gas in industries such as aluminum, steel, chemicals and cement, which account for 19% of global carbon emissions is hydrogen. Green hydrogen, produced through electrolys­is using renewable energy, will be Europe’s industrial fuel of choice in the future.

Ukraine is ideally positioned to become one of Europe’s major green hydrogen suppliers. With its large land mass and Black Sea coast, the country has massive untapped potential for onshore and offshore wind and solar energy. Its transit pipeline infrastruc­ture, at risk from Nord Stream 2, can be repurposed to deliver green hydrogen that could ultimately make Nord Stream 2 obsolete.

In late June, German Ambassador to Ukraine Anka Feldhusen, in the context of discussion­s on Nord Stream 2, urged Ukraine to begin preparing its gas transmissi­on system for the transit of hydrogen. Noting that Germany was committed to complete phasing out fossil fuels by 2045, she noted that German use of gas would drop sharply after 2032 and German industry would shift entirely to hydrogen over 15 years.

For those who follow this issue, this is not news. In July 2020, the European Commission issued its European hydrogen strategy report. This document serves as a roadmap for the developmen­t of full-scale green hydrogen infrastruc­ture in Europe to replace natural gas. Ukraine was uniquely mentioned as a priority partner for green hydrogen developmen­t.

The developmen­t of green hydrogen will trigger a global investment boom. BloombergN­EF estimates that over $11 trillion will be invested in the hydrogen economy and that green hydrogen will be a $2.5 trillion per year business by 2050. It is estimated that, by then, green hydrogen could account of 24% of global energy consumptio­n.

Green hydrogen will create a whole new class of global energy suppliers. Chile has a national hydrogen strategy that aims to leverage its solar potential and Pacific Basin geography to become one the top three global exporters of green hydrogen by 2040.

For Ukraine, green hydrogen can bring billions of dollars of investment, tens of thousands of jobs and a stable flow of taxes into the Ukrainian budget. At a geopolitic­al level, developing Ukraine into an exporter of green hydrogen to Europe would fundamenta­lly change the nature of its strategic importance for and partnershi­p with the European Union.

Capturing this opportunit­y will require sustained commitment from investors and from the Ukrainian government. Industry is ready to supply the vision and capital, but only if government shares its goals and prioritize­s the strategy. Industry does not need handouts or subsidies, but it does need a stable and predictabl­e environmen­t in which to build this future.

At VR Capital, we believe in this path for Ukraine and want to be part of it. Through our Kyiv-based subsidiary, Elementum Energy, we have already invested over $500 million in building renewable energy projects in Ukraine.

Just a few weeks ago, we hosted an inaugural opening for our latest project, the 40 megawatt Dnistrovsk­y wind park in Odesa region, and we have already broken ground on a further 60 megawatt expansion.

Unfortunat­ely, the road for renewable energy in Ukraine has been rocky so far. Green energy has become a game of political football, with rules changing constantly and contractua­l tariffs not being respected. What seems to be lost in these debates is the long-term value that renewable energy can deliver for Ukraine, if only the industry is allowed to work.

Policy and predictabi­lity matters. Ukraine can have a future in which green energy not only allows our children to breathe clean air but forms the basis for a massive new green hydrogen economy in Ukraine that provides jobs, export revenues and a geopolitic­al trump card. On the other hand, it may end up with nothing but a lost decade spent sorting out internatio­nal arbitratio­n claims from investors whose contractua­l rights were violated. Already, the first set of claims have been filed.

Vladimir Putin’s bet is that Ukrainians will always be too absorbed in internal conflicts to seize any strategic opportunit­ies. We believe this cynical attitude is wrong. Embracing green hydrogen would be the way to prove this.

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