The global drive towards decarbonization is shifting Russian policy on renewable energy. For years, Russian policymakers claimed that decarbonization was a problem for later, with no long-term goals for expanding into renewable energy. According to the Climate Action Tracker, an organisation that monitors countries’ commitments to climate pledges and overall climate policies, Russia’s efforts are ‘critically insufficient.’ Despite this, Russia has big ambitions for hydrogen production, seeing it as a lucrative clean energy of the future.
The country aims to have 20% of the hydrogen market by 2030. It believes hydrogen is the clean energy source that will replace the high carbon industry and wants to be a leader in the market. By 2035, the government expects to export 7 million tons of hydrogen.
According to BP’s Statistical Review of World Energy 2021, Russia’s oil and gas exports went down 11% and 9%, respectively, between 2019 and 2020. This was partly due to the pandemic, which reduced demand for high carbon fuels, but was also caused by global initiatives to reduce high carbon production. Despite this, Russia remained the world’s largest net exporter of oil and gas combined.
Russia already produces more than two million tons of hydrogen annually. However, this is mainly through steam reforming of natural gas. The country’s proximity to both the European and Asia-Pacific markets also makes it uniquely positioned to become one of the largest exporters of hydrogen. In addition, Russia has vast solar and wind energy production opportunities, especially in the remote Arctic region.
Russia intends to use its advanced gas transportation infrastructure and its longstanding hydrogen production history (for military and space exploration purposes) to its advantage. It leads in its resource base and scientific background in hydrogen production, transportation, and storage. This includes possible special investment in territories that are adaptable for hydrogen production, as well as relevant equipment manufacturing and R&D.
The global hydrogen market players will likely be receptive to future partnerships with Russian businesses. For example, Enel – a large Italian manufacturer and distributor of electricity and gas – set up an office in Saint Petersburg in June 2021 intending to establish a green hydrogen project in Russia.
Moving with the growing tide of decarbonisation
Societal pressure and global commitments towards decarbonisation influenced many oil and gas companies to diversify into renewable energies. In Q1 2021, European-based oil and gas giant Total announced a more aggressive renewable energy target, aiming to outpace clean energy leader Iberdrola on renewable power capacity by 2030.
While neither the Russian government nor Russian oil and gas companies will respond to international pressure to clean up their energy production, they will follow the markets. As Europe – the largest importer of Russian oil and gas – switches to hydrogen, Russia will adapt to maintain its position as the largest energy exporter to one of the world’s biggest markets.
Russia’s conversion to cleaner energy production would be in line with leading economies worldwide. The US is projected to have a 34.4% share of the global renewable energy market by 2030, according to GlobalData figures. The US, Germany, UK, France, and Norway have all pledged to be carbon neutral or greenhouse gas (GHG) neutral by 2050.
Escalating hydrogen production will be a long-term ambition for Russia, with no immediate signs that it is slowing oil and gas production. The petrostate needs to align with the industry shift towards carbon reduction if it wants to compete with the world’s largest economies. It has the infrastructure and natural resources to tap into the burgeoning hydrogen market and mitigate the negative economic impact of decarbonisation.