How Ukraine’s renewable gas potential can help European energy security

Ukraine can offer the EU an alternative to Russian gas in the future – natural gas produced domestically blended with biomethane or hydrogen writes Olga Bielkova.

Olga Bielkova is Director of Government & International Affairs at the Gas Transmission System Operator of Ukraine (GTSOU).

Russia’s invasion of Ukraine has deteriorated Europe’s growth outlook, with the European economy enduring a partial to full cutoff of natural gas exports from Russia. The current Kremlin gas policy has become a heavy shock therapy for the European energy market.

As a result, EU countries are pushed to urgently review their energy strategies and search for alternative gas supply sources. On top of the EU’s policymakers’ priority list are demand reduction measures, accelerating the uptake of renewable energy across sectors and substituting Russian gas with alternative supplies.

However, diversification from pipeline gas to LNG would be much more complex in a total shutoff scenario, as infrastructural bottlenecks would reduce the ability to re-route gas within Europe mainly due to insufficient import capacity or transmission constraints.

Once Europe rejects the Russian gas pressure and blackmail, the Russian and Ukrainian gas transit infrastructures will be in the same position. In light of the ongoing green energy transition, Ukraine envisions strengthening its integration into the European market and becoming an integral part of it.

Ukraine can offer the EU an alternative to Russian gas in the future – natural gas produced domestically blended with biomethane or hydrogen.

Also, Ukraine featured prominently in the EU’s hydrogen import plans before the Russian invasion. Ukraine’s draft Hydrogen Strategy from December 2021 aims at renewable hydrogen exports, building on its extensive existing natural gas infrastructure. The draft document includes targets of up to 10 GW of renewable hydrogen production capacity by 2030, with 7.5 GW dedicated to EU exports.

The REPowerEU plan provides the conditions for developing the biomethane value chain in the EU, aiming to reach 35 bcm/year. Part of these volumes will be imported from third countries, with a unique role assigned to Ukraine.

Currently, biomethane production in Europe stands at 2.9 bcm and is expected to grow at a strong rate of 16% per year to reach over 5.5 bcm by 2025. However, these volumes will only be compared with the support of third countries if the proper policy measures and financial aid are in place.

It would be beneficial for the EU and Ukraine to ensure that, as soon as the first biomethane plants start production in Ukraine, European countries can include it in RepowerEU data. Investors depend on the regulations in Ukraine and export possibilities in the EU. From the moment Ukrainian molecules enter the gas system of Ukraine and flow to Europe, they should be treated similarly to biomethane produced and delivered within the EU.

In these very dark circumstances for Ukraine, biomethane is one of the few industries with a chance to attract investment. The country’s parliament adopted a law on biomethane production in October 2021, and the legislation sets the foundation of a national biomethane market, providing for nondiscriminatory access to gas networks (both transmission and distribution level), laying down the legislative grounds for establishing a biomethane registry and introducing the concept of “guarantee of origin”.

As noted by the IEA, “Ukraine’s substantial biomethane and hydrogen production potential could play a significant future role in enabling exports to the rest of Europe.”

According to various experts’ estimates, it is feasible to achieve biomethane production in Ukraine at one bcm in the coming years. This would position the country as a major biomethane supplier to Europe on par with Germany, which remains the largest producer with over one bcm output in 2020.

The development speed will depend on concrete measures to lift existing entry barriers and facilitate biomethane integration into the EU’s internal gas market. Close collaboration with Ukraine and other neighbouring countries should be supported, and the possibility of joint projects between Ukraine and member states should be explored.

As noted before, hydrogen production and exports show an equally positive outlook in Ukraine. At the Ukraine Recovery Conference last July, the Ukrainian government presented a post-war reconstruction plan in which hydrogen is the most essential item of energy investment. Out of a proposed $114bn for energy transition, hydrogen takes up $40bn for electricity generation and transport infrastructure.

Through the installation of 8 GW until 2030, as outlined by Hydrogen Europe in the 2×40 GW initiative and endorsed by the German and Ukrainian Energy Ministries, Ukraine could produce around 21 TWh of green hydrogen annually.

This would cover 12% of the total hydrogen demand of the EU in 2030 projected in the EU Hydrogen Roadmap. Then, the extensive existing natural gas pipeline infrastructure in Ukraine can enable cheap hydrogen transport for both blending in the short term and pure hydrogen in the longer term.

In July 2021, the EBRD and GTSOU agreed to cooperate on low-carbon hydrogen and to develop hydrogen supply chains.  But to be an effective producer of clean hydrogen and biomethane for the European market, Ukraine’s existing infrastructure will require further investments from private and public investors in the right set of policies and regulations at the EU level.

Scaling up biomethane production will contribute to achieving Ukraine’s energy independence and the possibility of becoming an essential player in the European energy market.

After the victory of Ukraine, Ukrainian authorities will have to rebuild the country “from scratch,” and the EU will have to redefine a lot of nuances of its energy security. The reconstruction will not be limited to infrastructure but also focus on approaches to developing economic, energy, and commercial relations with the EU countries.

Ukrainian gas, both natural and renewable, can effectively contribute to Europe’s energy security and offer an effective alternative to prevent any future security or supply crisis.