Russia in the age of the energy transition: an impetus for the transformation of the Russian energy sector

(3) Technological forces. Although the development of a hydrogen economy enjoys growing interest and support within Russia's political and economic circles, technological obstacles constitute a core challenge. Transportation infrastructure is of particular relevance here. Russia's extensive pipeline infrastructure is often named as a competitive advantage and a valuable infrastructural basis on which the country could build upon while developing its hydrogen economy (Shiryaevskaya, 2018). However, Russia's industry is well aware of several problems. The existing pipeline infrastructure is dedicated to the transportation of natural gas, not hydrogen, which is why the latter can only be blended into the former. Apart from security risks such as flame spreading, blending can also lead to material damages, including embrittlement, crack propagation and fatigue behaviour of steel pipes (Loginov and Koloshkin, 2019). Moreover, compressors and gas turbines are sensitive to hydrogen. This sensitivity and the potential material damages can cause operational accidents, which can lead to unscheduled repair works and commercial losses due to the interruption of deliveries. What is more, blending impacts the gas quality and substantially changes the composition of the transported gas because of the decreased energy density. This can negatively affect end-users, as they would be required to use greater amounts of gas to satisfy their needs (FutureBridge.com, n.d.). Furthermore, the equipment in the industrial sector could also be negatively impacted, since not all equipment is designed for the use of gas mixtures (FutureBridge.com, n.d.). In addition to these problems, blending can lead to the violation of contractual obligations. Moreover, the export of hydrogen in the form of gas mixtures also faces constraints with regards to the different blending limits of potential export markets. In the EU, for example, regulatory frameworks differ significantly among the Member States. While countries like Belgium allow only 0.1%, Germany's limit ranges from 5-10% (Fuel Cells and Hydrogen Joint Undertaking, 2017). In view of these challenges, alternative ways of transportation are being considered. Marine transportation, for example, is promising, but the production of hydrogen tankers has begun only recently with Japan's launch of its 8.000 tonnes Hydrogen Frontier (Harding, 2019). Although this constitutes a significant step forward, the marine transportation of hydrogen has yet to be developed on a large-scale.

Apart from transportation infrastructure, the production of blue and green hydrogen also faces technological obstacles. As mentioned before, Gazprom “looks to hydrogen to make gas greener for Europe” (Shiryaevskaya, 2018). While the addition of CCUS technologies to steam-methane reforming is usually considered as the main approach in the production of blue hydrogen, Gazprom researches alternatives. The company indicates methane pyrolysis as one of the most promising technologies of the future to produce hydrogen without the release of CO2 (Gazprom, 2019). The process can produce blue hydrogen, as solid carbon becomes the by-product from the split of hydrogen from methane (Lavery, 2018). Hence, it constitutes an option to prevent fossil fuels from becoming stranded assets, as they could be used for the production of hydrogen. Gazprom currently explores the technology in Samara, Ufa and Tomsk and has already patented it in various countries (Gazprom, 2019). On its website, the company states that “the next step is to arrange for the batch manufacturing of equipment modules (standardized) producing methane-hydrogen fuel, as well as the rollout of this technology at the facilities of Gazprom” (Gazprom, 2019). Thus, methane pyrolysis constitutes a potential pathway for the production of blue hydrogen in the case of Gazprom. However, the technology still needs to become further developed and reach the expected level of maturity before it becomes available for production on a large-scale.

Russia's nuclear sector is also involved in the development of technologies for the production of blue and green hydrogen. The HTGR is a particularly promising technology, as underlined by the aforementioned Ponomaryov-Stepnoy (OKBM Afrikantov, n.d.b). The design of the HTGR “enables hydrogen production with conventional electrolysis with the overall thermal efficiency of 35%-44%” and can be deployed not only for the electrolysis of water, but also “for high-temperature steam reforming of biomass, coal, and natural gas” (Revankar, 2019, p. 79). Hence, it allows for the production of both green and blue hydrogen, which would be another way to prevent Russia's fossil fuels from becoming stranded assets and to allow the country's energy sector to join the energy transition. In view of this opportunity, the technology is being studied worldwide. In Russia, Rosatom's subsidiary OKBM Afrikantov has been developing the technology for the past forty years and carried out several HTGR projects (OKBM Afrikantov, n.d.a). The company seeks to add the production of hydrogen to the application options of the HTGR and has created several technical proposals and preliminary design (OKBM Afrikantov, n.d.a). As is the case with Gazprom's methane pyrolysis, however, the HTGR still needs to become fully developed in order to produce blue and green hydrogen.

In view of the above, it becomes clear that there are both drivers and obstacles for the development of a hydrogen economy in Russia. In political terms, there has been growing interest and support from various organisations. The Ministry of Energy has expressed its endorsement and formed a working group to develop a National Programme for the Development of Hydrogen Energy. In addition, the corporate sector has been becoming increasingly interested. It views the hydrogen economy as a new business model. What is more, various attempts have been already made to create a basic institutional framework. Most noteworthy are the new Energy Strategy until 2035 and the new nuclear energy programme. In economic terms, one can point at the improved utilisation of the capacity of power plants, export prospects and earnings, and the increased economic efficiency of energy supply to remote and isolated areas. Concerning economic obstacles, high costs are the biggest problem, as blue and green hydrogen is expensive and not competitive with fossil fuels at the moment. In technological terms, the existing pipeline infrastructure is often named as Russia's competitive advantage. However, the blending of hydrogen into natural gas poses several technological challenges. What is more, the production of blue and green hydrogen faces several obstacles. Methane pyrolysis and the HTGR are promising technologies, but both still need to be developed further in order to produce blue and green hydrogen on a large-scale. Table 5 summarises the arguments presented in this sub-chapter.

Table 5: Summary of discussion regarding carbon unlock

Conclusion

This dissertation explored the relevance of the energy transition to Russia and discussed how it functions as an impetus for the transformation of the country's energy sector. The dissertation positioned itself within the literature on the geopolitical implications of the energy transition and among scholars who discuss how countries can become winners and losers of the energy transition. With the use of a qualitative meta-analysis, the dissertation defined the energy transition before turning to the debate about the pace and scale of it. The debate facilitated a deeper understanding of the energy transition's relevance to Russia's energy sector, as it showed that a pivot to Asia and growing relations with African countries can help Russia to mitigate the EU's declining demand for its fossil fuels. However, the dissertation also showed that the fossil fuels industry faces several obstacles to its partial reorientation, which is why it has been argued that the country's energy sector should also become a part of the energy transition. Building upon these considerations, the dissertation then explored how the energy transition could enhance the transformation of Russia's energy sector. It used the two established concepts of carbon lock-in and stranded assets and introduced the notion of carbon unlock to formulate a distinct conceptual framework. Using this framework together with a PEST analysis, the dissertation showed how political, economic, social and technological forces maintain Russia's carbon lock-in condition, how stranded assets can function as a potential driver of change, and how systematic forces support or impede a carbon unlock. The hydrogen economy served as an exemplary carbon unlock process. As the discussion showed, the hydrogen economy enjoys growing interest and support within Russia's political and economic circles, but high prices and technological problems obstruct its further development.

To conclude, it can be argued that even though Russia's carbon lock-in condition remains strong, stranded assets could potentially unlock this condition and introduce a carbon unlock process. As stranded assets are a proxy of the energy transition's disruptive impact, the dissertation shows how the energy transition functions as an impetus for a transformation of Russia's energy sector. Although a partial reorientation of the fossil fuels industry can mitigate the energy transition's disruptive impact, it becomes also clear that countries like Russia need to consider low-carbon response strategies. The hydrogen economy is a promising option for a potential transformation of Russia's energy sector. This is even more the case as it could enable Russia to use its fossil fuels for the production of blue hydrogen and therefore prevent them from becoming stranded assets. At the same time, the country can advance the production of green hydrogen, in particular through its far developed nuclear sector, and thereby expand a low-carbon energy system. In this way Russia could ensure a smooth transition and maintain its position of a global energy superpower.

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