Wednesday, May 08, 2024

Analysis: Kazakhstan has to balance its Green Hydrogen mega-project with domestic and ecological constraints

8 MAY 2024
Agha Bayramov



Introduction

Hydrogen technologies are one of the central topics in the energy transition. Different nations have different stances on it. Some governments see hydrogen as a decarbonisation tool or part of their energy security strategy, while others see it as a potential export commodity.

Kazakhstan, a pivotal energy player in the region, is embarking on ambitious plans to emerge as a major exporter of hydrogen energy. In October 2022, in “the presence of Kassym-Jomart Tokayev, President of the Republic of Kazakhstan, and Charles Michel, President of the European Council, representatives of Hyrasia One and the Kazakh government signed the Investment Agreement ($ 50 billion deal) for this lighthouse project in Astana.” Following this, In November 2022, at COP27 in Egypt, the European Union signed a memorandum of understanding with Kazakhstan on cooperation on green hydrogen and critical raw materials.

Leveraging its abundant solar and wind resources, the Hyrasia project aims to annually produce 2 million tons of green hydrogen by 2032, capitalising on Kazakhsta’s extensive expertise in the energy sector. However, transitioning to hydrogen energy in the Caspian Sea region presents several challenges. How can Kazakhstan bring green hydrogen to Europe? and What are the potential challenges?

Hyrasia One Hydrogen Project

The Hyrasia One project, to be located in the Mangystau Region, will use electricity from solar panels and wind turbines to produce 2 million tons of hydrogen annually starting in 2032, with production beginning in 2030. Founded by Wolfgang Kropp and headquartered in Dresden, Germany, the project will install millions of solar panels and thousands of wind turbines in the vast steppes of southwestern Kazakhstan, generating about 40 gigawatts of renewable electricity. This energy will be transported close to the Kazakh coastal city of Kuryk to produce green hydrogen via water electrolysis — through what is known as power-to-gas. According to the Svevind Energy group, the project can be used locally in Kazakhstan, for steel and aluminium production, or exported to European markets.

However, several limitations hinder the deployment of hydrogen energy in Kazakhstan, including (1) the need for R&D investment to decrease technology costs and build local capacity, (2) environmental issues, (3) lack of domestic demand, and (4) transport issues.

Domestic Awareness

The lack of domestic demand for green hydrogen is a significant issue. Currently, unabated hydrogen in Kazakhstan is primarily used in its three refineries (located in Atyrau, Pavlodar, and Shymkent), as well as as a feedstock for ammonia production in the fertiliser industry. Despite its significant potential for green hydrogen production, there is currently no domestic demand for renewable or low-carbon hydrogen in Kazakhstan, nor are there any policy instruments aimed at stimulating its production and consumption. In this regard, the local private actors’ readiness to invest in green hydrogen technologies remains low currently.

Limited R and D

Although there are a limited number of small-scale ongoing demonstration projects, including the “First Molecule” project implemented by the Kazakh company Green Spark Limited, there is insufficient local research and development (R&D). At the domestic level, there is widespread unawareness in Kazakhstan regarding the transformative potential of green hydrogen or its practical applications that would benefit local communities.

Water Scarcity

In essence, initiating a green hydrogen economy in Kazakhstan will inevitably lead to an increase in water consumption as water is the key component of green hydrogen production. However, water scarcity is a major concern in Kazakhstan, particularly in the southern and western regions, where the population heavily relies on irrigation for agriculture. According to the UNEP, by 2040 the country may face significant shortfalls amounting to 50 per cent of its needs. Kazakhstan has eight water basins, seven of which lie in transboundary territories. More than 44 per cent of Kazakhstan’s river flow is formed on the territory of other countries, so the deficit will occur primarily due to intensive water use in neighbouring countries.

Given the impending challenge of water scarcity in the country, careful analysis of the water balance must be carried out by clearly outlining how much water would be consumed by each sector. Developing hydrogen energy in the country should not prioritise energy transition at the cost of water security.

Furthermore, the Aral Sea crisis, a significant ecological disaster that resulted from the diversion of rivers for irrigation purposes, had a severe impact on the country’s water resources. Rural areas face challenges in terms of accessing clean water and adequate sanitation facilities. In addition, the Ural River’s levels have been decreasing since the 1970s.

Agriculture is the largest consumer of water. Heavy irrigation is essential for crop cultivation because of the vast arid and semi-arid regions. The industrial sector also requires substantial water resources for manufacturing processes, cooling, and energy production, including electricity generation and thermal power plants. Water is used in thermoelectric power plants to cool the turbines and maintain operational efficiency.

Nonetheless, the dropping Caspian Sea levels are a sign of a critical situation that requires immediate action. Looking at the future, population growth, expanding industrial activities, and agricultural demands will place additional pressure on water resources in Kazakhstan. The rate at which the sea level is falling has also accelerated in recent years. For example, the average rate of decline over the past three years is about 23.3cm a year. In June 2023 the local Aktau authority declared a state of emergency over the critically low level of the sea. A green hydrogen economy will exert further stress on water capacity, highlighting the need to prioritise water in Kazakhstan’s management.

Transport Challenges

Because of its landlocked geography, Kazakhstan faces limited options for exporting green hydrogen or ammonia to Europe. One option is to construct hydrogen pipelines across the Caspian Sea, Caucasus, and Turkey to reach southern Europe. The marine transport industry is represented on the Caspian Sea by the ports of Aktau, Kuryk, and Bautino. Transit shipping in the Caspian Sea includes routes from Aktau to Baku (475 km), Turkmenbashi (550 km), and Bandar Anzeli (700 km) (CAREC, 2021).

Currently, the volume of transportation along this corridor increased by 86%, reaching 2.8 million tons, up from 1.5 million in 2022. This is a substantial increase compared to just 586,000 in 2021. (Astana Times, 2024). Nevertheless, the transport capacity of Kazakhstan's ports is currently limited. Additionally, hydrogen transport via the Caspian Sea does not reach target export destinations directly but only transit countries such as Azerbaijan, the Russian Federation, and Iran. Furthermore, it needs to be transported via terrestrial transportation modes such as pipeline, railway, or truck. Additionally, the Russian invasion of Ukraine, using Russia as a transit route is no longer feasible for the EU.

Conclusion

Kazakhstan's Hyrasia One project presents significant potential alongside numerous challenges. Limited R&D investment, environmental concerns, lack of domestic demand, and transportation challenges hinder its deployment. The landlocked geography limits options for exporting green hydrogen to Europe, exacerbated by the infeasibility of using Russia as a transit route due to the recent invasion of Ukraine. Furthermore, establishing a green hydrogen economy will inevitably increase water consumption, highlighting the necessity of prioritising water management. Overcoming these challenges requires stimulating domestic demand, investing in R&D, and increasing public awareness. International cooperation, particularly with the EU, is essential for success.

References

Astana Times (2024). World Bank Presents Key Findings of Latest Study on Middle Corridor in Tbilisi. https://astanatimes.com/2024/03/world-bank-presents-key-findings-of-latest-study-on-middle-corridor-in-tbilisi/

Carec (2021). Ports and Logistics Scoping Study in CAREC: Volume II. Central Asia Regional Economic Cooperation (CAREC) Institute. https://www.carecprogram.org/uploads/Ports-and-Logistics-Scoping-Study-in-CAREC-Vol-II_4th-proof.pdf

Kropp, A. (nd). Green energy for the energy transition and decarbonization of industry.

https://hyrasia.energy/
Source: This analytical article was prepared for commonspace.eu by Dr. Agha Bayramov, Assistant Professor at the University of Groningen and co-founder of the Hague Research Institute.

photo: The Hyrasia project will use solar and wind power to produce hydrogen.
The views expressed in opinion pieces and commentaries do not necessarily reflect the position of commonspace.eu or its partners


CAN ‘TAIWAN’S CITIZEN POWER PLANT’ LEAD TO ENERGY AUTONOMY IN TAIWAN? 

Written by Hui-Tzu Huang. 

In the past, in Taiwan, energy usage, like electricity was not a major concern for most people. We just needed to pay our electricity bills on time. But in recent years, that mindset has slowly been changing. This shift comes from citizen anti-nuclear movements, rising electricity prices, controversies over energy technologies, and influence from the experiences of energy cooperatives abroad, like in Germany or Japan. Some residents in Taiwan are gradually embracing the concept of energy autonomy. The concept of an “energy prosumer” has flipped the traditional perception of centralized energy. An energy prosumer combines the terms “energy producer” and “energy consumer,” meaning citizens are no longer just consuming power; they can also generate their electricity. In the future, they might even be able to distribute electricity themselves. 

Burghardt Flieger, A pioneer of German energy cooperatives, once said: “Energy cooperatives are the counterpoint (Gegenpol) to globalization.” Energy cooperatives are generally defined as non-governmental organizations created to promote renewable energy and provide services for the members. As globalization progresses, wealth continues to accumulate in the hands of large international corporations. Cooperatives, as a legal organizational form, economically allow members to collectively afford and politically ensure citizen participation. From this perspective, cooperatives represent one of the “most important alternative solutions” to counteract globalization.  

How has the trend of user-oriented energy cooperatives, rather than investor-oriented ones, developed in Taiwan? Taiwan’s energy landscape exhibits several distinct characteristics. Firstly, electricity prices are extremely cheap, leading users to be indifferent towards their electricity consumption. Despite a recent increase in electricity prices in April 2024, households typically only pay around 2-6 NT dollars per kilowatt-hour. Consequently, the low electricity prices result in a lack of motivation among residents to engage in energy conservation efforts. Secondly, since the Renewable Energy Development Act was enacted in 2009, the government has vigorously promoted renewable energy sources such as solar photovoltaic, onshore and offshore wind power, fishery-electricity coexistence, and the current focus on geothermal development. However, the government’s handling of controversies surrounding renewable energy has not shown much progress. This has created numerous negative perceptions among the public, such as the perception that conglomerates control renewable energy and are simply a replica of the petrochemical industry, integrating both legal and illegal influences. In summary, the combination of low electricity prices and immature renewable energy technologies coupled with societal relations has resulted in a lack of high motivation among the public to participate in renewable energy initiatives. 

Despite this, there is still a group of environmentally conscious individuals in Taiwan who have initiated citizen power plants scattered across various locations in Taiwan, including urban and rural areas, as well as the northern, southern, western, and eastern regions. In terms of renewable energy types, these projects mainly involve solar energy and micro-hydropower, with a particular emphasis on rooftop solar installations. Since 2011, the establishment of the “One Person, One Kilowatt” initiative in Taipei City has been the catalyst for these citizen power plants, advocating for energy autonomy and drawing lessons from Germany’s experiences. Sunnyfounder, Taiwan’s first online crowdfunding-based citizen power plant, has over 600 sites across the country, with a total participation of 33,000 memberships. It collaborates with welfare organizations or donates a portion of its profits to them and is the only citizen power plant authorized for electricity sales. Green Advocates Energy Co-op is the first citizen power plant in Taiwan organized as a cooperative, with a total of 9 sites.  

Taihsi Village in Changhua County is a representative example of citizen power plants in rural areas, aiming to transform from a region formerly impacted by petrochemical industries into one that promotes local development through green energy. Taromak in Taitung is a citizen power plant initiated by Indigenous tribes to advocate for the self-use of electricity. Kinmen Renewable Energy Community Cooperative is the only citizen power plant on an outlying island. Ji-an Township in Hualien, located in the eastern rural area, is the only citizen power plant primarily focused on micro-hydropower. 

In Taiwan, the organizational forms of citizen power plants are highly diverse, including limited liability companies, cooperatives, nonprofit organizations, social enterprises, and unincorporated groups with designated representatives or managers. The Energy Transition White Paper stipulates that citizen power plants must meet the following criteria: participation in funding by the public, sharing of benefits among participants, or feedback to local public services and charitable purposes. 

Different types of citizen power plants actually have different philosophies. Online crowdfunding-based citizen power plants, as a form of social innovation, may not necessarily be recognized by citizen power plants due to their lack of local identity. Citizen power plants that sell electricity through Feed-In Tariff (FIT) have also been criticized, as they are perceived as not conducive to energy autonomy. Some citizen power plants led by businesses have been criticized for residents’ lack of actual participation, contrasting with citizen power plants where residents are actively involved. Given the diverse forms of citizen power plants, some idealistic participants doubt whether they truly align with the ideals of community development and energy autonomy. If a citizen power plant does not directly contribute to these goals, can it still be considered a citizen power plant? 

In Taiwan, the expansion of citizen power plants is often criticized for its potential commercialization and loss of integration with local development. Similar problems also exist in the development of energy cooperatives in the international community. From the inherent characteristics of energy cooperatives, there are advantages such as reduced contract costs, low risks, and higher participation. However, cooperatives may also face pressure to adopt a corporate structure. Shareholders may expect investment returns and decision-making power, gradually leading cooperatives towards profit-oriented companies. 

Additionally, Taiwan faces a unique challenge related to the role of Taiwan Power Company (Taipower). Although Taiwan’s Electricity Act has gradually moved towards liberalization, it has not been fully implemented yet. Taipower is a product of the authoritarian regime era and still dominates Taiwan’s power generation and transmission. Despite setting a development schedule for smart grids, there is internal disagreement within Taipower regarding the definition of distributed energy. Many employees still believe that Taiwan, being a small island unlike the United States, does not necessarily need to further pursue distributed energy. Currently, the goal of Taipower’s distributed grid project is to directly supply power from gas turbines or renewable energy sources to science parks and industrial parks rather than focusing on non-industrial areas. Therefore, the underestimation of distributed energy’s potential hampers the development of small-scale citizen power plants and fails to address the issue of insufficient power lines in rural areas. 

Most citizen power plants choose to sell electricity to Taiwan Power Company through FIT to gain higher profits compared to self-consumption. This brings us to a dilemma: despite the rising electricity prices, Taiwan’s electricity rates remain relatively low. As a result, the purchasing price is consistently higher than the self-consumption price. This pricing structure may effectively promote the development of a distributed energy system and enhance energy security, both important goals of energy transition. 

Citizen power plants in Taiwan are experiencing limited growth for several possible reasons. First, many people are still unaware of how to participate, and the concept of citizen power plants is not yet widespread. Second, the attitudes and regulations differ significantly across various counties and cities. For example, Taipei and New Taipei City are more open to such initiatives and have relatively comprehensive regulations. However, interestingly, whether to enforce these regulations still depends on the enthusiasm of senior officials and the willingness of staff to implement them. Third, the government’s approach to promoting citizen power plants is highly contentious for some participating groups. For instance, in Taipei, the government invites groups to bid for citizen power plants through tendering, but the bidding regulations are not favourable. The government requires a 2% contribution from citizen power plants, along with engaging in community service or environmental education. However, there are no similar requirements for businesses.  

Moreover, even if residents are interested in citizen power plants, they still feel doubtful about the application process. Specifically, although it is legal to install citizen power plants on illegally built rooftops, people are still afraid that they will be punished if they apply to local governments. Lastly, green finance lending still heavily relies on traditional credit principles. Banks primarily consider the operational scale and the credit of borrowers based on risk assessments. This makes it extremely difficult for small-scale citizen power plants to secure financing. 

Despite facing various challenges in developing citizen power plants, I believe that citizen power plants remain a crucial concept and practice in ensuring energy security. Due to geopolitical factors and the high demand for electricity from the semiconductor industry, Taiwan has a high level of energy vulnerability. Citizen power plants are the result of increasing awareness among people about energy participation. Conversely, they are also an important driver for raising public awareness of energy. If the promotion and implementation of citizen power plants can be sustained, the public will be more knowledgeable about energy systems. This, in turn, can break the situation where specific entities or businesses monopolize the energy system. Moreover, citizen power plants provide a stronger oversight role in the social and environmental impacts of energy technology. 

Hui-Tzu Huang is an Assistant Professor at the Department of Cooperative Economics and Social Entrepreneurship at Feng Chia University and a Network Fellow at Future Earth Taipei. She extends her sincere gratitude to the Institute of Sociology at Academia Sinica and the Risk Society and Policy Research Center at National Taiwan University for their invaluable contributions to this research. The insights gained from discussions and interviews with them have greatly enriched the content of this article, and she is truly grateful for their support and resources. 

This article was published as part of a special issue on “Exploring Technology and Society in Taiwan.”

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