“Hard” decarbonization: It is planned not where electricity
can be used, but where electricity is not suitable: in steel production, the
fertilizer industry and the long-distance fleet. In these sectors, it is not a
waste, but the only real alternative to fossil fuels.
Carbon capture (CCS): The technology that allows the further
use of gas by capturing emissions is currently expensive compared to simple
burning of natural gas. However, international agencies (e.g. the IEA) say that
without CCS, it will be almost impossible to achieve climate goals in the
cement or chemical industries.
Which is cheaper: technology that allows the further use of
natural gas by capturing emissions or burning green hydrogen?
As of 2025, the use of natural gas with carbon capture and
storage (CCS) technology remains a cheaper alternative than burning green
hydrogen. Although the price of green hydrogen is falling rapidly, the current
production infrastructure and energy costs still lead to a higher cost.
Here are the main price comparisons (per 1 kg of hydrogen
equivalent):
Blue hydrogen (natural gas + CCS): costs around $1.50-$3.50.
This is considered a more economically attractive transitional solution due to
the developed gas infrastructure.
Green hydrogen (electrolysis from renewable sources): costs
around $3.50-$6.00 (up to $7.00 in some cases). In some regions with extremely
cheap renewable energy and government subsidies, the price can drop to $2.00,
but globally it remains higher.
The most important factors affecting the price difference in
2025:
Technological maturity: Natural gas cracking (SMR) combined
with CCS is a technologically more mature process, so its initial investment
(CAPEX) is lower than that of large-scale electrolysis plants.
Gas price volatility: The attractiveness of blue hydrogen is
directly dependent on the market price of natural gas. If gas becomes more
expensive, the competitiveness of green hydrogen increases.
Subsidies and taxes: The US Inflation Reduction Act (IRA)
and similar EU initiatives provide tax credits of up to $3.00/kg for green
hydrogen, which could make it cheaper than blue hydrogen in certain projects as
early as 2025. Trump and the AfD will put an end to these subsidies.
Efficiency losses: When converting electricity into hydrogen
(electrolysis), compressing it, transporting it and burning it again (in
turbines or fuel cells), about 60–70% of the initial energy is lost. In
comparison, direct charging of batteries saves about 85–90% of energy. Where we
can, we will use electricity, not green hydrogen.
The Lithuanian elite is distinguished by its special ability
to invest our money in things that are not profitable, e.g. green
hydrogen:
“Lithuania and Europe still believe in hydrogen, but are
coming back to reality – achieving the previously set goals will be very
difficult. Despite the fact that the demand for this technology is being viewed
more soberly, regulation remains unchanged and even restrictive, according to
representatives of businesses related to this area. It seems that we will not
see a real hydrogen revolution in Lithuania until the hydrogen pipeline
connecting Finland and Germany is built, says the Deputy Minister of Energy.
This could happen in the middle of the next decade at the earliest.
Airidas Daukšas, Deputy Minister of Energy, speaking at the
Baltic Energy Forum 2025 event in mid-December, emphasized that the emerging
hydrogen energy sector in Lithuania does not yet have a dedicated law, but one
can be expected in mid-2026.
“All foundations start with clear and stable rules. As you
know, we currently do not have long-term or specific rules that would regulate
hydrogen and related issues. Therefore, together with an inter-institutional
working group, we are preparing a draft law on hydrogen. We hope that this law
will be approved in the upcoming parliamentary session. It will establish the
legal, financial and organizational conditions for the creation of a
competitive, economically sound and reliable hydrogen market in Lithuania,” he
said. Consultations with sector participants are currently underway, until
January 19.
Lithuania currently has two large hydrogen producers and
consumers – the oil refinery Orlen Lietuva, which is building a 20 MW
electrolysis unit, and the nitrogen fertilizer manufacturer Achema.
The companies produce so-called grey hydrogen – they use
natural gas for this. The Orlen project could later grow to 100 MW of green
hydrogen capacity and become the largest project in the country, says A.
Daukšas.
Achema's situation is quite different - the company refused
122 million euros of EU support for green hydrogen capacity production in 2024
due to significantly increased investment costs. However, the Ministry of
Energy hopes that this position will change in the long run.
"We believe that in the coming years, the discussion about
hydrogen should be raised again," said A. Daukšas.
Next year, the first small green hydrogen plants for
transport should start operating in Vilnius and Klaipėda. As we have already
written, "Ignitis Group" is analyzing the possibilities of
implementing the aforementioned 1 GW project in Elektrėnai, but starting
immediately with a large project may seem irrational.
Today, these are all local plans. However, the biggest
regional discussions are being raised by the future megaproject - the hydrogen
corridor from Finland to Germany through the Baltic States and Poland.
“We understand that the greatest potential (of hydrogen –
VŽ) is export, not domestic demand, because Poland and Germany need energy
sources. So hydrogen could be a solution. And we, as a country with many
renewable energy resources, could supply hydrogen through this pipeline. I do
not want to speculate when this corridor could be implemented or when exactly
it will start operating, but we hope that this could happen by 2033-2035,” said
A. Daukšas.
The ministry estimates that export capacity through this
corridor by 2040 could reach 91 TWh.
“The biggest breakthrough in the hydrogen sector will be
when we have a corridor. Because the main consumption is in the south – in
Poland, Germany. We need to focus on these projects,” said A. Daukšas.
Cable to Germany – not a competitor
In addition to the hydrogen corridor, there is also intense
talk about a project to build a submarine power cable from Lithuania or Latvia
to Germany. No exact details have been agreed yet, but representatives of the
Baltic states and Germany are already discussing this project, and it is
intended to seek European funding. The cable could be completed by 2035–2037.
Both the hydrogen corridor and the power connection with
Germany will be designed to transport excess electricity, of course, in the
case of hydrogen, an additional step will need to be taken. It is not yet clear
how much both projects will cost, but it will be a considerable amount. For
comparison, the land connection “Harmony Link” between Lithuania and Poland
alone, which will begin construction in 2028, will cost a total of about 900
million euros.
However, Paulius Butkus, head of development and innovation
at EPSO-G, points out that these two projects can be developed in parallel and
will not compete with each other.
“We will prepare a study that will show that these are not
competing projects. Investments will be required in different areas, because in
one case, we will have to create a completely new infrastructure based on
hydrogen – when have we built something so big and new? A cable with Germany –
yes, the costs are considerable, but the distance is not that great compared to
the European scale. Maybe it is a big project for the Baltic States, but not
for Germany. When we started talking to them, they told us that they want not
one, but three cables,” the interviewee said.
He estimates that the long-term total renewable energy
potential of the Baltic States is 80 GW, and Finland, where the hydrogen
corridor would start, plans to have 100 MW of wind energy alone.
“If you want to transport huge amounts of energy in Europe,
you can’t do it through the electricity grid,” said Butkus.
Energy sector players are poking at regulation
Kasparas Liepinis, CEO and founder of H2Latvia and
coordinator of the Latvian Hydrogen Alliance, believes that governments around
the world should do more, especially by focusing more on consumption rather
than production.
“How can we encourage this? Maybe it could be tax credits,
incentives to reduce carbon dioxide use and switch from natural gas in
industries that generate large amounts of heat – glass, cement production,
etc.,” he said, adding that while EU funding is sufficient for small, pilot
projects, larger ones will require a broad system of state incentives.
Butkus shares a similar view. According to him, when talking
to potential developers, they hear very large numbers.
“But when you ask where that hydrogen will be used, they say
it will be exported. But it’s not that easy – even with the infrastructure for
export, you still have to find someone to use it. Consumption is the biggest
bottleneck in all of Europe,” he points out.
The most pessimistic picture among the participants in the
discussion was seen by a representative of Orlen S.A. In Poland, this company
is the second largest hydrogen producer. Poland itself is the third largest
hydrogen producer in Europe – but this hydrogen is not considered green,
because it is all produced from natural gas.
“Although we see a lot of potential and Orlen is developing
several projects, the problem is the price. We want to reduce carbon dioxide
emissions, but green hydrogen is 2-3 times more expensive than the other
option, which we also consider clean. "This is low-carbon hydrogen
produced by combining natural gas with carbon capture and storage (CSS),"
said Jerzy Dudek, Regulatory and Compliance Coordinator at Orlen S.A.'s
Regulatory and International Affairs Department.
He said that the hydrogen targets set by the EU are a
problem – the hydrogen industry should be allowed to grow with the help of
market forces, and not chasing the numbers raised. The Renewable Energy
Directive aims that by 2030 green hydrogen should account for at least 1% of
all energy supplied to the transport sector and at least 42% of all hydrogen
used in industry, and by 2035 – 60%.
“We have a problem with the targets related to the EU’s
reliance on hydrogen – that this is what will ignite the market. But there is
no market, so there is no production, consumption, infrastructure,” said J.
Dudekas.
The fact that Lithuania’s target of achieving 1.3 GW of
hydrogen capacity by 2030 will probably not be implemented was also
acknowledged by A. Daukšas in the discussion. He stressed that such optimistic
calculations are characteristic not only of Lithuania, but of the whole of
Europe.
J. Dudekas says that developers of hydrogen projects are
also deterred from making a final decision by some of the requirements
specified by the EU, which Orlen considers excessive. For example, the fact
that from 2028 a rule will come into force, according to which electricity for
the production of green hydrogen must not be used from any renewable sources,
but only from newly connected projects no older than three years. Another
problem is the requirement for hourly green electricity accounting, which will
come into force in 2030. This is the main criterion identified by Achema, which
refused EU support.
The regulatory regime for the sector has remained, despite
the fact that the Community understands that it has assessed the development of
this type of energy somewhat too optimistically.
“I think that Europe has already realized that the goals for
hydrogen were set with inflated interest,” said K. Liepinis. – We will not
achieve those goals – now we are talking about a confrontation with reality and
how quickly we can find real use for hydrogen. The fever is over and thank
God.”"
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