This is the municipality’s way to attract hydrogen companies
When a municipality attracts hydrogen companies to its area, the way is to follow CEPD principle: contacts, experience, profitability and demand. Here are some examples.
My colleagues and I are visiting Demo North in Luleå, Sweden, in June. At a cocktail party, the host, an Invest in Norrbotten employee, is tirelessly leading people to other people. At that moment, there is no hope of a longer conversation with him, because the most important thing for him at that moment is to make contacts: not within his own organisation, but between strangers. He knows what each of the guests can bring and to whom, and who needs it. I will come back to this in the section on profitability.
At the BotH2nia goes event in Oulu in May of this year, Skarta will present to the audience what they have planned with the municipality of Utajärvi for the local industrial area. "Utajärvi Municipality?", asks a participant from the audience. She, too, represents a small town and says she has learned that unless there is an industrial activity in the locality that needs hydrogen, or at least a large heating plant, there is no reason to have high hopes for the word “hydrogen”.
However, the company will be in contact with a new potential customer, and the municipality will gain new experience and insight into what could be possible and work in their area. Utajärvi will be a pioneer on the world map.
I ask a company from Oulu, whose main presence is in other countries, what they consider when deciding to invest in hydrogen-related projects. The answer is clear: profitability and the size of the future market. As a public sector hydrogen network builder, naturally I would have liked to hear about the availability of a trained workforce and smooth licensing processes. Those are issues that we as public actors can have more influence on.
In Luleå, I listen to a company telling me that there were exactly two places in the world where it seemed possible for them to invest: northern Sweden or northern Norway. The reason was the exceptionally low electricity prices in these regions. The basic prerequisite, of course, was to generate that cheap electricity from renewable energy sources, in order to save on emission allowances.
Suddenly, I also understand the value of making contacts in this way. Unless information about the opportunities and good experiences on offer is passed on between players, the value of the whole region will remain untapped. Hence the tireless movement of our Norrbotten hosts from one guest to another.
Profitability is, of course, affected by whom a company needs to create a complete value chain. What it costs for raw materials, energy and subcontracting, but also what people are willing to pay for the finished product, and how many people need the product. We get to the point of demand.
In the Norrbotten region, we have reached a point where, from large companies like LKAB onwards, companies are signalling the demand-driven nature of the market. Even the Northvolt start-up has a full order book before the battery factory in Skellefteå Sweden is even up and running.
However, this situation was not achieved in a single step. It was preceded by the political will in Sweden to attract 100 000 new residents to the region by 2030 and to do all the jobs that the hydrogen economy was seen as capable of generating.
Some larger Finnish companies have so far exported their hydrogen investments to Rotterdam. The size and proximity of the market and possibility of meeting demand in a cost-effective way have been cited as one of the main reasons for this.
The municipality can have a particular influence on contacts and experience.
Our own experience is that municipalities can at least influence contacts and experiences. Lobbying for electricity prices in northern Finland to be at the same level as in neighbouring western countries is a more difficult task for municipalities. Turning sparsely populated areas into metropolises is perhaps even more difficult.
This is why the National Hydrogen Network focuses on networking and sharing experiences. We will bring together public and private actors from as many relevant actors as possible to enable companies to build profitable value chains. Alongside this, we aim to ensure that once a location is decided, permits can be decided on quickly, and the workforce is given the additional training it needs. In other words, the public sector is well-equipped to play its role, also in relation to hydrogen investments.
Hydrogen pipelines and onshore wind power
There are a couple of important competitive advantages in the northern Baltic Sea that municipalities should bear in mind.
Finland and Sweden's competitive advantage in the hydrogen economy is onshore wind power, which is half the production cost of offshore wind power. In central Europe, onshore wind power no longer fits the bill. Thus, the cost of renewable electricity is inherently more expensive there than here. This is important for the production of electrolysis hydrogen, as the cost of electricity accounts for about half the cost of producing green hydrogen.
At the same time, national hydrogen gas pipelines are already being planned in Finland and Sweden. The first phase of the Nordic Hydrogen Route will link the Gulf of Bothnia coastline from Vaasa, via Kemi, all the way to Sweden. The European Hydrogen Backbone initiative's vision of a European hydrogen pipeline network in 2050 will link Finland's hydrogen pipelines to an EU-wide network. Public projects in the new market will, of course, also electrify the private business market. It suddenly becomes clear where and on the basis of which resources hydrogen projects should be considered in the first place. The possibility of transporting hydrogen by pipeline will increase the size of the market or the stock of raw materials accessible to many companies, thereby affecting profitability and demand.