Work package manager: Seinäjoki University of Applied Sciences

The purpose of the work package is to build an understanding of the ongoing developments and plans related to the hydrogen economy in South Ostrobothnia, who the key actors and stakeholders are and what their needs are to promote the hydrogen economy.

In the first phase of the VEPE project, a study was conducted to assess the hydrogen economy, focusing on both local stakeholder networks and national and international developments.

There is a need for hydrogen in the clean net zero energy economy like many studies before have shown, but the target amount of hydrogen has decreased considerably only in the last couple of years. The biggest need for clean hydrogen can be found from today’s grey hydrogen applications such as ammonium and fertilizers in which most of the emission dirty grey hydrogen is used. On top of that, there is an emerging market forming in a direct iron ore reduction in which electricity cannot be the only input and hydrogen is required. Also, maritime and air transportation are likely applications where hydrogen will be used. Development of these markets is assessed in the study in relation to South Ostrobothnia.

One of the biggest slowdown factors in clean hydrogen industry based on this study, and many others including (Tengler 2024; IEA 2024b ja TNO, 2024), is the higher than expected levelized cost of hydrogen. In particular, the investment costs are 4-5 times higher than studies indicated at the beginning of 2020s. Partly in relation to investment cost, the levelized cost of clean hydrogen is even 8 times higher than grey hydrogen and over 4 times more than the goal of reaching of 2 euros per kg (Martin, 2024b; Laurikko et al., 2020). The situation is made even more complicated by the fact that the decreasing cost development will be much slower than previously thought (Burchardt et al., 2023). The higher levelized cost means that Finnish government plans will require much more public financial support than has been decided which is described in the fifth chapter of the study.

South Ostrobothnia hydrogen economy plans are closely tight into this wider clean hydrogen development macro-economic national and international context. Despite the slow development, South Ostrobothnia has many competitive factors that can be utilized in hydrogen production. Electricity generation development projects can be quickly implemented, and the bottlenecks of the national electricity grid can further improve the strategical location of the South Ostrobothnia. There’re enough electricity generation projects to meet the demand of two large scale green steel factories.

In relation to this current state analysis, an additional levelized cost of hydrogen analysis is published later which further strengthens the analytical potential of the later stages of this project and improves the analysis of hydrogen industry opportunities in Finland and in South Ostrobothnia.

The full Work Package 1 study is available in Finnish here: WP1 – Analysis of the current state of the hydrogen economy