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Foreign mega-investments in the production of so-called green fuels, which are expected to double Estonia's energy consumption, are being touted by bankruptcy experts and hype-mongers. Investors with deep pockets are nowhere to be seen.
Usual bankruptcy wizards and dream merchants parading their supposed mega-investments
The urgent need to subsidise offshore wind farms ˗ to the tune of 2.6 billion euros ˗ was created by the huge hydrogen production that would bring thousands of jobs to Estonia. According to the Investment Pipeline of the Entrepreneurship and Innovation Foundation (EISA), hydrogen projects would consume up to 6.6 terawatt hours (TWh) of electricity, at least 2.8 TWh.
According to the lobbying register, in October last year a representative of the Norwegian company Clean Industrial Solutions Holding AS (CIS) visited Climate Minister Yoko Alender (Reform-party) to discuss the construction of a hydrogen plant. Shortly before, Alender and Deputy Secretary-General Jaanus Uiga had twice discussed the construction of a hydrogen infrastructure with the state-owned company Elering.
This was around the same time that fuel giant Shell put on hold the construction of Europe's largest hydrogen plant in the port of Rotterdam, originally scheduled for completion in 2025, due to economic concerns.
«It is always exciting when curious journalists reach out ,» Ulvang said in response to Postimees' questions: about the scale of hydrogen production CIS wants to establish in Estonia;, whether the company also cooperates with Estonian companies;, and whether there are any strategic investors-partners.
«It is true that we are exploring opportunities for establishing green hydrogen production in Estonia,» says Ulvang. «However, we have not yet concluded on any specific locations, and we are currently investigating several possibilities. Our flagship project is CIS Liepaja in Latvia, where we are gaining valuable knowledge and experience in the development of green hydrogen projects. We intend to apply these insights and experiences in Estonia.»
He did not answer the question about investors, although it would cost well over a billion euros to build factories in Latvia and Estonia.
The man bursting with ideas saw his business collapse in Norway
In 2011, the newspaper of Sør-Varanger municipality (pop. 10,000) in the county of Finnmark, on the border of Norway, Russia and Finland, praised Rune Ulvang's grandiose property development - nearly 30 private houses and several apartment blocks.
«Ulvang is fantastic. He's full of ideas,» the county newspaper wrote in December 2018, when Ulven Investment started bottling water, developing tourism and other initiatives in the area.
In 2019, The Barents Observer wrote that Ulvang Keeps shuttling back and forth to China, that his hometown of Kirkenes would sign a partnership agreement on port development with the Chinese port city of Yingkou.
But at the end of 2020, his business went up in smoke. The local newspaper Sør-Varanger Avis reported the bankruptcy of Ulven Investment, leaving creditors with a loss of almost six million euros. According to the paper, the company's over-investment had destroyed tourism, and the coronavirus pandemic had caused chaos.
The trickster discovered fresh prey
While Ulvang's creditors in Norway were cursing him, he married the famous Latvian model Maija Silova and moved to Latvia to live with her. «It didn't take long to convince her,» the model admitted to the Latvian tabloid gossip magazine Santa.
"Full of ideas," Ulvang did not remain a decoration on her husband's sofa, he set new irons in the fire both in Latvia and Estonia.
According to the Norwegian Business Register, Clean Industrial Solutions Holding AS, established in October 2023 (Ulvang's stake is 25 per cent), states on its website: "CIS has expertise and experience from energy and industry and is building a significant portfolio of energy and green industry projects. We focus in particular on wind power, solar power and hydrogen."
The company's turnover is zero, but that does not bother Ulvang and his business partners.
The hotspot for bankruptcy artists
The Latvian Investment and Development Agency (LIAA, a sister company to EISA) issued a flashy announcement last November that a declaration had been signed for the Liepaja Special Economic Zone (SEZ) on the establishment of a sustainable industrial centre in Liepaja.
Among the signatories was CIS Liepaja, which plans to produce hydrogen from renewable energy. In addition to the Norwegians, the CIS subsidiary also has a 16 per cent stake in the notorious Latvian businessman Andris Griģis, who went bankrupt in 2014, owing creditors €38.4 million.
The remaining projects are also ambitious: an offshore wind support base and heavy cargo terminal, a so-called green aviation fuel (SAF) Plant, production of hydrogen-powered aircraft and CO2 export terminal for carbon transportation and storage.
LIAA recognises that the goal of entrepreneurs planning grandiose industrial projects/new industries is to receive financial support from the Latvian state and the European Union.
For more information about CIS, Ulvang recommended contacting his business partner and company director, Tor Arne Pedersen. According to his LinkedIn account, his main job is to run a municipal company in Ulvang's home county that operates four hydroelectric power plants and the local electricity grid.
Pedersen claims on his account to have previously managed the construction of several wind energy projects in Sweden in collaboration with the French company Neoen. He also vaguely states: «Initiatives were undertaken to combine renewable energy solutions with megaprojects focused on green hydrogen in the Baltic region.»
Asked where CIS plans to find the money for major investments, Pedersen said: “We hope to get support from the governments of the different countries and also to find investors once CIS has taken root in the project.”
The methanol industry's reported electricity usage raised eyebrows
The second pillar of the doubling of Estonian energy consumption claimed by Kristen Michal's (Reform-party) government is the methanol plant in Pärnu, which Postimees has written about before.
According to the EISA investment pipeline, the methanol plant will require 3.15 TWh of energy per year. The technology described to Postimees by Power2X, which would use hydrogen produced in large quantities in a giant electrolyser to produce methanol, could indeed use that much electricity to produce 500,000 tonnes of methanol per year. Given the average price of electricity in Finland of 50 euros per MWh, the cost of the electricity alone to produce methanol would be 350 euros per tonne. This is the current world market price for methanol. In addition, land would have to be bought and a factory built. You also have to pay for the wood needed to produce methanol.
Another costly scheme came to light amid the state forest administration's tender process
Contradictions also emerged between the production plans submitted to Postimees and those submitted to Pärnu City Council and the State Forest Management Centre (RMK).
The city government insisted that the plant was not explosive and therefore did not require special planning for its construction. This claim appeared to be false, as the 300-400 MW electrolyser planned for the plant would produce 150-160 tonnes of hydrogen per day. Any amount over 50 tonnes is considered dangerous.
After being confronted, RMK admitted that Power2X had instead provided data on a conventional wood methanol (wood alcohol) production technology for wood, which would require minimal hydrogen and electricity.
"This has nothing to do with electrolysis. The addition of H2 from electrolysis is only used to better bind the carbon. Many do this precisely so that all the carbon remains in circulation and no quota has to be used," explains Timo Kikas, a member of the competition committee and a chemist at the Estonian University of Life Sciences.
The cost of producing wood alcohol remains the same as last year, according to cost-benefit calculations published by ScienceDirect.com, at least €550, but more likely between €600 and €750, which would mean a loss of at least €200 per tonne.
There is currently no solution in the European Union to cover the difference between the market price of methanol of €350 and the price of so-called green methanol production.
However, Indrek Kaing of the Ministry of Economic Affairs and Communications, head of the commission that assessed the RMK wood enthusiasts' business plans, claimed that both Power2X's and AS Biojet's similar plans were economically feasible, but refused to elaborate.
Power2X is deflecting and distorting the facts
"For our bio- and e-methanol concept, this annual power requirement (3.15 TWh per year - ed.) estimate is well within the uncertainty ranges commensurate to the stage of development we are in," confirms Peter Daemen, Power2X Estonia project manager, regarding the magnitude of the energy requirement.
Regarding the data that the traditional method of producing methanol from wood uses about five times less electricity, Daemen replied: "With regards to your question on calculations and comparison to your linked source below: we leave it up to your discretion to judge the quality, relevance and applicability of your source to our bio- and e-methanol concept; our numbers are based on the hard proprietary work of real-world process engineering and project development, that we execute confidentially with OEM’s, licensors, engineering firms and our own experts."
Daemen did not respond to questions about the actual cost of electricity in the first and second/subsequent stages of the plant. Asked how it would be possible to sell e-methanol fuel, which is twice as expensive as regular jet fuel, CIS CEO Pedersen said: "The required proportion of e-fuel, 1.2 per cent of all jet fuel, is so small that even if it costs twice as much, the overall price of the fuel will increase only marginally."
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Projects total 4 billion, while only 130 million has been promised
The Power2X guys have managed to confuse the media in their own country even more than in Estonia.
"Alarm bells are ringing everywhere, but there is hope for two Dutch companies: Power2X and Rotterdam Advario have announced the construction of a new factory in the port of Rotterdam," wrote the Dutch national daily NRC in October. "They produce e-SAF fuels (e-sustainable aviation fuel) from so-called green methanol, which is made from hydrogen and CO2."
The plant, which will produce 250,000 tonnes of e-SAF a year and be the largest of its kind in the world, is expected to be completed by 2030 at a cost of €1.5 billion. Power2X is backed by the large Canadian pension fund CPP, and Advario will be able to make its share of the investment from its own funds, the head of Advario told the newspaper.
However, according to the newspaper, no final investment decision has been made, let alone contracts for the purchase of feedstock and the sale of fuel.
CPP, which owns a majority stake in Power2X, has plenty of money. According to its website, two years ago the CPP had 32 billion earmarked for sustainable energy projects.
There is no real investment in sight, although Power2X is working on mega-projects in Europe, with a total cost of around four billion euros. In addition to the Estonian and Dutch plants a hydrogen plant in Spain and hydrogen and green ammonia production in Portugal have been mentioned.
The promise made two years ago to invest only 130 million euros (not four billion!) in Power2X projects is still up in the air.
Although in both Estonia and the Netherlands, Power2X has claimed that the funding comes from a pension fund, the Portuguese project still needs investors to "bring the project to life", according to its website.
There is currently no place to store hydrogen, as the planned European hydrogen pipeline is still on paper. There are also no known major customers.
No response was received from the Canadian Pension Fund Investment Company.
The advancement of biofuels is sluggish
The Dutch national daily NRC wrote last October that the development of biofuels is stalling because potential buyers, mainly airlines, do not want to buy expensive biofuel.
Oil giant Shell said the construction of a planned plant in Rotterdam had been temporarily halted because of financial problems. BP, the oil and gas giant, said biofuel production could weaken the company. The plan was to make jet fuel from used cooking oil, which, unlike wood, costs nothing - it pays to deliver it.
"Flying on hydrogen is still an illusion," the paper said of aviation.
The entrepreneurs cited European Union rules as the basis for their business success, which require airlines to use e-SAF fuel for at least 1.2 per cent of their total fuel consumption by 2030.
Royal Dutch airline KLM has reportedly expressed interest in buying the aircraft, and production would be enough for 7,000 flights between Amsterdam and New York.
However, it is noted that Power2X is currently one of the few companies planning to produce e-SAF on an industrial scale.
The newspaper blamed the slowdown in the same field, by big and well-known players Shell and BP, on the invasion of cheap Chinese biofuel, into which the EU has launched an anti-dumping investigation.
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Comment:
Masterclass - The miracle of responsibility wind-dropping
Estonian forests are no longer sequestering carbon.
Wind energy is being promoted vigorously.
Business plans differ from fairy tales.
It is possible that our government, in promoting wind energy, has stumbled upon fortune-hunters who know all about the greenery that has taken over Europe and can live off the abundant subsidies, writes Marek Strandberg, head of the science and technology department.
Estonia, as you have heard, needs a lot of renewable energy so that we can produce large quantities of methanol and other miracle fuels to make our planes - yes, their planes somewhere out there - fly even greener. For a political decision to increase the share of electricity produced by wind generators in Estonia, it is not necessary to directly invent consumers whose needs will be met by building wind farms. However, Estonia has chosen to do just that, by trying to show how many jobs and how much electricity consumption a particular company would create if it were to set up in Estonia.
It can be assumed that these arguments were also used to convince the public of the inevitability of paying billions in subsidies. When Postimees asked questions, all that was left of the ultramodern methanol republic with its unprecedentedly large electrolysers was a fairly ordinary wood distillery, where the need for hydrogen is rather modest. But turning wood into methanol in this way is certainly neither green nor sustainable, since Estonian forests have already ceased to be carbon sinks: they emit more carbon dioxide into the atmosphere than they absorb through photosynthesis.
Today, a situation has arisen in which both the former and current climate ministers have created a situation in which, in order to justify the desired increase in wind energy production, attempts have been made to find companies that would confirm that they really want to start using enormous amounts of electricity - and specifically from wind farms. This task was assigned to the Entrepreneurship and Innovation Foundation, the State Forest Management Centre and the Ministry of Economic Affairs and Communications. They have then tried to solve the problem with the means at hand and may have come across fortune hunters who are well acquainted with the greenery that has taken over Europe and who can live off the abundant subsidies. What is worrying, however, is the inability of Estonian institutions to distinguish business plans from possible fairy tales. In my opinion, the government could say, without any particular distortion, that we have three choices: to increase total energy production, to maintain it at the same level, or to reduce it altogether. These are the different ways in which society can develop. The Prime Minister, as head of government, seems to have chosen the first one, and he should still be responsible for it, and not allow other institutions to justify their political wishes with their tied up calculations.