The Finnish hydrogen sector
November 2023

The Finnish hydrogen sector

Current status

Finland has a long-standing tradition in the industrial use of hydrogen. The current annual production for industrial purposes is approximately 5 TWh (status 2020), the majority of which is produced through steam methane reforming. Main use-cases are in oil refining and biofuel production, chemical industry, mining and ore refining. Additionally, circa 800 GWh of by-product hydrogen is generated yearly in industrial processes and used in industrial boilers, for district heating, and as process gases. With increased hydrogen demand on the horizon, the available production capacity must be multiplied and the existing capacity transformed to rely on electrolysis or carbon-capture technologies.

Transition to clean hydrogen

The vastly decarbonised electricity production sector and functioning electricity transmission system provide strong foundations for economically feasible hydrogen production via electrolysis. The high-performing grid is developed constantly developed to meet future demands, and the increasingly high zero-carbon ratio in electricity production portfolio already ticks off grid emission intensity demands. While dependent on imports in the preceding fossil-running energy system that is now being phased-out, Finland possesses in abundance the resources needed for the new generation of energy solutions: water, biogenic CO2, metals, and space for greenfield projects.

With these building blocks, Finland aims to turn its future electricity surplus through hydrogen into industrial investments and the export of derivatives with high value-added. Considerations of energy security and self-sufficiency, together with aspirations to build economic growth on carbon neutrality and domestic green industries, are central incentives for both private and public sector actors, and the general atmosphere is favourable towards clean hydrogen projects.

The recent years have witnessed the unveiling of an unprecedented number of clean hydrogen projects in Finland. Substantiated investment plans for upcoming years have reached an aggregate of several billion euros with exponential growth in sight, as more projects receive the green light from authorities and financers. Finland’s first industrial-scale green hydrogen and methanation plant is expected to become operational in Harjavalta in 2024. With its ca. 20 MW capacity, the facility will more than triple the country’s electrolysis capacity upon commissioning. In its wake, the Finnish hydrogen landscape with its planned hydrogen valleys in North, Southwest and Southeast Finland has over a short timespan become home to a booming pipeline of GH2 plants, with CODs early in the latter half of the decade and first GW-scale facilities planned to go operational in 2030.

Business cases

Finland’s emergent hydrogen projects are characterised by close cooperation between pioneering hydrogen/P2X-focused developers and traditional local energy companies. Hydrogen demonstrations and full-scale installations alike are being developed in urban industrial areas in connection with existing power generation or chemical plants. This sector-coupled approach enhances the competitiveness of the hydrogen value-chain by enabling the harnessing of exhaust gases for on-site CO2 extraction, the supplying of by-product oxygen to nearby plants, and the use of waste heat for district heating. A local treat is the Finnish forest industry, which as the nation‘s third largest industry provides a source of biogenic CO2 and a prospective oxygen off-taker.

As no dedicated market for hydrogen has yet been created, the vast majority of projects under development rely on clean hydrogen as feedstock for integrated e-fuel facilities. Further solutions explore the role of hydrogen in steel-making, energy storage and system flexibility services, as well as the production of downstream chemicals and fertilisers such as ammonia. Future prospects in these fields are estimated to be even brighter: although the market development is subject to significant uncertainty, Nordic hydrogen is considered to be well on the road to being cost-competitive compared to fossil-based solutions by the end of the decade.

The demand-side shows promise as well, and the early-on focus in industrial and transport applications appears a natural continuation playing to the Finnish strengths in heavy industry and ship-building. As these sectors are beginning to decarbonise, the long-standing expertise and supply chains in steel manufacturing, refinery, and maritime solutions create fertile ground for the regional clean hydrogen demand. Indeed, clean hydrogen is visioned as a cornerstone for recasting and creating domestic green industries. Businesses have seized this opportunity to jump on the bandwagon and are engaged in ground-breaking industry-led research into i.a. hydrogen engines and hydrogen-reduced iron.

Project development

Project development in Finland calls for working dialogue with local stakeholders, energy companies, grid operators, municipalities and environmental authorities. Key development activities include environmental assessments, securing of land rights and electricity supply, spatial planning and permitting, as well as the conclusion of project agreements.

Finland has no "one-stop-shop" permit for hydrogen electrolysers. Several individual permits and statements from different state and municipal authorities are required, with limited procedural coordination in place, but the permitting practices are becoming more established as more projects enter the permitting phase.

Clean hydrogen development further enjoys some of the procedural privileges and supportive measures for renewable energy. This includes a recently adopted procedural priority to green transition projects between 2023-2028 in administrative courts and the Regional State Administrative Agency.