Achemos Grupe: the journey of a large fertiliser company towards decarbonisation

Linas Vidauskas, board member of one of Lithuania's largest fertiliser and agribusiness groups, spoke at a Nord/LB-organised London event Evolution of the financing of renewable energy offtake last Thursday and highlighted the role that large industrials have in setting an example for other big polluters in turning to green energy. inspiratia attended the event and found out more about the company's journey towards decarbonisation.

inspiratia insights:

• Lithuanian companies have been slow to adapt to greener ways of doing business, but there are signs of change on the way.
• To decarbonise ahead of the curve, manufacturers will either have to engage with renewable PPA's or, like Achemos Grupe, expand into renewable development.
• Hydrogen will be key in the decarbonisation of heavy industrial fertiliser manufacturing.
• The country is hindered by a weak power grid, as well as convoluted approval processes that make projects more difficult to develop than needs be.

One of the few renewable chemicals companies in the Baltic region, Achemos Grupe, which was founded in the mid-1990s, now exports its products and services, ranging from fertiliser and gas production to trade, agribusiness, logistics and energy, to over 30 countries.

Under the umbrella of the largest ammonia producer in Lithuania sit thirty-eight businesses predominantly spread across Lithuania, but with some presence in Eastern and Western Europe too.

The first steps towards decarbonisation

Historically, the Group's concerns were primarily orientated towards how much natural gas they consumed to produce a ton of ammonia and on improving their efficiency. This allowed to cut CO2 emissions, as less gas per ton of ammonia also means less CO2. Today, the priority fully is the evaluation of how much CO2 the company can cut.

In the fertiliser space, not many Lithuanian companies are familiar with renewable energy practices. However, as discussed by Vidauskas, in 2021, the Achemos Grupe became a pioneer in the sector when it asked its renewable business, Renerga, to cancel all its external commitments to selling green electricity, and to instead sell the renewable energy produced directly and exclusively to its mother company.

By December 2022, Achemos Grupe's energy was solely produced internally, from Renerga's own renewable sources, with the exception of their chemical company, Achema. Currently, around fifteen percent of the ammonia producer's energy needs are provided by renewable energy.

Producing green hydrogen in-house is another solution the company is looking at to ensure the continued operation of its ammonia plant in the most sustainable manner. As such, one of the two ammonia synthesis plants that is located on their site will replace 30% of natural gas with electrolysers. Vidauskas declared that this change would eliminate around 300,000 tonnes of CO2 per year, equivalent to removing approximatively 250, 000 passenger cars from the roads every year. For this project to materialise, the group secured €122 million (£107m US$122 m) from the Just Transition Fund – a European Commission support fund for the transition towards climate-neutrality. The project is anticipated to reach operational status in 2026.

New wind farm to speed up the transition

Increasing renewable energy generation for the Achema group will also be addressed with the construction of a wind farm in the windiest region of Lithuania.

LT-Energija, a subsidiary of Achemos Grupe, is developing a new wind farm in the Pagegiai district. Vidauskas informed the audience that forty wind turbines will be built for the Pagegiai wind park. The project, advised on Nord LB, is expected to be operational by 2026 and Achema is already committed to purchasing the energy produced by the farm.

Achemos Grupe's total decarbonisation investment in 2005-2021 has been estimated at €112 million (£98.6m US$119m). Thanks to the expansion of renewable energy sources, notably bioenergy and wind, the carbon intensity of the power and heat sector has decreased over the past decade, and these ongoing efforts will certainly set the tone for the region's big manufacturers in the race to decarbonise.

Overcoming future challenges

The Achemos Grupe is not alone in its decarbonising efforts as Lithuania has witnessed a boom in the renewables sector over the last two years.

The country has made strong progress towards realising its vision of a secure, competitive, sustainable and innovative energy system in the Baltic region, yet an evolution of the industrial mindset will be necessary for a transition to happen at a national level.

Eventually, every large manufacturing group in Lithuania will have to find solutions to decarbonise. However, large industrials have a wide set of financial motivations they must prioritise, while also being tied down to a complex regulatory landscape.

One strategy that has helped with reducing the impact of high prices and encouraged a move to renewables in other parts of Europe – and which was highlighted in our own European PPA Outlook and in our latest Financing the future of offtake: what are the trends? feature – is the use of PPAs to reverse the closure of some aluminium smelters due to securing guaranteed electricity prices. Other large groups might not take the same route as Achemos Grupe, developing their own source of renewables generation, relying instead on PPAs exclusively.

Additional questions arise around grid availability in a country that from increasing electricity infrastructure constraints, noted Vidauskas. The lack of grid availability means that there are a lot of projects only at the "speculation" stage trying to secure a higher frequency gridline in anticipation of their permits being approved, leading to greater grid congestion across the country.  Lithuania also has complex planning regulations that further hinder renewable energy project development.

However, there are attempts by institutional bodies to alleviate these issues. The Lithuanian government has supported major reforms of the electricity and natural gas markets, with a view to further integrate within the EU energy system and markets.

In 2019, the European Commission approved a measure to support the production of electricity from renewable energy sources for electricity-intensive industrial consumers in Lithuania. In 2022, a €1 billion (£880 m US$1 bn) support scheme launched by the government attempted to facilitate the process of developing renewable energy projects, by fixing energy prices prices in a time of extreme price volatility, providing assistance to businesses and investing in future energy developments. Incorporating loans and subsidies, the government anticipates this regulation to be one of the most significant assistance packages in the EU-27.

Achemos Grupe's recent transition to renewables is amongst the first but certainly not the last in the region. With the upcoming parliamentary elections in Lithuania in 2024, many regulatory answers could be found to accelerate the decarbonisation of Lithuania's manufacturers. However, strong and attentive leadership will only be the first of many steps that the country needs to take if it is to reach its net zero targets on time.