What ZAAO's Biomethane Trucks Tell Us About Latvian Hydrogen
A Vidzeme waste company now fuels its own collection trucks with biomethane it makes from biowaste, after weighing hydrogen and setting it aside on cost and delivery times. The reasoning behind that decision is the most useful thing the Latvian hydrogen ecosystem has read all year.
NEWS
HydrogenLatvia
9/17/20264 min read
Five waste collection trucks in Vidzeme now run on fuel their owner makes on site, out of the biowaste those same trucks bring in. ZAAO's circular economy centre at Daibe closed that loop in 2026, and the company's board chair Gints Kukainis told Dienas Bizness it took five years to get from idea to working system. Somewhere in those five years, hydrogen was on the shortlist. It didn't make the cut — and the reasons he gives are worth more to Latvian hydrogen stakeholders than any policy paper published this year.
A five-year build that ended in self-supply
The sequence ZAAO describes is straightforward. A €10 million biodegradable waste processing plant started up in 2024, producing biogas as one of its outputs. An upgrading module turning that biogas into vehicle-grade biomethane followed, built over roughly a year and a half with the company's own money. Five trucks run on it today. Kukainis says a procurement for the next batch goes out at the end of this year, with about ten biomethane trucks expected in the fleet by early 2027, and a longer-term target of ten to twelve — roughly a third of ZAAO's heavy vehicles.
Note what is absent from that description. No offtake agreement. No price index. No counterparty risk. The producer and the consumer are the same balance sheet, and the refuelling point sits at the depot the trucks return to every evening.
Why hydrogen came off the shortlist
Three options were weighed, according to the interview: hydrogen, battery electric, and biomethane. Hydrogen was assessed seriously — Kukainis is explicit that the technology exists. What ruled it out was the package around it.
A hydrogen truck was estimated at three to four times the cost of the conventional alternative, with the fuel it needs on top.
Delivery lead times for both the production technology and the vehicles were long enough to be a project risk in their own right.
Estimated fuel cost per kilometre came out well above diesel, not near it.
The battery electric truck was rejected on physics rather than price. Heavier than a combustion equivalent, and a winter range of about 150 kilometres against daily collection routes of 200 to 250 kilometres. ZAAO bought one anyway — it works Valmiera and Cēsis and charges at Daibe — because running costs are genuinely lower where the route fits. That is a fleet operator making a duty-cycle decision, vehicle by vehicle, and it is exactly how every serious Baltic fleet will decide.
None of this is an argument against hydrogen. It is a benchmark. Municipal waste collection — depot-return, predictable, sub-300 kilometre routes, with a free feedstock sitting in the yard — is close to the worst possible case for hydrogen and close to the best possible case for biomethane. The honest reading is that ZAAO ran the numbers correctly for ZAAO.
The policy vacuum is the common denominator
The most quotable line in the interview has nothing to do with molecules. Kukainis says the whole thing could have been done faster had there been a clear state position on support for biomethane production equipment. Five years, and a meaningful share of them spent waiting to find out whether a support programme would exist.
Latvian hydrogen developers will recognise that sentence immediately, because it is their sentence too. Projects here are not usually stopped by engineering. They are stopped by not knowing, at the moment a board has to commit capital, what the support architecture will look like — and by the fact that a maybe is more expensive than a no. A firm no lets you redesign around own funds, as ZAAO eventually did. A maybe just burns quarters.
The interregional H2Value project is a case study in what that uncertainty does to a footprint. Launched in late 2022 with roughly €4.28 million of EU funding, it set out to build the first cross-border green hydrogen value chain between South Estonia and northern Latvia — production, a refuelling station, fuel cell vehicles in urban transport. By the time the pilot reached delivery, the value chain demonstration had migrated south: it is now expected to complete in Jelgava during the second half of 2026. A project designed to anchor hydrogen in the Tartu–Vidzeme corridor ended up anchoring it somewhere else. When ZAAO, sitting in that same corridor, sat down to evaluate hydrogen for its fleet, there was no local refuelling infrastructure, no neighbouring offtaker, and no visible cluster to share cost with. The comparison it ran was therefore hydrogen at full standalone cost against biomethane it could make from its own rubbish. That contest has one outcome.
Captive offtake is the template worth copying
Strip ZAAO's project down and what remains is a structure, not a fuel. Production and consumption inside one organisation. A known, unchanging demand profile. Refuelling at the site where the assets already sleep. Feedstock that arrives as a business input regardless. The molecule is almost incidental to why it works.
That is the structure Latvian hydrogen needs to reproduce, and the sector has spent too long chasing the opposite of it — open-market green molecules sold to buyers who do not yet exist, at prices no one will underwrite. The projects most likely to reach financial close here are the unglamorous ones:
An industrial site that already buys grey hydrogen and can switch the source without changing anything downstream.
A port handling operation where equipment, refuelling and demand sit inside one perimeter and one operator's budget.
A long-haul or heavy-duty fleet whose routes genuinely break the battery case, paired with electrolysis at its own depot.
A grid-adjacent producer using hydrogen to absorb curtailed wind, where the value is in the electricity system rather than the fuel market.
Each of those replaces market risk with operational risk, which is the kind of risk a Latvian board knows how to price.
What the ecosystem should take from Daibe
There is a version of this story the hydrogen sector tells itself where ZAAO is a setback. It isn't. It is a Latvian company that built domestic fuel production, cut fossil imports, and did it with its own capital while the state made up its mind. The sector should be studying the method and arguing for the conditions that let it happen sooner.
The practical ask is narrow. Clarity on support instruments early enough to be designed around, rather than announced after investment decisions are taken. Infrastructure decisions that create a cluster somewhere specific instead of thin coverage everywhere. And a willingness, on the hydrogen side, to go looking for the duty cycles where we actually win — heavy long-haul, industrial process heat, port handling, ammonia — instead of contesting the ones where a cheaper answer is already parked in the yard.
Kukainis got five trucks running on his own waste. Latvian hydrogen's job is to find the five customers whose numbers work the same way, and then make sure they don't have to wait five years either.