22 December 2023 9:00 GMT UPDATED 22 December 2023 9:03 GMT
By Rachel Parkes in Seoul
South Korea is at the forefront so-called “hydrogen economy”. It is the leading market for hydrogen vehicles; it has thrown its weight behind controversial ammonia co-firing in coal plants; its industrial giants are investing in renewable hydrogen and ammonia export projects from Australia to Canada to Oman.
Stay ahead on hydrogen with our free newsletter
Keep up with the latest developments in the international hydrogen industry with the free Accelerate Hydrogen newsletter. Sign up now for an unbiased, clear-sighted view of the fast-growing hydrogen sector.
Yet contrary to the received wisdom in Korea, the country has masses of renewable energy potential (see panel below) that could be used to meet demand from many sectors — more efficiently and cheaply than producing or importing low-carbon hydrogen.
South Korea’s hydrogen fuel supply crisis will ease next week: ministry
In fact, according o the Global Wind Energy Council, the peninsula could accommodate 78GW of fixed offshore wind capacity, as well as an additional 546GW of floating capacity — and many international players and Korea’s large corporates are now starting to invest gigawatt-scale projects in the country (see panel below).
The problem for Korea, according to a senior executive at SK Ecoplant, a subsidiary of the SK conglomerate that is active in both hydrogen and renewables, is that the country needs time to get the development right — time that the climate emergency and Korea’s energy security do not afford.
. Projection of Gray Whale 3 offshore wind farm in Korea, one of the wind farms in a portfolio of Korean projects part-owned by SK Ecoplant. Photo: DORIS
“We need to diversify source[s] of energy,” Woojin Jang, vice-president of the green hydrogen and renewables unit at SK Ecoplant, tells Hydrogen Insight. “So maybe the offshore wind farm can become a reliable source of electricity in the future. Bu, the process for development may take roughly ten years in Korea.”
The country will not rush its offshore wind development unduly. In fact, it wants to take a measured approach in order to get it right, Jang explains
“Recall the experience of Denmark,” he says. “They took a lot of time to persuade the local people to understand the scheme and then to give some benefit to the people to promote [it]. But in Korea, we are relatively at the early stage. So it’s quite challenging to persuade the local people.”
Ambition vs reality | Only a tiny proportion of the world’s clean hydrogen projects have firm offtake deals: BNEF
SK Ecoplant recently invested in a portfolio of five Korean offshore wind farms under development by French major TotalEnergies and UK-based offshore wind developer Corio — and no decision is yet forthcoming on whether those projects will be connected directly to the grid, or used for electrolysis.
But Korea’s constrained electricity grid also requires massive expanson, requiring more time and more consent. Coupled with public unease over maritime development, this means that a reliable offshore wind electricity supply to decarbonise the country’s vast energy needs — industrial demand currently gobbles up 24% of all Korea’s existing renewables production — is some way off.
“It will take too much time to get stable electricity from these offshore wind farms,” Jang warns.
And there is another clock ticking as well: as of next year, the country is launching its first clean H2 subsidy auction, with delivery of first clean hydrogen and ammonia scheduled for 2027 — long before there will be significant amounts of domestic renewable energy supply.
“Due to the slow progress of renewable energy projects, it is quite challenging to provide clean electricity to green hydrogen and ammonia business developers in Korea,” says Jang. “Therefore, Korea’s power generation companies and private companies have developed mainly overseas projects to secure green hydogen and ammonia.”
Japan and South Korea to join forces on procurement of clean hydrogen and ammonia in bid to reduce costs: report
Much of the demand for green H2 and ammonia from the auctions — the vast majority of it imported — will come from Korea’s power generation companies, such as fellow SK subsidiary SK E&S, which is planning to co-fire imported ammonia in Korea’s coal-fired power plants with the stated aim of reducing emissions.
Some critics — as Hydrogen Insight has reported — have warned that co-firing is as “dirty and expensive” as burning polluting fossil fuels.
But Jang argues that, like imports of green ammonia, the measure is necessary for Korea.
“In Germany, they almost closed their coal power plants,” he says. “In Korea, we are not ready to do that. In Germany, there are plenty of solar farms and wind farms to support energy demand, but in Korea, we are heavily dependent on coal and gas and other fossil fuels. We cannot dramatically change the source of energy.”
Analysis from BNEF last year estimated that while a 50% co-fire of ammonia with coal reduces the emissions of a coal-fired power plant, overall it produces more carbon dioxide than a fossil gas plant, and at a higher cost than renewable energy. Analysts at the research house subsequently urged governments to use ammonia to make fertiliser instead of burning it in power stations.
Major Asian companies invest up to $2bn in Indian firm aiming to produce one million tonnes of green hydrogen a year by 2030
But Jang argues that Korea’s vast industrial demand for hydrogen and ammonia from the fertiliser and chemicals industries is precisely why their use in power stations is warranted.
Imports of green H2 and NH3 are inevitable, he says and may as well be expanded to partially decarbonise fossil-fuel-based power stations, which many in Korea see as a fact of life until renewables infrastructure is ready to roll.
“We need to diversify anyway,” he says. “In 2027, we are going to import gren hydrogen or ammonia from the international market because they are the basic materials for many chemical compounds. We need to find some substitute to replace grey ammonia. So there will be another use for this green ammonia and hydrogen.”
Moreover, he has faith in Korean regulators’ effort to regulate ammonia and hydrogen co-firing with coal and gas respectively. Central government is now developing a set of rules and it will be very “strict”, he claims.
Korea abroad
The inevitability of green hydrogen imports is borne out by Korean corporates splashing cash on international renewable H2-based export projects — not least World Energy GH2’s 1.5GW Nujio’qonik project in eastern Canada, in which SK Ecoplant recently bought a 20% stake.
INTERVIEW | ‘This is why sales of hydrogen cars are falling — even in South Korea’
Last year, SK Ecoplant also signed a preliminary agreement to build a solar-based hydrogen plant in Australia with compatriot East-West Power (EWP).
Korean steel gian Posco heads up a consortium of companies hoping to produce 200,000 tonnes of green hydrogen per year for export as ammonia from Oman — with volumes expected in South Korea by 2030.
And Korea’s biggest conglomerate, Samsung, earlier this year brokered a preliminary land deal for a green hydrogen project in Western Australia, as part of a consortium that includes EWP.
But Jang points out that not all volumes from projects in which Korean companies participate will make it to Korea itself — especially if their international customers ramp up demand for decarbonised products.
“If you consider the distance from Atlantic Canada to Korea, it will be very expensive to transport the hydrogen,” he says of the Nujio’qonik project. “But we may consider exporting this hydrogen to some of the facilities managed by Korean companies in international market.”
In fact, for SK Ecoplant, some of these foreign investments have been made with overseas Korean operations in mind, especially as domestic poduction of green hydrogen and ammonia in Korea is “neither feasible nor economically viable”, says Jang.
Green hydrogen projects in Asia-Pacific ‘are all focused on exports — which is why they aren’t getting built’
“In Canada, maybe the Korean companies will build their plant in Canada,” he explains. “Then we can divert part of the hydrogen or ammonia to the plant. Korean companies are very active in learning business in the international market, so we don’t need to focus on Korea because we need to see beyond the Korean market.”
Moreover, the Nujio’qonik project is expected to deliver volumes primarily to Europe — where SK and other Korean companies have many industrial customers.
“EU, US, all these developed countries, they would like to establish a very sophisticated and very reliable guideline to reduce the carbon dioxide by certain period of time. So we are destined to meet these customers’ demands.”But there are no signs of electrolyser production or deployment by SK on the orizon.
A lack of reliable, stable, affordable electricity supply for electrolyser operation is the biggest obstacle to deployment, says Jang, as is the need to build out manufacturing capability for balance of plant, which SK Ecoplant is planning to do in Korea.
But it is also to do with a lack of offtakers in SK’s core markets for the green hydrogen Bloom’s electrolysers can produce, which is why, for now, the company is not yet supplying, let alone making, electrolysis equipment in Korea.
‘Solid-oxide hydrogen electrolysers could be cheaper to install than alkaline or PEM in some circumstances’: study
Electrolysers
SK Ecoplant is just one of SK’s 180-plus subsidiaries, with construction and recycling divisions within the subsidiary operating alongside its renewables and hydrogen units.
Therefore the company has many fingers in green hydrogen pies, including equipment production. In 2021, the company signed a deal with US manufacturer Bloom Energy to distribute 500MW of the compny’s solid-oxide fuel cells and electrolysers, as well as a research and development (R&D) centre for electrolysers in Korea.
Meanwhile SK E&S, which like all SK subsidiaries operates independently of other SK companies, in 2021 signed a separate deal with US-based PEM electrolyser and fuel-cell manufacturer Plug Power — currently facing a stock-market rout — to make hydrogen and ammonia for use in Korea’s gas- and coal-fired power plants and its mobility sector.
The choice for SK Ecoplant to pitch in behind solid-oxide machines, which were until relatively recently considered a “dark horse” in the electrolyser space, was informed by the knowledge that much of green hydrogen production would be integrated into ammonia plants, Jang explains, for which there is abundant waste heat that can be used by solid-oxide technology to boost efficiency and cut costs.
South Korea’s lack of green hydrogen may put key industries in a ‘precarious situation’, warns legislator
“Bloom’s solid oxide eectrolyser technology looks perfect, but some characteristics of the hydrogen generated by electrolysers, such as pressure and purity, are not going to meet some commercial requirements,” says Jang. “We need to attach specific components before the electrolyser, after the electrolyser. We sourced many vendors to make [these components].”
In fact, while Western and Chinese hydrogen proponents have been concentrating on building supply, Korean players have focused hard on the missing piece of the puzzle their competitors are now scrambling to find — demand.
“Maybe we may consider building a factory in Korea, or some other places in Asia, to provide the full electrolyser package in the future,” explains Jang. “But this is just an idea at this moment.”
Ultimately, SK Ecoplant will simply generate its own demand, says Jang — an unsurprising view given the Korean conglomerate’s history of providing every service imaginable.
“We need to develop projects,” he says. “If we develop projects,definitely we will provide [electrolysers]. But the ideal location for the factory will be next to the country where there is a lot of demand.”
South Korea currently meets a tiny amount (2%) of its total primary demand with renewables, according to the International Renewable Energy Agency (IRENA), with most of this due to the use of renewable biodiesel used in transport, although a sizeable portion is made up of generation from solar PV.
It has been widely assumed that Korea, with its relatively small land mass, high population density and restrictive permitting laws, will find it difficult to make significant progress on renewable energy.
The country has around 15GW of installed solar capacity, with a negligible amount of installed wind power.
But according to the Global Solar Atlas, Korea has good irradiation levels of 1,138 kWh per metre squared. With a government target to reach 30.8GW solar by 2030 (as part of plans for 20% of the power mix to be met by renewables by 2030 and30-35% by 2040), the sector is expected to grow by 5% every year.
Moreover, the peninsula, surrounded by three seas, may have the potential to capitalise on the huge strides made on offshore wind cost reduction in recent years, especially if floating turbine technology matures and can be made economically viable.
According to the Global Wind Energy Council (GWEC), the seas surrounding South Korea could accommodate 78GW of fixed offshore wind capacity — more than its current fossil fuel power station generating capacity — as well as an additional 546GW of floating.
And some believe that floating offshore wind success will be more likely in areas where governments also incentivise green hydrogen production, such as South Korea. GWEC said in 2022 that “a target dedicated to hydrogen may indicate a preference for relatively high load factor renewables like floating wind”.
