THREATS FROM NORTH KOREA: Korea dangles ‘portfolio standard’ as incentive for hydrogen investments

 

The South Korean energy market is dangling ‘clean hydrogen portfolio standard’ or mandatory percentage of off-take (volume purchase) as an incentive for would-be developers or interested investors in its emerging hydrogen industry.

In a presentation at the ongoing 2nd Korea Offshore Wind and Hydrogen Summit here, Seong-hee Yang, senior manager for Global Legal, Finance and  Cooperation Department-International Cooperation Team of Korea Electric Power Corporation (KEPCO) noted that the performance standards for hydrogen has been intended “to promote the use of clean hydrogen, and it is separated from the existing RPS (renewable portfolio standard) system and provides a support system that meets the characteristics of hydrogen power generation.”

He emphasized that the mandated pie is 10-percent of the power generation mix and this is typically reckoned from the prior year’s actual record of electricity generation.

Yang said the price and award of hydrogen development contracts would be done through a competitive bidding system as underpinned by Korea’s Ministry of Trade, Industry and Energy (MOTIE), which is also its government agency laying down the policy framework for hydrogen investments in the country.

The KEPCO executive qualified that the initial bidding for hydrogen ventures in South Korea kicked off this year, and “electricity sales company and community energy suppliers were designated as mandatory purchasers of hydrogen power generation.”

He added “the amount of clean power KEPCO purchases and the cost of purchasing power are determined in the hydrogen market and passed on to consumers.”

Yang specified that “the hydrogen power generation volume is determined by the MOTIE’s announcement; while unit purchase price is determined in the hydrogen power generation bidding market.”

The KEPCO executive conveyed that the investment-offers for hydrogen developments in Korea have been set two-tiered – one is for the regular or gray hydrogen market that could be utilized in planned re-purposing or retrofit of its thermal plants; while the other is clean or green hydrogen that could be coupled with renewable energy, primarily for offshore wind installations.

For the gas plants, Yang stated that the preliminary target will be 20-percent blend and that will be ramped up eventually as technological innovation for hydrogen advances on commercial maturity, primarily on the facets of cost competitiveness and technology innovation.

And in the targeted co-firing of ammonia with coal plants, ammonia is essentially a derivative of hydrogen – or hydrogen serves as an important catalyst for the production of ammonia. In particular, ‘green ammonia’ would refer to ammonia produced using hydrogen that is generated through renewables or low-carbon sources.

He underscored that the Korean government is aggressively pursuing hydrogen investments as part of the country’s overall decarbonization aspiration and to achieve its mid-century net zero goals.

“The Korean government plans to power the country mainly with hydrogen, renewables and nuclear by 2050 and phaseout coal,” Yang stressed.

And since Korea has limited resources on the production of massive-scale green hydrogen that will satiate the needs of its own market, KEPCO indicated that it will be exploring opportunities for hydrogen production in offshore markets – including those in Australia, Middle East North Africa (MENA) and North America as these markets already show competitiveness on green hydrogen ventures.

The secondary international portfolio that the Korean firm has been setting its sights on would be South Africa and Latin America “where resources are abundant but infrastructure is lacking and political risk is relatively high.”

For green hydrogen, Yang highlighted that the development paradigm “involves integrating water electrolysis and ammonia production facilities with renewable energy infrastructure,” adding that “this approach is similar to the IPP (independent power producer) business model and KEPCO holds an advantage due to its stability to leverage its overseas business experience and core competencies.”

He further cited that “considering the trend of declining unit costs for mid- to long-term renewable energy and hydroelectric facilities and strengthening policy support in various countries, green hydrogen is expected to have medium- to long-term price competitive edge over blue hydrogen.”

As explained, gray hydrogen is produced from natural gas through a process called steam methane reforming (SMR) or a chemical process in which methane from natural gas reacts with steam to produce hydrogen and carbon dioxide; while blue hydrogen has the same derivation from natural gas, but the key difference in the development process is the integration of carbon capture and storage or CCS technology. 

Source: Manila Bulletin