South Korea recently announced its hydrogen economy roadmap. It underlines a great determination to shift large swathes of its economy to hydrogen energy by 2040 — from power and heat generation to passenger and freight transport.
The roadmap doesn’t lack ambition – and certainly isn’t merely a demand-creation programme for Hyundai’s fuel cell vehicles. The country aims fundamentally to reorder its economy and, if it’s successful, will be at the forefront of a greener global economy.
This, in turn, is bringing huge opportunities for western firms, particularly in the upstream hydrogen technologies Korean companies need to complement their strength in fuel cells.
Korea hopes that, by becoming a leader in hydrogen energy, it can improve its terrible air quality, meet its bold emission reduction targets, strengthen its energy security and create the jobs and export industries of the future.
There’s now ferocious opposition to coal in Korea due to its effect on air quality, and to nuclear power on account of safety concerns. While more solar and wind power is coming online here, few believe these will ever be adequate, reliable energy sources for the country’s dense population centres or its energy-intensive manufacturing base.
At the same time, Korea is now able to import large quantities of cheap natural gas from the US. As most of the hydrogen used in energy production is reformed from natural gas, a hydrogen economy potentially allows the country to reduce its dependence on oil from the Middle East and geopolitical chokepoints such as the Straits of Hormuz and Straits of Malacca.
So, if the country is able to roll out a safe infrastructure and drive the necessary technologies down the cost curve, hydrogen fuel cells hold the promise of reliable, large-scale distributed power on a small footprint. And, if Korea can crack that nut, the global export potential for its fuel cells could be huge.
What’s the current situation?
South Korea already has strong incentives that encourage the uptake of fuel cells, such as the Renewable Portfolio Standard, mandatory renewable energy in public buildings and subsidies for fuel cell vehicles. The new hydrogen roadmap builds on these measures.
In terms of the primary players, Doosan dominates the stationary fuel cell market here with three technologies. The latest of these — an SOFC (solid oxide fuel cell) product — is the result of a joint development agreement with our client, British firm Ceres Power, which we helped conclude this summer.
Doosan’s PAFC (phosphoric acid fuel cell) product is the first viable utility-scale fuel cell in the Korean market — albeit still supported by state subsidies. Sales at Doosan’s PAFC division topped USD $1 billion in 2018, with most coming from the domestic market. The company has now modified its product so it’s able to run directly on hydrogen (rather than natural gas) and recently won a contract for the largest such fuel cell installation in the world.
Doosan also became the first company in the world to commercialise hydrogen-powered drones when it launched its DS30 drone system this month. The drone is able to stay airborne for two hours and is aimed primarily at global infrastructure and logistics markets.
What about fuel cell cars?
Korea’s Hyundai, meanwhile, leads the global pack in fuel cell cars, alongside Japan’s Toyota.
See this striking video ad Hyundai has just run in Spain to advertise its Nexo hydrogen car:
Hyundai wants to drive the uptake of fuel cells on a worldwide scale and recently announced it will sell its PEM (proton-exchange membrane) fuel cell drive system to other OEMs. This month, the company also signed an MOU with American engine manufacturer Cummins, aiming to replace diesel trucks with fuel cell trucks in the US commercial vehicle market.
So, Doosan and Hyundai dominate in Korea, but there are plenty of other strong local players here, too.
International entrants are also looking to exploit the market and signing licensing or distribution agreements with well-placed Korean firms. US firm Bloom Energy, for example, signed a distribution agreement with SK D&D this year and, just this month, announced a collaboration with Samsung Heavy Industries to develop fuel cell-powered cargo ships.
What are the roadmap’s goals?
The goal of Korea’s hydrogen roadmap is essentially to make the country the world’s largest producer of fuel cells globally by 2030.
By 2040, Korea aims to be producing over six million hydrogen fuel cell vehicles. And it wants 40,000 hydrogen-powered buses, 80,000 hydrogen taxis and 30,000 hydrogen trucks on its roads — all powered by 1,200 hydrogen refuelling stations.
On the stationary power side, the country wants to build on its lead in fuel cells for utility power generation, while also placing increased focus on fuel cells for residential and commercial use here.
By 20 years’ time, South Korea wants to be producing 15GW of fuel cells for its domestic and export markets.
And this does not just look like wishful thinking, as it’s being backed by some serious investment. Next year alone, the Korean government will invest almost half a billion dollars in the hydrogen economy, USD $330 million of which will be spent on fuel cell vehicles and refuelling stations.
That’s a ten-fold increase on its 2018 spending and represents only the public sector side. Hyundai and its suppliers alone plan to invest an additional USD $6.5 billion by 2030.
So where are the opportunities?
While South Korea has strong capabilities in fuel cells across multiple application areas, it trails in upstream systems. As a result, western firms with technologies in the production, compression, distribution, storage and delivery of hydrogen should find plenty of opportunities here in Korea.
Also, despite Korea’s impressive fuel cell industry, the country’s market leaders and challengers are always looking for ways to improve their offerings. They’re continually searching for material and process improvement technologies, or to bring new fuel cell technologies to market – SOFC being a great case in point. Korean corporations always have one eye abroad and are generally highly open to international co-operation
So, it’s imperative that international firms specialising in the hydrogen economy or fuel cells should have a Korea strategy — both to target its rapidly-growing domestic market and as a route to global opportunities.
With the level of investment being pumped in, South Korea looks set to play a commanding role in shaping the global hydrogen economy – a role in which ambitious western firms should seek to play a part.
To discuss opportunities for your business in South Korea, you can contact Jonathan Cleave at firstname.lastname@example.org