[The Lagging Hydrogen Economy] The US Invests '12 Trillion+a' in Hydrogen... Should Korea Only Focus on Hydrogen Power Generation?

New Government Declares Itself a Hydrogen Importer in the Hydrogen Economy Era
Urgent Support Needed for Companies Planning 50 Trillion Won Investment
US and EU Launch Trillion-Won Investments Across Hydrogen Value Chain

Editor's NoteHydrogen, the most abundant element on Earth, emits water when burned. With no greenhouse gas emissions, it is gaining attention as a new energy source in the carbon-neutral era. Countries around the world are making efforts to foster a hydrogen economy. South Korea was the first in the world to develop hydrogen vehicles and holds the highest adoption rate, but there is still a long way to go. Especially since the new government took office, concerns have been growing that hydrogen policies might be regressing. This article examines the role of hydrogen as a future energy source and the importance of policy support.

Hydrogen is emerging as a future eco-friendly energy source. It is the most abundant element on Earth and produces no carbon dioxide emissions when combusted. It can be obtained not only from oil or natural gas but also from water, with no risk of depletion. In short, it is the dream fuel that can change the future.

However, South Korea is forced to rely mostly on overseas sources for hydrogen. At this rate, the country cannot escape the energy-importing trap, where the economy falters every time international oil prices rise, despite having no domestic oil production. [Related Article] 'Lagging Hydrogen Economy'

The government has already declared itself a 'hydrogen importing country,' stating that by 2050, it will import 22.9 million tons, or 82%, of the 27.9 million tons of hydrogen consumption. In contrast, the United States and Europe (EU) are investing tens of trillions of won in funding companies entering the hydrogen industry, putting all their efforts into fostering the hydrogen economy. It is ironic that South Korea, once called the 'hydrogen industry pioneer,' is now in such a state.

Last year, through the 5th Hydrogen Economy Committee, the government announced the 'New Government Hydrogen Economy Policy,' pledging to nurture the 'world's number one hydrogen industry.' The plan targets seven strategic areas: water electrolysis, liquefied hydrogen transport ships, trailers, charging stations, fuel cells (mobility/power generation), and hydrogen turbines, aiming to discover and support technologically capable companies.

However, government support related to the entire hydrogen lifecycle, including clean hydrogen, remains grossly insufficient. This year's government budget for the core renewable energy technology development project is only 119.6 billion won. The support budget for fostering hydrogen-specialized companies is a mere 2.3 billion won, a slight increase from 1.9 billion won last year.

The U.S. government has announced massive support measures from clean hydrogen production to utilization. In June 2021, the U.S. Department of Energy launched the 'Hydrogen Shot' plan, aiming to reduce the cost of clean hydrogen production to $1 per kilogram within the next 10 years. Since then, it has expanded research and development funding related to clean hydrogen production and is promoting demonstration projects.

Additionally, through the Inflation Reduction Act (IRA) and the Bipartisan Infrastructure Law (BIL), various incentives have been provided across the hydrogen industry, including hydrogen infrastructure, production, and hydrogen vehicles, with new tax credits.

The IRA offers up to $3 per kilogram tax credit for clean hydrogen production and applies tax credits to hydrogen vehicles and fuel cells for power generation. The BIL allocates $8 billion for building clean hydrogen hubs and $1 billion for water electrolysis technology development, totaling $9 billion, equivalent to about 12 trillion won.

The EU plans to invest approximately 42 billion euros (about 59 trillion won) by 2030 in developing and expanding water electrolysis facilities for hydrogen production. Additionally, it will invest 65 billion euros in mid-to-long-term hydrogen infrastructure such as transportation, charging, and storage, and 220 to 340 billion euros in wind and solar complexes for green hydrogen production.

Even the Australian government announced a strategy in 2021 to expand initial production scale by applying carbon capture and storage (CCS) technology as one of the clean hydrogen production methods, deciding to invest 217 million dollars (about 350 billion won) to establish low-carbon hydrogen production hubs including CCS. Japan also increased its hydrogen-related budget by 11% to 7.586 billion dollars (about 10 trillion won) last year and allocated 652 million dollars for hydrogen use, storage, and recycling projects including CCS.

Institutional support is also failing to keep pace with corporate investment speed. The government plans to open a hydrogen power generation bidding market in the first half of the year to create a hydrogen ecosystem. However, the market's purpose is focused on 'expanding distributed power sources' by supplying power to multiple locations, and it has been criticized for being designed passively to blend hydrogen with existing coal power generation. Critics argue that hydrogen is being used not as a new energy source but as a supplementary role supporting existing power generation.

The 10th Basic Plan for Electricity Supply and Demand, released last month, included only coal-ammonia and LNG-hydrogen co-firing power generation, omitting green hydrogen and water electrolysis.

This is causing companies planning to enter the hydrogen business to hesitate in investing. An energy industry official said, "When producing electricity using hydrogen in the power generation sector, subsidies like CHPS should be considered for the industrial sector as well, providing subsidies when clean hydrogen is used to reduce greenhouse gases," adding, "Government support is necessary to secure economic feasibility when matching import volume and price during overseas procurement."

According to government plans, South Korea will continue to rely on hydrogen imports in the future. The Hydrogen Economy Implementation Basic Plan sets the clean hydrogen self-sufficiency rate at 34% by 2030, meaning more than 60% of the clean hydrogen needed domestically will be imported from overseas.