3,000 GWh Clean Hydrogen Power Generation Bidding Market Opens
Reduced Burden for Operators and Enhanced Flexibility in Power Generation
The Ministry of Trade, Industry and Energy announced on May 9 that it will open the hydrogen bidding market for 2025. This year, the Clean Hydrogen Power Generation Bidding Market (CHPS) will feature the incorporation of exchange rate fluctuations into settlement calculations to mitigate risks, as well as the introduction of a quantity borrowing system to increase operational flexibility. The government has also reduced the burden on participants to encourage broader involvement, and attention is focused on whether this will be well received.
The Ministry of Trade, Industry and Energy disclosed these details at 5 p.m. on the Korea Power Exchange's hydrogen power generation bidding market website.
The hydrogen power generation bidding market is a system for purchasing and supplying electricity produced using hydrogen or hydrogen compounds (such as ammonia) as fuel. Depending on the fuel used, it is divided into clean hydrogen power generation and general hydrogen power generation.
Only power generation facilities that use fuel meeting the domestic clean hydrogen certification standard (greenhouse gas emissions of 4 kg CO2e or less per 1 kg of hydrogen) are eligible to participate in the clean hydrogen power generation bidding market. General hydrogen power generation bidding is open to facilities using reformed hydrogen and by-product hydrogen.
Hydrogen power generation facilities include fuel cells, hydrogen turbines, coal-ammonia co-firing, and hydrogen engines. The general hydrogen power generation market mainly features fuel cell technology, while the clean hydrogen power generation market includes LNG-hydrogen co-firing and coal-ammonia co-firing methods.
The clean hydrogen power generation market is being launched for the second time this year, following its debut last year. The volume for this year is set at 3,000 gigawatt-hours (GWh) annually, which is enough to supply electricity to 850,000 households. The contract period is 15 years. Actual power generation must commence by 2029, following a business preparation period (three years plus a one-year grace period).
The final bidders will be selected around November through a comprehensive evaluation of price indicators, clean hydrogen utilization grades, fuel supply stability, and industrial and economic contributions, among other non-price indicators.
This year’s clean hydrogen power generation bidding market introduces new features that the industry has consistently requested, such as an exchange rate-linked settlement system and a quantity borrowing system.
In the first clean hydrogen bidding held last year, only Korea Southern Power was selected as the final operator (750 GWh out of a total 6,500 GWh capacity), which was considered a lackluster result. At that time, the excessive burden placed on operators despite the high level of uncertainty, as well as insufficient government support for the hydrogen industry, were cited as problems.
Until now, the clean hydrogen power generation bidding market had a fixed settlement price in Korean won, meaning operators bore the risk of won-dollar exchange rate fluctuations. Starting this year, the power generation price linked to the exchange rate will be settled based on the exchange rate at the time of settlement.
In addition to the existing quantity carry-over system, a new quantity borrowing system has been introduced, allowing operators to advance the use of next year’s volume for power generation. This is intended to provide flexibility in cases where it is unavoidable to fall short of the contracted generation volume, such as during scheduled maintenance.
However, the guarantee of utilization rates, which operators have requested, was not included. Operators argue that without a guaranteed utilization rate, it is difficult to estimate hydrogen demand over the 15-year contract period, which puts them at a disadvantage when negotiating fuel supply prices.
In response, an official from the Ministry of Trade, Industry and Energy explained, "Even under the current system, hydrogen power generation can be dispatched with priority according to constrained generation, and the introduction of the quantity carry-over and borrowing systems helps supplement the business case."
According to the 11th Basic Plan for Electricity Supply and Demand, clean hydrogen-ammonia power generation capacity must reach 15.5 TWh by 2030 and 43.9 TWh by 2038. These figures represent 2.4% and 6.2% of total power generation capacity, respectively.
Meanwhile, the general hydrogen power generation bidding market aims to promote the installation of distributed power sources. This year, the bidding volume is set at 1,300 GWh annually, with a contract period of 20 years. Actual power generation must begin by 2027, following a two-year business preparation period.
The final bidders will be selected around August through a comprehensive evaluation of price indicators, the impact on the power grid, and industrial and economic contributions, among other non-price indicators.
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