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Factsheet Series No. 1
EMBRACING H2 AS A WHOLE
Building up a hydrogen economy and society as a whole counts as one of South Korea’s most ambitious plans. Where are the opportunities in the South Korean hydrogen market? What do Swiss exporters need to know about it? This factsheet provides an overview on the hydrogen market, policy and business opportunities in the Korean hydrogen economy.
Key Points
• The government is supporting up- and downstream hydrogen industries through key projects, investment and deregulation • Industry strengths: Fuel cell electric vehicles, fuel cells, applications • Key opportunity areas: Production, storage, and distribution
MARKET OVERVIEW
In recent years, South Korea has emerged as a strong proponent of fuel cells and hydrogen energy. Based on supportive policy measures and innovation from local industry, the country is positioned to become a global leader in fuel cells which are used for powering vehicles or providing electricity. South Korea’s key industries such as the automotive, shipbuilding and petrochemicals are already equipped with world-class technology for hydrogen utilization, especially in mobility (vehicles, drones, etc.) and applications (fuel cells). In January 2019, South Korea legislated world's first hydrogen law ("Hydrogen Economy Promotion and Hydrogen Safety Management Act") to secure grounds for promoting the hydrogen economy & society in the long-term.
However, the country is lagging in upstream technologies such as production, storage, as well as distribution infrastructure/equipment. Thereof, the importance of acquiring upstream technologies is addressed in the country’s Hydrogen Economy Roadmap, which aims to foster new industries, to reduce greenhouse gases and fine dust, and to ensure energy security.
BACKGROUND
In January 2019, South Korea laid out the Hydrogen Economy Roadmap (hereinafter: the roadmap) to develop technology and infrastructure needed for a hydrogen economy. The roadmap focuses on hydrogen-powered vehicles, fuel cells for household and industrial use, hydrogen production/ storage/ distribution. Its implementation is mainly supported by H2KOREA, a public-private sector alliance formed to promote the shift to a hydrogen economy. Its key tasks involve aligning policies with valid business models, boosting R&D and commercialization of hydrogen technology, expanding hydrogen production and distribution infrastructure, and fostering global cooperation hydrogen network. South Korea targets to achieve an annual production of 5.26 million tons of hydrogen by 2040 (up from 130,000 tons in 2018); thereby, halving the average hydrogen cost to KRW 3,000 (USD 2.59) per kilogram.
It also aims to produce over six million hydrogen fuel cell vehicles. Commercial vehicles such as city buses and taxis considerably can run longer distances than general vehicles, which greatly contributes to better air quality. In Seoul, there are currently 10 hydrogen taxis operating and seven hydrogen city buses will be introduced within this year. Nationwide, there are currently 35 hydrogen-powered buses running, with the figure set to reach 2,000 units in 2022. By 2040, South Korea will operate 40,000 hydrogen-powered buses, 80,000 hydrogen taxis and 30,000 hydrogen trucks on its roads - all powered by 1,200 hydrogen refueling 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. In 20 years, South Korea aims to produce 15GW of fuel cells for its industries and export markets. The government expects that developing hydrogen economy by 2040 can create approximately 43 trillion KRW (36.7 billion CHF) in economic value as well as 420,000 jobs.
Goals of the Hydrogen Economy Roadmap Hydrogen Hydrogen Hydrogen Fueling Fuel cells for Year supply price vehicles stations industrial household (ton/ year) (USD/ kg) (Unit) (Unit) use (GW) use (MW) 2040F 5,260,000 2.59 6,200,000 1,200 15.0 2,100 2022F 470,000 5.17 81,000 310 1.5 50 2018 130,000 - 2,000 14 0.3 7
As a milestone to integrate hydrogen into the economy and society, South Korea initiated three test city projects to apply hydrogen technologies in residential and transportation industries: 1) Ansan focuses on green hydrogen production connected with tidal power generation. The city aims to create a hydrogen ecosystem which involves production, storage, transport, and utilization of hydrogen. A state-run apartment complex with more than 200 households as well as start-up incubators, logistic centers, and sewage treatment plants will use heating systems run by hydrogen; 2) South Korea’s industry powerhouse Ulsan develops a pipeline network using IoT technology to deliver by-product hydrogen from large-scale petrochemical plants to buildings and fuel stations. It also wants to demonstrate forklifts and ships run by hydrogen; 3) Hydrogen production facilities will be built in Wanju, supplying Jeonju with hydrogen. Wanju will serve as a hydrogen production base and supply 408 households with hydrogen. Jeonju, where Hyundai Motor’s hydrogen car NEXO is produced, will use hydrogen to operate 49 city and shuttle buses.
RECENT DEVELOPMENTS
Despite the corona virus outbreak and limited company activities around Daegu and Ulsan area, the government is ambitiously stepping up to implement its plans based on the roadmap. The Ministry of Industry, Trade and Energy (MOTIE) announced to invest more than 16 million USD in constructing hydrogen refueling stations exclusively for buses and boost development of local-made main parts. Korea Gas Technology Corporation is currently building 16 hydrogen refueling stations nationwide. Korea Midland Power Co. (KOMIPO), one of South Korea’s six regional power generation companies, has initiated a technology development project for producing hydrogen with organic waste.
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KEY AREAS
MOBILITY
Vehicles
With a global market share of 50%, South Korea is the first country that succeeded in mass producing hydrogen-powered cars: Hyundai Motors became the world’s first automaker to commercialize fuel-cell electric vehicles (FCEV) with the introduction of ix35 Fuel Cell - also known as Tucson Fuel Cell - in 2013. Hyundai’s second-generation FCEV, the NEXO, has a range of over 609 kilometers and emits clean water vapor and purifies the air while driving. Hyundai leads the global pack in FCEV, alongside Japan’s Toyota.
For the local market, Hyundai Motors plans to produce 500,000 hydrogen-powered vehicles and supply 200,000 fuel cell systems per year by 2030, investing a total of 7.6 trillion KRW (6.5 billion USD) along with its 124 partnering companies to expand related research and development efforts.
Opportunities
The main import items in the FCEV field are electrolyte membranes & gas diffusion layers applied in stacks, high-pressure vessels, carbon composites, bipolar plates used in stacks and vessels, and power devices necessary for power control units. Also, parts for power converters as well as high- pressure valves, regulators, safety devices used in storage devices are dependent on import.
Best Practice Examples
There are crucial joint projects ongoing between Hyundai Motors and several Swiss companies:
1) Hyundai Motors has established a Joint Venture with Swiss-based H2 Energy AG called Hyundai Hydrogen Mobility AG. From 2019 to 2025, Hyundai Motors will deliver 1,600 hydrogen-powered heavy-duty trucks; H2 Mobility Switzerland will then lease a large portion of these more energy-efficient trucks. 2) Hyundai Motors further will invest in the Swiss GRZ Technologies, an EPFL spinoff. Storage tanks from GRZ Technologies can store up to 10 times more hydrogen than other tanks, even at a lower pressure. This company also has technology that can reduce the cost of maintaining hydrogen fueling stations and reduce the time it takes for fueling vehicles. 3) Hydro Spider AG, which is the result of the collaboration between Alpiq, H2 Energy, and Linde, works closely with Hyundai Hydrogen Mobility.
Drones
Doosan Mobility Innovation (DMI) became the first company in the world to commercialize hydrogen- powered drones when it launched its DS30 drone system in October 2019. The drone is able to stay airborne for two hours and is aimed primarily at global infrastructure and logistics markets. For entering the US market, DMI has signed an agreement with Microsoft to develop solutions for its hydrogen fuel cell drones. They will develop drone software and monitoring solutions using Microsoft’s cloud platform, Auzure, and AI and IoT, and push for joint sales. DMI also partnered with two U.S. companies: ReadyH2 will supply with hydrogen to deliver it to DMI’s customers in the USA. Another agreement was signed with Skyfire Consulting, an US public safety drone operation service company, to implement a pipeline check project in the USA. Last year, it 3/8
successfully carried out a test with Skyfire to deliver medicine to its destination at 70 kilometers away from the starting point.
Meta Vista Inc. used a quadcopter drone powered by a 650 watt fuel cell module provided by Intelligent Energy. The UK-based firm developed an ultra-lightweight liquid hydrogen storage tank to work in conjunction with the fuel cell. MetaVista used 390 grams of liquid hydrogen on the test flight and the combined result of both companies’ technologies was a drone boasting an energy density of 1,865 watt- hours per kilogram. Both companies suggest fuel cells can result in significantly longer flight times than can be offered by traditional battery-powered units.
Hyundai Motors and Uber will collaborate on developing self-flying electric cars designed to carry up to four passengers with a pilot and fly on trips of up to 100 km. Hyundai will produce and deploy the vehicles while Uber will provide aerial ride-share services. These electric air taxis will most probably powered by hydrogen fuel cells.
Opportunities
Swiss Federal Institutes of Technology in Lausanne (EPFL) and Zurich (ETH) and the University of Zurich are at the forefront of flying robotics and unmanned systems. Switzerland is actively promoting start-ups related to this industry and its drone ecosystem. This leaves room for various R&D opportunities between Switzerland and South Korea.
FUEL CELLS FOR POWER GENERATION
As of the end of 2019, South Korea had 408MW of fuel cell power, accounting for 40% of global supply. For fuel cell generation, it has grown to be the largest in the world. Main players in this field are Doosan Fuel Cell, Korea Fuel Cell, a spin-off of POSCO Energy, and Bloom SK Fuel Cell.
Doosan Fuel Cell dominates the domestic market with 79% of market share. Doosan’s 50 MW power plant, world’s first large-scale hydrogen fuel cell power plant, will be completed in 2020. The project, which will be developed by the special purpose company Daesan Green Energy, will contribute 400,000 MWh of electricity each year, enough to power 160,000 homes. Doosan’s latest technology concerns SOFC (solid oxide fuel cell) which is the result of a joint development with British firm Ceres Power. Doosan’s PAFC (phosphoric acid fuel cell) is the first viable utility-scale fuel cell in the local market — albeit still supported by state subsidies. Doosan’s PAFC division’s sales topped 1 billion USD in 2018, mainly generated in the domestic market. It has modified its product so it is able to run directly on hydrogen. Also, it recently closed a contract for the largest such fuel cell installation in the world. Doosan also began producing electrodes for its fuel cells in-house and adopted an automated manufacturing system for its fuel cell stacks.
The fuel cell division of POSCO Energy occupies approximately 48% of all fuel cell facilities in South Korea. However, quality issues in fuel cell stacks were raised in 2014 and POSCO Energy has since then suffered from obtaining orders and the resulting sales deficit of 106.2 billion KRW in 2018. POSCO established a spin-off Korea Fuel Cell to speed up the joint venture process with the US firm FuelCell Energy (FCE) and to increase its competitiveness in the market. Korea Fuel Cells entered a legal dispute with FCE as they were not able to solve problems in a facility that stabilizes 300-kilowatt fuel- cell stacks. FCE is now attempting to enter the Korean market independently.
Bloom SK Fuel Cell was set up by SK E&C and Bloom Energy to supply SOFCs in Korea. The production facility will be set up in Gumi in southeast region. Bloom SK Fuel Cell will expand its production volume from the initial 50 MW a year to 400 MW later. 4/8
In addition, Bloom Energy will also power two projects for KT Corporation, South Korea’s largest telecommunications company. The two 900 kW projects will provide electricity directly to the national grid, and power more than 1,800 homes.
Opportunities
Main import items are electrode catalyst, fuel converting catalyst, valves, blowers, bipolar plates, heat exchangers, main materials for electrical power converters and fuel supply systems. The fuel cell market will grow extensively as it is backed up by environmental-friendly energy policies: A LNG billing system for fuel cells will be introduced soon, and weighted renewable supply certificates (RECs) for fuel cells will be maintained for a certain period. This system mandates large power producers with installed capacity over 500MW to produce power at least 10% with new and renewable energy sources. They need to extend this ratio to 28% by 2030. Furthermore, large power producers need to generate 668 MW on average per year by 2040.
FUEL CELLS FOR BUILDING HEAT AND POWER
The market leader of building fuel cells is S-FuelCell which is a spin-off of GS Caltex. Its sales portion consists of 87% for building fuel cells, 11% for power generation fuel cells, and 2% for after services and research. As for fuel cell for buildings, S-FuelCell possesses production equipment and related technologies. As for fuel cells for power generation, it distributes Fuji Electric products.
According to the roadmap, the government targets 50 MW by 2023 of accumulated installation with building fuel cells. In practice, it is assumed that 36 MW will be generated with subsidies of 25 billion KRW. Buildings with a total floor area of 1,000 ㎡ or more which are newly built, expanded, or renovated by public organizations and local governments are required to supply a certain percentage of the expected energy consumption by using new and renewable energy.
In addition, zero-energy construction, which reduces energy use and minimizes energy consumption through the production of new and renewable energy, is implemented in phases of 20 years. Buildings subject to this regulation must meet an energy self-sufficiency rate of 20% or more, and benefits are applied differently based on grades of each building. The government estimates that buildings subject to zero energy construction compared to all new buildings will be 5% in 20 years, 76% in 25 years, and 81% in 30 years. Buildings subject to mandatory application are public buildings with 1,000 ㎡ or more in 20 years, public buildings with 500 ㎡ or more and private buildings with 1,000 ㎡ or more in 25 years, and public/private buildings with 500 ㎡ in 30 years. In order to promote voluntary zero-energy construction, private buildings are benefitted with incentives such as easing construction standards in floor area ratio / altitude and 15% reduction in acquisition tax. Apartments with more than 30 households are subject to mandatory application from 2025.
Opportunities
Main import items are electrode catalyst, fuel converting catalyst, valves, blowers, bipolar plates, heat exchangers, main materials for electrical power converters and fuel supply systems. As more plants and buildings will be built within the next 20 years powered with hydrogen, the fuel cell sector will certainly be an interesting market for Swiss exporters in this sector.
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PRODUCTION
Large petrochemical complexes in Ulsan, Yeosu, and Daesan are already equipped with hydrogen pipelines and high purity production technology. They are producing, circulating, and utilizing around 1.64 million tons of byproduct hydrogen per year. Additional supply is feasible only if these complexes convert their processes accordingly.
Furthermore, South Korea lacks core technology in producing hydrogen of liquefied natural gas (LNG) reforming or through electrolysis and falls short in demonstrations for commercialization. Hydrogen from LNG reforming can be produced through the existing nationwide LNG supply network by converting them into hybrid filling stations. However, South Korea lacks expertise in extracting technology. While South Korea uses small-size extractors from the Japanese manufacturer Osaka Gas and large-size extractors from the German company Linde, the country wants to localize and secure relevant technologies in the future.
In the long run, South Korea considers to win hydrogen from a large-scale power to gas (P2G) system utilizing renewable energy. However, its technology competitiveness only reaches 60-70% of the level of pioneers such as the USA and Germany. Korea Midland Power Co., Ltd. in cooperation with H2Korea, and Hyundai Motors installed the very first P2G system on Jeju Island for producing green hydrogen. Korea Midland Power Co., Ltd. will invest additional 420 billion KRW (341 million USD) into expanding manufacturing facilities as well as developing green hydrogen fuel cells business.
STORAGE & DISTRIBUTION
South Korea has secured commercialization technology in storing and distributing hydrogen in high- pressure gas at 500 bar. For long-distance transportation of hydrogen, conventional pipelines in petrochemical complexes need to be adjusted to be capable of delivering high-pressure gas. Also, existing 500 tube trailers need to be constructed lighter in order to reduce transportation costs. South Korea further plans to build a main line network for hydrogen distribution.
However, South Korea is considering to introduce and commercialize liquefied hydrogen which is more economical and the safest way in terms of storage and transportation of hydrogen: liquefied hydrogen can be saved in air pressure/temperature and has less volume than hydrogen in gas form. However, Korea’s hydrogen liquefaction and storage technology for long-distance bulk transportation still remains in the development stage. Liquefaction technology is also necessary for import and foreign production of hydrogen with brown coal. However, only a few SMEs in South Korea are engaged in this field, while the USA, Europe, and Japan started commercializing liquefied hydrogen plants. The roadmap supports technology development and localization of liquefied hydrogen plants and the main parts such as tanks, pumps, and valves.
Opportunities
South Korea strongly pursues developing liquefaction technology due to safety and economic reasons. This market sector is particularly interesting for Swiss exporters who secured liquefaction technologies and main parts used for storing and transporting liquefied hydrogen.
INFRASTRUCTURE
Hydrogen refueling stations (HRS) in South Korea mostly have been built and operated by local governments. Private players are still hesitant to be involved in HRS construction or operation due to
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issues such as high costs and low profitability. In 2018, South Korea only had 14 HRS for 2,000 hydrogen vehicles on the roads. In 2019, the number of the hydrogen fueling stations reached 24. In order to accelerate building processes of refueling stations, the government established a special purpose corporation (SPC), the Hydrogen Energy Network (HyNet), to involve various stakeholders from the public and private sector to develop its hydrogen-fueling infrastructure with 1,200 stations across the country.
Under the framework HyNet, Korea Gas Corporation, Hyundai Motors, Air Liquide Korea, Woodside, EcoBio Holdings, Kolon Industries, Hyosung Heavy Industries, Nel Korea, Bumhan Industries, JNK Heaters, SPG Chemical, Deokyang and Valmax Technology Corporation consolidated to promote the establishment of private-led HRS construction and operation model, facilitate institutional reforms, and encourage more private entities to participate.
Authorities as well as Hynet are facing resistance of residents in expanding hydrogen infrastructure due to safety concerns. The government is preparing to enact eight safety regulations in regard to hydrogen and supports localization of main parts for the hydrogen infrastructure. Currently, main parts in hydrogen refueling stations are mostly imported and the ratio of local parts only accounts for 10%. Particularly, the most common valves used in HRS are all imported parts, mostly from the US firm Swagelok. Industry experts refer to the fact that local parts did not reach reliability and performance level to that of the imported parts yet.
Opportunities
Imported compressors, valves, and other main parts used in existing refueling stations are preferred by refueling station constructors due to their high performance and product reliability. Especially, those parts must endure at least 820 bar. The government has recently established technical standards for ten types of valves used in HRS, the KS B ISO 19880-3.
CALL FOR ACTION
While South Korea has strong capabilities in fuel cells and mobility, it lacks core technologies in upstream systems. As a result, Swiss firms with technology and know-how in production, compression, storage and distribution will find numerous business opportunities in South Korea.
Even local market leaders and challengers in the mobility and fuel cell sector always pursue ways to improve and optimize their offerings. They are continually searching for material and process improvement or introducing new fuel cell technologies to commercialize. Local firms always carefully observe global trends and are generally highly open to joint cooperation.
With the size and level of investment in the hydrogen business, South Korea will arguably play a leading role in shaping the global hydrogen economy. Thus, it is strongly recommended for Swiss companies specializing in hydrogen technology to draft a Korea strategy. It aims both to target the rapidly-growing local market and take a route to global opportunities. International gas and hydrogen companies are already looking to exploit the market and signing licensing or distribution agreements with well-placed Korean firms.
Switzerland Global Enterprise (S-GE) and the Swiss Business Hub Korea (SBHK) will help you decide on a suitable market entry strategy in South Korea. Whether market study, partner search, certification or organization of promotional events, we provide you an all-around support based on your specific requirements and priorities. Especially, we can arrange individual meetings at exhibitions and conferences and accompany you to these occasions. 7/8
For inquiries, please contact:
HEADQUARTER ZURICH OFFICE RENENS
Jacqueline Tschumi Alain Graf Consultant Japan + South Korea Senior Consultant Asia [email protected] [email protected] Direct +41 44 365 54 83 Direct +41 21 545 94 97
Switzerland Global Enterprise Switzerland Global Enterprise Stampfenbachstrasse 85 Ch. Du Closel 3 CH-8006 Zürich CH-1020 Renens
OFFICE LUGANO
Monica Zurfluh Head of S-GE Southern Switzerland [email protected] Direct +41 91 601 86 85
Switzerland Global Enterprise Corso Elvezia 16 6901 Lugano
USEFUL LINKS
Related Organizations Organization Website Phone H2Korea www.h2korea.or.kr +82 2 6258 7450 Korea Hydrogen Industry Association www.h2.or.kr +82 52 277 9812 Korea Association for Natural Gas & Fuel Cell eng.kangv.org +82 70 7729 3664 Electric Vehicles
Exhibitions and Conferences Name of Event Website Location International Conference on Hydrogen energy.mofa.go.kr Chosun Hotel, Seoul Korea Hydrogen Expo www.khexpo.co.kr DDP, Seoul H2World www.h2world.net CECO, Changwon Hydrogen Mobility + Energy Show www.h2mobility.kr KINTEX, Ilsan
This report was written in collaboration with H2Korea
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