Seoul — South Korea, which relies on imports to meet all of its oil and gas needs, is making a push towards renewable and clean energy sources including hydrogen, but hurdles such as high costs and political uncertainty could slow progress.
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President Moon Jae-in's "Green New Deal" unveiled in July calls for the spending of Won 73.4 trillion ($62 billion) over the next five years as part of efforts to achieve a "carbon-neutral economy" by 2050. The plan is part of a broader Won 160 trillion "New Deal" program to brace for the post-coronavirus era aimed mainly at creating 1.9 million jobs.
The ambitious plan calls for expanding the country's power generation capacity of solar panels and wind turbines to 26.3 GW in 2020 and 42.7 GW in 2025, up from 12.7 GW last year, which would reduce South Korea's heavy reliance on coal in electricity production.
But the plan is not without hurdles, high cost being one of them.
South Korea's low electricity rates make it difficult for renewables and hydrogen to make meaningful inroads into the country's power market, analysts said.
"South Korea's electricity rates based on nuclear and coal are at the lowest-level among OECD members and therefore power production by renewable sources and hydrogen are less economically viable and competitive," said Lee Seong-ho, a senior research at the Korea Institute of Energy Technology Evaluation and Planning.
Coal and nuclear have served as the "baseload" generators under the country's electricity production based on a "cost-based pool."
The cost-based pool means electricity made by cheaper fuels such as coal and nuclear are traded first, and only when power demand gets stronger do natural gas- and oil-fired power plants increase operation.
So, unless the price of renewables and hydrogen becomes low enough, their share of power production is not expected to increase, Lee and other analysts said.
LACK OF CLARITY AROUND HYDROGEN
The Green New Deal is in line with President Moon's much-touted "hydrogen society" initiative unveiled last year with an aim to use hydrogen as a major energy source for transportation and power generation in the country.
To facilitate sales of hydrogen-powered vehicles, the Green New Deal calls for increasing the number of hydrogen charging stations to 450 by 2025 from the current 37 across the country. The government will also ease regulations on hydrogen fuel stations, while providing more hydrogen fuel cell buses and taxis and LNG-fueled trucks.
But the government has provided no clear picture on how it plans to secure hydrogen supply under the deal and how it expects to achieve lower prices.
The government has said it would pave the way for the country to increase hydrogen supply to 470,000 mt/year in 2022, 1.94 million mt/year in 2030 and 5.26 million mt/year in 2040, from 130,000 mt/year currently.
"With the supply plans, the domestic price of hydrogen would be lowered to Won 6,000 ($5.1)/kg in 2022, to Won 4,000/kg in 2030 and to Won 3,000/kg in 2040, from Won 8,000/kg currently," said a senior official at the Ministry of Trade, Industry and Energy.
However, Park Jin-nam, a hydrogen specialist in Kyungil University, said the supply plan looks unrealistic even if the country uses all production means, including steam reforming of LNG and production of "green hydrogen" through electrolysis using renewable electricity.
EV SALES COULD FACE SUBSIDY HURDLE
The green plan also aims to increase the number of electric vehicles to 1.33 million units by 2025 - 1.13 million battery-based and 200,000 hydrogen-powered ones - from 91,000 units and 5,000 units in 2019, respectively, which would cut the country's demand for auto fuels.
Under the green initiative, the country will push for the early scrapping of some 1.2 million aging diesel-powered vehicles blamed for worsening air pollution by providing subsidies for those changing to LPG-powered cars or EVs.
Government subsidies and tax benefits have been a major contributor to the popularity of eco-friendly cars, but these are expected to dwindle.
The government has promised to keep providing subsidies to EVs until up to 2025 under the Green New Deal, but funds available for the program are expected to drop with a rise in sales given the fixed subsidy budget.
Tesla vehicles took up 43% of the total subsidies doled out by the government in the first half this year due to their higher prices compared with local brands, according to the Korea Automobile Manufacturers Association.
In addition, local EV drivers are increasingly discontented about rising charging costs with the increase in electricity tariffs.
Since taking office in May 2017, President Moon has pushed to reduce the country's heavy reliance on coal and nuclear in power production by boosting renewable sources.
But it is uncertain that the New Deal plan will be upheld by Moon's successors when his single five-year term ends in May 2022.
With the popularity of Moon's ruling party on a decline, the main conservative opposition party has vowed to scrap Moon's anti-nuclear and green policy for the sake of a manufacturing-driven economic recovery if it comes to power.