[South Korea-China-Japan Hydrogen Race for Supremacy]③ "From Hydrogen Mobility to a Hydrogen Ecosystem"... The Need to Complete the Production and Supply Value Chain

Korea's technological edge in hydrogen mobility
Decarbonization opportunities for emissions-intensive industries
Fuel cell adoption rises as electricity demand grows

Editor's NoteHydrogen is beginning to move beyond its role as a future energy source and be used as fuel to power factories, ships and cars. China and Japan are joining forces with businesses to gain an early lead in the market for producing, transporting and consuming hydrogen. China is building large-scale green hydrogen production facilities and industrial complexes, while Japan is supporting businesses in bringing hydrogen projects to market by offsetting the price gap with conventional fuels over the long term. Competition is now intensifying, moving beyond technology development to lowering costs and securing users. South Korea, which has strengths in hydrogen vehicles and fuel cells, must also act urgently to gain an early lead in the market. The Asia Business Daily examines the hydrogen industry strategies of China, South Korea and Japan and explores the roles of governments and businesses in turning technology into market competitiveness.

South Korea, the first country in the world to establish a policy framework for the commercialization of hydrogen, still faces the challenges of making hydrogen economically viable and expanding infrastructure. Although it has developed the world's best-selling hydrogen fuel cell vehicle, producing and supplying hydrogen economically to power those vehicles remains a challenge. The country has reached a stage where it must build on the technological expertise it has developed in hydrogen vehicles and fuel cells to strengthen competitiveness across the broader industry.

China is accelerating hydrogen commercialization through large-scale production and the development of industrial clusters, while Japan is doing so through long-term subsidies and supply chain development. South Korea, too, must swiftly expand its hydrogen ecosystem from production through storage and transportation to gain an early lead in the market. However, even the budget for supporting its strong mobility sector is being reduced.

According to the Ministry of Climate, Energy and Environment's 2027 budget proposal, next year's budget for the hydrogen vehicle deployment program is KRW 445.7 billion, down KRW 130.5 billion (22.6%) from this year's revised allocation of KRW 576.2 billion. The budget for hydrogen refueling station installation will also fall 36.9%, from KRW 189.7 billion this year to KRW 119.7 billion.

Despite efforts that began with the establishment of the Hydrogen Economy Roadmap in 2019 and continued with the enactment of the Hydrogen Act in 2021, the scale of key support programs is being reduced or the programs are being suspended. This has raised questions about whether long-term targets can be achieved.

Support is being reduced in mobility, considered the area where South Korea's hydrogen industry is most advanced. With a hydrogen fuel cell vehicle ecosystem centered on Hyundai Motor Group, South Korea has built a competitive position in vehicle deployment and refueling infrastructure. Hyundai Motor's Nexo is the world's best-selling fuel cell vehicle, with 46,585 units sold in South Korea over the past 10 years. As of August, the country had 309 hydrogen refueling stations and 493 dispensers nationwide, more than Japan's 161 stations and Germany's 113.

However, unlike its achievements in hydrogen applications, South Korea is still considered a latecomer in producing clean hydrogen. Its small land area and mountainous terrain make it difficult to expand renewable energy generation, which also stands in the way of producing green hydrogen using renewable electricity.

Following the establishment of the Hydrogen Economy Roadmap in 2019, the country also laid the groundwork for industrial development and safety management by introducing the Hydrogen Act. However, making hydrogen economically viable and expanding infrastructure remain challenges. As key support programs are also being scaled back or suspended, concerns are growing about whether long-term targets can be achieved.

Experts advise South Korea to build on its strengths in hydrogen applications and expand its hydrogen value chain from production through storage and transportation. Since commercialization requires close coordination across each stage, they say the country must first specify where and how much hydrogen will be used, while developing the supply infrastructure in tandem.

Other countries have praised South Korea's hydrogen application technologies and proposed cooperation. "I think South Korea has made good preparations in hydrogen fuel cells and mobility," said Zhang Chen, secretary general of the China Energy Research Society. "However, South Korea relies heavily on overseas sources for hydrogen production, so there is considerable scope for mutual cooperation in China's advanced electrolyzer technology, which produces hydrogen by splitting water through electrolysis."

The International Energy Agency (IEA) also noted in a recent report: "Although South Korea has expanded renewable energy generation over the past decade, renewables account for the smallest share of total electricity supply among IEA member countries." It added that South Korea "needs to clarify the policy tools required to expand hydrogen demand in sectors where emissions can be reduced, such as heavy freight transport."

Opportunities to expand hydrogen demand are also emerging beyond cars. Two prominent examples are the transition to low-carbon operations in emissions-intensive industries such as steel and chemicals, and securing electricity for artificial intelligence (AI) data centers.

Carbon reduction has become a matter of corporate survival due to measures such as the European Union's (EU) carbon border tax, the requirement to use sustainable aviation fuel (SAF), and the International Maritime Organization's (IMO) low-carbon regulations for maritime transport. Hydrogen use is expected to expand not only in steel and chemicals, but also in shipping and aviation.

The EU has mandated that SAF account for 6% of aviation fuel by 2030 and that synthetic fuel make up 1.2% of all aviation fuel. In addition to SAF made from biological feedstocks, synthetic fuel produced by combining captured carbon dioxide with green hydrogen will be needed. This creates a potential link between carbon reduction in the aviation industry and increased hydrogen demand.

The rapidly growing electricity demand from data centers amid the spread of AI is also considered a new market. Data centers need a continuous supply of large amounts of electricity, but it is becoming increasingly difficult to meet this demand using existing power grids alone. As a result, global companies such as Oracle and Intel are increasingly adopting on-site fuel cells that generate electricity directly at their facilities.

In South Korea, experts say the application pathway should take into account the high price of hydrogen. In its report, "Six Years of the Roadmap to Revitalize the Hydrogen Economy: Progress and Outlook," the Korea Institute of Science and Technology Evaluation and Planning noted: "Given the high cost of hydrogen in South Korea, it is necessary to consider practical application pathways, such as prioritizing LNG-reformed fuel cells or building infrastructure that links hydrogen hubs with data centers."

Hydrogen is also expected to help balance renewable energy generation, which varies with weather and seasons. The idea is to use surplus electricity to split water and store the resulting hydrogen, then use it when needed. This approach would use hydrogen for long-duration energy storage that batteries may struggle to provide.

"Energy generated from renewable sources can be stored in batteries if it is to be used over 10 to 20 hours, but the economics deteriorate sharply when storage is needed for a week or longer," said Kim Changhee, a professor at the Korea Advanced Institute of Science and Technology. "Connecting water electrolysis technology, which produces hydrogen by splitting water, with renewable energy can help solve this problem."

This content was produced with the assistance of AI translation services.