"After Vowing to Become No. 1 Globally, Sudden Policy Brake Puts Companies’ Massive Investments at Risk"

Reduction in Fuel Cell Power Generation Bidding Expected by Ministry of Climate
Large-Scale Investments by Companies Following the Government's Hydrogen Economy Roadmap
Fuel Cells Gaining Attention Overseas as Power Source for AI Data Centers <

A view of SK Eteronics' SOFC fuel cell power plant 'Chungju Eco Park,' which has commenced commercial operation. SK Eteronics

Concerns are mounting among related companies as the government is reportedly planning to drastically reduce the scale of hydrogen fuel cell power generation bids this year. While fuel cells are drawing attention overseas as a power source for AI data centers, there are concerns that the domestic market could actually contract due to policy uncertainty in Korea.

According to the government and related industry sources on May 15, the Ministry of Climate, Energy and Environment plans to issue an administrative notice this month regarding the "Announcement on the Calculation of Annual Purchase Volumes for the Hydrogen Power Generation Bidding Market." Through this notice, the government will specify the scale of future hydrogen bidding markets to be opened, as well as the annual purchase volumes for buyers.

Previously, the Ministry of Trade, Industry and Energy opened the hydrogen power generation bidding market for the first time in 2023 and announced bidding volumes for the period from 2023 to 2025. According to the original plan, new bidding volumes should have been announced at the end of last year, but the notice was delayed due to a shift in energy policy direction under the new administration.

Hydrogen bidding is conducted separately for general hydrogen and clean hydrogen, with bidding volumes announced separately for each. Both inside and outside the government, it is expected that the focus of hydrogen policy under the new administration will shift towards green hydrogen, and as a result, bidding volumes will significantly decrease.

In particular, the government is reportedly planning to sharply reduce the general hydrogen bidding volume for fuel cells. General hydrogen bidding allows for the use of gray hydrogen extracted from natural gas as well as by-product hydrogen from petrochemical processes. Having raised the national greenhouse gas reduction target (NDC) for 2035 to 53-61%, the government maintains that it has no choice but to reduce fossil fuel-based general hydrogen bidding.

From 2023 to 2025, the government conducted general hydrogen bidding at an annual scale of 1,300 GWh, which corresponds to 200 MW per year in terms of facility capacity. The fuel cell industry is demanding that at least this level be maintained until 2030 for the sake of policy consistency and predictability.

The government classifies fuel cells as new energy under the "Hydrogen Economy Promotion and Hydrogen Safety Management Act." In January 2019, during the Moon Jae-in administration, the government announced the "Hydrogen Economy Revitalization Roadmap," setting the goal of achieving the world's number one market share in hydrogen vehicles and fuel cells. The plan also aimed to expand fuel cells for power generation to 15 GW (with 8 GW for the domestic market) by 2040.

In the "First Basic Plan for Hydrogen Economy Implementation," established in November 2021, the policy goal for fuel cells was stated as "creating stable hydrogen demand by 2030 to contribute to building an ecosystem for revitalizing the hydrogen economy and expanding private investment."

Until now, the government has expected fuel cells to play a priming role for the introduction of the clean hydrogen power generation system in the future. The government also anticipated that fuel cells would serve as distributed power sources in data centers, industrial complexes, large buildings, and new apartment complexes.

In line with this government policy, companies expecting the fuel cell market to expand have made large-scale facility investments over the past several years.

Doosan Fuel Cell has built and is operating a phosphoric acid fuel cell (PAFC) production plant in Iksan with an annual capacity of 275 MW. Last year, the company also completed a 50 MW solid oxide fuel cell (SOFC) plant in Gunsan. The company's cumulative investment so far is nearing 1 trillion won.

SK ecoplant invested 48.6 billion won to establish a joint venture plant (Bloom SK Fuel Cell) with Bloom Energy in the United States. This joint venture can produce 200 MW of SOFC annually.

Mico Power invested 120 billion won in research and development (R&D) and the construction of a 50 MW plant in Pyeongtaek. HD Hydrogen, a subsidiary of HD Hyundai Heavy Industries, is also building a production facility with a capacity of 100 MW in Pyeongtaek. It is reported that the company has invested about 360 billion won, including the acquisition of Finnish fuel cell company Convion for approximately 72 million euros.

The combined annual production capacity of Korea's major fuel cell companies is 675 MW. Even if the government continues bidding at the current annual scale of 200 MW, utilization rates would remain below 30%. Lower utilization rates inevitably lead to increased losses.

The pain experienced by more than 250 partner companies supplying parts to these firms is even more severe. Kim Dongyun, CEO of Enerplate, a hydrogen fuel cell supply chain partner, said at a press conference held at the National Assembly on the 14th, "If the market shrinks and policy risks increase, it could lead to halted investments and an outflow of talent," adding, "For companies that invested based on government policies, there is virtually no way to endure."

This press conference was jointly organized by Assembly members Kim Sohee and Kim Yongtae of the People Power Party, who are research directors for the National Assembly Hydrogen Economy Forum. Kim Sohee and Kim Yongtae stated, "With the advent of the AI data center era, Korea is fully capable of fostering competitive companies, just like Bloom Energy in the U.S., which has grown into a global enterprise," and emphasized, "We should not close the domestic market, only to end up nurturing overseas companies instead."

A Ministry of Climate official said, "The general hydrogen bidding volume has not been finalized yet," and added, "We have continued to support fuel cells for over 20 years."

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