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Business trends

South Korea targets hydrogen economy, from cars to cities

Seoul eyes infrastructure spending to help Hyundai expand fuel cell vehicles

Hyundai Motor developed the world's first fuel cell vehicle in 2013. It hopes to sell 10,000 units of Nexo, its second model, in 2020.   © Reuters

SEOUL -- South Korea has launched a drive aimed at realizing a "hydrogen-powered society" with a series of public-private partnerships.

The country will accelerate its efforts to produce hydrogen fuel cell vehicles, or FCVs, and establish the infrastructure to support them, such as hydrogen fueling stations. It will also use hydrogen as an energy source to complement oil and natural gas.

South Korean companies, led by Hyundai Motor, have also started moving toward achieving a society powered by hydrogen. The country aims to be the first to popularize the new energy source.

But the path to achieving this will be long and bumpy due to the many challenges involved, not least of which will be ensuring safety. The country's efforts are likely to serve as a litmus test for whether hydrogen-powered societies can be achieved elsewhere in the world.

President Moon Jae-in has declared South Korea's goal of becoming the world leader in terms of future car technology by 2030. He made the declaration on Oct. 15 during an event at Hyundai Motor's research center in Hwaseong, near Seoul.

The event was held by the South Korean government to unveil its development strategy for the future of the car industry.

The government is aiming to achieve a hydrogen-powered society in South Korea earlier than other countries, in accordance with its "hydrogen economy revitalization roadmap," which includes plans for the production of FCVs and other technologies.

The government has set a target of manufacturing a total of 6.2 million FCVs domestically by 2040. It will also introduce FCVs to the public transport system and provide subsidies for infrastructure development.

In September, Seoul also announced a "hydrogen model city" initiative, designed to produce, store and use hydrogen fuels to supply electricity to offices and households.

The government plans to launch demonstration models of how a city using only hydrogen as an energy source can function by 2020. These tests will be conducted on small plots of about 10 sq km at three locations across the country.

It also plans to shoulder 50% of the infrastructure development costs, while major property developers and others will take charge of construction.

Moon has expressed his willingness to proceed with the push toward a hydrogen economy, calling it a "revolutionary change" in the industrial structure as it can turn traditional energy sources such as coal and oil into hydrogen.

Moon's confidence stems in part from Hyundai Motor becoming the world's first company to mass-produce hydrogen FCVs back in 2013. He is backing the automaker as a world leader in related technology.

According to Hyundai Motor, cumulative sales of its first FCV model reached 1,000 in 2018. The company hopes to sell more than 10,000 units of its second FCV model, the Nexo, in 2020.

The South Korean government plans to boost the number of hydrogen fueling stations -- which are crucial for the proliferation of FCVs -- in the country to 1,200 by 2040, from the current 15.

Hyundai Motor has expanded its FCV lineup so that it can introduce fuel cell buses and taxis in partnership with local government. Hydrogen fuel applications have also spread beyond cars. Samsung Heavy Industries, for example, has developed oil tankers partially powered by fuel cells.

Hyundai Motor's FE Fuel Cell Concept car on display at the 2017 Seoul Motor Show in South Korea.   © Reuters

While the eco-friendly credentials of FCVs, which emit no carbon dioxide when operating, have drawn global attention, electric vehicles are becoming more popular as their charging facilities are easier to build and their batteries are widely being developed. While FCVs are more efficient than EVs, as they require shorter charging times and can drive longer distances, construction of hydrogen stations has fallen behind schedule.

Japanese research company Fuji Keizai predicts that the global fuel cell market will grow by a factor of 23 to about 5 trillion yen ($46.1 billion) by 2030 compared with fiscal 2018, with the cells set to be used for a variety of purposes beyond cars, including industrial machinery, buses and boats. Following growth trends of other markets in Asia, that for fuel cells is expected to grow rapidly in the region, notably in China and South Korea.

FCVs have been steadily drawing attention, as evidenced by the fact that Toyota Motor unveiled Mirai, the next-generation FCV model, at the Tokyo Motor Show, which kicked off Oct. 24.

The biggest barrier to a hydrogen society will be the construction of hydrogen stations and other infrastructure. Building a sufficient number of hydrogen stations to support the industry will not be easy, even with the will of the government in South Korea, where the total land area is about a quarter that of Japan.

Government initiatives to develop infrastructure are necessary while private companies remain loss-making, but support has been limited so far.

Simon Park, vice president of Hyundai Motor's fuel cell business group, described South Korea's fuel cell drive as being like "Death Valley," and that it was one step short of market penetration, adding that the company would need to overcome difficulties before fuel cells become widespread.

Government subsidies and other measures will be essential in order for a hydrogen society to be achieved, he said.

The plans to construct hydrogen stations faces headwinds, too. In May, a hydrogen tank explosion at a fuel cell plant killed two people and left six injured in the eastern city of Gangneung. The accident has left local residents worried about the safety of the plant and led to some hydrogen station construction plans being put on hold.

While FCVs are seen as being as eco-friendly as EVs, many challenges remain in terms of infrastructure, costs and safety. Japan, Europe and the U.S. will be closely watching South Korea's efforts to transform into a hydrogen-powered society.

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