Korea seeks new growth engine in hydrogen economy

Hydrogen to bring changes to global energy hegemony

By Nam Hyun-woo

The successful Nasdaq debut of hydrogen fuel-cell truck maker Nikola has shown the world that the "hydrogen economy" is now a matter of global interest, not just a regional promotion by Korea and Japan.

This comes at an opportune moment for Korean companies that have been preparing their portfolios for the day when hydrogen would begin to play a significant role in energy supplies, as well as providing the country with an opportunity to have a greater influence on the global energy trading structure.

On June 9, Nikola's market capitalization surpassed $30 billion during the day's trading, moving past that of Ford at $28.8 billion and Fiat Chrysler Automobiles' $20.5 billion. This came five days after the hydrogen truck startup's value skyrocketed to $26 billion on its first day of trading on the Nasdaq.

Though the hydrogen truck startup's value is now hovering slightly over $20 billion, analysts said the successful debut and the following rally of hydrogen stocks worldwide show that the concept of a hydrogen-powered economy is now endorsed by global investors.

"The industrial initiative for the hydrogen economy used to be confined to Korea and Japan, but is now expanding to the U.S., Europe and China," Eugene Investment & Securities analyst Han Byung-hwa said. "This is because most countries now seek to blend in renewable sources in their mid- and long-term energy plans, and this requires hydrogen for the purpose of storing those energies."

Energy carrier

Though hydrogen fuel-cell electric vehicles (FCEVs) are the best-known use of the element, analysts said the recent rally of hydrogen stocks is attributable not only to high hopes for FCEVs and other eco-friendly cars. Rather, they said the strengthening of global environmental regulations on carbon emissions from thermal power plants is driving this trend.

Hydrogen is the most abundant element in the universe, but it mostly exists as compounds such as water. Due to this, a reforming process is required to use hydrogen for generating electricity, and this also requires electricity. For example, experts say the ultimate form of producing "green hydrogen" is electrolysis, which uses electricity to decompose water into oxygen and hydrogen.

Due to this nature, hydrogen is widely accepted as an "energy carrier" or "natural battery" storing electricity generated from renewable sources for later use. Since solar and wind power produce variable output depending on environmental conditions, power generation from renewable energy sources needs to be coupled with an electricity storage system (ESS) for stability, and hydrogen can play such a role.

For example, E.ON of Germany is running a 2-megawatt power-to-gas plant, making hydrogen from wind power. Australia is describing its hydrogen exporting plan as a "sunshine export," because the country converts hydrogen using solar power.

"While batteries are bound to discharge by themselves, hydrogen stored in a high-pressure tank does not leak," Hyundai Mobis Vice President Ahn Byung-ki said in an interview with The Korea Times. "This increases the attractiveness of hydrogen as an energy carrier."

Due to this potential, many advanced countries and global corporations are paying greater attention to the hydrogen economy.

The European Union recently announced a hydrogen strategy, in which the economic bloc plans to nurture the market through spending 140 billion euros by 2030, creating 140,000 jobs, and significantly cutting the cost of generating "green" hydrogen.

This followed Germany's plan to invest about 90 billion euros by 2030 in building a hydrogen infrastructure.

Ten Hyundai Motor hydrogen electric trailer trucks, being exported to Switzerland, wait to be loaded on to a ship at Gwangyang Port in South Jeolla Province, Monday. Courtesy of Hyundai Motor

The government here has set up a hydrogen economy roadmap, in which the country will produce 6.2 million hydrogen vehicles and build 1,200 hydrogen filling stations across the country by 2040.

It government also seeks to secure stationary fuel cells for capable of producing 15 gigawatts of power by then, meaning the country will be one of the largest fuel cell markets in the world. At the end of 2018, the total output of stationary fuel cells in Korea was 97 megawatts, which accounts for more than 40 percent of the estimated 240 megawatts in the global market that year.

In line with the roadmap, Hyundai Motor Group is taking the initiative with the government providing relevant support.

On Monday, Hyundai Motor exported 10 XCIENT Fuel Cell trailer trucks to Switzerland, which the carmaker claimed was the first mass-production of commercial hydrogen trucks. The company is scheduled to export an additional 40 trucks by the end of the year and a total of 1,600 by 2025.

Its auto parts affiliate, Hyundai Mobis, is working on the scalability of hydrogen fuel cells, using those supplied for the Hyundai Nexo vehicle to power its plants. It is also planning a pilot project of powering an apartment complex with the vehicle fuel cells.

Along with the Hyundai Motor Group companies, Doosan Fuel Cell is garnering investors' attention with its market dominance in the stationary fuel cell market. Though the company logged a humble 20.1 billion won ($16.83 million) in sales and a 4.6 billion won operating loss in the first quarter of this year, its share price of 30,450 won, Monday, has increased by 6.3-fold since it hit a low of 4,180 won, March 19.

Along with another fuel cell maker S-Fuelcell, Korea's only fuel cell tank maker Iljin Diamond and materials maker Sang-A Frontec also enjoyed a handsome rally during the period.

Analysts said countries are enhancing their efforts toward hydrogen economies because it can not only be a new industrial growth driver but also a turning point in the hegemony of oil.

"When the hydrogen economy is fully implemented, the global energy hegemony will transfer from countries producing oil or gas to those with high potentials in renewable energy," Hyundai Motor Securities analyst Kang Dong-jin said.

"Depending on the situation, those with poor resources can become nations exporting energy, and Korea can be one of them. And these changes in the global energy trading structure will inevitably affect international relations and each country's national security."