According to a report by German investment bank Deutsche Bank, South Korea’s focus on forging a complete hydrogen energy ecosystem in line with its climate pledge is presenting new investment opportunities, as the country is in desperate need of a technological breakthrough to reduce the cost of green transition.
Korea’s ambition to increase fiscal spending to foster hydrogen-related research and development, combined with the legal and institutional framework in the works, will play a critical role in accelerating the country’s push to cut carbon emissions by 40% by 2030, according to a blueprint unveiled earlier this month at the United Nations Climate Change Conference in Glasgow, Scotland.
“Despite possible costs and mounting external obstacles, Korea has expedited its race to net zero, with its concentration on hydrogen giving a huge investment opportunity,” said Juliana Lee, chief economist at Deutsche Bank Research.
This comes despite a Bank of Korea projection that the cost of Korea’s green transformation might be as high as 0.25 percent to 0.32 percent of its GDP every year until 2050.
However, the expense of a green transition looks to be unavoidable, given that the cost of doing nothing may be as high as 1.13 percent of Korea’s GDP by 2050 and 4.25 percent by 2100, according to Lee, who cited research from the Korea Environment Institute.
In this context, the question of how to reduce the cost of the green transition arises, necessitating the development and commercialization of hydrogen technology.
“In the case of a technology breakthrough in either carbon capture or ‘new’ energy, the cost of green transition may be decreased,” Lee said. “In South Korea, there is a special emphasis in building a whole hydrogen energy environment.”
To achieve a full-fledged hydrogen ecosystem by 2040, it is important to close the hydrogen technological gaps between Korea and its international competitors through R&D expenditures. The US and Europe, according to Lee, are ahead of Korea in terms of storage, environmentally friendly water electrolysis power generation, and hydro-powered ships, trains, and drones.
Soon after the Hydrogen Economy Law took effect in February, the Korean government vowed in March to assist Korean enterprises’ investment of a total of 43 trillion won ($36 billion) through 2030. According to Deutsche Bank, this spending is comparable to France, Germany, Italy, Spain, and Portugal’s total spending of $44 billion.
Furthermore, revisions to Korea’s parliament are needed to develop institutional frameworks such as Clean Hydrogen Energy Portfolio Standards and a national clean hydrogen certification system, as well as a hydrogen price reporting system and the designation of hydrogen-specialized industrial complexes. It’s also establishing a Hydrogen Industry Life-cycle Safety Support Center, which should be operational by December.