Green hydrogen subsidy system boosts production

The Ministry of Trade, Industry, and Energy has given producers or importers of green hydrogen a legal foundation for subsidizing the difference between the production costs of green hydrogen and gray hydrogen in order to ensure the competitiveness of green hydrogen.

A representative proposal to “Partially Amend the Act on Promoting the Hydrogen Economy and Hydrogen Safety Management” was also introduced by National Assembly member Kim Sung-hwan, chairman of the MDP Policy Committee (National Assembly Committee on Industry, Commerce, Small and Medium-sized Venture Enterprises, Seoul, Nowon Byung), in order to establish a foundation for subsidy support for the production and import of green hydrogen.

Major nations worldwide are putting a lot of effort into developing rules that will encourage green hydrogen produced by renewable energy.

In the energy transition strategy “REpowerEU,” the EU announced plans to implement a “Carbon Differential Support Agreement (CCFD) system” to subsidize the cost differential between the production of green hydrogen and gray hydrogen, while the United States included the first green hydrogen tax credit in history in the Inflation Reduction Act (IRA). Germany will also provide financial support for the importation of green hydrogen produced abroad.

Currently, gray hydrogen, which is created from fossil fuels, makes up around 96% of the hydrogen generated globally. Gray hydrogen is an energy source that is not appropriate for the era of carbon neutrality, it is noted, as it emits carbon throughout the production process.

Green hydrogen, on the other hand, is considered a key technology for carbon neutrality because it electrolyzes and generates water using renewable energy without emitting any carbon.

By 2050, the market for green hydrogen is predicted to be worth $300 billion (or 375 trillion KRW), hence it is crucial to advance technology. Because of this, nations all over the world are putting their lives on the line to promote the use of green hydrogen.

However, green hydrogen is seen as a barrier because it has a higher production cost than gray hydrogen.

Gray hydrogen costs 12.2 USD (US$) per kilogram, but green hydrogen costs 37.2 USD (US$) per kilogram, a difference of three and a half times. However, green hydrogen’s price competitiveness remains insufficient.

By 2030, green hydrogen is anticipated to cost between US$1.4 and US$2.3 per kilogram, according to KEPCO. There are increasing calls for the government to support policies until green hydrogen becomes affordable.

The current legal framework in Korea, however, provides no basis for securing the competitiveness of green hydrogen, and the current government strategy likewise places a strong emphasis on encouraging gray hydrogen.

Due to the difference in production costs between green hydrogen and gray hydrogen, this amendment mandates that the Ministry of Trade, Industry, and Energy give producers or importers of green hydrogen priority.

Kim Sung-hwan, an assemblyman, said, “The production of green hydrogen needs to be substantially expedited in order to complete the major energy transition focused on renewable energy sources and the decarbonization of the industrial structure. The acquisition of green hydrogen is being postponed due to a lack of economic viability, which is a regrettable reality, the speaker said. He continued, “In order for our economy to achieve a major transformation of decarbonization in earnest, it is necessary to introduce a subsidy system that supports the cost of producing green hydrogen.”

Congressman Kim said that since green hydrogen is created by the water electrolysis of renewable energy electricity, it is necessary to encourage the increase of the renewable energy supply in order to produce enough green hydrogen.

According to Congressman Kim, “This amendment will actively contribute to addressing the climate crisis and achieving the goal of carbon neutrality by laying the groundwork for revitalizing Korea’s supply of green hydrogen and enhancing the system of one stone that will also propel the expansion of renewable energy.”

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