South Korea is pressing ahead with a second auction of electricity capacity from hydrogen power plants.

Operator Korea Power Exchange (KPX) will accept bids during 6–13 October for a second auction to award 650GWh of electricity contracts to hydrogen-based power generators, with the contracts to be awarded in November.

However, as with the first auction, October’s tender will allow bidders to fuel their systems using so-called “general hydrogen”—namely byproduct hydrogen from industrial processes or grey hydrogen from gas/LNG, potentially undermining the country’s emissions reduction goals.

The first clean hydrogen power auction—which will not allow gas or byproduct hydrogen to compete—will not take place until 2024. The selection criteria is likely to include the hydrogen’s co-firing ratio and emissions intensity.

650GWh – Auction volume

The upcoming second auction comes after KPX concluded the first tender by selecting five fuel-cell generation companies to supply 715GWh for 20 years starting in the first half of 2025. The winners were not disclosed, but Hydrogen Economist understands one was Lotte SK Eneroot, a joint venture between South Korean firms Lotte Chemical, SK Gas and Air Liquide Korea. Local media has separately reported that the awardees each have less than 40MW of generation capacity.

When South Korea first released its draft proposal to launch an auction for hydrogen power in early March, it indicated the purpose of the auction was to “promote the use of hydrogen”. But KPX announced during a presentation to stakeholders a few weeks later that the aim was to “maximise the role of distributed resources”, implying fuel cells would be favoured.

This was reflected by the auction’s outcome—although a number of power generation technologies were eligible to participate, only fuel-cell generators submitted bids.

State-run utility Kepco will purchase the electricity generated through 2023’s auction for 20 years. Starting in 2024, independent power producers are encouraged to offtake the auctioned volume. Since South Korea’s power market is centralised, consumers will bear the high cost of hydrogen power in the end.

Grey area

The KPX announcement did not disclose how the five generators will source their hydrogen fuel, but Hydrogen Economist understands Lotte SK Eneroot will use byproduct hydrogen from Lotte’s Ulsan refining facility to generate electricity.

South Korea produces little blue or green hydrogen but is one of the world’s biggest consumers of LNG, so the likelihood is the other four generators will directly use gas. This has been the most popular way of feeding fuel cells installed under the existing Renewable Portfolio Standard (RPS)—a policy that requires a certain share of power generation to come from renewable energy.

But fuel cells that directly use gas have similar greenhouse gas emissions to combined-cycle gas turbines. The RPS policy has been criticised for giving high subsidies to such fuel cell installations, which would not contribute to South Korea’s goal of reducing emissions. The result of the first auction suggests a similar problem still exists.

Local media reported Doosan Fuel Cell will supply fuel cell equipment and facilities to four of the auction’s five winners, amounting to 70MW of the 89.3MW won. The Korean conglomerate’s longstanding track record in its home market and high use of domestically sourced components enabled it to score highly for local content.

The Korean push for the auctions underlines how Seoul is keen to see hydrogen fuel cells used to provide baseload power, which contrasts with other countries due to the high cost of burning hydrogen and ammonia. For instance, in Germany—which introduced a hydrogen power auction around the same time—local authorities are set to promote hydrogen and ammonia combustion in turbines instead, and use the power generated for seasonal balancing rather than baseload.

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Author: Shi Weijun