Targeting Blue Hydrogen Among the Hydrogen Trio

Interest in carbon neutrality has surged following the recent UN Climate Change Conference (COP26). The South Korean government announced plans to reduce greenhouse gas emissions by more than 40% compared to 2018 levels (up from the previous target of 26%) by 2030, and is soon expected to establish and announce relevant enforcement regulations.

Hydrogen is one of the key alternatives proposed by the South Korean government to achieve its carbon neutrality goals, and it is a field in which South Korea holds a technological advantage comparable to that of advanced countries. Domestic companies have made significant innovations in hydrogen vehicles, hydrogen fuel cells, and turbine power generation, and are already producing and exporting numerous products on a global scale, supported by world-class infrastructure. However, there remain unresolved challenges.

Last month, the government announced that it would increase the target for hydrogen use by 2030 from the previous 1.94 million tons to 3.9 million tons, with the goal of having 50% of this hydrogen come from clean sources. Hydrogen is categorized into green (produced using renewable energy), blue (produced from natural gas with carbon capture), and gray (produced from natural gas) based on the production method, with green and blue hydrogen being considered clean hydrogen. Currently, most hydrogen produced domestically is gray hydrogen, and the supply available for use, excluding what producers consume themselves, is only 200,000 to 300,000 tons---far short of the government's target.

Achieving the clean hydrogen goal is even more challenging. Considering the availability and efficiency of renewable energy sites in South Korea, blue hydrogen is more economical than green hydrogen. However, to be recognized as blue hydrogen, the carbon capture, utilization, and storage (CCUS) aspect must be addressed. South Korea lacks suitable underground resources, such as gas fields, for large-scale carbon storage. The silver lining is that, compared to hydrogen, carbon can be relatively easily transported overseas using existing infrastructure and can be permanently stored in oil fields and gas reservoirs in oil-producing countries. For example, Hyundai Oilbank is already working on a business model in collaboration with Saudi Aramco to leverage such overseas CCUS resources.

Therefore, to expand domestic clean hydrogen production and achieve carbon neutrality, greater attention and effort must be directed toward the institutional and technological development surrounding CCUS. This includes identifying and developing carbon demand sectors, as well as establishing technologies and business models that enable carbon storage and utilization both domestically and internationally. The government should provide research support for CCUS methods that can be recognized as contributing to carbon reduction and quickly set standards and support measures through international discussions. This would help reduce regulatory uncertainty for the private sector and aid in setting long-term investment and business directions.