The Asian nation’s big promises give Australia hope it can pivot its third-biggest trade relationship away from fossil fuels. But is it just hyperbole?

he future of Australia’s third-biggest trade relationship is taking shape in a quiet street about 50 kilometres south of Seoul.

Wedged between two freeways, a river and a hospital in suburban Dongtan, the HyNet hydrogen refuelling station that Woodside Energy partly owns is working at full capacity.

Both bowsers were occupied by civilian motorists driving hydrogen-powered Hyundai cars on the day The Australian Financial Review made an unscheduled and unannounced visit to this off-broadway pocket of the Korean capital.

“Citizens were very concerned about the risk of explosion, so it was difficult to find a suitable installation site,” says hydrogen expert Rhee Hanwoo when asked why the number of hydrogen refuelling stations in Korea is lagging the aggressive targets set in 2018.

Woodside isn’t the only Australian connection at the Dongtan refuelling station; Macquarie Group was very likely responsible for transporting the hydrogen to the tanks at Dongtan, given its subsidiary Approtium owns more than half of the tanker trucks that carry hydrogen around the Korean Peninsula.

These early footholds could serve corporate Australia well if Korea comes good on its promise to consume 127 times more hydrogen in 2050 than it did last year.

Government and industry in Korea regularly cite Australia as the most important player in an aggressive hydrogen strategy that will rely on imports for 82 per cent of supply.

“Without Australia, we can’t make it to renewable energy 100 [per cent] by 2050,” says Korea Zinc vice president Kijune Kim from his refinery in the Korean manufacturing mecca of Ulsan.

Hydrogen is the obvious and convenient answer for governments in Canberra and Seoul as they search for ways to pivot the trade relationship – which has doubled in value since 2014 on the back of soaring coal and gas prices – towards cleaner and greener pastures.

But Korea has undershot many of the hydrogen targets it set five years ago, and slow progress on those 2018 goals raises doubt over whether the latest batch of big targets are a genuine opportunity for Australian exporters or just another bout of hydrogen hyperbole.

“It is true that the Australia-Republic of Korea trade relationship is currently very carbon-heavy,” says Australia’s ambassador to South Korea, Catherine Raper, from her office 19 floors above Seoul’s Jongno-Gu district.

Raper is not just referring to the $16.2 billion of coal and the $8.1 billion of liquefied natural gas (LNG) that Australia shipped to Korea in the year to June 2022.

She’s also talking about the $1.8 billion of beef and the $8.3 billion of iron ore that Korea bought from Australia that year. While not fossil fuels, both commodities are part of processes that have big carbon footprints and are challenged by the emissions cuts promised by both nations.

Korea has vowed to cut emissions by 40 per cent between 2018 and 2030, then for emissions to reach net zero by 2050.

Coal would be a big loser under that plan; 28 of Korea’s 57 coal-fired power generators would be abolished or switched to gas generation by 2036.

The rest are expected to be gone by 2050.

A new coal-fired power station was built at Gangwon last year, and two more coal-fired units are scheduled to be built at Samcheok next year.

But they are expected to be Korea’s last coal-fired plants, with coal’s share of the energy market already declining from almost 42 per cent in 2018 to 34 per cent in 2021.

By 2036, the International Energy Agency (IEA) predicts coal’s share of Korean energy generation will fall to 14.4 per cent.

LNG’s share is expected to fall from 29 per cent in 2021 to just 9.3 per cent by 2036, according to the IEA.

Hydrogen is planned to rise from almost zero to 2.1 per cent of Korea’s power generation in 2030 and 7.1 per cent by 2036, in addition to forecasts for rapid increase in hydrogen consumption by motorists.

Few Korean companies have embraced the decarbonisation challenge with as much enthusiasm as Korea Zinc, which turns Queensland dirt into the indium needed for touchscreens, the zinc that galvanises steel and other metals needed for semiconductors, electronics and electric vehicles.

The green revolution offers big opportunities for Korea Zinc, but to seize them, the company will need to convince carbon-conscious customers that its metals have a low carbon footprint.

That will require a big change. Korea Zinc’s giant Ulsan refinery gets half its power from an onsite generator that burns methane gas, while the rest comes from Korea’s carbon heavy power grid.

But change is happening. The company has promised to fully power its Townsville refinery with “renewables” – a term that includes green hydrogen made with renewables – by 2040 and its Korean refinery by 2050.

“It will be producing green zinc,” says vice president Kim.

The Townsville plant gets about 25 per cent of its power from an adjacent solar farm, and that will rise to 100 per cent by 2040 if the company delivers its promised 9 gigawatts of renewables, mostly wind, in Australia by 2040.

It’s not just talk; Korea Zinc spent $US304.7 million in May last year acquiring Queensland renewable power developer Epuron, and it acquired a 30 per cent stake in the giant MacIntyre wind farm that Acciona expects to complete in Queensland next year.

Excess power from that arsenal of Australian renewable assets will be used to make green hydrogen, and the plan is to ship it back to Korea for use at the Ulsan refinery.

“We will transform our own generator [at the Ulsan refinery] to use hydrogen or ammonia by then,” says Kim when asked how the refinery will have net zero emissions by 2050.

“Now almost 50 per cent of the hydrogen can be co-fired with natural gas, and it will be 100 per cent by 2040 or 2050.”

Building an equivalent renewable power fleet to make green hydrogen in Korea would be difficult.

About 51.6 million South Koreans squeeze into a nation that is less than half the size of Victoria. The lack of space is exacerbated by the fact 70 per cent of the country is mountainous, making it less suitable for solar and wind than Australia’s wide open spaces.

Despite those challenges, the government of Yoon Suk Yeol still wants renewables’ share of the Korean energy supply to rise from 7.5 per cent in 2021 to 21.6 per cent by 2030.

It’s a big ask, and big industrials such as Korea Zinc reckon it will be easier to import green hydrogen made by Australian renewable energy.

“I think Australia is the best place to invest, especially for the renewable energy, because especially for solar we need a lot of sunshine which Australia can provide, also for the wind and compared to our Korean peninsula, you have a huge amount of land available and with very low expense,” says Kim.

“That is the reason why we are really serious in pursuing our green metal project in Australia.”

The giant Korean conglomerate Posco – a long-standing investor in Australian iron ore, coal and lithium mines – has also announced plans to spend $US28 billion on Australian hydrogen projects and a further $US12 billion on green steel projects by 2040.

Details on how, where and when Posco plans to unleash that capital remain elusive, but the sincerity of the pledge was on display when Posco chairman Jeong-Woo Choi travelled to Canberra in November to personally communicate it to Prime Minister Anthony Albanese.

“It is still at a very early stage,” says Posco Australia managing director Ben Kim when asked about the company’s hydrogen plans.

“In order to get a big volume of hydrogen, we need to look at the countries like Australia which can produce green hydrogen based on renewable energy so that is why we are happy in Australia.”

Korean electronics giant Samsung dipped a toe in the water earlier this year when it invested an undisclosed sum in a West Australian hydrogen project being developed by Infinite Green Energy.

Yoon’s conservative government took power in South Korea last year, and as president he has carried on his predecessor’s enthusiasm for hydrogen.

Korean consumption of hydrogen is planned to rise from about 220,000 tonnes in 2021 to 3.9 million tonnes by 2030 then to 27.9 million tonnes by 2050.

About 82 per cent, or 22.9 million tonnes, of the hydrogen consumed in 2050 will come from foreign suppliers such as Australia, according to the Korean government’s plan.

All that hydrogen will be either carbon-free “green” hydrogen made from renewables or “blue” hydrogen made from fossil fuel operations with carbon capture and storage attached.

Rhee Hanwoo runs a hydrogen hub near Ulsan which has 188 kilometres of pipelines carrying grey hydrogen – made with fossil fuels with no effort to capture the carbon – from nearby petrochemical plants.

All that hydrogen will be either carbon-free “green” hydrogen made from renewables or “blue” hydrogen made from fossil fuel operations with carbon capture and storage attached.

Rhee Hanwoo runs a hydrogen hub near Ulsan which has 188 kilometres of pipelines carrying grey hydrogen – made with fossil fuels with no effort to capture the carbon – from nearby petrochemical plants.

“The hydrogen shipped from Australia it can actually bypass the conflict areas so it will be a very stable source of hydrogen,” he says.

“To think about a country that can produce and supply green hydrogen and which is a green economy, Australia will play a big role.”

The Korean government plan also predicts rapid growth in hydrogen-powered cars, a view influenced by the fact Korean car maker Hyundai was the first in the world to start “mass-producing” hydrogen-powered cars for civilian motorists in 2013.

There were 29,733 hydrogen-powered cars on Korean roads at last count, but the government said in March that number would rise to 300,000 by 2030 with the help of generous subsidies.

“In the case of hydrogen vehicles, the subsidy rate varies among local governments, but consumers receive 32.5 million won ($36,379), or 46.4 per cent of the total price of 70 million won,” says Hanwoo.

The government has said it will encourage more uptake of hydrogen cars by building more hydrogen pipeline networks and refuelling stations.

“The government will diversify hydrogen mobility, including vehicles, ships, trams and drones, and expand the scope of hydrogen utilisation by building hydrogen clusters and cities,” the Yoon administration said in March.

“The government will pursue a transition to low-carbon transportation by distributing electric and hydrogen vehicles, converting all diesel trains to electric trains, and securing key technologies for zero-carbon ships.”

Now for the reality check.

In 2018, the Korean government predicted 80,000 hydrogen-powered cars would be on the nation’s roads, but only 37 per cent of that target has been achieved.

The government had envisaged 310 hydrogen refuelling stations would sustain the nation’s motorists; at last count there were 213 across the country.

Hydrogen was supposed to provide Korea with 1.5 gigawatts of power generation by 2022. It’s unclear exactly how much power is being generated by hydrogen, but according to the International Energy Agency, hydrogen was not one of the 10 energy sources that provided 99.75 per cent of Korea’s power in 2021.

Hanwoo’s best guess is about 1.4 gigawatt hours a day can be traced to hydrogen.

He cites several reasons why the number of hydrogen refuelling stations – like those partly owned by Woodside – has fallen short of the Korean government’s targets.

“There were three main obstacles. First, citizens were very concerned about the risk of explosion, so it was difficult to find a suitable installation site. Second, due to the low localisation rate of the charging station equipment, in the event of a component failure, it was not repaired smoothly, and the parts price was high and expensive,” he says.

“Third, the hydrogen transported by the tube trailer [trucks] must be stepped up from 200 to 700 atmospheres to charge the vehicle, but when the temperature rises during the step-up process, it must be cooled again, which consumes a lot of electricity. The huge cost of electricity is a huge burden for charging station operators.”

Woodside and its partners in the HyNet consortium were aiming for 100 refuelling stations by 2022.

When the Financial Review visited in May, there were 41 HyNet refuelling stations in operation and another 40 under construction.

If hydrogen-powered cars have a big future in Korea, you wouldn’t know it touring the world’s biggest car factory at Ulsan.

About 6000 Hyundai cars roll off the production line each day at the mammoth factory, and 88 per cent of them are traditional petrol guzzlers. Almost 12 per cent of them are electric vehicles. The number of hydrogen-powered cars is said to be “less than 1 per cent” of production.

A chicken or egg dilemma has engulfed the hydrogen vehicle sector in Korea. Why would motorists buy a hydrogen car if refuelling stations are thin on the ground? But why would companies build refuelling stations if hydrogen cars are few and far between?

There is debate in Korea as to whether the structure of subsidies for hydrogen vehicles and refuelling stations is appropriate.

“A total of 3 billion won ($3.3 million) is invested in the construction of one hydrogen refuelling station, of which 50 per cent, or 1.5 billion won, is subsidised by the Ministry of Environment, the central government,” says Hanwoo.

Some observers say the government must offer electricity price support to those operating hydrogen refuelling stations to manage the energy-hungry process of keeping hydrogen cool and compressed in tanks.

As the debate drags on, the comparatively simple business of building electric vehicle charging stations flourishes.

London-based transport consultancy Rho Motion says only about 0.6 per cent of vehicle sales in Korea last year were hydrogen-powered, equivalent to about 10,000 cars.

By 2040, Rho Motion expects hydrogen cars will have only about 0.8 per cent of the global car sale market.

But some still hold hope.

In Japan, car manufacturer Honda swam against the tide earlier this year when it announced plans to launch a hydrogen-powered version of its CRV model.

“Hydrogen has high potential as an energy carrier and will be essential to achieve a carbon-neutral society. Honda Motor believes that initiatives to build a society with hydrogen utilisation will be accelerated from here onward,” the company said when asked why it had moved into hydrogen cars.

But Rho Motion does not believe Honda’s surprise pivot will be the start of a trend.

“The majority of OEMs [original equipment manufacturers] do not have hydrogen FCEVs [fuel cell electric vehicles] in their future model line-up,” says Rho Motion analyst Will Roberts.

“Ultimately for the passenger car market, the cost is high and EVs [electric vehicles] are winning out as the better alternative. More attention will go towards hydrogen in the heavy-duty vehicle classes going forwards.”

One wildcard in South Korea’s energy future could be nuclear, given Yoon is more favourable to nuclear power than his predecessor.

A government road map published in March suggested that nuclear would contribute 32.4 per cent of Korea’s energy in 2030, up from 27.4 per cent in 2021.

Five nuclear projects that were frozen by the previous government are expected to resume operations, while a further 10 that were scheduled to shut after 2030 are expected to have their operating lives extended.

Nuclear’s share of the energy mix is tipped to rise to 34.6 per cent by 2036.

“We expect the new policy to generate significant implications on demand for LNG [liquefied natural gas] in power sector in the longer term,” Fitch subsidiary BMI said in a recent analyst note on Korea’s nuclear renaissance.

Nuclear power could also be a simpler way to make hydrogen than building vast renewable power farms in Australia and meeting the sizeable challenge of shipping hydrogen long distances.

Earlier this year, the European Union announced its formal definition of “green hydrogen”, and in a big win for the nuclear-powered French, hydrogen made from nuclear-powered electrolysis was included in the definition of “green hydrogen” alongside hydrogen made with renewables.

But Hanwoo doesn’t expect the Korean nuclear renaissance to cut Australia’s lunch on green hydrogen.

“No matter how advanced Korea is in the nuclear industry, renewable energy cannot be left out of Korea’s energy portfolio. This is because the EU did not recognise nuclear energy as a sustainable carbon-neutral tool when it enacted CBAM [its carbon border tariff scheme],” he says.

“There is a persistent backlash against nuclear power in Korea. Until fusion technology is commercialised, hydrogen will be a useful means of carbon neutrality.”

Working in hydrogen’s favour is the fact it is not just an energy commodity, but can also be a chemical catalyst in industrial processes.

Posco hopes hydrogen can be a replacement for coking coal in the steel making process and thereby solve the “hard to abate” nature of steelmaking.

“We do need large amount of hydrogen [at our steel mills] in the future, but then again to put hydrogen into a blast furnace there needs to be a technological breakthrough which we are working on,” says Posco’s Australian boss Ben Kim.

“In order to produce one tonne of green steel you do need 1 gigawatt of solar power. 1.6 gigawatts is a lot – you may need half of your country to be able produce all the solar power and cover it with the solar panels, so I’m not sure that is reachable and realistic, but we will have to wait and see.

“Technology [breakthroughs] is happening, so maybe it is happening to the hydrogen sector as well.”

Australia is famously an exporter of commodities, but less well understood is the fact Australia has always needed to import capital to be able to fund the development of those export industries.

Ambassador Raper reckons hydrogen will be no different.

“Korean investment in Australia in the clean energy industry and offtake agreements are going to be very important to helping to transition our trade to a low emissions future,” she says.

“We are looking to attract increased Korean investment into the clean hydrogen industry in Australia and help grow that industry both in Australia and for export, including into Korea.”

Back at the Ulsan refinery of Korea Zinc, Kim reckons Australian hydrogen proponents can push ahead with their projects and be confident their investment won’t be left high and dry.

“I do think Australia can be sure that many places, including Korea, needs Australian green hydrogen,” he says.

Extracted in full from: Hydrogen: Why Korea’s missed hydrogen targets matter for Australia (