For years, Asia — home to some of the world’s biggest emitters of carbon — has been urged to move away from fossil fuels to combat climate change.
Countries in the region – including their three largest economies China, Japan and India – have been criticized over the past year for not making a bigger commitment at the global climate change conference COP26.
But six months later, there is another, arguably more immediate, reason for Asia to make the transition away from oil, gas and coal: money.
Global energy prices have skyrocketed since late February, when Russia launched its invasion of Ukraine.
It has pushed European countries to find ways to rely less on Russian gas, with Germany hoping hydrogen could be the answer.
Japan and South Korea also invested heavily in hydrogen technology before the war in Ukraine, and rising energy costs have provided an additional incentive to accelerate their transition to greener fuels.
However, Asian economies have continued to burn coal to generate electricity, despite the fact that it pollutes the environment.
While some countries have made strides in moving away from fossil fuels, in emergencies – like when two of the region’s economic giants, China and India, were hit by power shortages – they turned to coal.
Japan had invested in nuclear power for decades, but after the 2011 Fukushima nuclear accident, Japan too returned to fossil fuels.
- Can hydrogen meet Germany’s demand for Russian gas?
- The changing face of the North Sea oil industry
Some experts believe that hydrogen can help countries transition from fossil fuels to renewable energy, and South Korean companies are now betting on it.
The country has announced the largest government spending in Asia to date for the development of hydrogen technology.
Seoul is stepping up investment in hydrogen production, fuel cell power generation technologies, and hydrogen-powered cars.
Hydrogen is also considered by some experts to be the most practical alternative to fossil fuels because it can be stored as a solid, liquid or gas.
That means it’s easier to store and transport compared to the sun and wind.
“Hydrogen is like an energy carrier,” says Vince Heo of S&P Global Commodity Insights in Seoul.
“You can store energy in hydrogen and use it at any time.”
A key issue is that there are different types of hydrogen and what South Korea is currently investing in is not zero-emissions.
The aim is the transition to so-called “green hydrogen”, which is also referred to as “clean hydrogen”.
It is made using renewable energy sources such as wind or solar power, but is the most expensive type of hydrogen to produce.
Hydrogen produced from fossil fuels is therefore seen by some experts as the first step towards green hydrogen.
“South Korea’s hydrogen is currently made from natural gas,” says Martin Tengler, BloombergNEF’s lead hydrogen analyst, explaining that it’s been dubbed “grey hydrogen.”
The next stage of the transition is ‘blue hydrogen’, which is also made from fossil fuels but captures and stores 60% to 90% of the resulting carbon dioxide.
South Korea’s biggest supplier of natural gas, SK, has invested more than 100 trillion won ($81bn; £64bn) but only in gray and blue hydrogen.
Hydrogen business unit chief Hyeong-wook Choo told the BBC the company did not invest in green hydrogen immediately because it required more technology and investment.
With renewable energy sources and the infrastructure to collect and distribute them not readily available in much of Asia, developing the right mix of technologies to harness enough energy to mass produce hydrogen has been a major challenge.
“We can develop the market by producing, distributing and consuming hydrogen. So when green hydrogen becomes available, there will be more opportunities to grow this hydrogen business,” added Mr. Choo.
The crucial question behind this is how much it costs to produce the individual types of gas.
“Green hydrogen costs more than two to three times that of gray hydrogen,” says Mr. Heo of S&P Global.
“Currently, it costs about $10 per kilogram to produce green hydrogen.”
Mr. Heo says that to be cost-effective, without government subsidies, the amount needs to drop by 70% to about $3 per kilogram.
But the rise in global energy prices means that “green hydrogen clearly has some momentum because it’s made from renewable energy, which is detached from the environment of high fuel prices,” he added.
For example, in Europe, the cost of producing blue and gray hydrogen rose by more than 70% at times after the Russian invasion of Ukraine, according to consultancy Rystad Energy.
When affordable green hydrogen becomes available, there are a number of industries that can benefit.
“We can replace gray hydrogen in industries where there are no low-emission alternatives, such as petroleum refining, fertilizer manufacturing, and heavy industries like steel production that require high temperatures,” Tengler said.
In order to be able to survive in global competition, South Korea has founded a hydrogen alliance, which more than a dozen companies have joined.
“The hydrogen industry right now is like the solar industry about 20 years ago, where few projects are being developed and the market has big ambitions,” said Mr. Heo.
Wind power is one of the keys to South Korea’s green hydrogen ambitions.
A consortium led by the Korea Maritime and Ocean University is developing a floating offshore facility for the production of green hydrogen in the city of Busan.
“We envision using electricity from wind and sun out at sea to boil and electrolyze seawater to produce green hydrogen,” said Doh Deog-hee, president of Korea Maritime and Ocean University.
Its advantage is its proximity to hydrogen consumers, Mr. Heo said: “You can save on hydrogen transportation costs because it’s a big, very expensive part of the hydrogen value chain.”
“But floating offshore wind power costs more than $300 per megawatt hour compared to $100 per megawatt hour using solar power. So a big question is how to actually optimize the cost of producing hydrogen from this plant,” he added.
The transition to cleaner energy sources has always been costly.
When world leaders met for COP26 in November, the world was faced with higher fuel prices due to post-pandemic pent-up demand.
Going back to fossil fuels has been and still is very tempting for many countries.
The question is whether rising fuel prices could be a greater motivator for switching.
Add Comment