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Latest Developments on the Hydrogen Act: Introduction of the Hydrogen Power Generation Bidding Market

2023.06.07

Hydrogen power, among other new and renewable energy sources, is garnering attention as one of the carbon-free power generation sources in Korea.  The Korean government sees the production and use of hydrogen, a fuel to generate electricity, as one of the nation’s major economic strategies for the future and established a “Roadmap to Promote the Hydrogen Economy” in January 2019 to integrate hydrogen power into the country’s urban energy system. 
 
For the promotion of the hydrogen economy, the Act on the Promotion of Hydrogen Economy and the Safety Control of Hydrogen was enacted and implemented as of February 5, 2021 (the “Hydrogen Act”).  The Hydrogen Act provides a legal basis to nurture and support hydrogen-specialty enterprises; the installation of hydrogen charging stations; the establishment of a foundation to develop human resources and safety control.  The Korean legislature recently amended the Hydrogen Act (the “Amended Hydrogen Act”), effective December 11, 20221, introducing a new set of standards for hydrogen power that is distinct and separate from the Renewable Energy Portfolio Standards (the “RPS”). 
 
Specifically, under the Act on the Promotion of the Development, Use and Distribution of New and Renewable Energy, a key law in the regulation of renewable energy businesses in Korea, the RPS requirements mandate that certain power generation businesses whose generation capacity exceeds 500MW generate a certain percentage of their electricity from new and renewable energy resources.  However, as the RPS requirements alone have shown limitations with respect to promoting and expanding the use of hydrogen for power generation, the Amended Hydrogen Act adopted a hydrogen power generation bidding market, through which certain electric utility entities, such as Korea Electric Power Corporation (“KEPCO”) and district electricity companies, will be required to purchase a certain quantity of hydrogen power generation, etc. 
 
And, on March 13, 2023, the Ministry of Trade, Industry and Energy (“MOTIE”) made an administrative pre-announcement to enact the Notification on the Calculation of the Purchase Quantity Per Year for the Hydrogen Power Generation Bidding Market, which has now taken effect as of May 24, 2023 (the “Notification”).  The Notification contains the bidding quantity for hydrogen power generation and the annual purchase quantity for buyers for the certain time periods stipulated thereunder.  Based on the Notification, MOTIE is expected to hold the first hydrogen power generation bidding in the first half of this year. 
 
Some key highlights of the hydrogen power generation bidding market, as currently contemplated under the Amended Hydrogen Act and the Notification, are set forth below. 
 
<img alt="" height="1014" src="https://www.jipyong.com//newsletter/kli/42_202306/img/board_11.png" width="820" /> 
 
The introduction of the hydrogen power generation bidding market this year will accelerate the use of hydrogen power generation and bring positive effects by improving hydrogen power generation-related technologies.  It is also expected to contribute to promoting distributed electricity power generation (as opposed to centralized electricity power generation) to take advantage of cost reductions in the installation of power transmission facilities.  However, the progress of hydrogen power generation is still in the early stages and will need time to be firmly established, including the adoption of detailed regulations related to the operation of the bidding market for clean hydrogen. 
 
<img alt="" height="167" src="https://www.jipyong.com//newsletter/kli/42_202306/img/board_22.png" width="820" />

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