South Korea plans a pivot to hydrogen. Should we care? Well, South Korea, with a population of 52 million, is the tenth largest economy in the world, has the fifth largest steel industry in the world, is a major producer of electronics, automobiles (# 5 in world) and batteries (#2), and the home to huge international corporations with world class technological abilities. The country has little in the way of natural resources (it has coal reserves but imports 99% of its coal consumption, and that’s it.
In November 2021, the cabinet approved a hydrogen target for 2050, with intermediate goals. Basically, the government wants to replace coal consumption with renewables (the government controls the electric company) and replace oil imports with hydrogen and encourage big industrial users of energy to turn to hydrogen. (Korea has a big steel industry, a main target for conversion.) News stories say that the gas company (also controlled by the government) will build a hydrogen production facility in the southwest of the country. The government also wants to encourage carbon storage. We assume that in a country with a tightly knit industrial base controlled by a few families, that the government has consulted with it and has bought in.
Now for the strategy. You will no doubt argue that Korea is not an ideal spot for green hydrogen production. Well the government plans for Korea to produce less than 20% of the hydrogen it will need in 2050. It will invest in overseas projects that will produce hydrogen, and that really means that it will open up a new business opportunity for Korean companies and others that want to produce for sale to Korea. The government says it wants to create 30 global hydrogen companies in the process. We suspect that many will sport the names of today’s major Korean companies.
The Korean strategy, if it works, will demonstrate the value of setting a clear policy, and creating business opportunities in the process. It also demonstrates a return to the belief that world trade and competitive markets are okay, but do not depend on them to find solutions to global climate change or energy security. (Okay, the Koreans would still get most of their energy from abroad, but most likely from Korean-controlled manufacturers of hydrogen, not from foreign-state or privately-controlled oil and gas and coal. ) Traditional internal energy companies that choose to go into hydrogen production might find themselves shut out of the market. If other countries follow suit, the energy market could become more and more balkanized.
The traditional economic development strategy was to set aside a domestic market, let local companies develop skills and scale in that market, and hope that those companies reach a level of skill and scale to compete abroad. Maybe we could learn something from the Koreans.
By Leonard Hyman and William Tilles
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