Korea Power Exchange's bid cancellation exacerbates concerns about clean hydrogen power market

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Korea Power Exchange's bid cancellation exacerbates concerns about clean hydrogen power market

Published: 05 Nov. 2025, 14:42

Audio report: written by reporters, read by AI

Hanwha Impact's hydrogen gas turbine plant in Seosan, South Chungcheong [SHIN HA-NEE]

Despite being the first country to legislate a hydrogen law in 2021 and launching the Clean Hydrogen Portfolio Standards (CHPS), Korea faces a growing crisis regarding the viability of its clean hydrogen power market as cost and policy uncertainties persist.

The crisis deepened on Oct. 17, when the Korea Power Exchange abruptly canceled its CHPS bidding notice just hours before the deadline, effectively resetting the market just a year after its inception.

Industry insiders said the cancellation came as a shock. “The notice went up only a few hours before we were due to submit our bids,” said one industry source, who requested anonymity.

Although the government did not clarify the reason for the cancellation, most observers link it to President Lee Jae Myung’s policy pledge to eliminate coal-fired power generation by 2040.

Korea's CHPS system was designed under the 2021 Hydrogen Economy Promotion and Hydrogen Safety Management Act, which mandates that the government purchase a fixed volume of electricity generated from clean hydrogen each year. The intent was to create demand and scale up hydrogen-based energy solutions.

However, the use of ammonia co-firing — a method in which ammonia is blended with coal in thermal power plants — has emerged as a policy flashpoint. The technology allows power plants to cut carbon emissions without overhauling existing coal-fired infrastructure and has been seen as a cost-effective transitional solution.

Unlike hydrogen, which incurs high costs for production, transportation and storage, ammonia is already widely traded globally as a raw material for fertilizers and plastics, making it more readily available.

President Lee Jae Myung delivers a budget speech for next year at the National Assembly in Yeouido, western Seoul, on Nov. 4. [LIM HYUN-DONG]

But ammonia co-firing has drawbacks, including emissions of nitrogen oxides and particulate matter. Critics also point to a policy contradiction: restarting coal-fired plants for co-firing under a government pushing for a coal phaseout.

On Oct. 29, following the cancellation, Climate, Energy and Environment Minister Kim Sung-hwan told lawmakers that "it is right to discontinue coal-ammonia co-firing,” signaling that such projects may be excluded from future bidding rounds. State-run utilities preparing ammonia co-firing projects now face considerable uncertainty.

In contrast, Japan is pushing ahead with ammonia co-firing to extend the life of existing coal plants. Japan’s largest utility, JERA, plans to begin commercial operations at its Hekinan coal plant in Aichi Prefecture by blending 20 percent ammonia into its fuel mix from 2027 — part of a phased approach to decarbonization.

Cost remains the biggest barrier to clean hydrogen power. In the inaugural CHPS bidding round last year, only Korea South-East Power secured a contract and won just 750 gigawatt-hours, with 11.5 percent up for bid. The rest of the bids exceeded the government’s price ceiling.

With ammonia co-firing likely to be excluded from the next round, power generation costs are expected to rise significantly. Although the government halved this year’s bidding volume and introduced new safeguards such as exchange rate adjustments, industry insiders say a realistic pricing mechanism is urgently needed.

Hydrogen production and storage facilities at Posco’s Pohang Steelworks in Pohang, North Gyeongsang [YONHAP]

Most projects require multi-trillion-won investments. Posco International is planning to replace aging plants with new liquified natural gas (LNG)-based hydrogen co-firing facilities. SK Innovation is building a blue hydrogen production facility in Boryeong, South Chungcheong, while Hanwha Impact is planning to convert existing LNG turbines into 100-percent hydrogen-fired turbines.

“The cost of hydrogen and its logistics is high, and the process of cracking or reforming imported ammonia into hydrogen is also expensive,” said a corporate representative. “These are still early-stage technologies globally, so the investment burden is inevitable.”

Industry consensus holds that the success of clean hydrogen power depends on government leadership in infrastructure development and market creation. Because Korea’s hydrogen value chain — from production to transportation and storage — is still underdeveloped, early-stage policy support is critical.

However, frequent policy shifts are amplifying uncertainty for companies. “With the market still in its formative stage, the most realistic solution is for the government to provide a stable institutional framework,” said Kim Jae-kyung, a senior research fellow at the Korea Energy Economics Institute.

This article was originally written in Korean and translated by a bilingual reporter with the help of generative AI tools. It was then edited by a native English-speaking editor. All AI-assisted translations are reviewed and refined by our newsroom.
BY KIM SU-MIN [[email protected]]