In November last year, the designation was withheld without apparent reason
Renewable energy and green ammonia were added and passed
Local governments “including plans due to requests from the Ministry of Climate”
Fading the purpose of “cheap electricity” at high costs
Concerns about dependence on China for imports of green ammonia
The Ministry of Climate, Energy and Environment’s request to expand the green hydrogen project was found to have played a role in the background of the recent designation of Gyeongbuk, Ulsan, and Chungnam as distributed energy-specialized areas (distributed special zones). Although the purpose of the spread of renewable energy is positive, it is pointed out that the government has exercised its authority excessively by inducing the introduction of certain energy sources. As a result, concerns are raised that the supply of inexpensive electricity, which is the purpose of the special zone, may be undermined, as well as increased dependence on China.
According to the Ministry of Climate on the 12th, Pohang, North Gyeongsang Province, Nam-gu, Ulsan, and Seosan, South Chungcheong Province were additionally selected as distributed special zones through re-deliberation by the Energy Committee in December last year. These regions were decided to “hold” without any apparent reason during the first deliberation held in November last year. On the other hand, in the deliberation at that time, regions that presented new industries were designated, focusing on renewable energy such as Haenam, Jeju, Busan, Gangseo, and Uiwang, Gyeonggi Province. In the next two months, these three regions passed the re-deliberation, drawing attention to the background.
According to related industries and local governments, Pohang City initially submitted a plan to supply carbon-free electricity to nearby secondary battery companies through ‘clean ammonia’-based fuel cell power generation, but revised it to ‘Green Ammonia’. Clean ammonia is a concept that includes ‘blue hydrogen’ that uses some fossil fuels such as natural gas in the process of producing ammonia, but green hydrogen must produce ammonia by decomposing water only with renewable energy. In addition to the existing projects, Ulsan and Seosan also persuaded the Energy Commission by adding a phased conversion plan to carbon-free power using renewable energy and green hydrogen. A local government official said, “We have added the details of the green ammonia-related project at the request of the Ministry of Climate.”
It is pointed out that this method can lead to a number of problems. First of all, the designation of a distributed special zone should be neutral without preference for a specific energy source, but the government’s inducement of the introduction of green hydrogen may be interpreted as an excessive exercise of authority. An energy academic official said, “There is no regulation that distributed special zones must use specific energy.” There are also concerns that the high cost of green hydrogen could weaken the low-cost power supply, which is the strength of the distributed special zone. BloombergNEF put the price of blue hydrogen at between $1.8 and $4.7 per kg in 2023 and green hydrogen at between $4.5 and $12. In other words, the price is at least twice as high as blue hydrogen.
If the company expands its excessively green hydrogen and green ammonia businesses in the absence of domestic infrastructure, supply chain risks could also increase. In fact, Pohang City, which has decided to start a green ammonia demonstration project from 2027, is reportedly trying to import it from overseas and do business because the domestic unit price is too expensive. “Currently, China is the only place where green hydrogen and green ammonia can be made to match the level of fossil fuels,” said Yoo Seung-hoon, a professor at Seoul National University of Science and Technology. “We cannot rule out the possibility that the past urea water situation will be reproduced due to increased dependence on China.”
The distributed special zone refers to an area where renewable energy operators can sell electricity directly to consumers without going through KEPCO’s transmission network. It has the advantage that electricity prices become cheaper and various new energy industries can be demonstrated. Various regulatory special cases are also applied for this.
