- SK established an organization dedicated to hydrogen business and plans to build a hydrogen eco-system encompassing “production, distribution and supply of hydrogen”
- SK E&S, SK’s subsidiary, will take the lead in production of hydrogen in the business with SK Innovation playing a part
- From 2023, the company plans on supplying 30,000 tons of liquefied hydrogen and on producing 280,000 tons of hydrogen by 2025 while obtaining key hydrogen technologies in the world
- SK joined RE100 and decided to enter the hydrogen business that is environmentally friendly to lead efforts in ESG management
SK is entering the hydrogen business, which is rapidly growing as the next-generation green energy source, in earnest to strengthen the eco-system of the Korean hydrogen market and facilitate the ESG (environment·society·governance) management that is global efforts.
Since earlier this year, SK has been reviewing the feasibility of hydrogen business and developing a strategy for it. The company also formed a “Hydrogen Business Task Force” dedicated to hydrogen business consisting of about 20 specialists from its subsidiaries for energy business including SK Innovation and SK E&S. The task force will concentrate SK Group’s core capabilities on implementing its strategy for conducting hydrogen business.
SK has three overarching strategies for its hydrogen business; using SK Group’s infrastructure to establish a mass production system for hydrogen and enter the Korean hydrogen market, managing the whole value chain ranging from production to distribution and supply of hydrogen to keep the business stable, and investing in technology companies to obtain key hydrogen technologies and build partnership to target the global hydrogen market.
□ Establishing a mass production system for hydrogen to enter the Korean hydrogen market
SK plans on using fully its own infrastructure to supply hydrogen at a competitive level. First of all, with SK E&S taking the lead, the company will construct a hydrogen production facility with an annual capacity of 30,000 tons by 2023 to provide the metropolitan areas of Korea with liquefied hydrogen. By processing hydrogen into liquid in liquefaction plants, the company expects to reduce inefficiency caused in the process of transporting and fueling hydrogen in the form of gas as well as to improve safety significantly. To this end, SK Innovation will supply the by-product hydrogen. Especially, SK Incheon Petrochem, a subsidiary of SK Innovation, is considered to be most well-positioned to address cost issues associated with long-distance transportation of hydrogen since it is located in close proximity to the metropolitan areas where the highest demand for hydrogen would come from.
SK also has a goal of operating a mass production system for eco-friendly “blue hydrogen”** led by SK E&S. SK E&S is Korea’s largest private LNG provider that directly imports more than 3 million tons of LNG every year, and plans on producing additional 250,000 tons of “blue hydrogen” without carbon dioxide from 2025 by using a huge amount of natural gas it has amassed. In the long term, the company plans to facilitate “green hydrogen”*** production business using renewable energy such as solar and wind power to complete a green production system for hydrogen that doesn’t generate carbon dioxide.
□ Managing the whole value chain ranging from production to distribution and supply of hydrogen to keep the business stable
SK will manage the whole hydrogen value chain ranging from production to distribution and supply of hydrogen to keep its hydrogen business stable.
Currently, the global hydrogen market as well as the Korean hydrogen market is considered to be still at an early stage. In particular, the Korean hydrogen market has challenges of supplying hydrogen vehicles due to lack of infrastructure for transporting and fueling hydrogen. In addition, existing hydrogen providers are not actively investing in infrastructure citing insufficient demand, which discourages the Korean hydrogen market to make progress.
SK, however, has experience and know-hows in leading creation of energy eco-systems by integrating stages of a value chain in energy business such as oil and LNG. The company plans on using primarily such experience and know-hows to build a virtuous cycle in the Korean hydrogen eco-system as soon as possible.
By 2025, SK plans to have a production system with a capacity of a total of 280,000 tons and to use gas stations run by SK Energy and rest stops for freight trucks as green energy service hubs where vehicles can be fueled with hydrogen. The company also plans on creating considerable demand for hydrogen to generate power such as fuel cell power plants.
□ Investing in key hydrogen technologies and build partnership to target the global hydrogen market
SK will also obtain key hydrogen technologies to target the global hydrogen market. Accordingly, the company will not only invest in overseas companies owning hydrogen-related source technologies but also build global partnerships to make its global hydrogen business competitive and to explore the Asian hydrogen markets including China and Vietnam.
While the importance of green management is growing as shown by countries around the world introducing green new deals and the Biden administration’s expected adoption of green policies, SK is leading the efforts in ESG management.
On November 2, SK along with SK Telecom, SK Hynix, SKC, SK Siltron, SK Materials and SK Broadband applied for RE 100**** for the first time in Korea, accelerating implementation of environmental criteria in ESG management.
By entering the hydrogen market, SK reaffirmed its management principles driven by ESG and expects the highest possible economic values. SK also anticipates a hydrogen eco-system it will build by facilitating hydrogen business in Korea and proactive entering the global hydrogen market will bring an additional 30 trillion won’s of net asset value to the group.
An SK official said, “The fact that SK Group decided to accelerate its hydrogen business means a turning point for SK’s investment portfolio that will focus more on green.” He added, “We will concentrate the capabilities we have developed in our energy business on creating an environmentally friendly hydrogen eco-system to become a company that leads efforts in ESG management not only in Korea but in the global hydrogen market.”
*By-product hydrogen: Hydrogen created additionally from processes of petrochemical plants. By-product hydrogen has often been gone wasted without being recycled due to difficulties of producing and distributing it.
**Blue hydrogen: Blue hydrogen is nearly pure hydrogen created by using CCUS (Carbon Capture Utilization and Storage) to capture and store carbon dioxide emission produced in the process of producing hydrogen using LNG reforming
***Green hydrogen: Hydrogen that eliminates emissions of carbon dioxide by using renewable energy to electrolyze water
****RE100: It stands for renewable energy 100% and is an initiative seeking to source 100% of electricity consumption from renewables by 2050.