Back in 2018, the Korean government designated the hydrogen economy as one of the sectors subject to strategic investment for innovative growth (Ministers’ Meeting on Innovative Growth held on August 13, 2018). The hydrogen economy is a scheme to designate the production and use of hydrogen, a fuel to generate electricity, as one of the nation’s major economic strategies for the future, and to change the energy infrastructure and the overall economy as required in accordance therewith. The government established a ‘Roadmap to Promote the Hydrogen Economy” in January 2019 to integrate hydrogen power into the country’s urban energy system.

Based on the foregoing scheme, the Ministry of Trade, Industry and Energy (the “MOTIE”) has enacted the Act on the Promotion of Hydrogen Economy and the Safety Control of Hydrogen on February 4, 2020 (Act No. 16942; to be implemented as of February 5, 2021) (hereinafter, the “Hydrogen Act”). The Hydrogen Act provides for matters related to the system to promote the hydrogen economy; a legal basis to nurture and support hydrogen-specialty enterprises; the installation of hydrogen charging stations and fuel cells and the promotion of such installation; the establishment of foundation to develop human resources; and the safety control.

In addition, on September 16, 2020, the Ministry of Land, Infrastructure and Transport (the “MOLIT”) issued a pre-announcement of legislation of the Act on Construction and Operation of Hydrogen Cities (Notice of the Ministry of Land, Infrastructure and Transportation No. 2020-1224) (hereinafter, the “Legislative Proposal”).

The MOLIT explained that the introduction of the Legislative Proposal was due to the necessities to establish and operate hydrogen cities in a systematic and consistent manner; to secure the safety of the hydrogen-based infrastructure; and to secure the capacity to accommodate residents from a long-term perspective. The Legislative Proposal has just gone through the review of the Ministry of Government Legislation last December 8 and is expected to be soon submitted to the National Assembly. It will be effective on the date after the lapse of one year from its enactment and promulgation.

Looking at the main content of the Legislative Proposal, it first gives a definition of the ‘Hydrogen City’, a new term that has emerged in recent years. Under the Legislative Proposal, a Hydrogen City refers to ‘a sustainable city, which connects the ecosystem of the supply and demand of hydrogen energy with the city and uses hydrogen energy for residence, buildings, and transportation, for the purpose of promoting the energy transformation and the transition to hydrogen economy’. In addition, the Legislative Proposal gives legal definitions of the terms related to hydrogen city, such as Hydrogen City Infrastructure, Hydrogen City Construction Skills, and Hydrogen City Enterprises.

In addition, according to the Legislative Proposal, the national government and local governments are required to establish comprehensive plans and urban- or gun-level plans on the construction of hydrogen cities, as applicable, which are consistent with the procedures and matters prescribed under the National Land Planning and Utilization Act. It is notable that hydrogen city construction plans can be developed and implemented not only by the national government and local governments, but also by the Korea Land and Housing Corporation, public institutions, and private enterprises who are defined as concessionaires under the Act on Public-Private Partnerships in Infrastructure. The concessionaires shall prepare an implementation plan for the hydrogen city construction project and obtain an approval from competent authorities.

Meanwhile, the Legislative Proposal also provides for several special regulatory exemptions on the construction of hydrogen cities. For example, in an event a concessionaire (i.e., a project developer) obtains an approval for its implementation plan, it shall be presumed that he/she has obtained relevant approvals/permits such as a determination of an urban or gun management plan under the National Land Planning and Utilization Act, a building permission under the Building Act, etc. to improve the project efficiency. In addition, if a development/implementation plan, which was established or approved in accordance with other laws and regulations, contains the content of the project implementation plan under the Legislative Proposal, the procedure to establish an implementation plan under the Legislative Proposal may be omitted.

The Legislative Proposal also provides special measures with respect to the installation of infrastructure for a hydrogen city to increase efficiency and flexibility in the installation of such infrastructure. That is, it allows the infrastructure to be established in a development restriction zone, eases the standards for the permission to occupy and use the roads, and provides for a regulatory exemption with respect to the permission to occupy and use urban parks under the Act on Urban Parks, Green Areas, Etc.

In terms of financial support, the Legislative Proposal contains a basis for the national or local governments’ financial support of parts of the costs required for implementing hydrogen city construction projects borne by private enterprises. It also introduces legal grounds to support the introduction, research, development, and dissemination of hydrogen city construction skills; the implementation of pilot projects such as establishment of a pilot city; and the export of power plant engineering for production, transportation, storage, and utilization of hydrogen power and hydrogen cities.

Last but not least, the Legislative Proposal allows installation of an agency in charge of supporting of hydrogen city construction which consists of professionals and a research center, for the purpose of promotion and penetration of hydrogen cities. Such agencies in charge are expected to analyze the performances and outcomes related to hydrogen cities, policy support, establishment of policies related to the development of professional human resources, and export assistance, etc.

If the Legislative Proposal above is enacted and implemented, following the Hydrogen Act that shall be effective in February next year, the promotion of hydrogen economy is expected to start gaining momentum as intended by the government. The Korean government has already established the Hydrogen Economy Committee, which is specified under the Hydrogen Act, even before the Hydrogen Act becoming effective next year, and the Hydrogen Economy Committee has recently considered and passed measures (in its meeting held in October, 2020) intended to introduce the Hydrogen Energy Portfolio Standard (HPS). The contemplated plan is that by implementing HPS, the power generation through use of fuel cell can be taken out from the current RPS (Renewable Energy Portfolio Standard), and the power generation operators with the RPS obligation can have a separate obligation under HPS, with the intended effects of expanding use of hydrogen fuel cells. To be sure, however, we may need to wait until the subordinate laws such as enforcement decrees and enforcement rules to the Hydrogen Act, etc., have been established in order to ascertain how any specific plans and measures of the Korean government for promoting the hydrogen economy will play out.