SEOUL: Aiming to cash in on a major push by South Korea to promote fuel cell vehicles, Sung Won-young opened a hydrogen refueling station in the city of Ulsan last September. Just one year on, he's thinking about closing it down.
Sung's new hydrogen station is one of five in Ulsan, home to Hyundai Motor Co's main plants and roughly 1,100 fuel cell cars – the most of any South Korean city.
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The government paid the 3 billion won (US$2.5 million) cost – six times more than fast charging equipment for battery electric cars – and the two pumps, located next to Sung's gasoline stand, see a steady flow of Hyundai Nexo SUVs daily.
Even so, Sung hasn't been able to turn a profit, hamstrung as the equipment can only refuel a limited number of cars each day and by the government's decision to set retail hydrogen prices low to bring consumers on board.
"All hydrogen stations will have no choice but to shut down unless the government subsidizes operating costs," Sung, 32, told Reuters. "Otherwise, this place will just become a 3 billion won chunk of steel."
If those impediments to commercial viability were not enough, a fatal hydrogen storage tank explosion this year has spurred protests against the government and Hyundai's ambitious campaign to promote the zero-emissions fuel.
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Calling hydrogen power the "future bread and butter" of Asia's No. 4 economy, President Moon Jae-in has declared himself an ambassador for the technology and targeted 850,000 fuel cell vehicles (FCVs) on South Korean roads by 2030.
That's no mean feat given fewer than 3,000 have been sold so far. Japan, also a big proponent of FCVs and with an auto market three times larger, plans 800,000 in the same timeframe.
The challenges of building out refueling infrastructure in South Korea underscore the long and uphill battle FCVs face to widespread adoption at a time when electric cars are stealing much of the green car limelight.
And for the government and Hyundai, the only automaker selling a fuel cell car in the country, it is an expensive project with no guarantee of success.
Moon is set to spend US$1.8 billion in central government funds to subsidize car sales and to build refueling stations for the five years to 2022 at current subsidy levels, Reuters calculations show.
Subsidies cut Nexo's price by half to about 35 million won (US$29,300) and sales of the model, launched in March 2018, have surged this year. In contrast, Japanese subsidies fund one third of Toyota Motor Corp's Mirai FCV, bringing its price to around US$46,200.
Some critics argue Hyundai is the main beneficiary of the government's ardent backing, but the automaker also has much at stake. With its suppliers, it plans to invest US$6.5 billion by 2030 on hydrogen R&D and facilities.
"There are risks that come with the need to make large-scale investments in building (hydrogen car) production facilities, securing supply channels and establishing sales networks," Hyundai said in an e-mailed statement.
HIGH PRESSURE
In May, a hydrogen storage tank at a government research project in the rural city of Gangneung exploded. It destroyed a complex about half the size of a soccer field, killing two and injuring six. A preliminary investigation found the blast was caused by a spark after oxygen found its way into the tank.
"One victim was blown away by pressure and then killed after being hit by rock," said Kong Gikwang, a lawyer who represents the family of one of the two who died in a lawsuit against the research complex.
One month later, there was an explosion at a hydrogen refueling station in Norway. This week, a hydrogen gas leak and subsequent fire at a South Korean chemical plant caused three workers to suffer burns.
Such safety concerns have fueled protests by South Korean resident groups worried about hydrogen facilities being built in their areas.
Kim Jong-ho, who began a month-long hunger strike against a planned fuel cell power plant in the port city of Incheon two days before the Gangneung blast, said the explosion refocused attention from pollution risks of hydrogen production to safety. Incheon has since agreed to review the safety and environmental impact of the plant.
Potential station operators have also gotten cold feet since the explosions.
Pyeongtaek city in April picked two gasoline stand operators to run hydrogen stands but within three months, both decided to bow out, forcing the city to restart its search.
"At first, I had great interest. But once I looked closely, I realized the government was pushing for something that can't make profits," one of the prospective operators said, asking not to be identified.
"And I couldn't live worrying about whether there would be an explosion."
To counter such fears, the government is holding briefings for residents, while Hyundai said it is working to convince consumers of hydrogen's safety with information promoted through Youtube and social media.
"VALLEY OF DEATH"
Despite government plans for 114 hydrogen stations – key for the widespread adoption of FCVs – to be built by end-2019, only 29 have been completed. Difficulties in gaining funds from local governments or businesses meant to help shoulder half the costs, delays in finding sites and opposition from residents have also hobbled efforts.
Those constructing the stations know they are in for a slog.
