South Korea’s ambitious plans for fuel cell CHP capacity

Japan is not the only Asian country with concerns over its nuclear power supplies. The response in South Korea has been to set targets for the growth of renewable energy and the installed capacity of fuel cell CHP plants, including what is thought to be the world’s largest. David Hayes reports from Seoul.

Government plans to boost production of renewable energy could soon make South Korea one of the fastest growing markets for fuel cell-powered CHP systems in the Asia-Pacific region. Although most fuel cell CHP systems installed so far have been relatively small in size, a number of large-scale fuel cell CHP projects are under development now and are expected to spur construction of other large fuel cell schemes in future.

Government long-term energy development targets call for renewable energy to generate at least 20% of South Korea’s total electricity supply by the end of the decade. Fuel cells are likely to be an important part of the renewable energy generation mix due to growing interest in captive power generation for backup power supply.

Interest in fuel cells and CHP among industrial electricity consumers has grown recently, following unexpected problems last winter at two Korea Electric Power Corporation (KEPCO) nuclear power plants. Condenser problems caused Unit 1 at Uljin nuclear plant to stop operating without prior warning last December. Although the unit was restarted the following day, a 950 MW unit went offline soon afterwards at Kori nuclear station due to generator trouble.

The two incidents have created widespread concern over the reliability of the nation’s electricity supplies in spite of power-saving measures that are being implemented to curb peak load demand growth.

The number of companies considering installing captive CHP facilities to avoid possible power shortages in future is growing. In addition to generating heat and power for their own use, companies are being attracted to the idea of operating fuel cell-based CHP systems as surplus electricity can be sold to South Korea’s electricity utilities, which need to buy in renewable energy from small producers to meet their own future renewable energy supply targets.

Under new central government regulations that took effect on 1 January, 2012, electricity utilities are required to supply a growing proportion of electricity generated using renewable resources. The government’s Renewable Portfolio Standard stipulates that 2% of all electricity supplied by South Korean power utilities in 2012 should be generated using renewable energy resources including CHP fuel cell schemes.

The proportion of electricity generated using renewable resources is due to increase to 20% by 2020.

With South Korea’s total installed power generating capacity stands at almost 70 GW, about 1400 MW of the nation’s electricity supply should be generated using renewable resources this year to meet the government’s target for 2012. By 2020 more than 14 GW for power supplies will need to be generated using renewable energy resources if government targets are to be met.


According to industry estimates, CHP fuel cell systems totalling around 55 MW have been installed in South Korea so far, most of which are less than 2800 kW in size. While the number of small systems installed is expected to continue growing, construction recently started on the country’s first large-scale CHP fuel cell power project, and more large CHP fuel cell schemes are expected to be built in future.

In March, POSCO Energy, along with partners Korea Hydro Nuclear Power Co (KHNP) ” a subsidiary of KEPCO ” and Samchully Gas Co, started constructing what is believed to be the world’s largest fuel cell power plant. With a planned generating capacity of 58.8 MW, the fuel cell park will consist of a series of natural gas driven 2800 kW fuel cell units located in Baran Industrial Park in Hwaseong city.

Permits and approval for the fuel cell park are expected to be completed by early this summer allowing power production to begin in 2013. Electricity generated by the fuel cells will be supplied to the national electricity grid, helping POSCO Energy’s partner, KHNP, comply with the government’s new Renewable Portfolio Standard (RPS) for renewable energy supply.

‘Korea Hydro Nuclear Power Co is building the Hwaseong fuel cell power plant to sell electricity along with other electricity it produces and heat to a district heating company,’ explained POSCO Energy Business Strategy & Marketing Group Manager Jong Jin Kim. ‘The project will start generating at the end of 2013. When the fuel cell park is completed it will reduce carbon dioxide emissions by 60,000 tonnes per year.’

When fully operational, the fuel cell park is expected to generate 464 GWh per year of electricity and 227 GWh per year of heating. The electricity output will be enough to supply 135,000 households, equivalent to 70% of Hwaseong city’s residents.

Seoul street scene ” the city should see over 200 MW of fuel cell power plant capacity installed by the end of 2014

Following commissioning, the Hwaseong fuel cell park will replace the Sungseo Industrial Park 11.2 MW fuel cell plant as the world’s largest fuel cell power plant. ‘Sungseo fuel cell power plant, which started up in June 2011 and is owned by Cobalt Sky Co, uses a feed-in tariff system. The company sells electricity to the power grid at a fixed price and makes a profit from the power plant,’ said Kim.


POSCO Energy is currently South Korea’s leading supplier of CHP fuel cell systems. The company is a subsidiary of Pohang Iron & Steel Corporation (POSCO), which is one of the world’s largest steel makers. In addition to power companies, POSCO Energy supplies CHP fuel cell systems to a wide range of clients including industrial and commercial enterprises in both the private and public sector.

‘KEPCO subsidiary companies are buying fuel cells to operate using methane or natural gas as fuel,’ said Kim. ‘Other customers include private companies who want to enter the renewable energy business, investing in renewable energy. Most of our customers are located in big cities where they can connect with the Korea Gas piped natural gas system and buy natural gas supplies though city gas companies.’

POSCO Energy has recently taken a new change, changing its name in February 2012 from POSCO Power. ‘We changed our name to POSCO Energy because the word “power” means electricity but we are doing more as we are involved in renewable energy, synthetic natural gas and other energy sources,’ said Kim.

‘We also own combined cycle power stations totalling 3300 MW installed capacity including our 1200 MW Incheon combined cycle station that previously was owned by Hanwha Energy. We are the largest independent power producer in South Korea.’

Parent company POSCO’s diversification into the energy sector is part of efforts to move away from its previous total reliance on iron and steel. ‘We think the steel industry may not go well in future and so we decided to expand into energy including renewable sources like solar energy, wind power and fuel cells,’ said Kim. ‘Fuel cells are reliable and only a small space is needed so we decided to start our CHP fuel cell business.’

POSCO Energy produces CHP fuel cell systems using fuel cell kits supplied by Direct FuelCell (DFC) of the US. The company produces fuel cells rated at 100 kW, 300 kW, 1400 kW and 2800 kW.

Since 2007, POSCO Energy has ordered 140 MW of fuel cell power plants, modules and components from Direct FuelCell and has entered into a memorandum of agreement with the US firm for an additional 120 MW of fuel cell kits.

POSCO Energy’s fuel cell plant is located in Pohang, on the east coast of the Korean peninsula. Except for equipment ordered from Direct FuelCell, POSCO Energy produces the rest of the fuel cell power plant units itself. The company initially imported entire power plant units from Direct FuelCell but several years ago started making fuel cell power plants itself, said Kim.

‘The capacity of our factory is 100 MW of fuel cell power plant units a year. This is the world’s largest fuel cell power plant factory in capacity and size,’ said Kim. ‘We are now making fuel cell power plant units with a total capacity of 40 MW to 50 MW a year. We signed an 80 MW fuel cell supply contract with Direct FuelCell last year. Fuel power plants of 2800 kW are now the average size for us. ‘There are now fuel cells totalling around 55 MW installed in South Korea. POSCO Energy has supplied 50 MW of this and other companies about 5 MW.’


Since 2005, POSCO Energy has supplied fuel cell systems to a range of customers including Tancheon water recycling centre in Seoul and Chosun University in Kwangju City which both installed 250 kW systems.

Elsewhere a 1200 kW system has been supplied to the Riverside Wastewater Treatment Centre in Busan, where it runs on blended anaerobic digestion gas. ‘The Busan fuel cell plant takes methane gas from waste water treatment and uses it,’ said Kim. ‘Our customer sells the electricity and uses the heat generated for the plant’s digestion chamber.’

New buildings in Seoul ” South Korea includes extensive district energy systems

POSCO Energy expects more 2800 kW fuel cell CHP systems to be installed in future as the number of large-scale fuel cell projects increases and as more industrial customers purchase fuel cells. Car manufacturers and other large industrial companies are interested in installing CHP systems and developing renewable energy sources to boost their ‘green’ credentials.

A growing number of large industrial companies view fuels cells as an attractive option to meet growing electricity demand for space heating in winter and for cooling systems in summer at a time when South Korea’s national electricity grid supplies are no longer considered completely reliable, said Kim.

Clients installing 2800 kW fuel cell systems include power companies, though Kim pointed out that electricity generated from renewable energy sources is yet to be included in the power pool market through which most electricity is supplied in South Korea. Power companies are able to generate electricity themselves using renewable energy sources to meet the government’s renewable energy supply target or can buy in renewable power from other power plants including fuel cell CHP plant operators.

An RPS system replaced the previous feed-in tariff system for renewable power in December 2011. Under the feed-in tariff system, renewable power producers received double the normal price for independently generated power. They now receive a system marginal price (SMP) tariff for which the price is contracted daily.

Companies investing in fuel cells to sell electricity often sell power to independent power producers. Heat produced by the CHP systems is either sold off or used by the fuel cell companies themselves. ‘When fuel cell companies sell heat, their customers include waste treatment companies, waste water treatment centres and district heating companies,’ said Kim. ‘Some fuel cell operators use the heat in their own power plants for heating and cooling their own facilities using absorption chillers.’


Meanwhile, the use of CHP fuel cell systems is set to surge with Seoul city government’s recently plans to support building CHP fuel cell power plants totalling 230 MW across the city. Intended to reduce reliance on nuclear power, Seoul’s plans include constructing 29 CHP fuel cell parks totalling 190 MW installed capacity and putting CHP fuel cell systems totalling 40 MW in 102 commercial buildings by the end of 2014.

South Korea has ambitious renewable energy targets and plans for CHP systems based on fuel cells

CHP fuel cell systems totalling 50 MW are due to be installed by the end of this year under the Seoul city government scheme. CHP fuel cell systems totalling 82 MW are due to be commissioned in 2013, followed by CHP fuel cell systems amounting to 98 MW in 2014.

The various CHP fuel cell systems planned for installation in Seoul include 11 systems at different locations totalling 70 MW that will supply power to the capital’s subway system, while ten CHP fuel cell systems totalling 70 MW installed capacity will be installed at water treatment plants.

Eight refuse collection centres will install CHP fuel cell systems totalling 50 MW while hospitals and data processing centres will install fuel cell systems totalling 10 MW. High -rise residential developments also are included in the Seoul government plan with CHP fuel cell systems totalling 30 MW due to be installed in various high rise apartment blocks.

To support the CHP fuel cell system installation programme, Seoul city government has announced that some fuel cell power plants will be built on city government-owned land. The possibility of providing financial incentives including a feed-in electricity tariff to CHP operators selling surplus power generation is being considered by city government officials.


POSCO Energy sees other opportunities to develop fuel cell use in South Korea. While gas turbines and gas engines are used for CHP systems, fuel cells are categorized as renewable energy by the government and so are not in competition with gas turbines and engines to power CHP systems, said Kim.

‘We are thinking about fuel cells for manufacturing and other companies that spend a lot on money on electricity such as car manufacturers, steel makers, data warehouse firms and food processing businesses,’ said Kim. ‘We also are thinking about the use of fuel cells in office and other buildings, which is why we developed the 100 kW fuel cell size.’

The natural gas transport and supply industry is another potential important customer for fuel cell CHP systems, the company believes. POSCO Energy is supplying Korea Gas Corporation (Kogas) with an 8.4 MW fuel cell power plant for installation at its new Samcheok LNG import terminal, which is due to open in early 2013. The fuel cells will be fuelled by boiled-off gas in the terminal. Kogas will itself use some of the electricity generated in the terminal and is considering uses for more electricity, including selling to a power company.

‘We are also thinking about putting fuel cells on the LNG ships. We are involved in a government project with Daewoo Shipyard to use fuel cells on LNG carriers as auxiliary engines due to requirements to reduce ship pollution,’ said Kim. ‘We are looking at using 300 kW fuel cells on ships. The co-operation programme with Daewoo Shipbuilding has just started less than a year ago. We are going to start with LNG carriers to use boiled-off gas during the sea voyage to power fuel cells.’

Meanwhile, POSCO Energy is looking to expand its fuel cell business overseas, targeting various potential markets in Southeast Asia and the Middle East. In Indonesia, the company recently supplied its first fuel cell system to Ancol Dreamland in Jakarta, a seaside family theme park with rides, a water park, hotel accommodation and other entertainment facilities.

POSCO Energy is supplying a 300 kW fuel cell, which will use natural gas, for the South Korean-government backed project. Installation is due for completion at the site in time for start up in September. ‘This is a captive generation power project. Natural gas is cheap and electricity costs are high in Indonesia,’ said Kim. ‘Electricity will be used for a desalination plant to treat seawater at this site and heat will be used for the desalination plant as well.’

Other potential markets in Southeast Asia include the Philippines. POSCO Energy is also looking at markets in the Middle East, including Dubai and Abu Dhabi, where the use of district cooling is growing.

David Hayes writes on energy matters in Asia. Email:

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