1.

Auction Volume and Preparation Period

Up to 6,500GWh of electricity produced from clean hydrogen will be auctioned for a 15 year period from the commencement of commercial operation (in case of co-firing of coal and ammonia, for the remainder of the subject plant’s lifespan). Successful bidders will have three years from the execution of the contract for the preparation of clean hydrogen power generation. However, considering that this is the launching year for the hydrogen auction, penalties applicable to delays in completion of construction will not be imposed until after 48 months form the execution of the contract.
 

2.

Eligibility

To be eligible for this auction, power generation facilities must (i) utilize clean hydrogen as feedstock, either co-firing coal with ammonia or gas with hydrogen, or be powered purely by hydrogen, and (ii) have obtained a power generation business license or have applied for such a license (or amendment) before the notice of tender expires. In addition, co-firing facilities must maintain the minimum co-firing mixture rate of 20% (based on higher heating value standard) and a failure to satisfy this requirement in any month may result in an adjustment of the contract price. Please also note that if the facilities do not meet the submitted co-firing mixture rate during any operational year, they may be subject to contract termination.
 

3.

Evaluation Criteria

Submitted bids will be evaluated based on bid price (60%) and non-price factors (40%). In addition, non-price factors consist of contribution to greenhouse gas reduction (45%), contribution to industry and economy (15%), business reliability (22%), resident acceptability and project progress (13%), and grid receptivity (5%).
 

4.

Clean Hydrogen Grade

The most important criterion within the non-price factors, contribution to greenhouse gas reduction, is subject to the following quantitative evaluation: (i) emission coefficient after hydrogen production (10 points), and (ii) clean hydrogen grade (35 points). By placing a substantial point difference between Grades 1 and 2 (in which “green hydrogen” would likely fall under) and Grades 3 and 4 (in which “blue hydrogen” would likely fall under), the evaluation system appears to provide a considerable incentive to encourage bidders to use a pure grade of clean hydrogen.

5.

Upcoming Schedule and Points to Note

Businesses that intend to submit a bid must register as a bidder between October 7-18, 2024 and submit a bid on or before November 8, 2024. Following the evaluation, bid winners will be announced in December 2024.

Any facility that deviates from the tender document in terms of contribution to GHG reduction (emission coefficient and clean hydrogen grade), stability of fuel introduction (a subcategory of business reliability) contribution to industry and economy, etc., during the operation may be subject to price adjustment.

Moreover, if proper implementation of the contract would be impossible due to failure to execute at least 30% of project budget within the first 18 months of the contract period, the contract may be subject to termination following deliberation of the Hydrogen Power Auction Market Committee.
 

6.

Implications

As a reflection of the government’s commitment to achieving carbon neutrality through clean hydrogen, the Notice fully incorporates the standards under the Hydrogen Act and associated regulations, and promotes the use of green hydrogen despite its relatively high price - by placing a substantial difference in points across clean hydrogen grades. Accordingly, it will be crucial to prepare a bid proposal, comprehensively taking into account not only price but also other considerations such as clean hydrogen grades, power grid, stable hydrogen supply methods, etc.

Further, as the Notice provides detailed information on (i) cancellation of bid award, (ii) price adjustment, and (iii) contract termination, copmpanies are advised to carefully review relevant information to assess whether there is an associated risk in the business plan prior to submission.