Japan’s Hydrogen Industrial Strategy
This commentary is part of Energy Rewired, a project from the CSIS Energy Security and Climate Change Program studying the industrial strategies of major economies for the energy transition. The project examines countries’ big bets on emerging energy technologies and how these will rewire the world’s energy map.
- Japan is a highly industrialized country with a severe lack of hydrocarbon resources that sees multiple values in using hydrogen, including energy security, industrial competitiveness, and carbon emissions reduction. In 2017, Japan issued the Basic Hydrogen Strategy, becoming the first country to adopt a national hydrogen framework.
- Japan has a broad end-use approach that looks at power, transportation, residential, heavy industry, and potentially refining. Meanwhile, Japan is a leader in fuel cell technology, especially fuel cell vehicles (FCVs), and Japanese leaders would like to export this technology to the rest of the world.
- Japan is highly focused on securing access to hydrogen feedstocks. It therefore has begun to test various options for sourcing hydrogen and there is a question about how its diplomacy might adjust to that need.
- The Japanese government provides robust funding for research, development, demonstration, and deployment (RDD&D), while also keeping its technology options open. Growing competition from European governments and businesses is a major concern to Japan. The national government seeks to increase public spending, technological innovation work, and collaboration with industrial stakeholders to expand a society-wide adaptation of hydrogen and fuel cell technology.
Japan sees hydrogen as a major way to decarbonize its economy while sustaining its industrial competitiveness. Hydrogen is among the 14 sectors identified under the Green Growth Strategy Through Achieving Carbon Neutrality in 2050 (announced in December 2020) that will be key for Japan’s ability to meet the dual objectives. The Japanese government doubled down on hydrogen with an update to the green growth strategy, announced in June 2021, that adds specific action plans to priority sectors.
Per the triennial Strategic Energy Plan, to be adopted by the cabinet later this fall, hydrogen and ammonia will make up 1 percent of both the primary energy mix and the electricity supply mix in 2030 to be consistent with the country’s 46 percent greenhouse gas reduction target (against 2013 levels). Beyond its use in the electricity generation and transportation sectors, hydrogen is seen as key for decarbonizing industrial sectors, such as steelmaking and petrochemical production. In particular, Japan also has a technological edge in fuel cell technology. The country continues to invest in this technology and seeks to be a top global exporter.
Reducing the cost of hydrogen production is a major agenda. The work is underway to reduce the cost from about US$1 per cubic meter (Nm3) in 2017 to 30 cents/Nm3 by 2030 and about or below 20 cents/Nm3 by 2050.
While Japan sees reliance on hydrocarbon as inevitable in the short term, the country seeks for the long term to shift the source of hydrogen and fuel cells from fossil fuels like natural gas to renewable energy, including a growing volume of domestically sourced renewable energy.
In 2017, Japan issued the Basic Hydrogen Strategy, becoming the first country to adopt a national hydrogen framework. The national government has also issued several strategic documents covering technological and economic aspects, such as the Strategic Roadmap for Hydrogen and Fuel Cells (2014, 2016, 2019), and the green growth strategy.
Japan is focused on expanding its hydrogen market from two million tons per year today to three million tons per year by 2030 and 20 million tons per year by 2050; through scale, the country seeks to drive down the cost of hydrogen to about one-third of the current level by 2030. In March 2019, the Japanese government updated its Strategic Roadmap for Hydrogen and Fuel Cells (initially adopted in June 2014 and previously revised in 2016). The roadmap presented new targets on the specifications of basic technologies and cost breakdowns and defined measures that are needed to achieve these targets. For example, the mobility targets included 200,000 FCVs by 2025 and 800,000 by 2030, as well as 320 fueling stations by 2025 and 900 by 2030.
The development of hydrogen supply chains is a major agenda, and both the Japanese government and companies are undertaking various projects, including the development of maritime transport. For example, Japan’s Kawasaki Heavy Industries Ltd. launched the world’s first liquefied hydrogen vessel in 2019 and completed the world’s first liquefied hydrogen receiving terminal in Japan in 2020. While Japan is currently focused on fossil fuel–based hydrogen supply chains, the country is also planning to establish a manufacturing technology base by 2030 to produce hydrogen from domestic renewable sources.
Japan wants to keep its technology options open and is investing in all carriers (i.e., liquified, methylcyclohexane [MCH], ammonia, and methanation) due to different advantages and the belief that it is too early to ascertain their long-term viability.
The mid-century carbon neutrality pledge, announced in October 2020, has furthered policy discussion of the following steps:
- More closely examine hydrogen demand potential and cost competitiveness
- Examine infrastructure needs in a comprehensive, society-wide manner
- whether to introduce support for hydrogen deployment in additional areas, such as petroleum refining
- how best to scale up the demand so as to reduce import costs
- whether to further focus on investing in the development of electrolyzer technology
- whether the scope of Japan’s resource diplomacy should expand to include growing ties with renewables-rich countries as potential suppliers of renewables-based hydrogen
- whether the Japanese government should support the export of hydrogen technology and products to other hydrogen user countries
The updated green growth strategy (June 2021) outlines future global market potential for hydrogen technologies and products in key sectors; identifies what needs to be overcome (mostly technical obstacles, but some regulatory); and provides timelines and numeric targets, such as units of deployed equipment (e.g., refueling stations) and end-use products (e.g., cars and residential fuel cells), as well as hydrogen volume used (e.g., steel making and electrolyzing).
The Japanese government provides robust funding for RDD&D. The Japanese fiscal year 2020 (April 2020–March 2021) government funding for hydrogen includes $247 million for clean energy vehicles (including, but not limited to, hydrogen and fuel cell), $40 million for residential fuel cells and fuel cell innovation, $52.5 million for innovative fuel cell R&D, $30 million for hydrogen supply infrastructure R&D, $120 million for FCV refueling stations, $141 million for the development of hydrogen supply chains using new sources abroad, and $15 million for hydrogen production, storage, and usage technology development. (The dollar values are based on the rate ¥100 = US$1.)
Furthermore, Japan’s national R&D agency, New Energy and Industrial Technology Development, is in the process of funding hydrogen projects that aim to establish a large-scale hydrogen supply chain ($2.7 billion allocated) and generate green hydrogen ($700 million allocated). The funding comes from the $20 billion Green Innovation Fund, which is one of the key policy tools under the green growth strategy, to support the mid-century carbon neutrality goal.
There is strong collaboration between the public and private sectors. Major areas where the public-private partnership is established include hydrogen use to decarbonize port operations via the Carbon Neutral Port initiative and expanded use of ammonia through the work of the Public-Private Fuel Ammonia Promotion Council. Moreover, a number of Japan’s leading energy companies, automakers, heavy industry companies, and financial entities have joined forces to promote hydrogen business and debate and recommend policy and regulatory conditions to realize a hydrogen economy (e.g., Japan Hydrogen Association, Clean Fuel Ammonia Association, and Japan H2 Mobility).
Japan has the largest fleet of hydrogen refueling stations in the world, with over 130 stations across the nation—centered in four major cities—since the rollout in 2013. The Japanese government provides financial support for their construction and operation, but costs remain high.
Meanwhile, a major hydrogen research complex is based in Fukushima Prefecture. The Fukushima Hydrogen Energy Research Field (FH2R), which opened in March 2020, uses solar power generation (20-megawatt capacity) on a 0.18 km2 site and electricity from the grid to electrolyze water in a 10-megawatt-class hydrogen production unit—the largest in the world. The FH2R will also host various tests to identify the optimal operation control technologies that combine power grid demand response with hydrogen supply and demand response.
As Japan explores various technology options and hydrogen sources, Japanese companies are involved in hydrogen supply chain–related projects with countries around the world, including Australia, Brunei, Indonesia, Malaysia, Singapore, Saudi Arabia, Russia, the United Arab Emirates, and the United States. Some of the most notable undertakings are as follows:
- Saudi Arabia: In September 2020, Japan received the world’s first shipment of fossil fuel–based ammonia from Saudi Arabia.
- Brunei: There was a demonstration of shipping natural gas–based hydrogen from Brunei to Japan, in the form of MCH. In May 2020, Japan received the first shipment from Brunei and used the supply for domestic power generation.
- Australia: The demonstration project on lignite-based liquefied hydrogen shipment from Australia to Japan is underway. The first shipment of Australian hydrogen to Japan is expected later in 2021.
Jane Nakano is a senior fellow in the Energy Security and Climate Change Program at the Center for Strategic and International Studies in Washington, D.C.
This commentary is made possible by support from the Hewlett Foundation.
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© 2021 by the Center for Strategic and International Studies.