Shulman Advisory

Hydrogen and Japan’s Energy Future

Much activity – and much hype – has surrounded the push towards the adoption of hydrogen as a key fuel in Japan.  Today we’re going to clear away some of the haze by zeroing in on several key aspects of what’s going on.


In December 2017, Japan’s “Basic Hydrogen Strategy” was approved by the Cabinet. One major reason stated for working to “realize a hydrogen society” is the need to reduce Japan’s dependence on imported primary energy sources, which has skyrocketed since the Fukushima accident in 2011. Japan’s level of energy self-sufficiency has been in the range of 6 – 7% throughout the post-Fukushima decade, putting it second to last in the list of 34 OECD member countries.

Another key reason is to achieve carbon emissions reduction targets. The government aims to bring emissions about 25% below FY 2005 levels by FY 2030.

Supply Chain 

Japan’s progress in building both domestic and international supply chains for hydrogen fuel, while encompassing some truly interesting projects, has only reached a demonstration stage.

In February of this year, electrolytic hydrogen production began at the Fukushima Hydrogen Energy Research Field (FH2R) facility, primarily powered by an on-site solar farm.  This pilot project was meant to supply hydrogen for the (postponed) 2020 Tokyo Olympics flame, and a variety of fuel cell vehicles and stationary fuel cell power supply systems slated for use at the games.

In addition to that, since 2015, Australia and Japan have been cooperating to build hydrogen production, gasification and loading facilities in Australia, and receiving facilities in Japan. The hydrogen will be produced from brown coal using an integrated coal gasifier combined cycle (IGCC) system. Beginning in the fall of 2020, shipping of hydrogen from Australia to Japan using the world’s first dedicated hydrogen tanker is scheduled to begin.

Finally, since August 2017, Japan has been participating in a hydrogen production project in Brunei in which Methylcyclohexane (MCH; toluene combined with hydrogen) is produced through a catalytic dehydrogenation process. MCH, unlike pure hydrogen, can be shipped using conventional tankers.


Procurement Volume and Price

In 2017, Japan procured about 200 tons of hydrogen at a price of 100 yen/Nm3.

The 2030 target is to procure 300,000 tons at a price of about 30 yen/Nm3, with a longer term target of 20 yen. (The price of natural gas adjusted to the calorific value of hydrogen is currently 16 yen/Nm3.)


Japan has set ambitious targets for the proliferation of hydrogen fuel cell vehicles and supporting infrastructure throughout the country. In 2018, about 3,000 FCVs were registered in Japan and there are currently 132 fueling stations in the country.

Following are the government’s stated targets:

FCV Targets

– 200,000 FCVs by FY 2025 and 800,000 FCVs by FY 2030

– Reduction of price difference between FCVs and HVs from about 3 million yen to about 700,000 yen

– Reduction of component costs including fuel cell systems (20,000 yen/kW to 5,000 yen/kW) and hydrogen storage system (700,000 yen to 300,000 yen) by FY 2025

– Expansion of vehicle models targeted at the mass-market

Hydrogen Station Targets

– 320 stations by FY 2025 and 900 stations by FY 2030

– Reduction of construction costs from 350 million yen to 200 million yen and operation costs from 34 million yen/year to 15 million yen/year by FY 2025

– Making stations independent from government support by the second half of the 2020s

– Reduction of the component costs including compressors (90 million yen to 50 million yen) and high-pressure vessels (50 million yen to 10 million yen)

Power Generation

Japan is also working towards the application of hydrogen as a fuel to burn for power generation. A demonstration project was conducted in FY 2017-2018 using a 100% hydrogen-fired plant in Kobe to supply power to facilities in the city, and work to improve the plant’s efficiency is still ongoing.

Mitsubishi Hitachi Power Systems has also developed a plant which can flexibly use different ratios of hydrogen and natural gas together.

As of 2019, the unit price for electricity produced in hydrogen-fired plants in Japan was 52 yen/kWh. The government aims to bring it down to 17 yen/kWh by 2030, and subsequently to parity with other forms of thermal power generation.

Export Potential

Japan is investing in the development of technologies with the potential to be exported and play a major role in the world’s hydrogen future – if that future does in fact come to fruition.

The dedicated liquefied hydrogen tanker slated to be used in the Australia-Japan demonstration project mentioned above was built by Kawasaki Heavy Industries. Hydrogen is cooled to minus 253°C for transport on the ship, giving the hydrogen 1/800 the volume of gaseous hydrogen. That, in turn, could help push the economics of international hydrogen shipping in the right direction.

Following years of testing in Japan, earlier this year Mitsubishi Hitachi Power Systems sold the combined cycle gas turbine plant mentioned earlier to an independent power producer in the US. The plant will initially be fueled with 30% hydrogen and 70% natural gas. As the availability of hydrogen increases, the plant will be shifted to 100% hydrogen-firing by 2045.  This technology provides a good way for power generators to invest in the ability to run hydrogen-fired plants while still hedging against uncertainty about the future availability and economics of hydrogen fuel.

Major Questions Remain

Taken at face value, Japan appears to be moving aggressively towards its goal of “realizing a hydrogen society” in the coming decades. The government has set aggressive targets, and the government and the private sector are both investing in key technology development. “Japan, Inc.” has a track record of moving mountains in impressively short time frames when everyone buys into the same goal.

However, all of this simply can’t be taken at face value.

If the government is serious about hydrogen as a mechanism to reduce Japan’s dependence on fuel imports, one would expect to be hearing more about developing domestic hydrogen production capability at scale than about overseas production demonstration projects. Setting aside supply risk and strictly considering carbon emissions reduction targets, Japan doesn’t yet appear to be moving aggressively to secure hydrogen produced in a green way from overseas sources – and that’s without considering carbon emissions resulting from the transport of the hydrogen, not to mention the question of whether green hydrogen can be procured at scale from overseas at an acceptable level of cost.

If the use of hydrogen as a fuel truly takes off worldwide, Japan appears to be positioning itself well to capitalize on the trend by producing hardware for export. But when it comes to hydrogen as a fuel to be consumed within Japan, in the context of carbon emissions reduction targets and the need to lessen dependence on foreign fuel imports, things still just don’t add up.

Stay Tuned

We’ll be taking a closer look at where energy infrastructure fits into Japan’s export strategy, and prospects for hydrogen related equipment in particular, in the September edition of our monthly J-Enerlytics Power Market Monitor report, which you can subscribe to here.

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