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Japan needs scale to make hydrogen imports viable

The lack of capacity to generate renewable energy in the densely populated island nation means it will need to rely on imports to fulfil its multi-decade hydrogen strategy

The postponement of the Olympic Games, where Japan planned to make fuel-cell vehicles the official means of transport, has done nothing to reduce the country’s need for scale in its budding hydrogen economy. 

Hydrogen is “very much on the strategic agenda”, says Tim Buckley at thinktank the Institute for Energy Economics & Financial Analysis in Sydney. The postponement of the Olympics, he says, gives Japan an extra year to make its hydrogen economy “more credible, rather than a show pony”.

According to the International Energy Agency (IEA), lack of hydrogen infrastructure is a barrier to adoption that governments and industry globally must work together to overcome. “There has been a sea change in Japanese leadership thinking,” Buckley says, with the Ministry of Economy, Trade and Industry having accepted the need to hit Paris Agreement targets.

“What is really needed to scale these supply chains is greater volume on the supply and demand endpoints” Kato, Lightstream Research

Japan, which relies heavily on imported fuels, adopted its Basic Hydrogen Strategy in 2017. The plan targets cost parity between hydrogen and other fuels. But Buckley says hydrogen is still about 20 years away from being a commercial reality. Costs will need to come down by between 60pc and 80pc, for which breakthroughs are needed in terms of both technology and scale. Buckley is encouraged by the annual double-digit deflation seen in renewable energy costs. This will need to be replicated in hydrogen, he says.  

Rivalry with South Korea is likely to provide fresh political impetus. A landslide victory for South Korea’s Democratic Party in elections in April gave President Moon Jae-in a strong mandate to press ahead with his Green New Deal under which South Korea has targeted net-zero emissions by 2050. “Japan will not want to lag behind its industrial rival,” Buckley says.

Supply chains

Japan lacks the land needed for large-scale onshore renewable energy, which could otherwise be used to generate green hydrogen domestically. If hydrogen is to be imported, massive quantities will need to be brought in, Buckley says, meaning supply and distribution chains need to be built.

The country has only a two-week reserve of LNG, showing the potential for Covid-19 induced supply disruptions is “frightening”, even for existing, well-developed supply infrastructure, says Dan Shulman, principal at consultancy Shulman Advisory in Tokyo.

The country will remain a “hostage” to imports, Shulman says. Due to Japan’s limited land availability, there is a “ceiling on adding renewable generation”, he says. “That is where hydrogen fits in.” Shulman sees hydrogen vehicles and refuelling stations in evidence in Tokyo, but he notes that a fuel cell vehicle still costs about ¥3mn ($27,800) more than a hybrid vehicle.  

60-80pc – Cost reduction for hydrogen to be competitive

Current supply chains are mostly at the proof-of-concept stage, says Mio Kato, an analyst at research institution Lightstream Research in Tokyo. But the technology supporting logistics is “very mature and proven to be safe. What is really needed to scale these supply chains is greater volume on the supply and demand endpoints,” he says. “It is a chicken and egg scenario.”

Kato points to Chiyoda Corporation, which has developed technology that bonds hydrogen to toluene (an aromatic hydrocarbon and derivative of benzene) so it can be transported using existing tanker capacity. The technology has not been fully commercialised but “could remove some of the bottlenecks” in hydrogen transportation, he says.

Still, Kato notes that hydrogen is very inefficient in terms of volume and requires dedicated infrastructure for transport and storage. The real attractiveness of hydrogen, he argues, may lie in its potential to provide easier transportation of energy from offshore windfarms.

The IEA says hydrogen can help to decarbonise long-haul transport, and Japan is making early steps with test runs on trains that combine fuel cells and lithium-ion batteries planned for 2021. The first trains will have a maximum speed of 100km/hr and will cover about 140km per hydrogen tank. 

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