Japan’s enthusiasm for hydrogen perplexes North Americans, whose rallying call is not “build the hydrogen economy” but “electrify everything."
Even with luminary Michael Liebreich newly boarding the hydrogen train, the country’s pro-proton stance strikes many as inefficient and counter-productive.
To understand Japan’s position, one must understand Japan’s situation. To the extent that all politics are local, all policies are too, and Japanese policymakers find themselves in a different place from their OECD colleagues.
Dependence on fossil fuel imports
At the recent Tokyo World Smart Energy Expo, photovoltaics, wind, batteries, smart grids, biomass and fuel cells were on display, as expected. But the expo also included next-generation thermal power.
Japan’s almost-complete dependence on imported fossil fuels for primary energy shapes the national psyche. The decline of nuclear power after the Fukushima meltdowns meant that imported fossil fuels provided 94 percent of Japan’s primary energy in 2015. Unsurprising, then, that incremental advances in combustion technology are deemed conference-worthy, even as renewables slowly take over the energy landscape.
Now only the world’s third-largest importer of coal behind China and India, Japan remains the planet’s biggest importer of liquefied natural gas. It played a pivotal role in creating the LNG industry a half-century ago, when it turned to the fuel in response to extreme air pollution stemming from coal- and oil-fired power plants, a situation not dissimilar to the one China finds itself in today. And despite consuming less oil than Texas, the country’s lack of petroleum resources makes it the world’s fourth-largest petroleum importer.
With nuclear power politically unviable, Japan will continue to rely on bulk energy imports for decades to come — even with an all-out renewables push. Fuel switching from coal, oil and LNG to hydrogen is an appealing path for emissions reductions; and as hydrogen and fuel cells will take decades to scale, combustion technology remains of keen interest.
Electricity: Japan’s unique double standard
With respect to renewables, Japan’s geography poses a challenge, as the country has just one time zone and an effectively islanded grid. Political relations may need to warm considerably before Japanese internet titan Softbank’s vision of an Asian super grid spanning Russia, China, Japan and South Korea can materialize.
A still bigger challenge is that the grid in eastern Japan runs at 50 hertz, while the grid in western Japan runs at 60 Hz, making it difficult for the two halves of the country to trade power; transmission capacity between the grids is limited to 1.2 gigawatts. Where Europe and North America benefit from continent-scale grid integration, Japan is partitioned between two grids.
This stranger-than-fiction reality stems from Tokyo purchasing generators from Germany in 1895, and Osaka, Japan’s second-largest city, choosing generators from General Electric shortly thereafter. Long-running stalemates aren’t unusual in Japanese business. While the VHS vs. Betamax standards battle resolved itself relatively quickly, by 1895 domestic soy sauce manufacturers Yamasa and the forerunners of Kikkoman had already spent a quarter of a millennium in commercial competition.
Given the challenges that Japan’s islanded and chimerical electric grid pose for renewables integration and its necessity-driven expertise with bulk energy imports, hydrogen becomes an appealing option for decarbonized energy. Policy support for renewables remains — homeowners with solar panels who purchase home energy storage units can receive 20 yen per shifted kilowatt-hour ($0.18 per kilowatt-hour) on top of photovoltaics feed-in tariffs — but hydrogen looms as Japan’s biggest emissions lever.
The tortoise and the hare, revisited
While conventional wisdom holds that North American businesses tend to focus on quarterly results, Japanese industrial policy tends to get mapped out by the quarter-century, with plans for slowly, methodically scaling new technologies. The Japanese Ministry of Energy, Trade and Industry (METI) Hydrogen/Fuel Cell Industry roadmap has a price target of 30 yen/Nm3 for imported hydrogen in 2030, dropping to 20 yen/Nm3 two decades later.
The 30 yen price corresponds to 330 yen/kg H2, or a bit more than $3/kg. With 1 kilogram of hydrogen containing almost exactly the chemical energy of a gallon of gasoline, this would correspond to an equivalent cost of $3/gallon for drivers. Fuel taxes would raise the cost for drivers, but the impact should be offset by fuel cells’ higher efficiencies and by hydrogen’s lower emissions intensity, as carbon pricing emerges.
METI’s plan calls for Japan to be home to 40,000 fuel-cell electric vehicles (FCEVs) by the end of 2020, to reach 200,000 FCEVs by 2025 and hit 800,000 FCEVs in 2030 — figures that will no doubt be dwarfed by the country’s plug-in electric vehicle population. (More than 200,000 plug-in electric vehicles had been sold in Japan by December 2017.)
Following the deployment (if not profit) success of Plug Power, a push into fuel-cell forklifts is coming; Toyota has repurposed Mirai fuel cells for the materials handling market and is the world’s largest forklift vendor, selling in America through its Raymond brand.
Fuel-cell buses have also been proposed as a means of increasing hydrogen consumption, as these are expected to consume about 45x as much hydrogen as passenger vehicles. However, Japanese plans for 1,200 fuel-cell buses by 2030 are far more modest than deployment goals in Europe (roughly 9,000 fuel-cell buses by 2025) and Zhengzhou in Henan, China (5,000 electric buses with fuel-cell range extenders by 2020). And these figures remain minuscule compared to current battery-electric bus volumes, with Chinese OEMs shipping about 90,000 e-buses last year alone.
Here we can see the Achilles’ heel in Japan’s incremental plans. While appropriate for scaling up industrial processes, the “move slow and check things” approach limits how quickly manufactured goods can achieve commercial production scale.
China’s “move fast and deploy things” approach means its vendors will spend much more money fixing problems in the field, but the scale and experience they gain should see them quickly becoming strong competitors, eventually doing to fuel-cell costs what they did to photovoltaics a decade ago. A domestic Chinese manufacturer has now claimed fuel-cell durability of 5,000 hours, adequate for fuel-cell range extenders and passenger vehicles. If Chinese manufacturers scale production of good-enough fuel cells faster than Japanese companies scale their own production, the price differential could force Japanese producers to retreat to the higher end of the market.
Even in the most optimistic scenarios, hydrogen consumption from fuel cells won’t be high enough to drive hydrogen costs down, so METI’s plan calls for dramatically increasing its use in business and industry. One might term this plan “hydrogen everywhere."
A byproduct of numerous industrial processes, hydrogen has historically been burned for heat, for lack of more valuable uses. The situation is not dissimilar from natural gas flaring at oil wells, a practice that continues in some areas today.
Given negligible automotive use in the near term and the cautious cadence of Japanese industry toward new chemical processes, Japan has chosen power generation as its first lever to increase hydrogen use. As noted in previous GTM coverage, Japan will soon source hydrogen from Brunei in the form of a liquid carrier. Australia and Norway have also been identified as potential suppliers of renewables-based hydrogen, which as a cleaner imported fuel would play the role LNG played 50 years ago.
Plans call for small quantities of hydrogen to be bled into coal- and natural-gas-fired power plants, with usage rising over time. Here, Japanese companies’ expertise with integrated gasification combined cycle coal plants — which generate a hydrogen-rich syngas mid-process — should facilitate the transition. Long the biggest climate villain, and with good reason, it would be remarkable if coal and coal-derived expertise became key to Japan achieving its hydrogen ambitions.
Countries’ approaches to energy are shaped by their constraints, and Japan’s resource-empty but resourceful position is at an extreme. Given the country’s islanded and split grid, and its near-total dependence on imported fossil fuels, the allure of hydrogen is understandable — inevitable, even.
For all its fuel cell enthusiasm, Japan’s first major steps toward hydrogen-driven decarbonization will occur in the power sector. There, in a majestically ironic twist, its against-the-grain focus on improving the efficiency of combustion — coal combustion, no less — may prove instrumental in helping it quicken its hydrogen pivot.
Matthew Klippenstein heads Electron Communications, a cleantech-centric consultancy. He chronicles the Canadian electric car market for GreenCarReports and co-hosts the CleanTech Talk podcast. He does not own shares in or conduct business with any of the companies listed above.
Note: Toyota paid for the author’s flight expenses to the World Smart Energy Expo.