In the upcoming ordinary session of the Diet to be held this month, the Japanese government plans to enact new legislation to financially support industries that are involved in the production and establishment of hydrogen and ammonia supply chains, as well as the development of relevant infrastructure. Needless to say, the envisaged legislation is designed to facilitate Japan’s goal of being carbon neutral by 2050.
The legislation will include regulations to exclude businesses that intend to produce hydrogen or ammonia using environmentally hazardous methods from receiving the government subsidy. In other words, the Japanese government will subsidize businesses that can produce and deal with “clean” hydrogen and ammonia.
During the seventh hydrogen policy subcommittee meeting held in December last year, Japan’s Ministry of Economy, Trade, and Industry (METI) compiled an interim arrangement plan to establish a supply chain system by around 2030 with a view to expanding the use of hydrogen and ammonia in the country. The plan proposed that the Japanese government would subsidize the difference in price between the two substances (hydrogen and ammonia) and existing fuels (fossil fuels) for 15 years. In the new subsidy system (called nesahoten in Japanese), the price of hydrogen will be cross-referenced with the price of liquefied natural gas (LNG), whereas the price of ammonia will be compared to that of coal.
The Japanese government also decided on the future energy policy at a session of the GX Implementation Council, which is chaired by Prime Minister Kishida Fumio. At the December 22 meeting, Kishida stated, “Steady efforts to gain trust from the public and local communities involved are indispensable in accelerating policy measures to deal with an energy crisis.” According to the energy strategy of the Kishida administration, more than 7 trillion yen in subsidies will be offered over the next 10 years to establish a hydrogen and ammonia supply network.
The Kishida government is planning on enacting the new legislation in order to provide the legal foundation for this 7 trillion yen subsidy toward the achievement of decarbonization and creation of a hydrogen society.
Notably, during the upper house election held in July 2022, both the Liberal Democratic Party (LDP) and Komeito, the ruling parties, pledged in their manifestos to promote Japan’s policy on hydrogen and ammonia.
One powerful facilitator of Japan’s hydrogen energy policy is the Parliamentary League for Promotion of Hydrogen Society, led by Obuchi Yuko, an LDP lawmaker occasionally described as Japan’s “political princess” due to her status as the daughter of former Prime Minister Obuchi Keizo and one of the candidates for a future female Japanese prime minister. Obuchi requested METI Minister Nishimura Yasutoshi to establish new legislation to promote a hydrogen society on December 8. On December 14, Obuchi and the parliamentary league furthermore made an official request for Kishida to support the promotion of a hydrogen society at the prime minister’s office.
Based on the carbon-neutrality goal declared by former Prime Minister Suga Yoshihide in October 2020, the Japanese government established the Green Innovation (GI) Fund of 2 trillion yen ($16 billion) in conjunction with the New Energy and Industrial Technology Development Organization. The fund is meant to subsidize 10 years of continuous support for business-led decarbonization projects as they progress from research and development (R&D) to social implementation.
Based on the GI Fund, a variety of hydrogen-related projects have been adopted. The projects in progress include:
- Establishment of a fuel ammonia supply chain;
- Utilization of hydrogen in the steel-making process;
- Development of next-generation ships, including hydrogen/ammonia-fueled ships;
- Development of next-generation aircraft, including hydrogen aircraft;
- Development of plastic raw material production technologies using, among others, hydrogen and carbon dioxide;
- Hydrogen production by water electrolysis using electricity derived from renewable energy among other sources; and
- Development of technologies for transportation, storage, and power generation for the establishment of an international hydrogen supply chain.
One of the projects resulted in the world’s first liquefied hydrogen transportation vessel, Suiso Frontier, which successfully transported liquefied hydrogen from Australia to Japan last year.
The financial support by the Japanese government based on the GI Fund helps to facilitate the creation of a hydrogen society, but hydrogen is not fully commercialized in Japan or the world as a whole. Similarly, the price of hydrogen fuel cell vehicles (FCVs) is considerably higher than other automobiles, including electric vehicles (EVs). In 2014, Toyota Motor Corporation launched Mirai, the world’s first hydrogen FCV, and the Japanese government has rigorously facilitated its hydrogen energy policy since then. However, the number of hydrogen stations is limited and promotion of FCVs has been faced with difficulties in terms of the price of vehicles and the number of hydrogen stations nationwide.
In a tweet on June 11, 2020, Tesla CEO Elon Musk dismissed fuel cells as “fool sells,” boasting about the competitiveness of EVs vis-à-vis FCVs. As reported in Japan Times last month, most major automakers expect that EVs will account for the majority of vehicle sales by 2030, and Musk’s Tesla made nearly eight times more profit per vehicle than Toyota for the third quarter of 2022.
Having said that, FCVs have not completely lost their business opportunity. If anything, automakers in European and Asian countries have continued to invest in and improve their FCV production and promotion. For instance, AFC Energy (based in the United Kingdom), Topsoe (Denmark), Hopium (France), and SFC Energy (Germany) are the main players in the FCV technology market in Europe. As Asia’s economic superpower, China has defied Musk’s warnings and has continued to produce and promote FCVs. South Korea has also pushed for the establishment of the hydrogen ecosystem and supported the promotion of FCVs.
Importantly, it has been pointed out that FCVs “may yet threaten Tesla” given the fact that Toyota, the world’s second largest automaker, has made consistent and strategic commitments to FCVs in collaboration with Honda. Therefore, major automakers in Japan and the world still find FCVs promising, and it has been argued that FCVs could be Tesla’s “biggest threat” in the future. In terms of recharging, for example, FCVs are superior to EVs because the hydrogen tank can be refilled in less than five minutes at a hydrogen station, whereas it takes about 15 minutes for EVs to be charged from 30 to 50 percent. It takes about an hour for EVs to fully recharge at a charging station.
Meanwhile, both Japan and the United States have attempted to increase the number of hydrogen stations. In the United States, Toyota and Honda have collaborated with Shell with a view to increasing the hydrogen refueling network in California in recent years. Shell has also collaborated with Hyundai to expand its hydrogen stations in the state. At the same time, the Japanese government has attempted to increase the number of hydrogen stations from 166 to some 1,000 by 2030. Given the length of cruising distance of FCVs, an increase in the number of hydrogen stations in the United States and Japan could be strategically important in the middle of the energy crisis aggravated by Russia’s invasion of Ukraine and the ensuing war.
On December 17-18, Toyota’s President and CEO Toyoda Akio himself, behind the wheel of a liquefied hydrogen-powered GR Corolla, participated in a 25-hour endurance race held in Thailand. The cruising distance of the hydrogen-powered GR Corolla has doubled compared to the previous model, and its official debut race is scheduled for February 23, at an endurance race to be held near Mt. Fuji.
As the case of the GR Corolla shows, technological innovation in the field of hydrogen energy as well as FCVs is still promising, despite being thought technically unfeasible in the past. The Kishida administration certainly thinks the hydrogen society dream is worth pursuing. It is expected to successfully enact the new legislation as one of its first tasks this year during the ordinary session of the National Diet.