Yuki Kohara

An attendant prepares to fill a car THE BIG STORY

at the Iwatani Hydrogen Refueling
Station in Tokyo’s Ariake district
on Dec. 15.

READY
TO ROLL
Japan is betting on a future
powered by hydrogen, and
aims to lead the world in the
race to commercialize it
AKANE OKUTSU and NANA SHIBATA
Nikkei staff writers

TOKYO While it looks like any other filling

station in Japan, the Iwatani Hydrogen Refueling
Station in the Shibakoen neighborhood of Tokyo
is distinguished by three things: the large “H2” on
the pumps, an absence of any smell of gasoline,
and the lack of very many customers. Five cars in
one hour were considered exceptional, according
to one station employee in mid-December.
And this was one of the busier days he had seen,
at one of the busiest hydrogen refueling stations in
Japan. “Generally speaking, other stations average
around three drivers per day, but here we see 30
customers,” said the employee, who asked that his
name not be published as he was not cleared to
speak to the press.
Shibakoen is an upscale Tokyo neighborhood
of government ministry buildings and wealthy
residents. This explains the relatively high demand
for hydrogen fuel: Many of Japan’s fleet of 3,757
hydrogen-powered vehicles are government owned.

Nikkei Asia - Special excerpt from Dec. 28, 2020-Jan. 10, 2021 Print edition. Nikkei Inc. No reproduction without permission.
 THE BIG STORY
Maho Obata
Japan’s Kawasaki Heavy
Industries launched the
world’s first liquefied
The rest are bought by wealthy, environmentally
conscious enthusiasts who can afford 7 million yen
(around $68,000) -- 6 million yen with a government
hydrogen carrier in 2019.
subsidy -- for a midsize, carbon-neutral sedan.
While the traffic is a small fraction of daily
numbers at a normal gasoline filling station,
the station employee said he was not deterred.
Optimism about the future of hydrogen was
why he enrolled in a mandatory three-month
training course before taking this job. “I really feel
the potential of next-generation energy -- that’s
why I chose to work in this business. Hydrogen
is something unique. I was attracted to the
possibility of the national project,” he said.
Japan currently boasts the largest network of
hydrogen filling stations in the world. There are
135 stations in all -- heavily subsidized -- which
symbolize the government’s faith in the future of
hydrogen and its effort to lead the world in the
race to commercialize it.
The showcase for Japan’s utopian “hydrogen
Testing the waters
Exporting hydrogen is a delicate business. Before being loaded onto hulking carriers, the gas must be cooled to –253 C to liquefy,
eventually shrinking to 1/800 its original volume. (Hydrogen liquefaction process at HySTRA supply chain pilot program, 2020-21)
Australia
Brown coal Gasification Gas refining Hydrogen land Hydrogen
transportation liquefaction
Mining site facility About Port site facility
(Latrobe Valley, Melbourne) 150 km (Port of Hastings, Victoria)
Source: CO2-free Hydrogen Energy Supply-chain Technology Research Association
society,” as the government refers to its future
plans, was to be the Tokyo Olympics originally
scheduled for summer 2020. Canceled over the
COVID-19 pandemic, they are now due to be held
next summer. Part of the Olympic Village, known
as Harumi Flag, was to be equipped with fuel
cells using hydrogen to generate electricity for
lights and air conditioning, while visitors would
be transported to various parts of Tokyo with
hydrogen-fueled buses.
Life in a hydrogen society does not have to be
drastically different, said Kenichiro Ota, an emeritus
professor at Yokohama National University who
has been involved in hydrogen research since the
1970s. “It would be perfect if everyone could use
hydrogen safely and without knowing it.”
Japan’s infatuation with hydrogen dates
back to the oil shock in the 1970s when it was
extensively researched as part of a green-energy
initiative known as the Sunshine Project, which
also included solar and wind power.
Since then, the government has been investing
steadily in the new technology. This fiscal year,
for example, the government has a budget
of 70 billion yen to promote hydrogen, with
the Ministry of Economy, Trade and Industry
requesting 84.8 billion yen for the next fiscal year
starting in April. Over 30 billion yen of that is
allocated for subsidizing purchases of hydrogen
fuel cell vehicles and for setting up hydrogen
stations like the one in Shibakoen.
In 2014, Japan led the world with the first
commercial hydrogen vehicle, the Toyota Mirai
(meaning “future” in Japanese). Honda Motor
followed with the launch of Clarity Fuel Cell in
2016, and in December, Toyota Motor launched a
highly anticipated new iteration of the Mirai.
Meanwhile, the most imposing example of
Japan
Liquefied Liquefied hydrogen Liquefied
hydrogen marine hydrogen
loading transportation unloading
About 9,000 km
Kobe Airport island
(Kansai)
Japan’s confidence in hydrogen lies in the port
town of Kobe in western Japan, where the world’s
first hydrogen carrier, the towering 116-meter
Suiso Frontier, lies at anchor. Built by Japan’s
Kawasaki Heavy Industries and launched in 2019,
the ship is the first in the world designed to carry
hydrogen -- kept at an extremely low temperature
of minus 253 C in order to be compressed into
liquid form. It is set to start shipping hydrogen
from Australia to Japan in 2021.
By 2030, Kawasaki Heavy aims to have two
ships ready to bring 225,000 tons of hydrogen to
Japan, enough to power 3 million fuel cell vehicles
for 10,000 km every year.
Japan sees hydrogen as important not just for
reducing carbon emissions, but also in terms of
energy security. Japan is heavily dependent on oil
shipped from the Middle East and via sea lanes
in the South China Sea. Adding to the complexity
of the energy puzzle is an unofficial ban on
new nuclear power plants since the Fukushima
disaster in 2011.
“It is important to diversify where to source the
energy from, because Japan is poor in resources,”
said Toshiyuki Shirai, head of the hydrogen and
fuel cells strategy office at the industry ministry.
Hydrogen is attractive because it can be produced
from various resources, from fossil fuel to wind
or sunlight, and can be imported from anywhere,
unlike electricity.
ELECTRIC BLUES Critics of hydrogen focus
on the cost. Fuel cells are “fool cells,” as Tesla’s
co-founder Elon Musk put it, calling hydrogen-
powered cars a “mind-bogglingly stupid” idea.
Tesla, which produces battery-powered cars, sees
hydrogen fuel cells as a competing technology.
It continues to fall in price, but not fast
enough for skeptics. METI estimates that the
cost eventually needs to come down to 20 yen
per normal cubic meter for hydrogen to be
commercially viable, almost on par with liquefied
natural gas. In 2017, it was 100 yen per cubic
meter -- five times as high as it needs to be.
And even with subsidies of over 1 million yen
per vehicle, fuel cell vehicles are an expensive
choice. Toyota’s new Mirai is priced (without
subsidy) from 7.1 million yen --- twice as expensive
as the electric Nissan Leaf, at 3.3 million yen.
Filling up the Mirai’s tank costs 6,776 yen to drive
850 km, while it costs a fraction of that -- up to
Nikkei Asia - Special excerpt from Dec. 28, 2020-Jan. 10, 2021 Print edition. Nikkei Inc. No reproduction without permission.
about 1,860 yen -- to fully charge a Nissan Leaf,
which has a shorter driving range of about 570 km.
The drawback with the Leaf is that charging
“
Society, as a
takes up to about one hour, while the Mirai takes whole, has
only three minutes. to work on
Even advocates admit that hydrogen may not
ever be the most efficient way to power light building the
vehicles. Hydrogen is best at some things but infrastructure.
functions when there is a division of labor between … So, that is
fuels, say some experts.
In terms of technology, “it is not about which why we are
one wins,” said auto analyst Takaki Nakanishi, aiming for
head of the Nakanishi Research Institute. “Fuel the hydrogen
cells are for large and long-range [transport], and
electric vehicles are more efficient when it comes society
to small and short-range.” together
Batteries, for example, are generally large
and cumbersome when it comes to storing
large amounts of energy. Fuel cells can be more
”
Takeshi Uchiyamada
compact and are also more suited to longer-term Toyota chairman
storage -- weeks, or even years.
$19 billion
Green technology fund unveiled by Japanese Prime Minister Suga
as part of a covid-19 stimulus package
“We see hydrogen, of which there is inexhaustible
deposits, as a new power source. We will create
hydrogen airplanes and hydrogen cargo ships,”
said Suga.
Source: Japanese government, Nikkei
So, hydrogen is seen as a key factor in the
green economy, because it could fill the gap as
an alternative fuel in sectors that have been hard
to electrify with renewable energy, such as steel
production and mass transport.
Japanese multinational Toshiba, for example,
is eyeing demand for its fuel cells in railroads and
ships, said Yoshihisa Sanagi, general manager
for hydrogen energy business at Toshiba Energy
Systems & Solutions.
Another possibility is power stations. “To
achieve mass use of hydrogen, it needs to be
used for power generation,” said Masashi Nagai,
 Koji Uema
THE BIG STORY

It’s a chicken- “ general manager of hydrogen supply chain

development at Japanese engineering company
Chiyoda. “Only after that, there would be a
and-egg bigger hydrogen market for different demands,”
problem, and including passenger cars, he suggested.
the Mirai was FINDING THE CHICKEN Optimists insist that
supposed to fuel cell vehicles are just as viable as electric
be the chicken vehicles and that solving the cost issue is mainly
a matter of scale. The current government target
”
Takaki Nakanishi
says that the economically viable 20 yen-per-
cu.-meter level is possible with a large enough
market: 10 million tons of hydrogen per year, the
An auto analyst,
referring to Toyota’s government says. Nikkei recently reported that
fuel cell vehicle the government is considering speeding up its
efforts in order to reach that level by 2030.
Ahead of rolling out the new Mirai, Toyota
Chairman Takeshi Uchiyamada said at a launch
event of the Japan Hydrogen Association: “It is
similar for all technologies. When technologies
are first introduced into society, the initial cost is
inevitably high because we have to ensure quality
and safety. Going through that experience fast
brings down the cost.”
Building the Mirai was an act of faith in Japan’s
commitment to hydrogen, he said. “It is not
like in the past, when it became widespread if
manufacturers worked hard to create an attractive
Hopes that the first generation of hydrogen cars
would be the catalyst for a wave of hydrogen
have proved a disappointment. Now, the same
ambitions have been transferred to the new Mirai.
“The first Mirai triggered that first wave, but
the result of it was not as great as originally
anticipated. [The industry] did not blossom,” he
said. “Hydrogen is that difficult.”
As of March, Japan had just 3,757 fuel cell
passenger vehicles, but the government plans for
this to rise to 200,000 by 2025. That would put the
market on par with EVs, currently 123,717. There
are a total of 10.9 million new-energy vehicles in
Toyota’s latest version of its Mirai
fuel cell vehicle, which went
on sale in Japan in December.
the day off to rent a fuel cell car to see whether
he liked it. “This is the first time I’ve found a
Japanese brand I really want to drive,” he said.
He was not the only one who felt the pull of
an eco-friendly vehicle. “I was trying to make a
booking and it was almost full.” He remarked,
“It’s very comfortable to ride, it’s silent, there is no
noise, and is very smooth when I start running.”
Another driver visiting a filling station in the
Shibakoen neighborhood, a civil servant in his
40s, said the fuel cell vehicle he was driving was a
government car rather than his own. “I hope fuel
cell vehicles will become more common, but there
normal ship used to transport chemical products.
Liquefying hydrogen is costly because it is very
difficult to keep hydrogen at minus 253 C.
“
I hope
Chiyoda used hydrogen produced in Brunei fuel cell
using waste gas from a natural gas plant, carried vehicles will
in a tanker in three round trips between Brunei
and Japan to supply a total of about 110 tons of become more
hydrogen. That amount would fill an empty Mirai common,
about 20,000 times. but there are
Another market entrant is Toshiba, which
not many
has been doing research on fuel cells since the
1960s and claims to lead in hydrogen technology.
Alongside companies such as Iwatani, the gas
stations. ...
That’s the
supplier, Toshiba developed a solar power farm
and a 10-megawatt facility for producing hydrogen obstacle
from renewable energy. The project was based in
Fukushima, the prefecture that in 2011 was hit by
a devastating tsunami and the nuclear disaster.
”
A driver at a hydrogen
The facility was launched in 2020 at a site that filling station in Tokyo
was heavy with symbolism: It was originally
reserved for a new nuclear power plant.
FIRST-MOVER ADVANTAGE 2020 might have
been hydrogen’s moment. While Japan was the
first to place a big bet on the fuel, other countries
in 2020 began to notice the potential. The next few
Emission-critical

$2/kilogram
Cost at which hydrogen is competitive with diesel
-- a level potentially achievable by 2030
Source: Bloomberg New Energy Finance
product at low cost. Society, as a whole, has to work
on building the infrastructure like electric cars
filling stations or fuel cell vehicle filling stations ...
or on logistics and creating the market in order to
increase the volume [of hydrogen]. So, that is why
we are aiming for the hydrogen society together.”
Drivers interviewed at Iwatani’s refueling station
said they liked their hydrogen fuel cell cars, such as
the Mirai, but the biggest drawback was the lack of
Tesla co-founder Elon filling stations. Meanwhile, the limitation on filling
Musk has infamously
called hydrogen-powered
stations is plainly due to the lack of cars.
Japan if hybrids are included, according to the
Next Generation Vehicle Promotion Center, a
Tokyo-based industry body.
Japan is counting on more customers like
Nobuyuki Ogawa, a man in his 50s who stood at
an Iwatani station having his vehicle’s tank filled
by an attendant in crisp workwear. He had taken
Reuters
Achieving net-zero emissions means radical changes in the way we supply,
are not many stations. ... That’s the obstacle,” he said.
transform and use energy
Then there is still the price. “If you look at a
Global energy sector carbon dioxide emissions reductions by measure
hydrogen station, you can see it is very expensive,”
in the Sustainable Development Scenario* (In gigatons of carbon dioxide per year)
Nakanishi pointed out -- attributable to the costly
equipment required to handle and store the fuel. 0
A batch of large Japanese companies are hoping
to reserve a share of the future hydrogen market.
One is engineering company Chiyoda, which –10
teamed with Nippon Yusen for what they call Avoided
demand
“the world’s first global hydrogen supply chain Hydrogen
demonstration,” a project that took off in 2020. –20
Bioenergy
Chiyoda’s system adds the chemical toluene to Other renewables
hydrogen, creating a more stable substance. That Electrification
makes it able to be transported and stored with –30 Other fuel shifts
existing technology used for petroleum products. Technology performance
Unlike liquefied hydrogen, the liquid needs to Carbon capture, utilization and storage
go through a process of removing toluene before –40
being used, for example, in fuel cells.
2020 ‘30 ‘40 ‘50 ‘60 ‘70
The process is less technologically complex *The scenario is aligned with the Paris Agreement to hold the increase in global average temperature
to well below 2 C above pre-industrial levels, and pursue efforts to limit the increase to 1.5 C above

cars a “mind-bogglingly “It’s a chicken-and-egg problem, and the Mirai than liquification. Transporting hydrogen the same. Under this scenario, global carbon dioxide emissions from the energy sector and industrial
processes are on track to net-zero emissions by 2070.
stupid” idea. was supposed to be the chicken,” said Nakanishi. stabilized with toluene can be done with a Source: International Energy Agency

Nikkei Asia - Special excerpt from Dec. 28, 2020-Jan. 10, 2021 Print edition. Nikkei Inc. No reproduction without permission.
 THE BIG STORY

In the case of Kawasaki Heavy’s project with

Koji Uema
Australia, hydrogen is produced out of cheap brown
coal. By turning the coal into hydrogen, it becomes
a transportable resource. Australia’s Victoria State
is currently trying to develop a commercial-scale
carbon capture and storage network.
This has been criticized as unrealistic by experts.
“If the Japanese government wants to promote
nongreen sources of hydrogen, then it needs to not
Toshiba’s project to promise carbon capture in the future, but carbon
High-pressure hydrogen
generate hydrogen capture has to be a requirement for any commercial

Kento Awashima
tanks designed
from renewable energy, project,” said Llewelyn Hughes, associate professor for the new model
based in Fukushima,
the prefecture hit
at the Crawford School of Public Policy at of Toyota’s Mirai.
by the 2011 tsunami Australian National University.
and nuclear disasters. “You need to price that cost of carbon capture

years will show whether Japan’s early lead in the
technology will remain intact.
In Asia, South Korea’s 160 trillion won ($145
billion) New Deal economic strategy includes
the provision of 200,000 hydrogen vehicles and
450 charging facilities by 2025. South Korea’s
Hyundai Motor began production of a hydrogen-
electric car in 2013 and launched the Nexo fuel
cell car in 2018. The 2018 Pyeongchang Winter
Olympics, meanwhile, showcased a hydrogen
bus. In the future, the company looks to use
hydrogen to fuel trains and flying cars.
China, which has been heavily subsidizing its
break up water into hydrogen and oxygen, using
electricity -- by 2024 and 40 GW by 2030.
Takeshi Kaneda, president of consultancy
Universal Energy Research Institute, criticized
Japan’s investments in hydrogen for being led by
large companies that do not move quickly with the
new technology. Other countries are catching up.
“It takes a decade for [Japanese companies]
to launch a commercial product,” Kaneda said.
“In the meantime, the rest of the world becomes
powered by hydrogen led by [companies that
started out as] startups,” he added. He referred to
the U.S.-based Plug Power, which provides fuel
Koji Uema
and include that cost in the project cost. ... I think it
is pretty certain that, in the future, green hydrogen
will be a much cheaper option.”
According to Kawasaki Heavy, it is aiming for a
hydrogen cost in line with the government target
of 30 yen per cu. meter, with carbon capture,
by 2030. The company also recently announced
that it would work on another potential supply
chain project to transport green hydrogen from
Australia.
Tomas Kaberger, chair of the Renewable Energy
Institute’s executive board, was more blunt: “In “Mirai” means “future”
Japan, there are ideas such as importing hydrogen in Japanese.
produced from fossil fuels, with carbon capture
and storage in other countries, which will never

electric-vehicle industry, is also going big in fuel
cell vehicles. It has a 2030 target to increase their
number to 1 million and to reach 1,000 hydrogen
refueling stations.
The country is setting up model cities and
subsidizing companies developing hydrogen-
related technologies. Chinese combustion engine
company Weichai Power bought shares of Canadian
fuel cell company Ballard Power Systems in
2018, and together they created a joint venture to
manufacture fuel cells for buses, trucks and forklifts.
The German government, for its part,
announced a target in June of achieving 5
gigawatts of renewable generation capacity by
2030 to enable the production of green hydrogen.
It plans to spend 7 billion euros ($8.5 billion) to
support the market rollout of hydrogen technology
and another 2 billion euros for fostering
international partnerships. The European Union
followed in July, announcing a strategy to install
at least 6 GW of electrolyzers -- equipment to
cell and on-site hydrogen stations for forklifts,
as one of the success cases. Its customers include
Walmart and Whole Foods, as well as carmakers
such as BMW.
GREEN, BLUE, OR GRAY? Hydrogen releases no
carbon when burned -- the only emission is water
vapor. But the process of producing hydrogen from
fossil fuels, such as brown coal, is dirty.
In order for hydrogen to be really “clean,” it
needs to be produced from renewable energy, or
from fossil fuels combined with carbon capture
technology to extract greenhouse gases. Hydrogen
from renewables is often called green hydrogen.
Hydrogen from fossil fuel is “gray,” or blue if
combined with carbon capture and storage.
Japanese companies like Chiyoda say that they
are aiming for either blue or green hydrogen.
However, for the moment, they say they will also
use gray hydrogen -- which is much cheaper -- in
an effort to jump-start the market.
be economically sensible.”
In the long term, hydrogen can be useful
in some sectors, said Hughes. But he also
suggested: “We have very good technologies
now that can rapidly decarbonize electricity.
... Our main focus right now should be on
deploying renewable energy.”
Japan is planning to revise its energy strategy
in 2021. The current energy mix goal for 2030
holds that renewables should account for more
than 22% of total electricity demand, which is
often criticized as too low. Without a medium-
term goal, “the risk is that you end up subsidizing
a lot of different technologies [including the
hydrogen-related ones]” without the “outcomes
that you need” to go green, said Hughes.
Hydrogen is also not the only technology
option for reducing emissions. Shigeru Muraki,
representative director of the Green Ammonia
Consortium and former vice president of Tokyo
Gas, said Japan is falling behind other countries in
2020
Year the EU, Germany and South Korea launched
their national or regional hydrogen strategies
Source: Nikkei Asia research
the use of pure hydrogen. But he also suggested
that ammonia would be a more cost-effective
option, even when combined with carbon capture.
“Japan can still compete in the world for [the
technology to use] ammonia and can lead in Asia,”
Muraki said. Ammonia is a compound of nitrogen
and hydrogen and does not emit carbon dioxide
when burned. It can more easily be liquefied
than hydrogen and can be handled using existing
infrastructure and technologies, which means
lower costs.
This could spark a new ammonia race, even
before the hydrogen race has started.

Nikkei Asia - Special excerpt from Dec. 28, 2020-Jan. 10, 2021 Print edition. Nikkei Inc. No reproduction without permission.