In October 2020, during his first address to Parliament, Japan's new Prime Minister Yoshihide Susa announced his government's intention to bring his country to carbon neutrality by 2050. This announcement reinforced the commitments made by the previous government, which aimed at an 80% reduction in emissions by the same date compared to 2010.
One of the major instruments through which the Japanese government intends to achieve this transition to a low-carbon society is the Ministry of Economy, Trade and Industry (METI). METI is largely responsible for the country's industrial and energy strategy, and works closely with private companies in the relevant sectors.
In its "Green Growth Strategy", METI has targeted 14 priority sectors for the transition to a carbon-free economy, divided into three categories: energy, transport and industry, and home and office. Hydrogen is involved in four of the seven "transportation and industry" sectors and especially three of the four energy sectors:
Transportation and Industries
Home and Office
Offshore Wind Power
Mobility and battery*
Semiconductors and ICT
Logistics, people flow and infrastructure*
Foods, agriculture, forestry and fisheries
Housing and building, Next generation PV
Fig 1: Priority growth sectors identified by the Japanese METI; hydrogen-related sectors are indicated by an asterisk *.
The originality of Japanese strategy
If Japan is today one of the most advanced countries in the transition to a hydrogen economy, its strategy differs from those of other industrialized countries by the low priority given to the domestic production of hydrogen, whether decarbonized or not.
Indeed, Japan relies heavily on imports to supply its economy with hydrogen, and is already organizing its supply chain accordingly. The reasons behind this choice are notably the geographical constraints that weigh on the country for green hydrogen, such as the lack of space on the archipelago for the production of renewable energy, or seabeds that are not very suitable for offshore wind power, or the resistance and uncertainties about nuclear power for pink hydrogen.
Although coal and natural gas import channels are well established, Japan does not seem to want to develop a domestic fossil hydrogen production channel (brown, grey or blue), for reasons that are not very explicit (see for example the end of this article). One can assume that CO2 capture and sequestration technologies are not well-suited to the country due to the seismic risk, and the fact that Japan wants to limit the domestic CO2 emissions associated with the production of brown or grey hydrogen.
Technologies and the roadmap
Although Japan's hydrogen strategy is ambitious and well underway, and has been widely embraced by Japanese private actors, the technical uncertainty associated with the various technologies for future large-scale use is leading the various actors to pursue various avenues of value chain development, particularly for international supply.
As a result, several solutions are currently being developed in this area. These include direct supply of liquefied H2 by tanker, chemical storage via a liquid organic compound (LOHC) such as methylcyclohexane, and supply through ammonia NH3. These technologies seem to represent the main avenues pursued by Japan. They have been put forward by a dedicated working group, see for example section 3.4 of this paper, presumably to the exclusion of alternatives such as pressurized hydrogen, methanol, renewable natural gas or solid storage. Some of those other technologies, however, have been selected for domestic applications, including local or regional distribution.
Of these three methods of importing hydrogen, ammonia is perhaps the most favored since large-scale production via natural gas and supply chains already exist. Japan currently imports 200,000 t/year, equivalent to 1/5th of its consumption. In the medium term, ammonia would be co-fired with a share of 20 % in Japanese coal power plants (see Fig. 2), as planned by the JERA consortium, which manages the majority of the country's thermal power plants; and in the longer term, industrialists are developing turbines that use pure ammonia as fuel.
In terms of volumes and forecast prices, Japan expects to import 300 kt/year of hydrogen in 2030, compared to 4 kt/year today, at a price of 30 JP¥/Nm3, or 357 JP¥/kg, equivalent to 3.3 US$/kg at the current exchange rate, compared to ~$10/kg today. As for ammonia, Japan plans to use 3 Mt/year of it in 2030, and targets a price of 15-20 ¥/Nm3, compared to 20-25 ¥/Nm3 today, which would correspond to about 0.2 US$/kg in 2030 compared to about 0.25 US$/kg today.
Fig 2: METI's roadmap for ammonia fuel. Source: METI
Unlike other developed countries, in particular the European Union, the actors of the Japanese energy transition seem to consider the green character (i.e. from renewable energy) of hydrogen as secondary, at least compared to the decarbonized character. Thus, the production of hydrogen from fossil hydrocarbons is considered acceptable, or even favored because of the lower costs; however, it seems that domestic production, which is in the minority, is restricted to green hydrogen for reasons of acceptability.
Moreover, to facilitate the development of supply chains Japan seems ready, in the short term, not to make the absence of CO2 capture and sequestration a blocking point for investments; in short, this means that Japan is ready to import brown or grey hydrogen. The LOHC and liquid H2 import pilot projects from Brunei and Australia respectively are two good examples, since the production is by methane steam cracking in the first case and coal gasification in the second, without CO2 capture and sequestration for now. However, this point is likely to evolve rapidly, as the reduction of greenhouse gas emissions is a major objective of the switch to a hydrogen economy.
Beyond the objectives of ecological transition and energy security, Japan's hydrogen strategy also aims to establish Japanese companies as major players in the market of hydrogen production and its derivatives in the Pacific. As such, Japanese companies and the government are actively seeking international collaborations with potential producer countries to invest in production and transportation infrastructures. In addition to the Australian and Bruneian examples, Japanese players are exploring partnerships throughout the Pacific region, as well as with oil-producing countries in the Persian Gulf: the United States, New Zealand, Malaysia, Russia, Saudi Arabia, etc.
While a large number of Japanese companies are involved in the development of the Japanese hydrogen economy, some are particularly involved in the international development mentioned above. These include Mitsubishi and its subsidiaries, which are involved in the entire hydrogen and ammonia value chain; Chiyoda Corp. which is developing LOHC transportation; Kawasaki, which is involved in liquefied hydrogen transportation, among other things; and Iwatani, both of which participated in the founding of the HySTRA consortium.
These partnerships are the result of coordination between industry, which directly contracts with and invests in overseas companies, and the government, which signs memorandums of cooperation with other national and regional governments and actively supports companies through technical and financial support and public-private consortia. Both the Japanese government and companies are thus willing to invest heavily in the infrastructure of the countries in the region to shape the future market for hydrogen and its derivatives, including ammonia.
An example of these processes is the pilot project to import blue ammonia from Saudi Arabia. A memorandum was signed between the Institute of Energy Economics of Japan (IEEJ), a think tank, and Saudi Aramco in 2019 at a Saudi-Japanese economic forum organized by METI, among others. The production aspect of the project was carried by Aramco and Saudi Arabia Basic Industries Corporation, using existing infrastructure. The IEEJ delegated the task of managing the transportation of ammonia to Mitsubishi, in partnership with UBE Industries and JGC Corporation, which specialize in chemicals and hydrocarbon engineering respectively. The whole process was supported by METI.
Japan is thus leading a policy of developing hydrogen imports combining a selection of promising technologies and multiple source countries around the Pacific and up to the Indian Ocean.
Canada is not excluded from these developments. If no major industrial partnership has been concluded between the two countries at the moment, Japanese institutional actors, notably METI, are interested in Canadian hydrogen production and export capacities.
On its Pacific coast, Canada can count on the production of blue hydrogen in Alberta and green hydrogen in British Columbia. These projects are consistent with Canada's federal hydrogen strategy, which identifies Japan as one of five major export markets, and relies on British Columbia's port infrastructure to export production from the province and Alberta to the Pacific, as described in this document pp 89-90.
Japan's hydrogen import strategy opens up many opportunities for players around the Pacific Rim to take advantage of. In particular for companies in countries that can organize a public-private collaboration framework.