Japan strives to make green hydrogen a pillar of its energy mix

Within a few years, trucks in Japan could be running on hydrogen made from renewable energy.

The country’s Ministry of Economy, Trade, and Industry announced in December that it will subsidize efforts by Honda and Toyota Motor to increase their production capacity for fuel cells that convert hydrogen into electricity for powering trucks. The ministry will provide over $90 million to Honda and more than $70 million to Toyota.

Like many countries, Japan aspires to become carbon neutral by 2050. It currently relies on imported fossil fuels for most of its energy needs; to reduce Japan’s carbon footprint, the government intends to add cleaner fuels to the mix. After some stumbles, the programs seem to be advancing—though large-scale use of H₂ as a fuel is still a long way off.

Hydrogen produced by electrolyzing water with renewable forms of energy is an important part of the government plan. Officials expect clean fuels like hydrogen and ammonia to represent 1% of Japan’s power consumption by 2030 and 10% by 2050. Over a quarter of the ministry’s $20 billion Green Innovation Fund is allocated to hydrogen-related technologies.

Several companies are enthusiastically endorsing the government’s vision. For example, Asahi Kasei is developing a business in electrolyzers and other equipment for H₂ production. “We aim to achieve sales of 100 billion yen [$660 million] by 2030, based on a business model of system sales and maintenance services,” says Masami Takenaka, an Asahi lead executive officer and general manager of the firm’s green solutions business.

Its limited unused land means that Japan cannot set up gigantic solar farms like those found in Australia, China, India, and the US. Instead, the country wants to combine domestic technology for renewable energy–derived hydrogen with an international supply chain for the gas itself. The government has set a goal for Japanese companies to be involved in operating 15 GW of water electrolysis–based H₂ production, either domestically or abroad, by 2050.

“Imported hydrogen is cheaper than hydrogen produced domestically using renewable energy and is essential for promoting the spread of hydrogen on a large scale,” says Akihiro Iiyama, a hydrogen and fuel cell expert at the University of Yamanashi. Japan lags several other countries in developing supplies of this green hydrogen, he adds.

“Importing cheap green hydrogen from overseas will be a continuous necessity, just like natural gas and crude oil now in use,” Iiyama says. “In this sense, it is important for domestic companies to make inroads into the overseas water electrolysis market in order to secure an off-take advantage.”

Asahi executives say the firm’s competitive strength lies in its 50 years of experience in brine electrolysis systems for chlor-alkali production, for which it has developed technologies such as membranes that separate the anodes and cathodes in electrolyzers.

“We are the only manufacturer in the world that can supply both electrolysis systems and membranes,” Takenaka says. “We can provide optimal modules by matching cell design and electrolysis systems and components.”

At Asahi’s facility in Namie, the firm is in the final stages of testing a 10 MW single-module electrolysis system. The tests focus on durability and response to fluctuations in the supply of renewable energy. Negotiations are underway with several potential customers interested in acquiring the technology within a year, Takenaka says.

In a second Japanese project, Asahi began an experiment in Kawasaki last spring to combine four 0.8 MW modules with the aim of optimizing operations when multiple modules are combined. “By combining data from Namie and Kawasaki, we will be able to design an optimal system for the 100 MW class that we are aiming for,” Takenaka says. A 100 MW electrolyzer can generate enough electricity to power 1,500 homes for a month.

In Malaysia, Asahi is considering a different type of demonstration project that would use green hydrogen in ammonia production and other applications. The firm is now in the basic design phase for a 60 megawatt-scale facility expected to start up in 2027. The project is partly financed by the Green Innovation Fund.

An emerging hydrogen player in Japan, Yamanashi Hydrogen Company (YHC), was formed in 2022 to develop businesses related to the production of hydrogen by water electrolysis.

YHC was established by the Yamanashi Prefectural Enterprise Bureau, which owns 50% of the company, and Tokyo Electric Power and the chemical company Toray Industries, each of which own 25%. The bureau is a unique municipal organization that enjoys independence over its financial and investment decisions. It gets steady cash flow from its 60-year-old hydroelectric power–generation business.

The bureau, which has about 80 electrical engineers on its staff, has begun R&D on a system in Kofu City that will store electricity created by solar panels. The project, supported by the Green Innovation Fund, will also test a water electrolysis facility incorporating YHC’s polymer electrolyte membrane.

Locally produced electrolytic hydrogen is being introduced to tire factories in Fukushima Prefecture and construction materials factories in Saitama Prefecture. The concept of hydrogen-powered factories is also growing in scale. A 16 MW system will be delivered to Suntory’s plant in Hakushu; the beverage company aims to have it up and running by year-end.

The green H₂ movement in Japan is growing, but it didn’t look so promising just a few years ago. A project commissioned in 2016 by the country’s New Energy and Industrial Technology Development Organization offered factories and other facilities in Yamanashi Prefecture green hydrogen as a fossil fuel alternative. Even though companies incurred no new costs for trying the system, only two had signed on as of 2021.

“We now receive inquiries from many companies, and the number of locations has increased to 15, despite the fact that users now have to pay an initial cost,” says Kazuya Miyazaki, a section chief at the Yamanashi bureau and an executive with YHC.

Miyazaki says YHC has launched a water electrolysis project in Tokyo with the city’s government and plans to expand into overseas markets. Feasibility studies have begun in India and Indonesia for the introduction of similar systems, he says.

Despite the lack of local solar resources, Japanese companies need to push forward with low-carbon hydrogen, says Iiyama at the University of Yamanashi. As environmental regulations tighten and societal expectations rise, companies “may not be able to survive if they do not have the option of hydrogen to decarbonize their factories,” he says.

“Hydrogen is especially needed in areas that are technically difficult to electrify, such as boilers,” Iiyama says. “Synthetic fuels made from hydrogen and carbon dioxide are expected to expand as an energy source for sectors where liquid fuels are essential, such as aircraft and heavy-duty work vehicles. It is imperative that we work toward an era in which hydrogen will be used not only as a fuel but also as a raw material in large quantities.”

Another important player in Japan’s emerging hydrogen economy is Iwatani, which is working on projects to supply the country with hydrogen produced overseas. Iwatani has a nearly 60-year history in liquefied hydrogen technology and currently operates three liquid hydrogen sites in Japan. In 2006 it built in Sakai City what is still one of the world’s largest liquefied hydrogen plants.

In 2016, Iwatani, Kawasaki Heavy Industries, and two other companies launched HySTRA, a research association to promote a carbon dioxide–free hydrogen supply chain. HySTRA set up a demonstration project in Australia to convert local brown coal into H₂ while capturing and storing by-product CO₂. The project was completed in 2022.

Later, the Green Innovation Fund backed a much larger Iwatani project to demonstrate commercialization of a liquefied H₂ supply chain. Kawasaki and the oil company Eneos are also partners in the project, which earned a grant to cover three-quarters of its $2 billion price tag until 2030. A key goal will be to shrink the cost of supplying hydrogen by two-thirds.

The partners will operate a ship equipped with four hydrogen tanks with a capacity of 40,000 L each, though only one tank will be used initially. When all four are in operation in 2031, they will be capable of transporting a production volume equal to Iwatani’s three liquefied hydrogen plants in Japan. Iwatani is also participating in a green hydrogen project in Australia with the power company Stanwell and other firms.

Hydrogen sourced from Australia would probably supply only coastal areas of Japan. “It is difficult to transport foreign-sourced hydrogen to inland areas at a low cost,” Iiyama says. “The best way to spread hydrogen to inland areas is to use on-site water electrolysis and short-distance transportation by pipeline.”

Cost will remain a challenge to the widespread adoption of green hydrogen in Japan. It costs 10 times as much as natural gas today, though the Japanese government aims to reduce that to just 1.5 times. “The cost will come down in the future due to growing demand for hydrogen, the construction of production lines by water electrolysis equipment manufacturers, and deregulation,” YHC’s Miyazaki says.

Another way Japan’s government will help make hydrogen more affordable is with a program that will subsidize buyers for the next 15 years. Businesses purchasing a minimum of 3,000 metric tons of hydrogen per year will pay no more for it than for natural gas. The program is already accepting applications and will be implemented in 2030.

Iiyama is enthusiastic about the pricing program. “The price differential compensation system will serve as an igniter for the spread of hydrogen,” he says. “It will be a system that pushes companies to use hydrogen.”

Katsumori Matsuoka is a freelance writer based in Japan.