This article is part three of a five-part series on clean hydrogen in heavy industry sectors in Japan. You can find part one here, part two here, part four here, and part five here.

Section three: the role of heavy industry in Japanese hydrogen strategy

Japan became the first country in the world to embark on a genuine H2 strategy, attempting to address two challenges: 1) decarbonization of Japan's economy, and 2) overhaul of Japan's energy policy since the 2011 Fukushima nuclear accident and the wind-down of nuclear power production and usage. In 2014, Prime Minister Shinzo Abe committed to Japan becoming a "H2 society," a future energy system where H2 would play a significant role in all sectors of the Japanese economy. Based on this vision, Japanese society would be based on three pillars: 1) H2 demand stimulation, 2) abundant H2 supply creation, and 3) the development of a resilient international H2 supply chain (Dellatte, 2023). 

In 2017, Japan issued the Basic Hydrogen Strategy seeking 1) to expand its H2 market from 2MM tons/year to 3MM tons/year by 2030 and to 20 MM tons/year by 2050 and 2) through scale, to lessen the hydrogen cost to about one-third of the present level by 2030. Overall, experts considered the strategy as misguided regarding production methods and applications. While supporting the vision of an H2 society, the strategy prioritized gray and blue H2 and neglected green H2 with the development of renewables (METI, 2017; Ohno et al., 2022; Ishihara & Ohno, 2023). In March 2019, Japan updated its Strategic Roadmap for Hydrogen and Fuel Cells (adopted and revised from 2014 to 2016) (Nakano, 2021). In October 2020, Japanese Prime Minister Suga Yoshihide declared that by 2050, Japan would aim to become a carbon-neutral society. In December 2020, the Cabinet passed the Green Growth Strategy Through Achieving Carbon Neutrality in 2050 - an industrial policy promoting economic growth and environmental protection in concert with the business community. By 2050, the strategy envisioned that Japan's energy mix would consist of renewable energy (50-60%), H2 and ammonia (10%), and energy from nuclear and thermal power plants (30-40%) (EPRS, 2021; Hawker, 2023). 

The updated green growth strategy (June 2021) outlined the future global market for H2 technologies and products in critical sectors, timelines, numeric targets, and H2 volume used (Nakano, 2021). The strategy stipulated a few avenues for funding Japanese H2 ambitions. First, the Japanese government committed to providing ample H2 research and development funding. As of fiscal year 2020, government funding included $247 million for clean energy vehicles, $120 million for FCV refueling stations, $141 million for the development of H2 supply chains abroad, $52.5 million for innovative fuel cell R&D, $40 million for residential fuel cell and fuel cell innovation, $30 million for H2 supply infrastructure R&D, and $15 million for H2 production/storage/ usage technology development (dollar values were based on the rate of US$1= ¥100). New Energy and Industrial Technology Development, the Japanese national R&D agency, also committed to funding H2 projects to establish an H2 supply chain ($2.7 billion allocation) and generate green H2 ($700 million allocation). The funds come from the $20 billion Green Innovation Fund, representing one of the vital policy tools for supporting the 2050 carbon neutrality goal (Nakano, 2021). 

In June 2023, the Japanese government revised its original H2 strategy, attempting to align it with the developments in global markets and the energy sector. Some new features include 1) the addition of a mid-term volume target of 12 MM tons/year by 2040, 2) a 15 GW new electrolyzer capacity target by 2030 for Japanese-related companies, and 3) an emission intensity standard to define clean H2 (3.4 kg – CO2/Kg-H2) (METI, 2023a). The experts consider the revision "unconvincing" (REI, 2023). First, while the revised H2 strategy focuses on direct H2 use in the heavy industry's hard-to-abate sectors as one of its core strategic areas, it especially favors H2 deployment for power generation, fuel-cell vehicles (FCV), and home fuel cells. For example, the strategy puts ammonia co-firing in Japanese coal-fired power generation at the center of its vision for H2/ammonia deployment in the power sector, virtually extending the life of coal-fired power generation. Second, the revised H2 strategy also promotes gray H2, still mainly procured from overseas, by deferring the application of clean H2 standards until at least 2030. Third, it does not acknowledge the lack of domestic clean H2 production due to the slowness of domestic renewables development (Ishihara and Ohno; Martin, 2023a; METI, 2023a).

In other words, Japan's H2 strategy is still structured to create H2 demand in all sectors of the economy versus prioritizing the promising areas, in terms of GHG reductions and viable economics, within the hard-to-abate industrial sectors. The eight industrial sectors (classified into five industries) are 1) chemicals (includes refining), 2) steel, 3) cement, 4) paper, and 5) automobile manufacturing. These applications are responsible for 40% of the total final domestic energy consumption. The use of heat in these applications constitutes 75% of the industrial sector's energy consumption (METI, 2023a). Furthermore, the revised H2 strategy does not consider the significant global shifts in the world, such as the rapid development of electric vehicles, solar PV power systems, and heat pumps, in the current H2 policymaking (Ishihara and Ohno, 2023). Therefore, the revised H2 strategy needs to be reexamined. The next section presents innovative policies to produce and integrate clean H2 into Japan's key heavy industry applications.

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