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Part 2

Hy-Politics – political considerations shaping the evolution of clean hydrogen policy

Summary of the use case in Japan

The “Hydrogen Basic Strategy” adopted by the Japanese Government on 26 December 2017 (the “Hydrogen Basic Strategy”) describes the use case for hydrogen as follows:

  • Power Generation: An alternative to LNG as fuel for combustion power generation;
  • Mobility: Use of hydrogen as fuel for FCVs (fuel cell vehicles);
  • Industrial process: Use of hydrogen for fuel cell cogeneration system; and
  • Fuel Cell: Storage for decentralised power source.

The Government has been particularly active in promoting FCVs by setting up a taskforce for deregulation since the automobile is one of the key industrial sectors in Japan.

The Hydrogen Basic Strategy illustrates two key advantages to the use of hydrogen: (i) energy security and (ii) promotion of a low carbon society. Japan is scarce in natural resources and securing energy resources has always been a top priority on the national agenda. Currently Japan is heavily dependent on fossil fuels which are imported from overseas for power generation and hydrogen is one of the key potential solutions for these issues.

Hydrogen is perceived as a promising future technology by the industry but the higher costs for production and transportation relative to other energy sources is a major obstacle to the widespread use of hydrogen. The research project organised under the Cross-ministerial Strategic Innovation Promotion Program (SIP) has identified three forms of hydrogen carriers, being: (a) liquefied hydrogen, (b) chemical organic hydride, and (c) ammonium. The respective carriers have their own advantages and disadvantages but there has been a degree of competition among these carriers.

The Latrobe Valley Project illustrated below is envisaging the transportation of hydrogen in a liquefied form which needs to be below negative 253 degrees celsius. Kawasaki Heavy Industries has launched a dedicated vessel for liquefied hydrogen transportation. In contrast, Brunei-Kawasaki project mentioned above adopts the chemical carbon hydride which does not require low temperatures but involves additional processes for extracting pure hydrogen from the chemical carbon hydride. The competition among the hydrogen carriers will continue as the technologies are evolving in this field.

“Mid and Long Term Policy for Ports and Harbours “Port 2030”” published by the Ministry of Land, Infrastructure, Transport and Tourism (MLIT) in June 2018 envisages that, as a part of national port development strategy, ports should function as a base for hydrogen-related activities which include, without limitation, import, production, consumption and storage.

In conjunction with this initiative, hydrogen was highlighted in the first meeting of the public private council for offshore wind projects recently hosted by MLIT and METI as one of the promising options for maximising the ports’ efficiency and potential. For example, hydrogen can be produced by the electricity generated by offshore wind farms and be stored in a liquefied form or consumed as fuel for FCVs.

Examples of demonstration/feasibility projects in Japan

Latrobe Hydrogen Energy Supply Chain Project (“Latrobe Valley Project”): this is a pilot project for development of the hydrogen energy supply chain between Japan and Australia by producing hydrogen through brown coal gasification without CO2 emission by carbon capture and storage (CCS) and export/import the liquefied hydrogen by a special vessel from Australia to Japan. In this project, Kawasaki Heavy Industries, Ltd., J Power, Iwatani Corporation, Shell Japan Limited, Marubeni Corporation and other Japanese companies formed an association called “HySTRA” and have undertaken the processes for the brown coal gasification in Latrobe Valley, liquefied hydrogen marine transportation from Victoria, Australia and unloading in Kobe, Japan. This pilot project is supported by funding from the Japanese Government through New Energy and Industrial Technology Development Organization of Japan (NEDO) and both the Australian federal government and the Victorian state government.

Brunei-Kawasaki Hydrogen Supply Chain Project (“AHEAD Brunei Project”): this is a pioneering project for demonstrating the viability of hydrogen energy supply chain between Japan and Brunei with the funding from NEDO. Mitsubishi Corporation, Chiyoda Corporation, Mitsui & Co. Ltd., and Nippon Yusen Kabushiki Kaisha have established the Advanced Hydrogen Energy Chain Association for Technology Development (AHEAD) for this project. In this project, hydrogen is manufactured from LNG in Brunei (210 tons annually at full capacity) and then imported into Japan by utilising the organic chemical hydride method and consumed as fuel for thermal power generation facility. According to AHEAD’s announcement, the methylcyclohexane (MCH), a chemical compound of hydrogen and toluene produced in Brunei, has arrived in Japan in December 2019 and the supply of hydrogen separated in a dehydration plant to the fuel gas turbines of a local power generation plant has been commenced and under stable operation since May 2020.

Feasibility Study Program for Ammonia Co-firing in Thermal Power Generation Facility: IHI Corporation, JERA Co., Inc. and Marubeni Corporation, in consultation with Woodside Energy Ltd., participated in NEDO’s feasibility study programme for application of the ammonia as fuel for a co-firing thermal power generation plant in March 2020. In this project, the ammonia will be produced from renewable energy and/or natural gases and transported to thermal power generation facilities where the ammonia is applied as fuel for thermal power generation. Ammonia does not emit carbon dioxide when combusted, and therefore would be useful for reducing the emission of the greenhouse gases.

Queensland Hydrogen Supply Chain Project: this is a technology-verification project carried out by Queensland University of Technology (QUT), the University of Tokyo, JXTG Nippon Oil & Energy Corporation (JXTG) and Chiyoda Corporation from December 2018 to March 2019. In this project JXTG produced MCH by using the electricity generated by QUT’s PV power generator, then MCH was transported into Japan and Chiyoda Corporation successfully separated the hydrogen from MCH.

 

Part 4

Hy-Achieving – creating a suitable incentive regime

In Japan, funding and financing support for clean hydrogen projects are available from key government organisations. Funding for hydrogen related research, feasibility studies and pilot projects is provided by NEDO and Japan Oil, Gas and Metals National Corporation (JOGMEC). NEDO has been supporting various energy related pilot projects in Japan and overseas including the Latrobe Valley Project and the AHEAD Brunei Project.

It is anticipated that financing support from Japan Bank for International Cooperation (JBIC), Nippon Export and Investment Insurance (NEXI) as well as JOGMEC would be available to support commercial scale hydrogen projects where Japanese companies are involved having significant roles including sponsors, contractors or off-takers.

It is notable that JBIC’s statutory law was amended in January 2020 to specifically include hydrogen as an eligible sector for JBIC’s export credits and overseas investment loans to projects in developed countries in addition to developing economies such as Australia. NEXI also launched “Loan Insurance for Green Innovation” in July 2019, which provides an increased commercial risk coverage rate of 97.5% compared with that of its usual loan insurance. Projects utilising hydrogen related technologies may be covered by this new insurance.

In addition to the initiatives taken by the governmental organisations, financial support has been made available by the Japanese Government to the consumers to incentivise purchase of FCVs.

 

Part 5

Hy-ly Volatile? making it safe, sustainable and transportable

Regulatory Framework

Liquefied or high-pressured hydrogen is regulated under the High Pressure Gas Safety Act and related regulations in a similar manner as liquefied natural gas. The Act provides that (a) permission from the local authority is required for substantial production, (b) importers must receive inspection by local authority before imports, (c) containers must conform to designated standards, (d) safety measures must be taken for transportation and (e) a permission is required for mass storage. Additional regulations may apply in the supply chain – for example, a hydrogen station is subject to the regulations under the Fire Service Act and the Building Standards Act. Prefectural or municipal governments may also apply additional local regulations to the extent not in conflict with the national regulations.

In terms of the health, safety and environmental regulations, general health and safety regulations under the Industrial Safety and Health Act apply to the industrial use of hydrogen. Construction of a large facility for hydrogen would require an environmental assessment under the Environmental Impact Assessment Act, and regulations under the Air Pollution Control Act, Noise Regulation Act and Vibration Regulation Act would need to be observed.

The Japanese Government has been working for years on deregulating the hydrogen supply chain with a focus on the FCV industry. METI has set up a taskforce to improve FCV-related regulations which resulted in a number of deregulations and improvement. For example, the unmanned hydrogen charging stations were not previously permitted, but the regulations under the High Pressure Gas Safety Act have been amended such that they are now made available with enhanced safety regulations, e.g. remote surveillance. Aside from FCVs, METI has recently developed the safety regulations for hydrogen-fuelled drones which have been garnering increasing attentions for the use cases such as short distance transportation or rescue operation in mountain areas.

Hydrogen may be contained in other chemical forms such as ammonium or organic hydride (methylcyclohexane). In the case of the ammonium, an approval is required for commercial production, imports, distributions, storage, transportation or exhibition under Poisonous and Deleterious Substances Control Act.

Gas Grid Distributions

The existing industrial scale pipeline network for natural gas distribution covers the connections among the cities with large consumptions. The transportation through these existing pipelines is regulated by the Gas Business Act. The “standard calorific value system” under the Gas Business Act requires that the calorific values per volume of the gases to be transported through the pipelines is fixed at a certain value, which requires the adjustment of the calorific values by mixing high or low calorie gases. Hydrogen gas contains fewer calories compared to natural gases in commercial use (e.g. methane gas) and transportation of hydrogen gas through the existing pipelines therefore is available to the extent of limited volumes.

In light of this, the Government is considering reforming the regulations by introducing a “calorie band system”. The calorie band system aims to deregulate the standard calorific value system by widening the requirement for the calorific values to be in a certain range rather than to be pegged at a certain value. The reform is still under discussion by the working group for review of gas business system chaired by the Agency for Natural Resources and Energy. The introduction of the calorie band system is an important step to achieve hydrogen distribution through the existing gas pipelines.

There are only a limited number of inter-site pipelines that are dedicated to transportation of the hydrogen. ANRE reported only three inter-site hydrogen pipeline projects in 2016 where the length of the pipelines is in the range of 150 meter to 1.2 kilometres.

Capturing the hydrogen opportunity for Japan and Australia

Now is the time to look for future global opportunities. Japan and Australia have begun initial collaborations, but we see significant potential in building this relationship and fostering a new wave of growth for both the Australian and Japanese markets.

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Key Contacts
Australia  •  Belgium  •  The EU  •  France  •  Germany  •  Italy  •  Japan  •  The Netherlands  •  Portugal  •  Spain  •  The UK
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