Japan’s national hydrogen strategy — a world first when unveiled at the end of 2017 — will do nothing to decarbonise the wealthy nation and must be “fundamentally revised”, with elements of the plan labelled “a complete failure”, “appalling” and “misguided” in a new analysis.

There is a “common understanding worldwide that hydrogen should be limited to applications where it would be difficult to achieve decarbonisation with other methods”, says the report by the Tokyo-based non-profit think-tank Renewable Energy Institute (REI), but Japan has instead laid out a vision of a “hydrogen society where hydrogen is used in every sector”, while promoting and subsidising the use of highly polluting grey H2.

“Such a strategy must be rectified without delay,” says the 20-page study, entitled Re-examining Japan’s Hydrogen Strategy: Moving beyond the ‘Hydrogen Society’ Fantasy.

The report outlines three key areas where the government’s strategy is severely flawed:

1) The selection of low-priority applications;

2) Prioritisation of fossil-fuel-based grey and blue hydrogen; and

3) The lack of focus on domestic green hydrogen production, leaving Japan lagging behind other nations.

Low-priority applications

“The 2017 Basic Hydrogen Strategy is misguided, both in terms of what hydrogen is used for and how it is produced,” the study explains, adding that the strategy focuses on the “bad ideas” of using H2-powered fuel cells for passenger cars and combined heat and power in buildings — options where all-electric options such as battery vehicles and heat pumps are very likely to be cheaper to buy and operate.

More than half of the ¥460bn ($3.2bn) spent by the Japanese government on hydrogen over the past ten years has gone to fuel-cell vehicles (FCVs), refuelling stations and residential fuel cells, with Tokyo setting targets of five million of the latter in operation by 2030, alongside 800,000 H2 vehicles.

But despite the huge amount of government funding ploughed into these sectors — including ¥2.53bn in subsidies for hydrogen refuelling stations in the fiscal year 2020 alone — sales have been “sluggish”.

“Total sales volume [of residential fuel cells] as of the end of fiscal [year] 2021 is 433,000. At this rate, only around 900,000 units, or one fifth of the target, will be sold by 2030.

“Uptake for FCVs is even worse... As of the end of fiscal 2020, the total number of units owned is a mere 5,170. Even if 1,500 units are sold per year for the next 10 years, sales would reach no more than 20,000 units by 2030. That’s only one fortieth of the target. The government’s FCV strategy has clearly been a complete failure.”

And while the government’s subsequent 2021 Strategic Energy Plan declared that efforts were needed to accelerate the “no-regret” uses of clean hydrogen, such as steelmaking, shipping and aviation, it still reaffirmed the need to “both support the introduction and further expansion of FCVs, and the strategic development of hydrogen stations” and added that Japan would continue to promote and expand “commercialised residential fuel cells ahead of other countries”.

Another complaint by the REI is the country’s plan to use hydrogen to produce electricity.

“Realising that its hydrogen strategy that focused primarily on [residential fuel cells] and FCVs was at a standstill, the government switched focus... to co-firing and hydrogen and ammonia in existing thermal power plants,” it says, pointing to plans by Japan’s largest power company JERA to co-fire 20% ammonia with 80% coal from 2023.

“The biggest problem here is generating power with ammonia, which has been prioritised in co-firing with coal due to the compatibility of burning velocities.

“Even if ammonia is 20% co-fired at ultra-supercritical coal power plants that boast the highest efficiency, emissions will be twice that of natural gas-fired power. JERA apparently plans to increase the co-firing rate to about 50% by 2030, but that would still exceed natural-gas-fired power emissions.”

The report adds that other developed countries “will consider it to be a policy aiming to prolong the lifespan of coal-fired power, which is supposed to be abolished by 2030 at the latest [to meet G7 decarbonisation proposals]”.

“Making a substantial financial investment in ammonia power despite it having no effect on reducing emissions is nothing short of a huge business risk.”

Prioritisation of fossil-fuel H2

The national strategy also prioritises and offers financial assistance to grey hydrogen derived from unabated fossil fuels, with the aim of creating high demand for hydrogen and a large-scale supply chain before significant amounts of green H2 are commercially available — a policy the REI describes as “a huge risk”.

“Until at least 2030, the main supply source in the government’s strategy is grey hydrogen, which does not contribute to reducing CO2 emissions at all,” it says, adding that, unlike other nations such as the UK and US, it does not define acceptable emissions levels from blue H2 (ie, grey hydrogen with carbon capture and storage).

“At this rate, Japan risks creating a system that distributes and uses hydrogen not recognised as low- or zero-carbon energy internationally. In this case, materials and products made with Japanese hydrogen risk losing global industrial competitiveness.”

The report adds that as the emissions from grey hydrogen production via steam methane reformation are 35% higher than from burning natural gas, a co-firing rate of 30% H2 and 70% methane in power plants — as proposed in the government’s 2021 Strategic Energy Plan — would actually increase emissions by 10% compared to zero co-firing.

“The higher the co-firing rate, the higher the emissions,” it explains.

The report continues that the national hydrogen strategy “emphasises industrial policy over decarbonisation policy... but the government should keep in mind that a policy that promotes grey hydrogen, which is at odds with decarbonisation, will never succeed, even as an industrial policy”.

Lagging behind in green hydrogen production

The “biggest problem” caused by prioritising fossil-fuel hydrogen is the “severe delay in domestic green hydrogen production”.

Compared to Europe and China, which are driving forward with large-scale renewable H2 production, “the extent of Japan’s lag is appalling”.

The Japanese electrolyser industry has also fallen behind Europe and China, both in terms of production capacity and electrolyser efficiency, the study explains.

“European and Chinese companies are already developing electrolysers as a business, have delivered 1,000-3,500 units, and are planning to build a gigawatt-level production system in the next few years. In contrast, one of the two [leading] Japanese [electrolyser makers] is still in the demonstration stage, and while the other has started deliveries, the scale is still smaller than that of companies in other countries.”

The delay in mass production of electrolysers has led to more expensive machines in Japan, the REI adds, explaining that Chinese alkaline machines are now available for delivery in 2023 for about $200 per kW, with Norway’s Nel planning to reach that level by 2025 — compared to $1,200/kW for the Japanese company at the demonstration phase.

Japan has a target for domestic alkaline electrolysers to cost ¥52,000 ($433) per kW by 2030, the report points out, adding: “Chinese manufacturers will soon attain about half the costs of Japan’s target for 10 years [sic] from now.”


The problems with the national hydrogen strategy are a result of old-fashioned thinking and a reluctance to embrace renewable energy, the study says.

Former prime mininster Yoshihide Suga declared in October 2020 that Japan would achieve carbon neutrality by 2050, and a few months later unveiled a national “green growth strategy”, which talks about a transition to a “hydrogen-powered society”, where ammonia and H2 (some of which will be produced by nuclear power) would be used for electricity generation, vehicles, ships, aircraft and “fuel-cell construction machinery”.

This December 2020 strategy also aims for Japan to source 50-60% of its energy from renewables by 2050, with 10% from hydrogen and ammonia, and the remaining 30-40% from nuclear and thermal power plants (the latter with carbon capture and storage).

The REI, which was founded by its chairman Japanese billionaire Masayoshi Son, describes this energy strategy as “skewed”, with “low targets” for renewable energy compared to other industrial nations.

“Having experienced the Fukushima nuclear disaster in 2011 and been forced to depend on fossil fuels from other countries for many years, Japan should be leveraging the trend of transitioning to renewable energy and playing the role of a world leader in decarbonisation and independence from fossil fuels. But instead, it has clung to policies that maintain the old energy supply system,” the report states.

“Even today there are those in the government who do not understand the huge potential of renewable energy in Japan and stubbornly cling to fossil fuels and nuclear power. This is supported by the actions of some companies who are trying to protect their narrow vested interests.”

The report adds that that solar PV technology was developed in Japan, and that local companies were among the first to build wind turbines, but “the growth potential was lost due to the old-fashioned power system”.

“If Japan does not fundamentally revise its hydrogen strategy, the hydrogen business in Japan may lose its growth potential just like solar and wind did. Japan must place its hydrogen strategy in its decarbonisation strategy and rectify the idea that any type of hydrogen will do.

“The government also needs to define what applications are truly needed to achieve decarbonisation, and build a system to meet demand by supplying domestically produced hydrogen and partially supplementing that with imports in accordance with how fast renewable energy grows.

“If Japan changes its strategy and policies, it will be able to play an important role in the global green hydrogen business by leveraging Japanese companies’ experience gained from efforts in building a supply chain. But time is running out.”