Transport

Japanese gas company will plough $1.25bn into hydrogen over five years — including possible investment in US production

Iwatani expects the price for its Japanese H2 to crash by 77% by 2030, but nevertheless projects $1.4bn in annual sales revenue

Iwatani hydrogen fuelling station in Tokyo.
Iwatani hydrogen fuelling station in Tokyo.Photo: Yoshi Tsuno/AFP via Getty Images
  • Polly Martin
Japanese industrial gas company Iwatani will invest 178 billion yen ($1.25bn) into its hydrogen business over the next five years, including 30 billion yen (around $211m) toward importing “CO2-free” H2 into its home country from overseas.

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The firm, which currently operates three hydrogen liquefaction plants and a number of hydrogen refuelling stations in Japan, is also mulling investment into green hydrogen production in the US, according to its latest medium-term plan.

And it is already putting cash toward Australian supply as one of the consortium partners on the planned CQ-H2 project, which spent A$82m (US$55m) to kick off front end engineering and design at the end of May.

The US is seeing major interest from international developers owing to the clean hydrogen production tax credit, which offers up to $3/kg depending on the project’s emissions intensity. And since the subsidy is agnostic to end use, it could heavily discount exported volumes of H2.

Japan revealed in a national strategy update published earlier this month that it is considering a contracts-for-difference subsidy for suppliers to close the cost gap between low-carbon hydrogen and its cheaper, fossil-based equivalent. However, it is unclear whether the final scheme will prohibit companies from stacking international subsidies.

Iwatani predicts hydrogen imports will cost 30 yen per normal cubic metre (Ncm), around $0.21/Ncm, by 2030. However, it also anticipates that the supply chain will take the rest of this decade to develop, with its overseas H2 export projects only due to start commercial operations from 2030.

‘Growing demand’

Iwatani projects “growing demand” for hydrogen in Japan — where it holds 70% of overall market share and monopolises the liquid H2 market — particularly for co-firing with fossil fuels for power generation and use in transportation.

In addition to setting up a fourth liquefaction plant in the country, the company plans to invest 33 billion yen to expand its supply for domestic hydrogen refuelling stations, as well as new facilities in the US for fuel-cell trucks.

Last year, Iwatani announced a partnership with Chevron to co-develop thirty hydrogen fuelling stations in California by 2026, with the US oil major bearing the construction costs and the Japanese firm taking on H2 supply and transportation as well as operation of the sites. Chevron would also partly supply the stations with excess grey hydrogen production capacity at its Richmond Refinery and future H2 pilot projects in the state.

In 2022, the company raked in 45 billion yen from sales of 14,000 tonnes of hydrogen. And it predicts it will see annual revenues of 92 billion yen by 2027 and 200 billion yen ($1.4bn) by 2030.

However, based on its projected sales volumes of 30,000 tonnes by 2027 and 300,000 tonnes by 2030, Iwatani appears to expect the price of hydrogen to fall from around 3 million yen per tonne to around 667,000 yen per tonne in the space of three years.

The predicted price by 2030 works out to around $4.69/kg, while the estimated price in years prior is more than $21/kg. Financial research firm S&P estimates that grey hydrogen production from steam methane reforming in Japan only costs $2.71/kg — which suggests the current price at which Iwatani sells its is significantly bumped up by liquefaction and delivery costs.

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Published 22 June 2023, 13:55Updated 22 June 2023, 14:41