Winning the global race for hydrogen

Mizuho Industry Research
May, 2023

image for hydrogen

As the world strives to achieve carbon neutrality, hydrogen is set to play an important role. As an energy medium, it is clean, emitting no CO2 during utilization. Hydrogen can be used to achieve carbon-free energy through the use of renewable energy (RE) and Carbon Capture and Storage (CCS), and it allows for the storage and long-distance transportation of large amounts of electricity.

Hydrogen is expected to be a viable solution for various energy challenges, serving as a power source for transportation modes and meeting industrial power demand. Spurred on by its comparative lack of natural resources, Japan has been at the forefront of developing policy around hydrogen supply and demand structures. Many challenges lay ahead, but the country is well positioned to meet those challenges and continue to play a leading role in the industry.

Key Highlights

Japan formulated the world's first national hydrogen strategy, the "Basic Hydrogen Strategy," in 2017. Since then, it has been a frontrunner in the global hydrogen industry. However, the EU is also gaining a presence, with plans to create 20 million tons of hydrogen demand by 2030 through upstream interests and REPowerEU. This report uses analyses of Japan's hydrogen supply and demand outlook and costs to consider how our resource-poor nation can stably procure hydrogen and what strategies are needed to succeed internationally in the hydrogen sector.
According to our estimates, domestic hydrogen demand in Japan will be around 1.5 million tons in 2030 and about 24 million tons in 2050. By 2050, domestic hydrogen demand will be centered around power generation (9 million tons), gas energy substitution (8 million tons), and automobiles (3.5 million tons), with demand growing rapidly as 2050 approaches.
Japan can potentially supply 4 to 5 million tons/year of domestic hydrogen by 2050, meaning an additional 20 million tons from overseas sources will be required. Multiple hydrogen production projects are being launched abroad, with imports from the Middle East, Australia, and North America expected to be the main sources, targeting exports to Asian markets. In terms of supply cost estimates, Middle Eastern blue ammonia/hydrogen will be the most cost-competitive by 2050, followed by U.S. blue ammonia and Australian blue hydrogen.
To win the competition for hydrogen against these foreign competitors, Japan must ensure steady hydrogen use and stable procurement. It is important for Japan to provide policy support that benefits both exporting and importing countries, such as: (1) Establishing balanced support systems; (2) Creating local hydrogen hotspots using a concentrated approach to quickly boost hydrogen demand; (3) Securing early commitments from hydrogen suppliers through joint procurement frameworks and providing cutting-edge technology.
However, it is also crucial for Japan to promote domestic production of CO2-free hydrogen to improve energy self-sufficiency and reduce hydrogen supply costs. While Japan's green hydrogen supply potential is limited due to scarce renewable energy resources, other options such as blue hydrogen from fossil resources or yellow hydrogen from nuclear power could be viable.
By uniting the government and related businesses to establish early hydrogen demand and secure both domestic and international hydrogen supply sources, Japan can succeed against international competition in the hydrogen sector.

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