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Commodities 2021: Japan to enter new era of hydrogen in 2021 with launch of liquefied transport

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Commodities 2021: Japan to enter new era of hydrogen in 2021 with launch of liquefied transport

Highlights

Liquefied hydrogen will be transported over 9,000 km

2021 will be 'first year of golden age of hydrogen,' says Tanaka

Lowering hydrogen costs remain key issue

Tokyo — Japan is set to enter new era of hydrogen development in 2021 as it launches the world's first transport of liquefied hydrogen from Australia, a key step forward in the commercialization of a potential new source of energy.

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The start of liquefied hydrogen transport over 9,000 km will come at a time when there is unprecedented momentum for the deployment of hydrogen as a key energy source in Japan after Prime Minister Yoshihide Suga said on Oct. 26 that the country would now aim for carbon neutrality by 2050.

"This is an important milestone for creating international hydrogen supply chains in the future," Toshiyuki Shirai, director of advanced energy system division & hydrogen and fuel cell strategy office at the Ministry of Economy, Trade and Industry, told S&P Global Platts.

"We hope to see vigorous moves towards further utilization of hydrogen in various sectors," Shirai said on a recent launch of the Japan Hydrogen Association, or JH2A, to develop a hydrogen supply chain and promote its greater use as a potential new source of energy.

The transport of the liquefied hydrogen will take place as part of a pilot project run by the CO2-free Hydrogen Energy Supply-chain Technology Research Association, or HySTRA, with aid from the state-owned New Energy and Industrial Technology Development Organization.

The project will demonstrate in fiscal 2020-21 (April-March) brown coal gasification and hydrogen refining in the Latrobe Valley in southeastern Australia; hydrogen liquefaction and storage of liquefied hydrogen at the port of Hastings; marine transportation of liquefied hydrogen from Australia to Japan and the unloading of liquefied hydrogen at Kobe.

The exact timing of the maiden transport of the liquefied hydrogen on the 8,000 gross tonnes Suiso Frontier, the world's first liquefied hydrogen carrier with a cargo loading capacity of 1,250 cu m, remains unclear.

The Suga cabinet decided its draft budget Dec. 21 for Japan's 2021-22 fiscal year, including the Yen 4.75 billion ($45.88 million) requested by METI for the transport of liquefied hydrogen between Australia and Japan, meaning the transport of liquefied hydrogen will likely take place in the next fiscal year upon approval by the Diet.

GOLDEN AGE

The carriage of liquefied hydrogen will be the third method introduced to transport hydrogen from abroad to Japan, where it aims to develop and commercialize supply chains by 2030 under its basic hydrogen strategy set in 2017.

With Japan having developed three ways of importing hydrogen and testing underway for each option, the country is entering a new phase of the hydrogen economy, said Nobuo Tanaka, former executive director of the International Energy Agency.

"2021 will be the first year of the golden age of hydrogen," said Tanaka, who is currently chairman of the steering committee of the Innovation for Cool Earth Forum, or ICEF.

"It is important that Japan should pursue both options of expanding blue and green hydrogen," Tanaka said, adding that the country could develop its supply chain, producing hydrogen from using upstream gas at LNG projects in the future.

Blue is commonly used for hydrogen production from fossil fuels with carbon dioxide emissions reduced by the use of carbon capture, utilization and storage, or CCUS, with green applying to hydrogen production from renewable electricity and gray referring to hydrogen production from natural gas, according to the IEA.

HYDROGEN TRANSPORT

In May, Japan's Advanced Hydrogen Energy Chain Association for Technology Development, or AHEAD, launched its pilot project to bring hydrogen using toluene into methylcyclohexane (MCH) using gas from the Brunei LNG liquefaction process to Tokyo Bay for use as a power generation fuel, the world's first supply chain for foreign-origin hydrogen.

It was followed by the import of the maiden blue ammonia cargo in October from Saudi Arabia to be used for power generation, with CO2 capturing process designated for use in methanol production at SABIC's Ibn-Sina facility, as well as captured CO2 being used for Enhanced Oil Recovery at Saudi Aramco's Uthmaniyah field.

Ammonia, a compound consisting of three parts hydrogen and one part nitrogen, contains about 18% hydrogen by weight and is already a widely traded chemical globally, and it releases zero CO2 emissions when combusted in a thermal power plant.

"In case of MCH having arrived in Japan, it will need to be processed for separating hydrogen at such a facility as a refinery," said Yoshikazu Kobayashi, senior economist at the Institute of Energy Economics, Japan's planning & administration unit.

"However, it has big enough potential for getting used for power generation at the industrial complex or as an industrial fuel," Kobayashi said.

Ammonia, meanwhile, has the benefit of being used as a fuel directly, using existing infrastructure in Japan, he added.

COST ISSUES

While Japan's expected start of liquefied hydrogen transport from Australia will help in expanding its development of a supply chain, lowering cost is a common issue for various hydrogen production and supply options today, Kobayashi said.

Under its basic hydrogen strategy, Japan aims to procure 300,000 mt/year of hydrogen, amounting to 1 GW of power generation capacity, and reduce the cost of hydrogen to Yen 30/normal cubic meters by around 2030.

Japan's current hydrogen procurement cost estimates stand at around Yen 170/normal cu m based on current technologies, according to the latest estimate released by METI Dec. 21, which is aiming to bring that down in stages to Yen 20/normal cu m by 2050.

METI also noted Japan's current 100% hydrogen power generation costs are estimated at Yen 97.3/kWh and Yen 20.9/kWh for 10% blending of hydrogen with regasified LNG for power output.

Platts assessed the price of hydrogen alkaline electrolysis at $14.02/kg, hydrogen Proton Exchange Membrane (PEM) electrolysis at $16.26/kg, and hydrogen Steam Methane Reforming (SMR) without CCS at $3.79/kg on Dec 18, with capital expenditures included for all three production pathways for Japan.

However the transport of hydrogen is not without its challenges.

"Hydrogen imports to Japan of whatever color - be it gray, blue or green [or purple from nuclear power] - are unlikely to achieve cost parity with LNG or coal in Japan for power generation for the foreseeable future, given LNG and coal projected pricing through to 2035," said Constantine Tsesmelis, director & principal consultant at Protos Consulting International, an independent oil & gas, energy & alternative fuels consultancy based in Perth.

"Shipping gray hydrogen to Japan also doesn't seem to make any sense. Japan could produce many million tonnes of gray H2 from LNG imports without having to go to the cost of developing a gray H2 supply chain," Tsesmelis added.