Japan dreams of a hydrogen society: As automakers join effort, will they lead the world or be left behind?
TOKYO — As home market to two of the three global carmakers selling hydrogen fuel cell vehicles, Japan is understandably optimistic about the outlook for hydrogen-powered cars.
If the government’s vision pans out, there will be some 800,000 of the futuristic water-emitting vehicles on Japanese roads by 2030, compared with just 1,700 today, along with a network of 900 filling stations to serve them.
But under the country’s broader plan, first articulated in a 2014 blueprint, the vehicle and infrastructure advances would lead Japan through a much larger societal transformation, one that positions the universe’s most abundant element at the center of the country’s everyday energy needs.
It envisions mini hydrogen plants at homes and businesses, a nationwide hydrogen distribution system coursing through the countryside, big advances in deployment and scale that would dramatically reduce vehicle and fuel prices, and the establishment of a carbon-free hydrogen manufacturing process, all in a bid to create the ultimate green-energy loop.
In chasing this so-called hydrogen society, the government in Tokyo is embarking on a revolution — potentially as significant as the shift from horses and coal to motors and petroleum more than century ago.
The venture could provide a preview of the obstacles the U.S., Europe and South Korea might encounter in their far narrower pursuit of hydrogen-powered vehicles, including technological limits, consumer reluctance, high costs and regulations.
“This is a very challenging goal,” conceded Yoshikazu Tanaka, chief engineer of the Mirai fuel cell sedan, which Toyota launched in 2014 and now sells in Japan, the U.S. and Europe. “But we need to keep pushing ourselves toward the ambitious creation of a hydrogen society.”
In a typically Japanese approach, the government and industry are pushing together, with heavy subsidies flowing in support of corporate hydrogen projects and businesses fully committed to seeing the government’s vision through.
One motivation for the collaboration is to project Japan and Japan Inc. as global clean-energy leaders ahead of the 2020 Summer Olympics in Tokyo. This comes at a time when the U.S. is signaling a pullback from its commitments to reduce carbon emissions and China is emerging as a more active fighter against climate change.
Another is the perennial quest for energy independence in a country that depends on imports for nearly all of its oil. Hydrogen holds special promise for resource-poor Japan because it can be produced from a wide variety of sources, including natural gas, coal, biomass, solar or wind power, nuclear power and even through hydroelectric stations.
For the auto industry, the stakes are high. A successful hydrogen campaign could vault Japanese auto champions Honda and Toyota back into the lead in the development of alternative powertrains, as they were with the gas-electric hybrids of the late 1990s and early 2000s. Among the others working on fuel cell vehicles are Daimler, General Motors, Nissan and BMW.
“This is where Japan is different from other countries,” said Hiroshi Katayama, deputy director for advanced energy systems at Japan’s powerful Ministry of Economy, Trade and Industry, or METI, the government agency spearheading the campaign. “I think Japan is in the lead.”
On the other hand, if Japan’s massive bet sours, it could divert its auto industry into an expensive dead end and leave it saddled with a technology it can’t sell overseas.
Automakers are leading hydrogen infrastructure innovation with a 40 percent share of patents in the subject, according to a March report from Lux Research Inc.
“However, the hydrogen economy is evolving in an isolated, Japan-specific way, and lacks support from other parts of the value chain, questioning the viability of the concept,” Lux said.
Indeed, there is a growing cadre of skeptics even among automakers. Daimler CEO Dieter Zetsche has said fuel cells would no longer be a major part of the German automaker’s future drivetrain plans, and Tesla CEO Elon Musk famously dubs them “fool cells.”
If history is any guide, Japan’s ambitions may be a little too high.
The plan calls for a cumulative 40,000 fuel cell vehicles in operation in Japan by 2020, then 200,000 by 2025 and a whopping 800,000 by 2030, a mere 13 years from now. The government has set this target even though the Toyota Mirai and Honda Clarity are the only fuel cell vehicles on the Japanese market today.
By comparison, it took Toyota Motor Corp. nine years to sell 500,000 hybrid vehicles after the launch of its flagship Prius in 1997. And that was a worldwide total, with the aid of multiple hybrid models — not to mention the fact that hybrids don’t require a completely new refueling infrastructure.
Through February, only 1,740 hydrogen cars have been delivered in Japan. Worldwide sales totaled a modest 4,000 vehicles. That includes Toyota’s tallies from Japan, Europe and the U.S., plus Honda’s volume from Japan and the U.S. It also accounts for Hyundai Motor Co., which launched its Tucson fuel cell crossover in 2013 and sells it in North America, Europe and South Korea.
That’s where the government intervention in the marketplace will be critical.
“If there are no hydrogen stations, we don’t expect to see an increase in the number of fuel cell vehicles,” METI’s Katayama said. “Hydrogen stations are actually not profitable. To ride out this unprofitable period, government and automakers need to throw in their support.”
Japan has fewer than 100 hydrogen stations up and running (vs. about 30,000 gasoline stations), at a cost of up to ¥400 million ($3.59 million) apiece to build. METI wants some 320 hydrogen stations in operation by 2025, and a network of 900 stations is envisioned for servicing 800,000 fuel cell vehicles by 2030.
To get there, the government is budgeting the equivalent of hundreds of millions of dollars in subsidies for hydrogen infrastructure and refueling stations alone, Katayama said.
The government chips in as much as two-thirds of the cost of each hydrogen station, said Masataka Kajiwara, senior manager of the hydrogen energy department at Iwatani Corp., a Japanese gas and energy company.
Iwatani operates about 20 hydrogen stations in Japan, including a public station in the shadow of the landmark Tokyo Tower.
On a busy day, as many as 20 cars stop by to refuel, Kajiwara says. Most of them are government officials driving fleet cars; only about 20 percent are retail customers.
The central government also subsidizes hydrogen fuel, reducing its pump price to the equivalent of just under $10 a kilogram. A 5-kilogram fill-up of compressed hydrogen, or roughly $50 worth, can power the car for about 310 miles.
The actual cost of the hydrogen is two or three times as much, Kajiwara said.
“Around 2025, we are hoping to make a profit,” he said.
The national government doles out another $17,960 in subsidies for the purchase of a fuel cell vehicle. Local governments often sweeten the deal with their own incentives. Tokyo, for instance, hands out an additional $8,980 to fuel cell vehicle buyers.
Yet even with those generous outlays, the Mirai can be a tough sell as a four-seat compact car, given its $64,972 sticker price in Japan, including consumption tax. In the U.S., the Mirai costs $57,585, including shipping, before subsidies.
Japan sees scale as the key to bringing those costs down. It wants to quickly ramp up demand for hydrogen in sectors far beyond the initially paltry market for fuel cell passenger cars. By deploying fuel cells throughout the country to power everything from homes and factories to forklifts and buses, Japan wagers that spiking demand will drive down fuel prices and spur availability.
Toyota said last week that it will begin testing the Mirai in China in October to gauge the market and promote the futuristic technology. It also announced plans to test a heavy-duty truck powered by a fuel cell system at the Port of Los Angeles as part of a feasibility study beginning this summer.The Toyota Mirai feeds hydrogen from an onboard tank into a fuel cell stack, where a chemical reaction with oxygen generates electricity to power a motor.
Visions of Hindenburg
Beyond the tough economics, Japan faces challenges with regulation and education.
Fueling stations such as Iwatani’s are hemmed in by what supporters say are outdated safety laws geared toward the industrial use of hydrogen at big refineries, where explosions are a concern. The rules require large setbacks from neighboring properties, which jack up the real estate costs for a filling station. Expensive safety walls are also required. Customers aren’t allowed to fill their own cars either.
“A lot of people still associate hydrogen with the hydrogen bomb,” said Tanaka, the Mirai’s chief engineer. Others think of the 1937 Hindenburg explosion.
“They are not really familiar with hydrogen, so they are not willing to use hydrogen as an alternative source of energy,” he said. “We can make hydrogen more familiar through FCVs.”
Publicly at least, Toyota is undeterred by the hurdles. It aims to boost fuel cell vehicle production to 3,000 Mirai sedans in the just-begun fiscal year, maxing out its current capacity.
Then, it plans an astronomical leap to 30,000 vehicles a year by 2020 — astronomical because the current Mirai line crawls at a pace of fewer than 10 cars a day out of a back-lot workshop at Toyota’s Motomachi assembly plant in Toyota City.
It’s the same workshop that once hand-built the $375,000 Lexus LFA sports car.
“To increase our production capacity by 10 times, we need to employ a totally new system and technology,” Tanaka said.
Toyota hasn’t said whether a new fuel cell nameplate will debut in that time frame. But chances are a new entry is on tap. Tanaka says multiple models eventually will be needed to reach Japan’s steep volume target of 800,000 fuel cell vehicles.
“To achieve that goal, we will have to sell 30,000 to 40,000 units of FCVs per year, from 2020 to 2030,” Tanaka said. “I don’t think we’ll be able to achieve the target with only the Mirai.”
Even if Toyota reaches its own lofty goal and produces some 400,000 fuel cell vehicles by 2030, Japan as a country would still be far from its national ambition of having 800,000 on its roads. Where the other half will come from is anyone’s guess.
Hyundai left the Japanese market years ago. And Honda has made no proclamations about even short-term production plans.
“That’s a difficult question,” Tanaka said about the path to 800,000. “It is important to have as many players as possible. … But we will make all possible efforts to do our part.”