Power of choice: The future of hydrogen-powered cars in Japan

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Three of Japan’s top car manufacturers made a big announcement in early March 2018. In a move intended to keep the domestic auto industry ahead of German and Chinese rivals, the trio is unifying efforts to sharply increase the number of hydrogen refueling stations across the country, setting the agenda for hydrogen as the fuel of the future.

Toyota Motor Corporation, Nissan Motor Company, Ltd., and Honda Motor Company, Ltd. have teamed up in a joint venture with a number of international gas and energy companies—including France’s Air Liquide SA—to construct 80 new hydrogen stations in the next four years, supplementing the 101 refueling facilities that are already in operation.

HIGH HOPES

The new venture, named Japan H2 Mobility, comes into being as the world’s leading economies draw up increasingly stringent environmental regulations. These rules are pushing forward development of a new generation of vehicles that are friendly to the planet. In Japan, that drive has focused on fuel cells that combine hydrogen with oxygen to produce an electrochemical reaction that can power vehicles or homes. But wider acceptance of hydrogen-powered cars faces a hurdle: the shortage of refueling stations. Japan H2 Mobility aims to solve this—and the auto sector has high hopes for the initiative.

“Hydrogen is a particularly promising alternative fuel since it can be produced using a wide variety of primary energy sources or sewage sludge, and can be generated from water by using solar and wind power,” said Jean-Yves Jault, a spokesperson for Toyota. “When compressed, it has a higher energy density than batteries and is easier to store and transport. In addition to its potential as a fuel for home and automotive use, hydrogen could also be used in a wide range of applications, including large-scale power generation.

“Fuel-cell vehicles contribute to the diversification of automobile fuels, emit no CO2 or environmentally harmful substances during operation and offer the convenience of gasoline-powered cars, with a charging time of about three minutes,” he told The ACCJ Journal.

Toyota has been developing fuel cell vehicles in-house since 1992, and in 2002 began leasing the fuel-cell Toyota FCHV SUV on a limited basis in Japan and the United States.

It has taken a long time to develop sufficient quality in fuel cell vehicles and to achieve a price point that buyers can accept, Jault said. The refueling infrastructure has been another hurdle, although current vehicles can travel up to 595 kilometers (370 miles) without refueling.

More broadly, Japan has been at the forefront of the promotion of hydrogen technology, due both to the desire to reduce harmful emissions and to help ensure energy security.

“At Toyota, we take environmental challenges—such as global warming, air pollution, and limited natural resources and energies—very seriously,” said Jault. “In order to solve these issues, we believe electrification of vehicles is indispensable.”

Pointing out that fuel-cell vehicles are also electric vehicles, he added, “Toyota has competitive expertise and know-how in the core technologies for electrification, thanks to its history of developing and selling electrified vehicles such as hybrids.” A key difference between these vehicles and those powered by better-known battery technology is that their electricity is produced onboard by the fuel cells, rather than being charged from the grid.

Although market share for hydrogen-powered cars is likely to remain low for some time to come, the European Climate Foundation predicts a surge by mid-century. Its February 2018 report Fuelling Europe’s Future forecasts a 10-percent share by 2035, 19 percent by 2040, and 26 percent by 2050.

LONG JOURNEY

George Hansen, who heads the program for fuel-cell vehicles at General Motors Japan Limited (GM), said his firm began tinkering with the first fuel-cell vehicle fully 50 years ago.

“The vehicle was very scientific and looked more like a spaceship than a car. The true pull for the technology really began in the late 1990s, as we made advances, and GM has been very committed to the use of fuel cells since 2000. But it has only been much more recently—say around 2015—that the movement began to produce vehicles in significant volume.

“And, as with any driving technology, with time and improvements the cost will come down to the point that it makes complete sense to drive a fuel-cell vehicle,” he said.

GM has merged its fuel-cell project with that of Honda, both in Michigan and Tochigi Prefecture, and the two companies have established a joint venture to begin manufacturing fuel-cell systems in the United States around 2020.

“The governments in both Japan and the United States are very supportive of work to advance the technology—although there are differences in how that support is being implemented,” Hansen said. “In Japan, the work is more centrally driven, with the Ministry of Economy, Trade and Industry getting all industries with a stake in hydrogen energy—including autos, appliances, and households—together with energy companies to create a grand hydrogen fuel-cell plan.

“The United States is more diverse,” he continued. “There has been support from the federal government and the Department of Energy for many years, but there have been pockets where the push has been strongest, such as in California, which has been building hydrogen stations.”

UNCERTAINTY

Yet not everyone is convinced that the revolution in hydrogen-powered vehicles is just around the corner, or that it is the correct road to take in any case.

“There are three major challenges with fuel-cell vehicles,” said Dr. Ali Izadi, head of Intelligent Mobility for Bloomberg New Energy Finance, as he ticked them off on his fingers.

“Fuel-cell cars are very expensive. For example, the retail price—without subsidies—of a Toyota Mirai is ¥6.7 million ($62,680), which puts it at about three times the price of other cars in the same class.

“While proponents argue that mass production would bring down the vehicle cost, unlike electric vehicles, which rely on lithium-ion batteries, fuel cells do not have existing high-volume applications that can help scale up demand and foster supply-chain expansion,” he said. “Electric vehicles benefit from decades of prior investment in lithium-ion battery manufacturing to serve consumer electronics applications, but fuel-cell vehicles need an onboard hydrogen tank, pumps, and compressors that are more complex than battery electric vehicles, hence they suffer higher vehicle manufacturing costs.”

Secondly, the cost of deploying hydrogen refueling infrastructure is “exorbitant,” said Izadi. The cost of a single station is about ¥400 million, significantly higher than the ¥100 million required to build a conventional gas station. Hydrogen fuel is also more expensive than gasoline or electricity in terms of the price of fuel consumed per unit mile driven, he added.

Finally, the energy efficiency of fuel-cell vehicles is lower than that of battery electric vehicles, as fuel cells have higher energy losses than batteries. It is also worth pointing out that the dominant approach to making hydrogen is steam methane reformation, which is not a zero-emissions process.

THE ROAD AHEAD

At the start of 2018, there were about 3,400 fuel-cell vehicles on US roads and some 2,300 in use in Japan. Izadi believes that deployments in Japan will increase over the next few years and overtake those in the United States as the government here teams up with Toyota and other developers with an explicit goal to utilize the Tokyo 2020 Olympic and Paralympic Games as an opportunity to promote hydrogen and fuel-cell technology.

“Even then, under the most optimistic scenario, we expect there will be only about 25,000 fuel-cell vehicles on Japan’s roads by the end of 2020,” he said. “As of now, there are already more than 160,000 electric vehicles—plug-in hybrids and battery electrics—on Japan’s roads. By the end of 2020, we expect that number to increase to more than half a million electric vehicles.”

Undeterred, Hansen said there is space in the sector for both systems to thrive.

“There has been a lot of discussion of this topic and the sense is that both systems have their distinct advantages. We see batteries as being best suited for smaller cars that go on shorter journeys, perhaps in cities, and carry smaller loads. But for bigger loads and longer ranges, fuel cells are more appropriate. I think that both can coexist and that both are needed.”

Jault agrees and said Toyota intends to push forward with its studies into production and sales “from a long-term perspective” that takes into account the development of hydrogen refueling infrastructure, national energy policies, vehicle purchase subsidies, environmental regulations, and consumer needs.

“We have said in the past that we would increase production volume of our hydrogen fuel-cell vehicle, the Mirai, from about 3,000 vehicles per year until 2020 to about 30,000 vehicles per year in the 2020s,” he said. “Hydrogen is already widely produced and used in industry. For example, much hydrogen is used in the production of ammonia. Also, hydrogen is produced when petroleum is purified at oil factories to make gasoline.

“Hydrogen stations themselves will not be profitable in the short term, but we need a long-term view until hydrogen is widely used as a fuel for automobiles,” he said. “It took three generations for the Prius to become popular. We think the usage of hydrogen will grow gradually.”

Custom Media publishes The ACCJ Journal for the American Chamber of Commerce in Japan.

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