Japan eyes launch of H2, NH3 subsidy scheme next summer

Japanese hydrogen and ammonia suppliers may be able to apply for government subsidies from around mid-2024, as Tokyo seeks to make the cleaner fuels more competitive by narrowing their price gap with conventional fuels.

The winners could be decided by the end of next year at the earliest. The plan is to open the scheme to applications from around the summer of 2024.

Companies that want to apply for the subsidy scheme should begin distributing hydrogen, including in the form of ammonia, synthetic methane and synthetic fuel, at a rate of more than 1,000 t/yr of hydrogen equivalent by the April 2030-March 2031 fiscal year, according to a draft interim report on hydrogen policies released by a subcommittee under Japan's trade and industry ministry on 6 December.

The report will be finalised by the end of January, the subcommittee said.

Meti aims to provide partial or full financial support to clean energy suppliers for 15 years, subject to them having a continuous business for 10 years following the end of the subsidies.

The amount of subsidy for each project will be based on the difference between the respective basic prices, which will generally be fixed for 15 years, and reference prices.

Basic prices should be estimated by potential subsidy recipients in advance, taking into account capital expenditure, operational expenditure and various costs to produce clean fuels.

Reference prices should be the highest cost out of the total cost of existing fuel and carbon prices, the actual selling price of hydrogen on a cfr Japan basis or at the domestic hydrogen production point, including in other forms, and the deal price in the past when selling in the existing hydrogen and ammonia market. In the power sector, for example, import costs such as for LNG and thermal coal would be an option for reference prices when substituting hydrogen for regasified LNG and ammonia for coal.

Tokyo is aiming to establish and stretch hydrogen supply chains beyond the power sector and into hard-to-abate industries, such as steel and chemicals, as part of the country's decarbonisation drive towards net zero emissions by 2050.

Japan expects to have 3mn t/yr of hydrogen supply in 2030, 12mn t/yr in 2040 and 20mn t/yr in 2050, including in the form of ammonia.

By Motoko Hasegawa

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