New Era of a Hydrogen Energy Society

28th February 2017

Ministry of Economy, Trade and Industry JAPAN

①Energy Saving Use of fuel cells enables high energy efficiency.

②Energy Security Hydrogen can be produced from various primary energy sources, including unutilized energy sources such as by-product hydrogen, flaring gas, and brown coal; and renewable energy sources. Procuring these energy sources from areas of relatively low geopolitical risk leads to enhancing energy security, and using renewable energy promotes energy self-sufficiency.

③Environmental Load Reduction Hydrogen does not emit CO2 when consumed. Applying Carbon Capture and Storage (CCS) technology to hydrogen production or using renewable energy enables a completely CO2-free system.

④Industrial Promotion Japan is ranked first in patent applications regarding fuel cells and is strong in this field.

Significance of Realization of a Hydrogen Energy Society

1

Conceptual Chart of a Hydrogen Supply Chain

Oil field/flaring gas, etc.

Brown coal, etc.

Electric power from renewable

energy

Pipelines High-pressure hydrogen gas

Fuel cell vehicles

Distributed power supply

Hydrogen refueling station

Hydrogen power generation

Hydrogen

Hydrogen

Hydrogen

Hydrogen

Hydrogen

Hydrogen

Liquid hydrogen Organic hydride

Production Storage and Transportation Consumption

2

Hydrogen Production Method

Fossil fuels (Petroleum, natural gas, etc.)

Hydrogen is produced by reacting fossil fuel with water vapor at high temperature.

Byproduct hydrogen (Iron-making, chemistry,

etc.)

Hydrogen is generated as a byproduct during the manufacture of sodium hydroxide or similar.

Hydrogen-rich byproduct gas is generated during coke refining, a steel manufacturing process.

At present, these substances are already being put to practical use.

Unused energy

Hydrogen is produced from unused energy such as low-grade coals like lignite, crude petroleum, and associated gas in gas fields (in the future, technology for reducing CO2 emissions, such as CCS, will be utilized).

Unused byproduct hydrogen will be utilized.

On a midterm basis, unused energy is

utilized.

Renewable energy (Wind power, solar power,

etc.)

Hydrogen is produced

in such a way that electricity generated by renewable energy is passed into water (electrolysis of water).

On a long-term basis, renewable energy is

utilized.

3

Revised Points of the Hydrogen / FC Strategy Roadmap

Phase 1: Installation Fuel Cell (Current-)

1. Stationary FC Clarifies price targets of residential FCs ⇒ disseminates without government support by around 2020

■ PEFC: 800,000 yen by 2019 ■ SOFC: 1,000,000 yen by 2021

2. Fuel Cell Vehicles Sets the goals of market introduction

■About 40,000 FCVs by 2020, 200,000 by 2025, 800,000 by 2030 Aims at introducing FCVs in main market segment (price range) by around 2025

3. Hydrogen Refueling Stations Sets the goals of installations and self-sustaining business

■About 160 stations by FY2020, 320 by FY2025 *Needs around 900 stations in case of 300Nm3/h refueling capacity by 2030

■Self-sustaining business of HRSs by the late 2020s Thereafter establishes adequate amount of stations in response to the spread of FCVs

Phase 2: H2 Power Plant/ Mass Supply Chain (Realized in the late 2020s)

4. Hydrogen Power Plant reflects a report by study group on H2 power plant (March 2015) , embodies the description

Phase 3: CO2-free Hydrogen (Realized in around 2040)

5. Hydrogen derived from Renewable Energy States to launch a working group which handles technical and economic issues regarding introduction of CO2-free

Hydrogen and come to conclusion by March 2017. Describes the promotion of advanced initiatives such as the reform 2020 project and Fukushima new energy

society initiative 4

Step by Step approach to realizing a Hydrogen Society Hydrogen / FC Strategy Roadmap

Phase:1 Phase:2 Phase:3

2020

Installation Fuel Cell H2 Power Plant/

Mass Supply Chain CO2-free Hydrogen

2009: Residential FC 2014: FCV 2017: Stationary FC around 2020: ・PEFC;800 thousand yen SOFC;one million yen ・FCV fuel cost ≦ HEV fuel cost HS; About 160 in total FCV; About 40 thousand in total

around 2025: ・FCV toward volume zone ・FCV cost competitive ≧ HEV HS; About 320 in total FCV; About 200 thousand in total

around 2030: FCV; About 800 thousand in total

2nd half of 2020’s: -H2 Cost (CIF) : JPY30/Nm3

-Enhance Supply Chain in Japan around 2030: -Import H2 from overseas -Full Scale H2 Power Plant

around 2040: -Full Scale CO2-free H2 (w/ Renewable Energy, CCS, etc)

- Accelerate RD&D

- Realize reasonable H2 Price

Tokyo Olympic /Paralympics

FCV: Fuel Cell Vehicle HS:Hydrogen Station HEV: Hybrid Electric Vehicle

2030

2040

5

Goals in the road map Progress

• Establish the self-sustaining market of “Ene-Farms” at the early stages, and disseminate 1.4 million units by 2020, and 5.3 million units by 2030.

Over 190,000 units diffused. (*As of September 2016)

• For the retail price of “Ene-Farms” (including construction cost for installation), aim at the price that can recover the investment within 7 or 8 years (PEFC: 0.8 million yen, SOFC: 1 million yen) by 2020, and within 5 years by 2030.

Average retail price of Ene-Farms (Including construction cost for installation) is about 1,210,000 yen. Payout time is about 15 years. * Excluding support by subsidized charge

Residential Fuel Cells

Changes in the diffusion number and retail price

2,550 9,998

19,282

37,525

71,850

115,455

154,059

193,587 303 298

260

210 165

149 145 121

0

50

100

150

200

250

300

350

0

50,000

100,000

150,000

200,000

250,000

2009fy 2010fy 2011fy 2012fy 2013fy 2014fy 2015fy 2016fy

Installed units Selling price

* Based on determination subsidization base （As of the end of January 2017）

Diffu

sed n

um

ber

of

Ene-F

arm

s [U

nit]

Reta

il price [

10,0

00 y

en]

6

Hot Water

Tank

25%

Control

System

5%

Fuel

Processing

System

20%

Auxiliaries

(Structural

Component)

30%

Stack

20%

2015fy 2019fy

Hot Water

Tank

30%

Fuel

Processing

System

5%

Auxiliaries

(Structural

Component)

20%

Stack

45%

2015fy 2021fy

Reduction of system cost (SOFC) Reduction of system cost (PEFC)

Breakdown of Cost Reduction for Residential Fuel Cells

7

• Major Ene-Farms manufacturers in Japan have been proceeded exploitation of overseas market through alliance with boiler manufacturers in Europe and others, and 600 units have been installed to date.

• Dissemination is promoted by utilizing political supports for installation overseas in the future.

① Panasonic: residential fuel cell system jointly-developed with Viessmann was released in Europe from April 2014.

And they launched New model corresponding to wider gas types in April 2016.

② Toshiba: In the spring of 2014, Toshiba announced about development of residential fuel cell system and

marketing alliance with BAXI Innotech (an affiliate company of BDR Thermea). They will provide PEFC fuel cell

unit. They started distribution in Korea in March 2015.

③ Aisin Seiki: Provides home fuel cell unit of SOFC for Bosch in Germany as a part of Enefield Project*. Aiming at

installation of 70 units.(Until September, 2016)

[Source] Created by Nomura Research Institute and the Agency for Natural Resources and Energy based on materials disclosed by companies and hearing

Trend in overseas deployment in Japanese manufacturers

[Residential Fuel Cells] Trend in Overseas Deployment

* Enefield Project is a promoting program to disseminate micro fuel cells for CHP by installing about 1000 units of micro fuel cells for CHP into residential house in 11 participating countries of Europe on a trial basis and validating its usefulness and economic efficiency from 2012 to 2017. EU capitalizes 26 million Euro.

8

Goal in the Roadmap Progress

• For business and industry use, aim at launching SOFC cogeneration type in 2017.

• Demonstrations have been progressing in several models steadily, and expected to be launched in 2017.

Development and Demonstration of SOFC units for business and industry

Demonstration of SOFC units for Business and Industry

Manufacturer

Denso Miura Fuji Electric Hitachi Zosen Mitsubishi

Hitachi Power Systems (MHPS)

（Reference） Bloom Energy

Demonstration model Business model

Appearance

Output 5 kW 5 kW 20 kW 50 kW 250 kW 200 kW

Type Cogeneration

(under consideration)

Cogeneration Cogeneration

(under consideration)

Cogeneration Cogeneration Mono-generation

Electrical generation efficiency

(target value)

(under consideration)

50 % 50 ％ 50 ％ 55 % 50 – 60 ％ （actual

performance）

Total efficiency (target value)

(under consideration)

90 % (under

consideration) 80 ％

73% (hot water) 65% (steam)

－

Major envisioned demand

Barbers and hair salons, small stores, family restaurants

Gym, welfare facilities, hospitals, small buildings

Data centers, large buildings, and hotels

9

Goals in the Roadmap Progress

• Launch FCVs onto the market by 2015, and aim at the market introduction as around 40,000 FCVs by 2020, 200,000 by 2025, 800,000 by 2030.

• Toyota began selling its Mirai in December 2014. • Honda began selling its Clarity Fuel Cell in March 2016. • In September 2015, Toyota announced the estimated global sales of FCVs

around 2020 as 30,000 or higher.

• Aim at realizing the price of FCVs having price competitiveness equivalent to that of hybrid vehicles at the same class by around 2025.

• The retail price of Toyota Mirai and Honda Clarity Fuel Cell are both around 7million yen. Further efforts to reduce costs for FC system and platinum catalyst are promoted.

Auto manufacturer Honda Motor

Car's name Clarity Fuel Cell

Retail price (including tax) 7,660,000 yen

Launch March 2016

Honda’s Clarity Fuel Cell

700 2,000

3,000

30,000

0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

2015 2016 2017 around 2020

Toyota’s expected global sales of FCVs (Single year)

Goals of Fuel Cell Vehicles for Dissemination

（Vehicles）

10

Goals in the Roadmap Progress

• Ensure about 160 HRSs in FY2020 and 320 in FY2025. • 80 HRSs are commercially available and 12 in process.

（*As of January 2017）

• For the price of hydrogen, aim at offering at the same or lower price as compared with the fuel cost of gas vehicles in 2015, and as compared with the fuel cost of hybrid vehicles by around 2020.

• In HRSs currently opened, the price of 1,000-1,100 yen/kg, which is close to the fuel cost of hybrid vehicles, is strategically set.

Progress of Hydrogen Refueling Stations for Goals①

* As of January 2017.

Map of Hydrogen refueling stations

[Tohoku , Tokyo area] 40 Stations

[Chukyo area] 22 Stations

[Kansai , Shikoku area] 15 Stations

[Chugoku , Kitakyusyu area] 15 Stations

Open 80 Stations (In process 12 Stations )

11

Compressor

1.2

Pressure

accumulator

0.5 Pre-cooler

0.3

Dispenser

0.4

Other

equipment

0.3

Construction

cost

1.2

Employment

cost

14

Repair expense

22

Electricity

expense

3

Other costs

8

Goals in the road map Progress

① Aims at reducing the installation cost into a half of the current cost by around 2020.

• Costs for installation: About 390 million yen * Average of actual benefit of grant money (as of the end of 2014) (fixed off site , 300Ｎｍ3/h) * Meanwhile, please note various facility expenses that are not covered by the support will be needed in addition to the above.

② Manufacturers providing equipment constituting the station aim at realizing lower equipment cost having competitiveness against manufacturers in Europe.

③ Aims to reduce the annual operating cost of hydrogen refueling station (except for depreciation expense) to closer to 20 million yen level.

• Operating cost About 47 million yen * Average amount of grant money applied (as of FY 2015) (fixed

off site 300Ｎｍ3/h)

Unit: 100 million yen Unit: million yen

Breakdown of costs for installation of hydrogen refueling station

Breakdown of operating cost of hydrogen refueling station

[Source] Created by the Agency for Natural Resources and Energy based on amount of grant money applied for projects for installation of hydrogen supply facility and reported amount of actual benefit.

Total cost for establishment: About 390 million yen

Total cost for management : About 47 million yen

* Average of actual benefit of grant money (as of the end of 2014) (fixed off site , 300Ｎｍ3/h)

* Meanwhile, please not various facility expenses that are not covered by the support will be needed in addition to the above

* Average amount of grant money applied (as of FY 2015) (fixed off site 300Ｎｍ3/h

Progress of Hydrogen Refueling Stations for Goals②

12

Establishing an Inexpensive, Stable Supply System

Production of

hydrogen:

Gasification,

reforming of

steam, etc.

Refinement of

hydrogen

Lignite

By-

product

hydrog

en

Associat

ed gas

Hydrogen sources in foreign countries

Conversion into

hydrogen carriers

MCH

Liquefied hydrogen

Hydro-

gen

Liquefaction

Combined

with

toluene

Technology has been

established.

● Transportation under

normal temperature and

normal pressure

→ Use of chemical tankers

Production of hydrogen: Conversion into

hydrogen carriers

CH３

Storage of hydrogen

carriers

Takeout of hydrogen

Use of

hydrogen:

Hydrogen

power

generation,

fuel cells,

Industrial

gas, etc.

Organic

hydride

Liquefied

hydrogen

It is necessary to develop

hydrogen ships.

Technology has been

established.

● Storage under normal

temperature and under normal

pressure

→ Use of petroleum tanks, etc.

Technology has been

established.

It is necessary to adopt large-scale hydrogen tanks and to

reduce boil off.

It is necessary to adopt

large-scale dehydrogenation

equipment and to achieve

high efficiency in

dehydrogenation.

Hydrogen is combined with toluene into methylcyclohexane.

→ Hydrogen in this state can be compressed to a volume equal to 1/500 of the volume under normal pressure.

Hydrogen is liquefied by being cooled to -253C.

→ Hydrogen in this state can be compressed to a volume equal to 1/800 of the volume under norm pressure.

Transportation of

hydrogen carriers

13

Characteristics of Power to Gas (P2G) Technology ～Hydrogen Derived from Renewable Energy～

It is considered that a complex system of water electrolysis and hydrogen tank has high potential of application to the area of large scale and prolonged energy storage for the good reason that the complex system has small loss over time and high expandability such as hydrogen tank as compared with competing storage battery technologies in terms of advantage. It is expected that P2G can be a promising item as a countermeasure against problems related to power system interconnection during introduction and expansion of renewable energy in Japan in the future.

[Source] Fuji Keizai

Positioning of various electric power storage technologies

Characteristics of energy storage using hydrogen (P2G)

・ Advantageous to large scale and prolonged energy storage ・ Impact from environmental conditions such as geography and geology is small.

CAES・・・Compressed air energy storage

Storage period

Storage scale

flywheel

Redox flow

Lithium-ion battery

Water pumping

Hydrogen

methane

14

Support HRS installations and promote creating new FCV demand.

Installation Fuel Cell

Phase 1

H2 Power Plant/ Mass Supply Chain

Phase 2

CO2-free Hydrogen

Phase 3

Focus on implementation from the present Realized in the late 2020s Realized in around 2040

Disseminate stationary FCs Disseminate FCVs

Subsidies for Stationary FCs [9.36 billion yen]

Promote the accelerated introduction and cost reduction of Ene-farm. From FY 2017, support for stationary FC for business and industrial use is added .

Subsidies for HRSs [4.5 billion yen]

Support for FCVs [Included in 15 billion yen]

R&D of FCs [3.1 billion yen]

Conduct R&D for better performance and lower costs of FCs, and demonstrate stationary FCs for business use

Stationary FC for business use

R&D of FC, etc.

Develop technologies for lower costs and safety of HRSs, and collect data for reviewing regulations.

Build a H2 supply chain

Demonstrate how hydrogen can be produced from untapped overseas energy resources, transported in the form of liquefied hydrogen or organic hydride, and used to generate power. Implement P2G field tests, etc.

R&D of H2 production, transport and storage

R&D for producing, transporting and storing H2 derived from renewable energy

[1.0 billion yen]

Develop technologies of high efficiency water electrolysis units, tanks for storing liquefied hydrogen, etc. with the use of renewable energy sources.

R&D of HRSs [4.1 billion yen]

Demonstrations for global H2 supply chain [4.7 billion yen]

Draft Budget for Hydrogen and Fuel Cells in FY 2017

15

1.Just started market introduction - Success to introduce Fuel Cell (FC) to the market - Need to enhance FC applications

2. Develop new role of hydrogen - H2 gas turbine : Develop large H2 demand - Power to Gas : Low carbon energy system

3. Well public / private and national/regional communication and cooperation

- H2 and FC Roadmap / Share the targets - Long history / Demonstration project (Stationary Fuel Cell / Fuel Cell Vehicle)

For Accelerating Realization of Hydrogen Society

16

Thank you for your attention.