Hydrogen energy is widely considered to be one of the most effective solutions for achieving a sustainable society, but it will not be easy for Japan to make this shift. There are major obstacles: Japan has already established an energy distribution system that is economical, safe and convenient; there is no coordination between those groups likely to see the immediate benefits of large-scale hydrogen adoption; and it will take time to revamp the underlying energy infrastructure to develop hydrogen energy supply chains.
EY believes that innovation, collaboration, and funding are crucial factors to creating a hydrogen-based society
Innovation: Maximizing the value of hydrogen energy creates benefits for everyone
Japan has already developed an energy distribution system that is economical, safe and convenient. For hydrogen energy to be widely accepted, technological innovaions and business model transformations are encessary to give hydrogen a competitive advantage. In addition, new ways of thinking are needed to drive the adoption of hydrogen energy. For example, drones powered by fuel-cells have a longer flying range than those powered by lithium ion batteries (LiB)*17 while fuel-cell powered forklifts unlike electric versions do not require battery changes, saving time and storage space. Once the public is aware of the value and benefits, it will be easier to speed up the creation of hydrogen-based society.
Collaboration: Building a value chain and promoting collaboration of national and local governments
Generate, store, transmit and utilize hydrogen energy: to build this robust value chain, people from a wide range of sectors must work together. The benefits of hydrogen energy for society are numerous. Beneficiaries include not only end-users but also national and local government. The advantages of hydrogen energy —carbon reduction, BCP, and innovation— need to be understood collectively in order to set prices appropriately, collect revenue, and redistribute it to stakeholders across the value chain.
There needs to be an ecosystem based on new business models that enable this complex exchange of value to be more widely understood.
Funding: Sustaining businesses that spur social change over a span of several decades
Restructuring Japan’s energy infrastructure and establishing a hydrogen energy supply chain will take several decades. For most private entities, this timeframe goes beyond what they usually consider when making capital investment decisions. In particular, there is always a risk that funding will dry up, and that a project might be shelved. On the other hand, sustainable investing has been on an upswing. According to some analysts, assets under management by sustainable investment funds exceeded ￥3,000 trillion ($28 trillion) in 2018*18. Such investors are expected to play a key role in supporting the development of a hydrogen-based society from a long-term perspective, while sharing a common goal and vision of how society will be transformed through the use of hydrogen energy, as well as the creation of shared value.