Theme: Energy transition in the Netherlands and Japan: how to benefit from each other through cooperation
Annabel Melhuish | VU Amsterdam | Masters of Environment and Resource Management – Sustainable Energy
A Hydrogen bond:
Forging trade opportunities between the Netherlands and Japan
International hydrogen trade and its ensuing value chains can unlock economic opportunities, generate new patterns of energy interdependence, and improve domestic energy security. Japan and the Netherlands could develop a bilateral agreement that revolves around green hydrogen, hydrogen-based technologies, and hydrogen energy carriers. This could provide opportunities for both nation states to build upon advancing technologies and decouple Gross Domestic Product from fossil fuels. This is particularly pertinent in the context of rising gas prices, as a hydrogen trade deal could reduce the Netherland’s dependency on imports from Russia and Japan’s reliance on imported fossil-fuels. A strategic export-import value chain could also help realise both countries’ ambitions to decarbonise their ‘hard-to-abate’ sectors, such as transport and industry. Japan has set targets to achieve a decarbonised, carbon-neutral society by 2050 through the deployment of low-carbon technologies (IEA, 2021). Significantly, a ‘true hydrogen society’ will only be possible with international collaboration, advancement of research and development and sharing of innovation (Li & Nishimiya, 2021).
Japan and the Netherlands share a rich cultural heritage and trade relationship that commenced in the early 17th century and continues into our contemporary society. This is exemplified by the 1641 Tokugawa policies that restricted contact with other nation-states, whilst permitting the Dutch to remain as Japan’s sole European trading partner (Klos & Derksen, 2016). A green hydrogen trade deal could draw on these cultural ties and create a
forward-looking hydrogen market that promotes international collaboration.
Japan is currently positioned as a global leader in hydrogen-based materials, technologies, and systems, owing largely to its extensive research, public and private investment (Li & Nishimiya, 2021). The cost of domestic hydrogen production is inextricably linked to land availability and abundance of clean energy resources. Japan has poor quality wind and solar resources, whilst 91% of land is excluded for hydrogen production due to the presence of forests. IRENA assessed the nation-states most suited for green hydrogen production, by comparing demand projections for 2050 and creating supply-cost curves. Japan presents a high levelised cost of hydrogen of USD $2.4/kgH2 under their 2050 ‘optimistic’ scenario in contrast to under USD $1/kgH2 for Europe (IRENA, 2022b).
Whilst local production is unlikely to meet energy demands, Japan is well positioned to benefit from and utilise imported hydrogen, particularly noting the government’s substantial investments in technology development and transportation of liquefied hydrogen. It is estimated that 670 million USD was invested in 2020 for hydrogen and fuel-cell development (IRENA, 2022a). The International Energy Agency posits that in 2019 globally listed organisations with headquarters in Japan invested 14.1 billion USD on research and development in the energy sector (IEA, 2021). This demonstrates the Japanese private sectors’ emergence as innovation leaders, with technological capability that could be sold internationally to promote trade flows. The Netherlands could be a large importer of this technology given the target for 3-4 GW of new electrolyser capacity by 2030 under their Climate Agreement (IEA, 2020).
High dependency on Russian gas imports have exacerbated energy insecurity in both European and Asian markets, further highlighting the need for decentralised renewable energy production. In response to Russia’s invasion of Ukraine, the European Union introduced the REPowerEU plan, which asserts that a further €210 billion is required between now and 2027 to cut dependence on fossil-fuel imports from Russia; that currently cost taxpayers €100 billion each year (REPowerEU Actions, 2022).
A trade deal between Japan and the Netherlands would be founded upon well-established diplomatic relationships and the stability of both political systems. The Netherlands is already forging bilateral trade agreements with Morocco, Namibia, Portugal, and Uruguay, demonstrating new patterns of energy interdependence and a recognition that a hydrogen economy requires international collaboration (IRENA, 2022a).
The Netherlands is strategically located to become a future hydrogen hub for Northwest Europe, owing largely to its robust port industry, extensive gas pipelines and storage fields that could be optimised for hydrogen transmission. In early 2022, the Dutch Government highlighted the importance of offshore wind in reducing greenhouse gas emissions by 49% by 2030, in comparison to 1990 levels (and a 95% decrease by 2050). The offshore wind energy target of 11.5 GW was increased to 21 GW by 2030. Importantly, industrial electricity demand may not meet this pace or supply of offshore wind energy, thereby creating strong growth opportunities for green hydrogen production (Ministry of Economic Affairs and Climate Policy, 2022). A formalised bilateral cooperation could accelerate the commercial deployment of Japanese technologies, prevent grid curtailment, and allow for the repurposing of gas infrastructure in the Netherlands.
The Port of Rotterdam is currently leveraging established energy infrastructure and a skilled logistics workforce to create a hydrogen backbone that can support the energy demand of Northwest Europe. HyXchange is a trading platform being developed by the Dutch Government in collaboration with 45 industry partners. The initiative will create price transparency, a spot market, and trading products that allow for a hydrogen pipeline and gas storage. This trading instrument will allow importing countries like Japan to be able to certify the sustainable value chain, generation source, and resulting emissions reductions.
In July 2021, a memorandum of understanding has been signed between Mitsubishi Corporation, Chiyoda Corporation, the Port of Rotterdam Authority, and Koole Terminals. The two Japanese and Dutch companies will examine the feasibility of commercial-scale imports of hydrogen into the Port of Rotterdam using hydrogen transportation and storage technology. Chiyoda’s SPERA technology could revolutionise international hydrogen trade, as unlike ammonia and liquid hydrogen, the Methylcyclohexane can be transported at ambient temperature and pressure (Port of Rotterdam Authority et al., 2021).
To conclude, a bilateral agreement could support Japan’s transition to a net-zero society by reducing dependency on gas and carbon-intensive assets (IRENA, 2022a). Japanese technological innovation and hydrogen demand could prove pivotal in the scaling-up of hydrogen production, export and transportation in the Netherlands and Northwest Europe. This international cooperation could decarbonise both energy systems, whilst generating a virtuous cycle of energy security, economic growth, and environmental sustainability.