➡️ Tell us about MHI and your role in the company. Where does MHI position itself in the hydrogen market?

I'm in charge of energy transition technologies, or green transformation technologies, as we call them now. Within MHI, I’m responsible for Europe, the Middle East and Africa. I have a background in research and academia. I have been doing research on these topics – CO2, hydrogen, bioenergy, and synthetic fuels – for the last 25 years. 

MHI launched a zero-emission strategy back in 2019, which boils down to the commitment to become carbon neutral by 2040… Being a Japanese company and understanding the importance of green energy to be imported and not locally produced, we recognise the role of H2 and the so-called zero-carbon fuels. We have positioned ourselves along the full value chain – that’s a unique strategy of MHI. This means that we can advise and work together with our partners from the production side of carbon-free fuels in general, their transportation, transmission, and storage, to up to the end use with technologies like gas turbines for power projects or fuel cells. So we have a one-stop shop, especially on the green fuels along the fuel value chain. 

On the ammonia value chain, we offer technologies from the production of hydrogen, the synthesis of ammonia, the transportation of ammonia, the use of ammonia as a fuel, and the cracking of ammonia back to hydrogen, and the utilisation of hydrogen or the combustion of ammonia. 

➡️ What are the biggest market challenges MHI faces in the hydrogen sector, and how is the company addressing them?

The biggest challenge in hydrogen is the distance between project ideas and real projects. The number of announcements is very big and interesting, but the actual FIDs are only a fragment. 
We are starting discussing again about projects on the 10 or 20 megawatts [scale], whereas the real projects are multiple hundreds or even gigawatt scale. Although concepts and design studies exist, the actual FID is not taken and the reason is very simple. In most of the cases, the renewable energy is not there, or it is at a very high price. Or simply, the maturity time is much longer than anticipated. 

That should not, however, disappoint us. This is not a surprise; this happens with all the new technologies. First, there is hype. Then there is a reality check – things are going down, there’s disappointment. Then there is maybe some consolidation, survival of the fittest, as always. Then we will have the first-of-kind projects – real projects that address real needs, and not create the need to justify the project. In the hydrogen case, that means the substitution of fossil hydrogen, and then you will have a market [turnaround]. 

How we move to FIDs, how we scale from small to medium and bigger size – that’s the biggest challenge. The second issue that comes from that, especially for Europe, is the question of infrastructure. Because there is no infrastructure right now. There will be infrastructure as it was the case with natural gas, but that has to be justified from the magnitude and the size of the actual hydrogen demand. That’s why we need real big projects that will create the demand to put hydrogen at the end-use location, first creating the infrastructure. 

➡️ The high cost of green hydrogen is a key concern among producers and users. How can the cost be brought down and over what kind of timeframe?

With hydrogen, one-third [of the price] is capex, two-thirds is opex. The capex size is going down already in mature technologies. In alkaline electrolysers, we are getting down the line with bigger sizes, the rollout of manufacturing capabilities, the optimisation of the balance of plant, the use of dedicated rectifiers or electrical load management devices. Everything that goes down to with scale will reduce capex. We have technologies that do not rely on expensive rare earths or different metals that could create a scarcity problem, which is the case with other energy source technologies. Along the capex side, I’m optimistic.

On the opex side, most of the countries which are energy-only markets, do not allow the end-user of big electricity consumption to benefit from the fact that it creates more demand to absorb more renewable energy. In other words, the creation of long-term, long-duration storage services in the energy market, is not rewarded. In fact, I would say that in some cases, it’s not even wanted from some markets. And that’s a hard truth. And unless we put the reliability of the electricity system as a service to be rewarded, we will always try to sell electricity at the highest price. [But] hydrogen is trying to procure electricity at the lowest price. So these two do not match and that’s a deficiency of the energy-only market. 

On the other hand, we are still not witnessing the effect of hard competition on the oversupply of renewables. Still, there is a part of renewables that runs in a protected environment, there are parts of it that are running already over feed-in tariffs. We don’t see the effect of the collapsing of renewable prices, because of excessive supply in the data. [But] this will come and this will come sooner than later. Then the renewable projects developer will have to look for customers other than the grid. This is where hydrogen can play a nice role, it can give some attractive PPAs [power purchase agreements] that will secure the business case of the renewable project developer. 

➡️ What other headwinds are challenging the hydrogen economy globally? Do different regions have different problems?

In Europe, it’s the high cost of electricity. The infrastructure question is a very important one. I am a great supporter of what we call hydrogen backbone. The absence of a backbone and the limited progress on clustering; that means consolidating the us. these are the [challenges]. In Europe, we have very few hydrogen clusters. The UK is doing an excellent job there but outside of the EU, you will see Rotterdam, Antwerp, some ports in the North Sea, but not much. There is a limited infrastructure that has to be scaled out in terms of pipeline. These are the major major roadblocks.

➡️ How do you view the current European regulatory framework on hydrogen? What regulatory changes would be necessary to accelerate the adoption and scaling of hydrogen in Europe?

Simplify, simplify, simplify. The European policy is always first punishing and then rewarding. And this is not delivering the anticipated result all the time, because people try to avoid punishment with whatever means they have. And we were seeing that, for instance, in several European markets, we still have coal plants running. On the policy side, I think there is over complexity in the classification of hydrogen and in the definition of eligibility of renewable sources used for hydrogen. Even the discussion between green and blue hydrogen is not helping. On one hand, it’s important that the policymakers should facilitate the first big projects and should also equally support infrastructure, which is there for everybody. We cannot make it without policy support; that’s obvious. On the other hand, it’s not fair to always blame the policy support. I think it’s more the market design than the policy support that delays the hydrogen rollout.

➡️ Do you believe international hydrogen standardisation will be key in developing the hydrogen economy?

Absolutely. We see that from Japan, for example, [it] accelerates the receipt of hydrogen, because they have clear standards – I would say – more close to reality and unbiased standards. [They are] not trying through standards to impose a certain policy view; that has to be decided by the market. The policy has to create a level playing field and not prescribe the solution.

➡️ When and where do you expect the first hydrogen-fired power plants to become operational? That is, plants running on hydrogen, rather than hydrogen-ready plants.

This is linked to the availability of hydrogen at scale. We, from the technology side, commit to 100% hydrogen firing readiness already now for the small and medium gas turbines, and by the end of the decade, for the large or utility-scale gas turbines. So technology is ahead of the hydrogen supply. I value very much the initiatives like the German initiative to have this 10-gigawatt hydrogen-ready [power plants]. I am a little bit afraid whether the infrastructure – not hydrogen itself – to reach the end user, will be ready by 2030. The current anticipation that somewhere between 2030 and 2035 we will have the first hydrogen-fired gas turbine is realistic. If you look in the States, we are starting next year to burn 30% hydrogen produced by ACES Delta in the Intermountain power plant. And we gradually ramp up to 100% somewhere up to 2045, because there the developers were very conscious of the availability of hydrogen, not of the technology. Maybe we will see some niche projects that have a clear hydrogen supply strategy – not necessarily green, most probably blue  – that will be somewhere in the mid of the next decade.

[In terms of where], in the EU, we have definitely the northern European countries. Netherlands, Germany, maybe the UK. I don’t think that the market in the southern European countries will justify hydrogen-fired power plants, although Spain and Italy have shown some interest. But there are new investments in gas that are not repaid yet, so they will continue. 

We are convinced that hydrogen-backed power will be essential for the safety of the grid. That’s something we said first, and I said it in person years ago. When everybody said that hydrogen-backed power is an illusion, I pointed out on the necessity of the reliable grid operation with zero carbon thermal power. And I'm glad that there are more people following this conviction.

➡️ At what price level would clean hydrogen be a feasible fuel to replace natural gas in Japan? In Europe, what would be the ‘ideal’ price for hydrogen to be largely adopted in hard-to-abate industries?

In an ideal world, equity on the energy content plus the CO2 price – remember that in Japan, they are just starting to introduce CO2 price. In the long run, hydrogen will make this parity. I can hardly say any numbers, but I’m tempted to say that if I see enough hydrogen at $5 per kilogram, this will incentivise the first project.

[In Europe], we have solid business cases for industrial sectors, in prices between $4 and $5 for the steel industry. Of course, we will welcome lower price. But, that is kind of the ceiling.

➡️ Is there anything else that you would like to add?

I pray for the big change in the mood to have ideas to have FIDs and first-of-kinds. I am optimistic that we will succeed – and that’s my message – because the industry keeps focusing on large scale. Demand pull is the name of the game and it’s not hundreds of passenger cars that we expect to become thousands out of the blue. It’s a single point of consumption of 100,000 tonnes per year, rather than the aspiration – to make an example – on the retail side. It is the industry who will pull hydrogen, not the retail utilisation. That’s my clear message.