The energy transition unlocks
new economic opportunities
Hydrogen’s potential to support the energy transition is attracting increasing attention. The applications of hydrogen range from fuelling vehicles, heating homes and businesses and providing an industrial feedstock to storing renewable energy and balancing the electricity grid.
Both green hydrogen, based on renewable energy generation, and blue hydrogen, in combination with carbon capture and storage (CCS) technology, are recognised in many countries as essential components in achieving a decarbonised economy, with the greatest interest coming from industry, power generation and mobility.
In its 2019-2070 Sustainable Development Scenario, the International Energy Agency (IEA) predicts global hydrogen demand will reach about 520 million tons by 2070. Mitsui & Co. believes that the development of industrial solutions, including those that are hydrogen-based, to address the global issue of climate change is not only an ESG obligation but also a business opportunity.
First movers on hydrogen also count on an attractive long-term commercial outlook: Bank of America estimates that the global hydrogen economy could be worth $11 trillion by 2050.
Mitsui was the first among the Japanese general trading companies to set a goal of net-zero emissions as its vision for 2050, and by 2030 it aims to halve its GHG impact compared to 2020 as the path to achieving the vision.
The company’s medium-term management plan, unveiled in May 2020, highlights “energy solutions” including hydrogen as a strategic focus for the realisation of a low-carbon society.
“Hydrogen is one of the clean energies that can be the key to the realisation of net-zero emissions,” says Takeo Kato, Managing Officer & Chief Operating Officer of Performance Materials Business Unit, Mitsui & Co.
Mitsui has already started efforts in the mobility field, where attention is focused on fuel cell electric vehicles (FCEV) and supporting infrastructure such as hydrogen stations as a starting point.
“In the immediate to short term, we are supporting the utilisation of hydrogen mainly in the mobility sector while from 2030, we expect the hydrogen value chain to expand further,” says Kato. “We plan to utilise Mitsui’s strength of operating in various business areas to build a value chain that provides solutions for the realisation of a hydrogen society.”
However, while it is imperative to decarbonise the still heavily fossil-fuel-reliant transport sector, the business case for hydrogen is still a work in progress. Reducing the cost of hydrogen and scaling up its application remains critical to its success.
The potential use of hydrogen in FCEVs in the mobility domain is growing. Hydrogen fuel cells, as used in vehicles, work by generating electricity through a reaction between hydrogen and oxygen, with the exhaust – water – being carbon-free.
FCEVs have a shorter fuel filling time and a longer cruising range than battery electric vehicles (BEV); however, they should be considered complementary, rather than competing, technologies for decarbonising the transport sector.
High levels of traffic congestion and exhaust pollution are increasingly making drivers in California seek out more environmentally-friendly solutions. Indeed, California is an ideal testbed for FCEV given its population, high levels of car ownership, and its favourable regulatory regime. With around 9,000 light-duty FCEVs on its roads, the state constitutes the world’s biggest FCEV market.
In June 2020, Mitsui announced a $25m investment in California-based FirstElement Fuel (FEF), a designer, developer, and operator of hydrogen stations for passenger cars, with a longer term view to expand into commercial vehicles such as buses and trucks which can benefit from the longer cruising range of hydrogen fuel cells. FEF is planning an infrastructure expansion to increase the number of hydrogen stations from 23 to 80 by 2025, and several of those stations will be capable of filling heavy duty, long-haul trucks.
“A market mechanism that encourages not only public financing but also private financing is well installed,” says Kato. “It is in California that businesses like FEF can actively develop. An optimal market mechanism based on supply and demand can draw out the incentives for private companies.”
For FCEVs the high total cost of ownership remains a challenge, and a multifaceted effort is required to reduce the costs for procurement and utilisation of the hydrogen with environmental value. This challenge can be addressed through developing both the technology and value chain further.
To reduce the cost of hydrogen and supply infrastructure, there needs to be more demand for passenger and commercial FCEVs, and improved, competitive supply and logistics. Here, the FEF investment dovetails with Mitsui’s existing investment in Hexagon Composites (HEX), a Norwegian manufacturer that manufactures plastic-lined carbon or glass fiber reinforced pressure cylinders including composite cylinders for natural gas and LPG, and high-pressure hydrogen fuel cylinders and supply systems used in transportation, storage and FCEVs.
Mitsui sees these initial investments as a basis for expansion in the hydrogen supply chain, and an opportunity to participate in the creation of the sector’s wider ecosystem.
“We think that HEX’s hydrogen transport trailers can strengthen the logistics supply chain and will allow FEF to procure hydrogen for its filling stations from the most suitable supplier,” says Kato.
“In collaboration with FEF and HEX, we will pursue demand creation in the commercial vehicle sector, and develop new business models. In addition, we plan to utilise our comprehensive strengths to expand hydrogen related business into new markets such as ships, railways, and mining vehicles, as well as other regions.”
Reforms that will scale up hydrogen use and production, making it more familiar, more standardised and based on efficient value chains, are underway in a range of markets.
Mitsui is now readying itself to deploy the expertise gained in California on the global stage. "We are cultivating the demand for hydrogen by expanding its use within the mobility market while applying the knowledge accumulated through the businesses related to FEF,” says Kato.
“In the near future, with a bird’s eye view from upstream to downstream – such as the production, logistics, and utilization of hydrogen – we aim to provide multiple solutions to society by demonstrating our comprehensive strengths within diverse industries.”
About Mitsui & Co.
Mitsui & Co. is one of the largest global trading and investment companies. Founded in Japan in 1947, we maintain a unique, unobstructed view of international markets through its worldwide network spanning across 64 countries and regions, with a diversified business portfolio stretching across 7 operating segments; Iron & Steel Products, Mineral & Metal Resources, Machinery & Infrastructure, Chemicals, Energy, Lifestyle, Innovation & Corporate Development.