By Lefteris Karagiannopoulos, Sonali Paul and Aaron Sheldrick OSLO/MELBOURNE/TOKYO, April 28 (Reuters) – Norway and Australia are racing each other to show they can supply Japan with hydrogen, hoping to fulfil its ambition to become the first nation significantly fuelled by the super-clean energy source.

While Australia has planned to derive liquid hydrogen from brown coal for some time, Norway could steal a march if a pilot project producing the fuel using renewable energy – a climate-friendly method more in keeping with Japan’s aims – is cheaper.

Japan is betting heavily on becoming a “hydrogen society” despite the high costs and technical difficulties which have generally slowed its adoption as a carbon-free fuel.

Prime Minister Shinzo Abe is pushing his vision of vehicles, houses and power stations using hydrogen to end Japan’s energy crisis since the 2011 Fukushima disaster, which led to a dramatic drop in electricity production from its nuclear plants.

The country’s annual hydrogen and fuel cell market is forecast to hit 1 trillion yen ($9 billion) in 2030 and 8 trillion yen in 2050, according to the industry ministry.

Kawasaki Heavy Industries (KHI) is developing a supply chain to back Abe’s initiative, which will be showcased when Tokyo hosts the 2020 Olympic games.

KHI has been looking at using brown coal from the Australian state of Victoria, where supplies are plentiful. However, it is hedging its bets with a project in Norway to derive hydrogen using power from hydroelectric dams and eventually wind farms.

Using Australian coal requires removing its climate-changing carbon and burying it in old oil or gas wells there.

In Norway, KHI has teamed up with Nel Hydrogen, a maker of hydrogen plants, with backers including Japan’s Mitsubishi Corp and Norway’s Statoil. The project aims to demonstrate that liquefied hydrogen (LH2) can be produced using renewables and delivered to Japan on tankers.

Nel Hydrogen’s market development vice-president Bjorn Simonsen told Reuters the company aims to deliver liquefied hydrogen to Japan for a minimum 24 yen per normal cubic metre (Nm3). A study on the scheme is due to be completed in 2019.

KHI estimates that hydrogen from Australia costs about 29.8 yen/nm3 and the company plans to establish a global LH2 supply chain like that for liquefied natural gas, KHI’s spokesman Keisuke Murakami told Reuters by email.

“If Norway commercial (production) goes rapidly it might be earlier than Australian commercial,” he said.

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Both projects still have a long way to go before they could start commercial production.

Under the Australian plan, coal would be converted to gas for processing to remove sulphur, mercury and carbon dioxide, leaving hydrogen. The Norwegian system would use renewable power for high-temperature electrolysis to split water into hydrogen and oxygen, which would be released into the atmosphere. In both cases, the hydrogen would be liquefied for shipment to Japan.

In Australia, a small demonstration ship is being built and KHI plans to build bigger tankers in the 2020s. The firm is also seeking support from the Victorian and federal (Commonwealth) governments, Murakami said.

A hydrogen plant would “contribute to job creation and the acquisition of foreign currencies,” he said, adding that a pilot project in Australia is scheduled to start before 2020.

Victoria is looking at the project due to the decline of brown coal mining and power stations burning the polluting fuel.

“The Victorian and Commonwealth Governments have been working with KHI on an engineering study into the possible production of hydrogen from Victorian brown coal,” the state’s resources minister, Wade Noonan, told Reuters. The government is waiting for KHI’s results, he said.

The Japanese government is backing KHI’s Australian initiative and budgeting 4.7 billion yen for it and related efforts this financial year, up 70 percent from the previous year. It is spending 22 billion yen backing other hydrogen initiatives.

Earlier this month Abe called on ministers to step up efforts to “lead the world in making the hydrogen society come true”. He called for 40,000 fuel cell vehicles to be on the streets by the 2020 Olympics.

So far, the technology has largely been applied to cars, with hydrogen used by a fuel cell to make electricity which in turn powers the vehicle. Toyota Motor Corp launched its hydrogen-fuelled Mirai model in 2014.

However, only a few thousand Mirai – which means “future” in Japanese – are on the roads, a figure dwarfed by numbers of technically simpler battery-powered cars worldwide.

Fewer than 100 filling stations sell the fuel in Japan as safety concerns have held back development following hydrogen explosions that rocked the Fukushima nuclear plant.

While Japan has high hopes of developing commercial scale power stations using hydrogen, environmental concerns over the use of brown coal and other fossil fuels may cloud its future.

“Over 95 percent of it today comes from fossil fuels. To speak about clean hydrogen we have to clean the dirty fuel that produces it,” said Cédric Philibert, a senior renewable energy analyst at the International Energy Agency. ($1 = 111.4500 yen)

(Additional reporting by Osamu Tsukimori in Tokyo; editing by David Stamp)

(c) Copyright Thomson Reuters 2017.