Hydrogen in Japan moves from domestic pilots to global supply chains
Japan’s Ministry of Economy, Trade and Industry has awarded the country’s first international projects for low-carbon ammonia under the national hydrogen support program. The move marks a turning point, shifting from small-scale domestic initiatives to large international supply chains, according to Wood Mackenzie.
Japan has allocated $6.8 billion to its first international hydrogen CfD, launching a major procurement cycle. Projects led by JERA and Mitsui & Co. secured 35 percent of the funding from the country’s $19.2 billion hydrogen support program.
The JERA and Mitsui projects
The two projects plan to import nearly 772,000 tons of blue ammonia per year, equivalent to about 120,000 tons of hydrogen, from Louisiana in the United States starting in 2030–2031. Following these awards, almost 65 percent of the $19.2 billion CfD budget remains available. As a result, Wood Mackenzie expects further international allocations as Tokyo expands its low-carbon hydrogen sourcing.
What contracts for difference are
A CfD, or contract for difference, is a financial mechanism designed to stabilize revenues for low-carbon energy producers. Under this model, the gap between a fixed strike price and the market price of electricity or hydrogen is covered by a government or public authority. If the market price falls below the strike price, the producer receives a top-up payment. If prices rise above it, the producer pays back the difference. The system reduces investment risk and supports the development of low-carbon energy projects.
Japan’s hydrogen support program
“This CfD round is a turning point, not the end,” said Shintaro Onishi, an analyst at Wood Mackenzie. “Japan is now supporting large-scale international supply chains, not just domestic ones. By leveraging U.S. production incentives such as the 45Q tax credit, alongside domestic CfD support, Japan has created a more cost-effective framework to secure low-carbon ammonia.”
Both projects will source blue ammonia from the Blue Point facility in Louisiana, with total production of 1.4 million tons per year. JERA holds a 35 percent stake and will purchase 0.5 million tons annually starting in February 2030, mainly for co-firing at its Hekinan power plant in Aichi. Mitsui holds a 25 percent stake and will supply 0.28 million tons from January 2031, primarily to Hokkaido Electric Power for ammonia co-firing. The remaining volumes will serve facilities operated by UBE Mitsubishi Cement and Tosoh. Together, the two Japanese consortia have secured more than half of Blue Point’s production capacity.
The projects have received 15-year CfD support from JOGMEC, funded through Japan’s $19.2 billion hydrogen program. While the exact subsidy amounts have not been disclosed, Wood Mackenzie estimates that the two projects account for nearly $6.8 billion, about 35 percent of the total CfD funding available. The subsidy period runs through 2045.
Leveraging Japan’s leadership in ammonia co-firing
CfD funding is underpinned by Japan’s technical leadership in ammonia co-firing, an area in which the country is a global frontrunner. JERA’s Hekinan power station aims to achieve 20 percent ammonia co-firing in one unit by 2029. The CfD program will enable the rollout of this technology to Hokkaido Electric’s Tomato-Atsuma plant.
The roots of this leadership date back to the mid-2010s, following the 2011 Tōhoku earthquake, tsunami, and the Fukushima nuclear disaster, which triggered a national pivot away from nuclear power. In response, the Japanese government launched a broad initiative to research and develop alternative energy sources. While Tokyo did not impose strict climate mandates at the time, it prioritized technologies capable of supporting the country’s net-zero ambitions. Ammonia emerged as a promising low-carbon energy carrier within this effort.
In 2024, JERA began co-firing coal with a 20 percent share of ammonia at the Hekinan plant, the first commercial-scale deployment of its kind. Developers subsequently addressed challenges related to nitrogen oxide emissions, and the company now targets a 50 percent ammonia blend by 2035. By 2050, low-carbon hydrogen is expected to meet 33 percent of hydrogen demand, replacing today’s carbon-intensive supply.
An integrated policy approach lowers value-chain risk
“Japan has built its hydrogen program around tangible demand,” Onishi added. “By linking imports to real use cases in utilities, cement, and chemicals, these projects create cross-sector synergies for large-scale ammonia deployment.”
The CfD awards reflect an increasingly holistic hydrogen policy. Both JERA’s Hekinan units and Hokkaido Electric’s Tomato-Atsuma plant had already secured support under Japan’s long-term decarbonization auction in fiscal year 2023, which covered capital costs. Combined with CfD support and infrastructure incentives, this approach helps reduce risk across the entire hydrogen value chain.