Japan’s pride might prevent Toyota from dropping fuel-cell tech

The videotape recorder that lost out to VHS in the format wars of the 1980s remains a reminder to all executives about the perils of holding tight to one technology when the rest of your industry is pursuing another.

Toyota insists on throwing money at cars powered by hydrogen tanks and fuel-cell technology, which it began developing in the early 1990s. The Japanese car maker is looking more isolated as others gravitate toward plugin electric vehicles to fulfil a vision of zero-emission cars, according to a Bloomberg report on Tuesday.

Putting an even finer point on that isolation was Tuesday’s decision by Mazda Motor, a longtime Toyota partner, to issue its first 10-year bond in three decades in order to raise money for areas such as electric-car investments.

A big reason Toyota’s probably holding on to fuel cells is out of loyalty to Japan, which in 2014 set goals to accelerate the development and deployment of hydrogen and fuel-cell technology to meet the country’s long-term energy needs. Since then, the government has spent more than US$1.2 billion developing the technology, according to Bloomberg New Energy Finance (BNEF).

Japan underpinned its economic rise by building industries including shipbuilding, electric power, steel and technology using plans like the one it has proposed for hydrogen. The government’s so-called Hydrogen Society Roadmap, which was updated in March 2016, pledged to deploy 800,000 fuel-cell vehicles and construct 900 charging stations by 2030. But progress has been slow: only 2,300 fuel-cell vehicles and 91 stations are on Japan’s roads today, BNEF estimates.

And although Toyota remains loyal to the ministry of economy, trade and industry’s programme, other Japanese car makers such as Honda have acknowledged that electric vehicles (EV) will proliferate faster and are starting to redirect investment.

Hydrogen has a couple of major advantages over battery-electric. One centres on energy density – the amount of power generated from a given mass of fuel. That is one of the reasons the maritime industry is also interested in the gas as a fuel.

Maritime Belge (CMB) has built the first commercial ship that runs on hydrogen and produces zero pollution, taking the world a step closer to cargo without emissions.

The Hydroville passenger shuttle can operate on compressed hydrogen as well as regular fuel oil, according to the Belgian company. The ship was recently certified to operate as a seagoing vessel by Lloyd’s Register. CMB will expand the technology to engines on cargo ships after initial testing, says Bloomberg’s Anna Hirtenstein.

Pollution from the trillion-dollar shipping industry is still loosely regulated. While it is estimated to produce as much as 3 per cent of the world’s emissions, it was not included in the 2015 Paris climate agreement. Ships almost always burn heavy fuel oil, one of the dirtiest and cheapest forms of energy.

Oversight on shipping emissions is about to change, however, as the International Maritime Organisation, a United Nations agency, is set to impose from 2020 stringent new rules that limit the amount of sulphur emissions from ships. There are also talks about adding a carbon tax.

While other forms of transportation are leaning toward batteries such as EVs and trucks, cargo shipping is simply too energy intensive for that to be an option.

According to Roy Campe, a research and development manager at CMB, even with the world’s biggest battery, a standard cargo ship could not sail for more than a day. Average CMB voyages last two or three weeks, he points out.

While a petrol-powered car can generate around 30 megajoules (MJ) from each kilogram of tank and fuel, batteries barely clear 1MJ per kg, according to a Royal Dutch Shell study. Hydrogen does not achieve petrol-style densities but it does get closer.

That explains why some critics are sceptical of Tesla’s Semi truck and new Roadster. With lithium-ion batteries already close to their theoretical maximum densities, increasing power output requires loading on more cells with diminishing returns.

Another touted advantage of hydrogen is that vehicles can be refuelled from a pump, rather than waiting the many hours it can take to fully recharge a battery-powered car. But since Japan went down the hydrogen path, recharge speeds – particularly for partcharging at high-kilowatt stations like Tesla’s Supercharger network – have been falling fast. As the cost of batteries diminishes and the number of charging stations rises, hydrogen-car believers like Hyundai Motor and Volkswagen’s Audi have backed away.

Those wondering where energy companies stand can follow the money: Shell’s acquisition of the electric charging operator NewMotion last month instantly gave it 30,000 EV charging stations. It only has a handful of hydrogen filling stations in Europe and California, with plans to roll out 400 more in Germany by 2023.

Toyota says it is pursuing battery-electric and fuel-cell batteries “at the same speed” but directing precious investment dollars into fuel-cell technology while the rest of the industry wades deeper into EVs suggests its decisions are driven more by government decrees than market forces.

While going against the grain can often work in areas such as stock-picking, it seldom prevails for technology that requires a network effect, or economies of scale, to succeed.