Japan will examine the first set of applications for its newly established framework supporting the development of hubs for low-carbon hydrogen and its derivatives after June 30, a government source said March 6.

The examination will take place as Japan began receiving applications on March 5, which will continue until June 30, for subsidies to support front-end engineering design (FEED) to be carried out and completed by the end of February 2026 under the fiscal year 2025-26 (April-March) budget.

For the first time, a Yen 5.7 billion ($38.42 million) budget requested by the Ministry of Economy, Trade and Industry was introduced to support the development of hubs for low-carbon hydrogen and its derivatives in FY 2025-26. The budget still needs to be approved by the Diet.

The FY 2025-26 budget for supporting the development of hubs for low-carbon hydrogen and its derivatives covers only the FEED for facilities such as storage tanks and pipelines at receiving terminals, which will be used by more than two companies, the source said.

Policy measure

The government's planned start of support for developing hubs for low-carbon hydrogen and its derivatives is part of key policy initiatives, alongside the price gap subsidy, to help develop its supply chains by FY 2030-31.

"In particular, 2025 will be an important year for use-case supply chains being developed at the dawn of the market from such coordinated supports for the [hydrogen and ammonia] price gap with fossil fuels and the development of hubs on the receiving front based on the Hydrogen Society Promotion Act," Daisuke Hirota, director of METI's Hydrogen and Ammonia Division, told Platts, part of S&P Global Commodity Insights, in December.

"To avoid our support being temporary for up-front investments, we will advance our regulatory and systematic measures altogether, with an eye to developing independent and strong supply chains as well as creating new markets and their expanded use."

Japan has earmarked Yen 3 trillion for a support framework -- similar to the international contract-for-differences arrangement -- covering the price gap between hydrogen and its derivatives' output, transportation costs and conventional fuel prices, based on the Hydrogen Society Promotion Act that took effect in October.

Price gap support

Japan has started examining the first set of applications for its newly established price gap support framework after Jan. 31.

The application process to select low-carbon hydrogen and derivatives supply projects started on Nov. 22 and is set to run until March 31.

"With the applications being closed in end-March, we expect to see multiple plans being approved by the METI minister following the screening in FY 2025-26," Satomi Takeshita, director of the hydrogen project support division at state-owned Japan Organization for Metals and Energy Security, told Platts in December.

"We are hopeful that 2025 will be an important year for model cases being selected for the deployment of hydrogen in society," Takeshita said.

JOGMEC will administer support for the price gap and hub development in cooperation with METI, with the ministry working to begin its support for hub development in FY 2025-26.

In June 2023, Japan set a goal of 12 million mt/year of hydrogen use by 2040, in connection with amendments to the national hydrogen strategy, aimed at bridging the gap between its initial target of 3 million mt in 2030 and 20 million mt in 2050, as part of efforts to accelerate the development of low-cost hydrogen supply.