1. 1 Japan’s Approach for Commercialization of Fuel Cell / Hydrogen Technology METI Ministry of Economy, Trade and Industry Jiro NAGAO ANRE, METI February, 2005

2. 2 Five Benefits of Introducing Fuel Cells Reducing Impact on Environment Highly Efficient （ Energy Conservation Effect ） Creation of New Industry and Job Enhancement for Industrial Competitiveness Diversification of Energy Supply Distributed Energy Resources Reducing CO 2 Zero NOx ， SOx and PM Significance of Introducing Fuel Cells Fuel Cell Vehicles: about 48% Stationary Fuel Cells: over 80% （ including heat ） Hydrogen can be obtained from not only petroleum, but also natural gas, photovoltaic, wind, bio-mass and by-product energy Fuel cells require a wide range of technology from various industries. ・ Reducing energy loss in transmission ・ Serve as backup energy in emergency Environmental technologies will affect industrial competitiveness

3. 3 R&D Stage Introduction Stage Diffusion Stage R&D on FC and H 2 Further R&D Step by step Construction Grow Naturally Demonstration Project Review of Regulations R&D Codes Infra 2002 -2005-2010- 2010 50,000 2020 5M 2030 15M 2010 50,000 2020 5M 2030 15M 2010 2.1GW 2020 10 GW 2030 12.5 GW 2010 2.1GW 2020 10 GW 2030 12.5 GW FCVStationary PEFC Expected Targets and Policies

4. 4 METI Budget for Fuel Cells (1) 2001FY: 11.7 2002FY: 22.0 2003FY: 30.7 2004FY: 32.9 2005FY: 35.5 (requesting) (Billion JPY)

5. 5 METI Budget for Fuel Cells (2) 2005FY (req.)  R&D on PEFC 5.5B - Strategic R&D alliance - New2.0B  R&D on Hydrogen Safety4.1B  Codes and Standards3.6B  R&D on SOFC3.3B  Large-scale demonstration for stationary application - New 2.5B  Strategic publicity - New 0.3B (JPY)

6. 6 New Energy Foundation ＜ cooperative companies ＞ ・ Ebara Corporation ・ Sanyo Electric Company ・ Nippon Oil Corporation ・ Toshiba International Fuel Cells Corporation ・ Toyota Motor Corporation ・ Matsushita Electric Industrial Co. Ltd ＜ participants ＞ ・ Ebara Corporation ・ Nippon Oil Corporation ・ Sekisui Chemical Co. Ltd ・ Central Research Institute of Electric Power Industry ・ The Japan Gas Association etc. ○ Demonstration & test of Stationary Fuel Cell in various conditions ○ Evaluation of Stationary Fuel Cell effect on electric grid Framework （ 2003-2004FY ） Sapporo Tokyo Osaka Fukuoka Osaka Nagoya 2002 ＦＹ 2004 ＦＹ 2003 ＦＹ 12 places 31 places Stationary Fuel Cell Demonstration 33 places

7. 7 Dramatic improvement both in power generation efficiency and heat recollecting efficiency can be observed between FY2002 and FY2003. Half of all failures occur during 4 months. Power Generation ratio (HHV) Heat Collection ratio (HHV) FY02 FY03

8. 8 WIN: Dec.-Feb. SPR: Mar.-May SUM: Jun.-Aug. AUT: Sep.-Nov. Courtesy of the Japan Gas Association (5 sites) More than 32% efficiency under real conditions

9. 9 Good Performance of Heat Recollection Efficiency Courtesy of the Japan Gas Association

10. 10 Major Improvement on Energy Conservation Ratio Courtesy of the Japan Gas Association

11. 11 More than 30% CO2 reduction under real conditions Courtesy of the Japan Gas Association

12. 12 JHFC Demonstration Project (1)  47 FCVs (in Jan. 2005) from both domestic and overseas auto manufactures  10 hydrogen stations with various H 2 sources  Study on energy efficiency from well to wheel

13. 13 JHFC Demonstration Project (2) Gasoline Reforming LPG Reforming Mobile at METI Liquid Hydrogen (by-product from steel mills) Naphtha Reforming Kerosene Reforming Natural Gas Reforming By-product from soda factories Water Electrolysis Tokyo Kanagawa Methanol Reforming FCV base station In Yokohama

14. 14 Current Topics (1) FC Bus Service in Tokyo Metropolitan area Period Aug. 2003 - Dec.2004 VehicleFCHV-BUS2 (1 unit) Route 2 routes of 20 to 40 km 3 to 4 round-trips per day Period Aug. 2003 - Dec.2004 VehicleFCHV-BUS2 (1 unit) Route 2 routes of 20 to 40 km 3 to 4 round-trips per day Tokyo Station Tokyo Teleport Tokyo Bigsite Monzen- Nakacho Ariake H2 Station ２ｋｍ Tokyo Service Route

15. 15 Hydrogen station (natural gas reforming + by-product from steel mills) Current Topics (2) Technology Showcase in EXPO 2005 FC Buses / H 2 Station Japan’s Government Pavilion Government of Japan Pavilion Electric power supply for the pavilion - PAFC 800kW - MCFC 720kW - SOFC 50kW Fuel cell buses (PEFC)

16. 16 P.M. Koizumi’s Initiative Basic Policy Speech by Prime Minister to the Diet (February, 2002) Introduction of First Commercially Released FCVs by the Government (December, 2002) Test Drive by Prime Minister (December, 2001)

17. 17 Current Topics (3) PM ’ s new Residence will introduce the world ’ s first Fuel Cell Systems to the marketplace next year. PanasonicEbara=Ballard

18. 18 Current Topics (4) Japan concentrates on stationary application. Target system cost is c. 500,000 yen (=5,000USD)/1kW. Mass production drastically reduces the cost. Joint R&D and other measures help us to reach the target. To achieve the goal in three years, Japan: ① Starts large-scale demonstration program (c. 400units) in order to urge “kaizen” (improvement) and assure a learning curve to design a mass-production system. ② Started a joint R&D team consisting of “top runners” in order to research and resolve degradation factors. ③ Started research to find ways to secure harmonized specifications or compatibilities of modules in order to achieve further cost reduction and self-inducting “evolution” of modules.

19. 19 International Cooperation  Joint Ministerial Statement between METI and DOE (January, 2004)  International Partnership for the Hydrogen Economy (IPHE) (November, 2003)

20. 20 International R&D Cooperation new international joint R&D grant program METI/NEDO started a new international joint R&D grant program up to 300,000 USD. 11 joint research activities were adopted last month. Diverse foreign partners from 8 counties: Université du Québec, National Research Council Canada (Canada), Chinese Academy of Science (China), Université Bordeaux 1 (France), National University of Singapore (Singapore), University of Fribourg (Switzerland), Institute for Energy Technology (Norway), Boreskov Institute of Catalysis - Russian Academy of Sciences (Russia), Applied Nanotech, Inc., Battelle Memorial Institute, Naval Research Laboratory, SRI International （ US ）