Japan’s ¥3 trillion Contracts for Difference (CfD) subsidy program for clean hydrogen has been heavily oversubscribed, with applications far exceeding the budget according to METI reports.
Launched by METI in December 2024 and closed in March, the 15-year scheme received close to 30 applications. METI plans to begin selecting projects on a rolling basis later this fiscal year, according to Shinichi Kihara, director general for international carbon neutrality policy.
This reflects a broader global trend, with the IEA predicting a 10x growth in all forms of hydrogen by 2040, with an increase in green hydrogen estimated to be between 100x to 150x current production.
This is not a linear growth curve; for a hockey-stick curve to be realized, human resources will face a massive bottleneck if hiring, training and growing the workforce isn’t urgently addressed.
Secure vs borrowed talent
McKinsey & Co. predicts 2 million hydrogen jobs will be needed by 2030, with 30 to 40% located in Asia-Pacific. This contrasts to a current global direct workforce of about 250,000.
To hit this target, the hydrogen industry needs to secure talent. Lets look at the word ‘secure’ – it suggests long-term committed professionals who are trained and specialized. These are ‘hydrogen people’. Today, few exist and the industry relies on borrowed talent, professionals with transferable skills. They are trained in another area and working on hydrogen projects, but may be quickly rotated and shifted out of these.
The think-tank people, economists, bankers and lawyers involved in hydrogen will do whatever shows promise. Large companies such as major EPCs, trading firms, etc, will commit talent to hydrogen and related initiatives for as long as they see commercial success; yet they’ll rotate talent out as soon as they feel they won’t win projects, or those projects lack the required profitability. Thus, much of the borrowed talent working on hydrogen projects today may not be working in the sector tomorrow.
For the hydrogen economy to take off, talent must see, feel and believe in the industry’s future. This will be shown by individual talent investing in their own education, training and reskilling to become hydrogen professionals; as well as by talent proactively moving to companies that win projects or are otherwise committed to continuing to pursue hydrogen opportunities. Bottom line – if talent is working in hydrogen based on their employer’s command, rather than their own initiative, the industry will not secure sufficient workforce.
The real cliff – Execution
In any infrastructure project, the workforce required in the planning and investment stage is around 10% needed for execution and operations. With the borrowed vs secured talent argument above, we are focusing primarily on the highly educated talent pool required for planning and investment. Once projects are approved en masse, we need people to build them, a lot of people!
- White collar talent: Clear policy, bankability, offtake demand, etc, will create commercial viability that will shift this talent pool to commit to hydrogen.
- Innovation talent: Technological innovation is happening in academia, start-ups and industrial players already. As with the white collar talent, commercial viability and demand at scale will drive the innovation industry and related talent.
- Blue collar talent: Hundreds of thousands of engineers, fitters, maintenance professionals will need to be identified, trained and employed to execute. Unless building this workforce is addressed prior to establishment of commercial viability, the need for talent will fall off a cliff.
Why top talent hesitates?
Recently, at the World Hydrogen Asia event in Tokyo, a constant recurring theme was the challenge of securing two key factors necessary for clean hydrogen projects to take off: Project finance, and long-term offtake.
Simply, the challenges in securing these two critical factors demonstrates that major parts of the industry still have hesitations over the long-term viability of clean hydrogen and its various downstream use cases that are still largely unproven at commercial scale.
If those in charge of other people’s money are not ready to commit long term, how can we expect people to stake their own careers and livelihoods long term? I’m not the first to say this, but those smarter than I need to sort out the economic and thermodynamic challenges the industry faces before we see a commitment from bankers, offtakers and workers.
Looking at the mindset of intelligent talent who value their career path, it’s clear they’ll choose industries, companies and positions that foster achievements to list on their CV and add value to professional profiles. This was a frustration for many in offshore wind, dedicating years to develop a project and preparing a bid, only to lose or worse –for their company not to bid right before the submission deadline.
Putting the spotlight on one talent segment in high demand right now – Offtake – we can see hesitation toward hydrogen and its derivatives. An offtake agreement is not signed in a day. It starts with education, work to get to an LOI, further work and negotiations to move to MoU. And it takes a lot more to get the talks to term sheet stage and definitive signed long-term agreements.
In two years in hydrogen, an offtake professional may sign multiple MoUs, however they are unlikely to close deals. Conversely, had that same professional opted to work in BESS and renewables space, during that time they would likely have multiple CPPA deals and a couple of tolling agreements under their belt. You could argue that hydrogen deals are more complex, but at the end of the day, results and wins on the board matter.
High barriers to entry and challenges for startups
Unlike simpler segments of the energy industry, hydrogen will require a more highly skilled, well trained workforce due to safety concerns and technological challenges.
Many of the major/ core players in hydrogen have hired and trained large groups of young talent. Many investors and developers are large trading houses such as Mitsui, Sumitomo, and Marubeni that have large pools of talent with plenty of power and infrastructure experience. Large engineering firms, such as Chiyoda and IHI, are leading in new technologies and also have large talent pools.
In the mobility and fuel cell sector, players such as Toyota, Honda, and Idemitsu are long-term supporters of hydrogen technologies. All of these areas, as well as Japanese EPC firms with extensive experience in LNG infrastructure, are well staffed, trained and experienced in working on projects both in and outside Japan. Once they are satisfied with the commercial viability and demand for their projects and technologies, these firms have the ability to develop internal ‘Centers of Excellence’ and train their workforce in bulk.
Unlike the solar or even BESS booms, it seems challenging for small to mid-size players to enter. With already limited talent mobility in Japan for loyalty and cultural reasons, compounded by a desire to stay with the company that has won projects and invested in their reskilling, Japanese talent is highly unlikely to move to smaller firms.
Conclusion: Chicken must come before the egg
Japan is betting big on hydrogen and isn’t the only country. While projects sit in the offices of politicians and corporate boardrooms, it can seem progress is made at an encouraging pace. Once bricks and mortar get involved at scale though, a talent cliff is looming.
Whether at a company or individual level, if you are bullish about hydrogen, you may need to invest heavily in talent before it is a sure thing.
Andrew Statter is a Partner at Titan GreenTech, an executive recruitment agency focused on the clean energy space.