Japan’s Local Energy Providers Turn to Distributed Generation

Let the games begin! By fully deregulating its electricity sector by next April, Japan plans to break up the 60-years of regional monopolies controlled by 10 vertically-integrated, investor-owned utilities (IOUs). Just at the end of October, 778 companies registered as power producers and suppliers (PPS) in order to sell electricity for commercial consumers who have a demand over 50 kW. In addition, 48 companies have registered and been approved as retail electricity providers to sell electricity to residential and small business customers.

The Great East Japan Earthquake and Tsunami Disaster of March 2011 marked a pivotal turning point in the conception of the nation’s electricity infrastructure. Specifically, safety and reliable supply. Due to the temporary shut-down of the country’s nuclear power reactors, some areas of Japan experienced rolling blackouts as well as large electricity rate hikes due to the resulting supply constraint.

The deregulation in process is expected to stimulate competition as well as lower the cost of electricity. According to a national survey taken by Mizuho Information & Research Institute, Inc., 83 percent of respondents said that they would switch providers if prices decrease.

Regarding energy mixes, 36 percent of respondents said that they would switch to renewable electricity providers as long as prices remain similar to what they are now, while and 5 percent said that they would use renewable energy only if prices decreased. Separately, 32 percent of respondents said that they do not want to use electricity generated by nuclear power plants.

distributed generation
Return of Nuclear Power for Deregulation?

Although the nation is still working to clean up after the 2011 Fukushima No. 1 nuclear power incident, the Federal of Electric Power Companies of Japan (FEPC) claims that nuclear power is important for the nation’s energy independency and energy affordability. In fact, the incumbent utilities have gradually restarted some of the nuclear power plants, which were taken offline after the Fukushima disaster.

Kyushu Electric Power Company, an IOU in the Kyushu region, has already restarted two nuclear reactors that they own in Kagoshima prefecture. Shikoku Electric Power Company, another IOU in the Shikoku region, received final local approval for restarting one of its nuclear power plants, making it the third to restart under new safety rules after the disaster. More nuclear power plants in different regions are also expected to come online.

While the incumbent utilities have announced to offer lower rates by cranking up large, coal-fired power plants and restarting nuclear reactors, small, local organizations are entering into the previously untouched, incumbent utilities’ turf by focusing on local sustainability with locally grown, distributed energy.

Consumer Cooperative Supplies Green Electricity to Members

Seikatsu Club (the Coop), a group of local consumer cooperatives that are dedicated to an all-natural, whole food, local, and healthy selection of products, established a PPS company called Seikatsu Club Energy in Tokyo prefecture over a year ago.

The Coop started warming up to the idea of “creating energy” around 2009.

“We were talking like ‘Isn’t it nice if we can choose electricity?’ But back then, we didn’t expect that day would come anytime soon,” Yushi Hamada, manager at Seikatsu Club Energy, said. Then, the disaster of March 2011 occurred and provided the push over the edge that the Coop needed to move forward with the idea.

The Coop includes 33 local cooperative organizations, spanning over 21 prefectures from Hokkaido to Hyogo prefecture, with 340,000 members. Having already actively promoted preservative and GMO-free local food, reusing and recycling of glass bottles for milk and condiments, and devised ways to reduce plastic packing, it was a natural course of action for the organization to embark on their next chapter of clean energy production and group-purchases for its members.

The Coop first developed a 2 MW wind generator, named Yume Kaze (or Dream Wind), in Akita prefecture, located in the northwest of Japan’s mainland. According to Hamada, the system was jointly developed with Hokkaido Green Fund, a non-profit organization, which promotes development of renewable energy by citizens. The Green Fund developed the nation’s first citizens’ wind farm, and it was created from Seikatsu Club in Hokkaido. The wind generator became operational in March 2012, producing 4,765 MWh annually.

distributed generationThe Coop has installed several roof-top solar photovoltaic (PV) systems on its members’ distribution centers and a couple of large-scaled, ground-mount systems, with a total installed capacity of 5 MW. In addition, the Coop procures green electricity generated from renewable systems installed not only at its cooperative organizations but also at its dairy produce suppliers.

The company, with a total supply capacity of 5.8 MW, started supplying electricity to its members’ facilities in April. The company plans to supply electricity to 55 members’ facilities located in the TEPCO territory (the Kanto region) and about 12 facilities located in four other incumbent utilities’ regions.

“We plan to extend its service to our residential members next year,” Hamada said.

Distributed Generation Provides Energy Resiliency and Reliability During Disasters

“I was afraid that my prefecture was missing the boat on the electricity deregulation, which can have great economic opportunities for us,” explained Takafumi Yamaguchi, a young entrepreneur who created Wakayama Denryoku Corp. (WEPCO), the first retail electricity provider in Wakayama prefecture.

Wakayama prefecture is located south of Osaka prefecture, the second largest metropolitan area in Japan. Wakayama is very rural and has many small- to medium-scale factories that operate as subcontractors for big companies in Osaka, where Kansai Electric Power Company (KEPCO), the nation’s second largest IOU is headquartered. “I want to support our local businesses and keep the money circulated within our prefecture,” Yamaguchi said.

His goals with the new energy company are to stimulate the local economy and build disaster resilient communities, by promoting consumption of locally produced electricity. A tsunami-producing quake is expected to strike the Nankai Trough, the deep ocean trench running from central to southwestern Japan. In addition, Wakayama prefecture, in particular, is expected to be hit the hardest.

Like previous earthquakes in Kobe in 1995 and then Fukushima in 2011, disasters can damage electricity transmission and distribution lines, leaving some communities without electricity.

“By dividing [large centralized energy resources] into local, distributed generations, we can have reliable energy supply,” Yamaguchi said. He is planning to coordinate this effort with villages, towns, and cities in Wakayama prefecture.

“Many of my customers are very supportive. It is like they are watching over from behind me as a parent,” commented Yamaguchi on local businesses’ preference to local energy providers. The company plans to supply energy to its local commercial customers early next year, and then to residential customers next April, with 10 MW of energy supply, including PV.

Although cost is an important deciding factor in the Mizuho national survey, 80 percent indicated that a “safe and reliable electricity supply” is critical to select providers. How Japanese electric consumers will make a very first choice on electricity will be revealed next April.

Graph: Nuclear Power Plants in Japan. Credit: The Federal of Electric Power Companies of Japan

Photo: 2 MW Wind Project developed in Akita prefecture, Credit: Seikatsu Club Cooperative

Lead image: PV System installed on a Seikatsu Club Cooperative’s Distribution Center. Credit: Seikatsu Club Cooperative

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Junko Movellan is a Solar Industry expert who writes and analyzes the US and Japan PV downstream markets. She has more than 15 years of experience in the PV industry, analyzing industry trends and developing business strategies for global companies. She previously worked as a Senior Analyst at Solarbuzz and as a Market Development Analyst at Kyocera. She is based in California, USA.

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