Japan has among the world highest electricity prices. The electricity market is scheduled for deregulation, allowing companies to generate their own electricity, which is expected bring down electricity prices somewhat.

Thermal power accounts for more than 60 percent of total electricity output. Put another way, Japan gets two thirds of its electricity from fossil fuels. With most of the rest coming from nuclear power and hydro power.In fiscal 2009, energy resources for domestic electric power generation included liquefied natural gas (29.4 percent); nuclear power (29.2 percent); coal (24.7 percent) and oil (7.6 percent). [Source: Japan’s Fiscal Year 2009 Annual Energy Report]

Renewable energy also costs more to generate than nuclear power. Generating one kilowatt-hour using nuclear power costs about 5 yen, while solar power requires 49 yen and wind power 9 yen to 14 yen. The government is facing many challenges to drastically expand the use of such renewable power.

The electricity industry is dominated by 10 regional utilities. Tokyo Electric Power Company is the world’s largest private electric power utility and is ranked by Forbes as the 51st largest company in the world. It was the third top income earner after NTT DuCoMo and Toyota in fiscal year 2001-2002. It had taxable income of ¥365.09 billion in 2004. Kansai Electric Power Company (KEPCO) is also very large.

One of the main culprits for Japan’s ugliness is the plethora of utility poles and wires. Unlike most developed cities around the world, where various kinds of cables are kept underground, most Japanese cities have them above ground. The reason for this is that after World War II Japan wanted to bring electricity as quickly as possible to as many people as possible and it was easier and much less expensive and obstructive to do this by putting up utility polls rather than laying cable underground.

Electricity Usage in Japan

Japan is split into two power grid systems with a total power generation capacity of 235 million kilowatts. Japan keeps massive electricity generating capacity much of the time in order to meet peak demand on hot summer days. This is regarded as great waste of capital but prevents black outs and shortages.

In 1973, the ratio of electricity used by industry was 50 percent. Now it’s just over 30 percent.

Records for power usage were set in August 2007 during a long-lasting heat wave accompanied by high industrial demand and a strong economy. In August 2006, during a nasty hot spell, demand for energy was so high that the government took emergency measure to make sure there wasn’t a power shortage.

A blackout in Tokyo in August 2006 affected 1.39 million homes and disrupted train and subway service. The blackout, the second largest in Tokyo Electric Power Co. history, lasted about three hours and occurred because an electric power line was snagged by a floating crane on a river in Chiba prefecture,.

The second highest level of electricity ever was consumed in July 2008 due to hot weather, heavy air conditioning use and industrial demand. The nation’s 10 utilities generated 94.12 billion kilowatt hours of electricity, a 9.5 percent increase from July 2007 when temperatures were 2 degrees C lower.

Thermal generation rose 25 percent in July 2008, with the amount of crude oil burned to generate electricity, nearly tripling to 1.2 million kiloliters because of increased demand associated with the hot weather and the loss of Kashiwaszaki-Kariwa nuclear power plant because of the earthquake in Niigata.

The loss of Kashiwaszaki-Kariwa nuclear power plant caused Tokyo Electric to fall into the red for the first time in 28 years. See Nuclear Power

Fondness of Bright Lights in Japan

Japan has a history of using more electricity for lighting than is necessary. Masao Inui, professor emeritus at Tokyo Institute of Technology and an expert in environmental design, told the Yomiuri Shimbun: "Delegations sent from Japan to Europe in the late Edo period [1603-1868] and early in the Meiji era [1868-1912] were fascinated by the bright gas lamps they saw in European streets. From that time, brilliant lighting came to be seen as a symbol of prosperity in Japan." [Source: Yomiuri Shimbun, May 2, 2011]

“According to the Japan Electric Lamp Manufacturers Association,” the Yomiuri Shimbun reported, “in Europe artificial light is generally used only when and where it is considered necessary. In Japan, though, there is a widespread tendency to illuminate entire buildings instead of just the sections in use, and electric lighting is often used when natural light is sufficient.”

“In Japan, per-person consumption of electricity-generated light is about 40 per cent higher than in Europe, according to JELMA. Even after the bubble economy burst in the late 1980s, electricity consumption in this country continued to increase, with urban streets becoming ever brighter. An Environment Ministry study measured light levels above Nakano Ward, Tokyo, in summer from 2006 to 2009. According to the study, the sky at night during that period was on average twice as bright as it was from 1988 to 1991.”

Electricity-Loving Japanese

Miki Tanikawa of Kyodo wrote: “The Japanese, over the decades, had become some of the most electricity-saturated people in the world. From electronic rice cookers to high-tech toilets, Japanese households are stuffed with all manner of electronic gadgets. Step outside, and the air is full of electronic noises — from the automatic till that counts your change with an image of a female clerk bowing and thanking you for your patronage, to the nonstop beeps, music and digital announcements at train stations and department stores. [Source: Miki Tanikawa, Kyodo, via Reuters, October 26, 2011]

“Over the past four decades, Japan's nominal gross domestic product has shot up from 73.3 trillion yen in 1970 to 468.4 trillion yen in 2011, and nationwide power output has climbed from 251.7 billion kilowatt-hours in fiscal 1970 to 822 billion kilowatt-hours in fiscal 2010. The average monthly electricity consumption per household jumped from 118.8 kilowatt-hours in 1970 to 302.2 kilowatt-hours in 2010. [Source: Jiji Press, May 6, 2012]

“Electricity had become like air. You never thought it would ever be unavailable,” said Hidetoshi Nakagami, president of the Jyukankyo Research Institute, which studies home energy issues. Electric excesses are egregious. In offices, for example, “in summer, you have ceiling lights beaming on the entire floor,” Mr. Nakagami said. “With such high wattage, you are using the air-conditioning in part to cool the heat radiating from the lights.” [Source: Miki Tanikawa, Kyodo, via Reuters, October 26, 2011]

“Takejiro Sueyoshi, an environmental expert and special adviser to the United Nations Environment Program, said, “Without anyone knowing, Japanese came to think that supply of energy will be there if you plug into the outlet.” In August, when power demand hits a peak, Mr. Sueyoshi said, “people stay indoors watching high school baseball tournaments,” with their air-conditioners on high.

“Electricity consumption and generation grew in a self-perpetuating cycle as users demanded more power to use the increasingly sophisticated and power-hungry gadgetry produced by Japanese electronics makers, while power suppliers, under legal obligation to meet the demand, took on increasingly heavy capital investment commitments. “In the end, this all necessitated building nuclear generators,” Mr. Sueyoshi said.

Generous and Reliable Electricity Supplies in Japan

Miki Tanikawa of Kyodo wrote: “Japanese law requires regional monopoly companies like Tepco to provide power to everybody living anywhere — no matter how isolated or remote — within their region. While other companies are legally allowed to sell electricity to industrial users, competition has in reality been limited. In return for accepting the responsibility of providing a universal service, the regional power giants have enjoyed a virtual monopoly in their markets. [Source: Miki Tanikawa, Kyodo, via Reuters, October 26, 2011

“In Japan, you get it if you ask for it,” Mr. Nakagami said. The regional companies “are obliged to serve anyone who lives under their jurisdiction,” and at universal prices, he said. “In exchange, they are given the monopoly.”

“The high reliability of supplies, a boon to consumers at one level, led people to take electric energy for granted. Since the mid 1980s, when the transformation and the distribution of electricity became nearly fully automated, blackouts have diminished substantially, said Junichi Ogasawara, a researcher and leader in the electric power group at the Institute of Energy Economics, Japan, a private-sector energy research company in Tokyo. “A thunder strike may disrupt power momentarily, but it is going be restored quickly without someone having to visit and manually check the hit electric poles,” he said.

Japan's Unique Electric History

“Japan's electricity history began in 1886, seven years after Thomas Edison put electric light bulbs into practical use,” according to a Yomiuri Shimbun article. “Under the modernization policy of the government during the Meiji era (1868-1912), factories sprang up across the nation, along with demand for electricity to power them. This led to the birth of hundreds of small and midsize electricity suppliers. In the Taisho era (1912-1926), these smaller utilities merged or were taken over until only five were left. During this realignment, Toho Denryoku emerged as the leader. The firm was led by Yasuzaemon Matsunaga, who was nicknamed the "king of electric power." Toho Denryoku was a predecessor to today's Kyushu Electric Power Co., Kansai Electric Power Co. and Chubu Electric Power Co. [Source: Yomiuri Shimbun, April 25, 2011]

“But in the early Showa era (1926-1989) when the military gained power, the government in 1939 established a state-controlled company, Nippon Hassoden K.K. (Japan Electric Generation and Transmission Company), to control the power supply. Matsunaga, who was a free market advocate, opposed the state takeover and retired from the business. After World War II, the Allied Powers' General Headquarters demanded the government restructure the electricity utilities, saying state control of the power supply had indirectly helped the nation continue the war.”

“Although Matsunaga was more than 70 years old at the time, he accepted the post of chairman of a governmental council tasked with realigning the power industry.The panel divided the nation, except Okinawa Prefecture, into nine blocs and established one private power company in each bloc. Matsunaga wanted to utilize the expertise of the private sector but avoid excessive competition.GHQ supported his idea and Nippon Hassoden was divided into nine companies in 1951. Because power demand in Japan was surging at the time, Matsunaga believed a huge capital investment would be needed to meet the nation's growing needs. He forced through a plan to raise electricity bills by more than 70 percent and was renicknamed the "devil of electric power." When Okinawa Prefecture was returned to Japan in 1972, Okinawa Electric Power Co. was established, bringing the number of power utilities to today's 10.”

“There are also companies that wholesale electricity to the 10 firms. These include Electric Power Development Co. (J-Power), established in 1952 to supplement the nine main companies' generation capacity; and Japan Atomic Power Co., established in 1957 as the nation's nuclear power pioneer.”

Encouraged by TEPCO to Go Electric

Miki Tanikawa of Kyodo wrote: “Masayuki Hattori, 46, lives with his extended family of seven in a house in the middle-class Itabashi neighborhood of Tokyo.” In 2006 “he received a sales pitch from Tokyo Electric Power Co., which had teamed up with appliance makers, that he found too attractive to ignore: Switch from gas as the fuel of choice for his home’s heating and cooking and go “all electric.” [Source: Miki Tanikawa, Kyodo, via Reuters, October 26, 2011

The package deal offered solar panels for home generation of electricity, grid connection for Tokyo Electric to provide backup power — and buy any surplus power generated by the panels — and a full range of electrical home appliances. It would provide all the energy that Mr. Hattori and his family would need and would also help the environment. It seemed like a win-win proposition. “We were also concerned about the safety for our aging parents, who were growing forgetful,” Mr. Hattori said. “They might turn on the gas cooker, forget about it and go out into the garden, for example.” A no-gas home would give him peace of mind, he said, so in 2006 he paid ¥3.5 million, or $46,000, for the package.

“For Tokyo Electric, known as Tepco, Mr. Hattori’s home was one of hundreds of thousands it was converting annually into electricity-only homes in the greater Tokyo area. Tepco’s all-electric sales pitch played into the Japanese love of electricity. In the greater Tokyo area, the number of all-electric homes grew from just a few thousands a decade ago to 850,000 by the end of 2010.

“Then came the earthquake and tsunami on March 11 and the destruction of the Fukushima Daiichi nuclear power plant. During the rolling blackouts that followed, Mr. Hattori’s solar panels were unable to meet his family’s power needs. Like others who bought into the all-electric idea, he has since scrambled to cut his dependence on the grid, turning to stop-gap solutions like portable cookers that used replaceable gas cannisters, batteries and even candles. “If you don’t have electricity, you can’t do anything,” Mr. Hattori said. “You can’t cook, you can’t watch TV and you can’t light up.”

“Ironically, having gas in the home was no help in the post-Fukushima crisis, because domestic gas appliances like boilers and cookers are now operated by electronic thermostats, timers and other controls. Consumers got so used to electronic controls in general “that gas equipment makers had to come up with those features,” said Mr. Ogasawara, of the Institute of Energy Economics. “Gas devices run on electricity. They won’t move without it.”

Japan Gets Electricity Wake-Up Call After the 2011 Tsunami and Fukushima Nuclear Crisis

On July 1 2011, the Japanese government ordered large-lot electricity users in the service areas of Tokyo Electric Power Co. and Tohoku Electric Power Co. to cut their consumption by 15 percent to cope with possible summer power shortages due to the crisis at the crippled Fukushima No. 1 nuclear power plant. It was the first time since the 1974 oil crisis that such a restriction had been imposed. In the end power outages and other potential crises were averted thanks to cooperation from not only large-lot users, but also small and midsize businesses and households.

“In October 2011 Miki Tanikawa of Kyodo wrote: “This past summer, traditionally a period of peak demand, Tokyo residents pared electricity use 16 percent in the inner-city area known as the 23 wards. But looming winter power shortages look to pose an even bigger challenge. The Ministry of Trade and Industry predicts that unless power production is restarted at some of the nuclear reactors around the country that are now suspended for inspection, national demand will outstrip supply by 4 percent to 20 percent during December, January and February — the coldest winter months. [Source: Miki Tanikawa, Kyodo, via Reuters, October 26, 2011

The blackouts imposed on domestic customers by Tepco after the Fukushima disaster were a rude awakening. The public’s expectation of abundant and stable power was particularly strong in Japan, Mr. Nakagami and other experts said, partly because of the legal framework for the country’s electricity industry, and the industry’s record of high technological and operational reliability.

“Until the wake-up call of the Fukushima disaster, “the whole energy setup in Japan was a way of life of the industrial, high-economic growth period,” of the 1960s and “70s, Mr. Sueyoshi said. “March 11 has posed us a question. Should we maintain the way of the 20th century?”

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Thermal plant

Liberalization of Japan’s Electricity Generation System

“The government began liberalizing the electricity market in the 1990s amid the economic slowdown that followed the collapse of the economic bubble,” according to a Yomiuri Shimbun article. “Various industries, frustrated by Japan's expensive power rates — which were then twice or three times higher than U.S. and European rates — had demanded introduction of competition into the electricity market.” [Source: Yomiuri Shimbun, April 25, 2011]

“In the first round of liberalization, the Electricity Business Law was revised in 1995, enabling private companies to enter the wholesale market and sell electricity to major power companies over long periods of time. Kobe Steel, Ltd., which was hit hard by the Great Hanshin Earthquake of January 1995, was blessed by the deregulation. The company became one of largest independent power producers (IPPs) in the country, using two coal thermal generators with a capacity of 700,000 kilowatts each at its Kobe works.”

“The retailing of electricity was liberalized in 2000. Large-lot power consumers with contracted wattage of at least 2,000 kilowatts, such as major factories and department stores, became able to sell electricity freely after being certified by the government as power producers and suppliers (PPSs). In 2004, liberalization was expanded to include midsize factories with contracted wattage of at least 500 kilowatts. From 2005, small business operators such as small-town factories and multitenant buildings with contracted wattage of 50 kilowatts or more became able to sell electricity. Overall, the liberalizations covered 63 percent of all the nation's electricity sales.”

“To coincide with the expanded liberalization of the electricity market, the Japan Electric Power Exchange started operating in 1995. The exchange gathers information on electricity surpluses and shortages and mediates spot transactions and forward transactions of electricity. Thanks to the liberalizations, electricity rates in Japan dropped by about 20 percent to levels below those of Italy and Germany, where high crude oil prices pushed up power rates.”

“However, only 46 PPSs remain, including some trading houses and a subsidiary of a major gas company. The amount of electricity they sell accounts for only 3 percent of the liberalized portion of the power business. Therefore, the regional monopolies by 10 major electricity suppliers continue. Furthermore, small-lot electricity supplies to general households have not been liberalized. Based on the principle of maintaining a stable supply of electricity, the Economy, Trade and Industry Ministry plans to study whether this field of business should be liberalized, with a conclusion expected in 2013.”

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Thermal plant

Breaking Up Japan’s Electricity Monopolies

Japan's 10 regional power companies monopolize both electricity generation and transmission. Some experts have proposed electricity generation and transmission be operated separately. Under this idea, power companies will only be allowed to generate electricity, while others will be invited to manage electricity transmission, stimulating competition among new and old companies. However, power companies will likely strongly oppose the idea, making it difficult for the government to draw together the different opinions it needs to fulfill its objectives.

The Economist reported: “Japan needs a smarter grid, with electricity prices that vary according to demand. Power should cost more when demand is high and less when it is low, giving people an incentive to run the washing machine in the middle of the night. It should also be simple for new producers of electricity — from clever start-ups to big industrial firms — to sell power back to the grid. Unfortunately, power generation and transmission in Japan is carved up into ten regional quasi-monopolies, which stifle such innovations.” [Source: The Economist, September 17, 2011]

These monopolies also prevent Japan from seriously pursuing alternative sources of electricity. Despite the nation’s technical prowess, wind power is underdeveloped and little effort has been made to exploit Japan’s vast geothermal potential. The monopolies’ habit of hushing up safety problems erodes public trust in nuclear power, which for all its troubles must surely be part of the future energy mix.

Japan should end the regional monopolies, separate the generation and transmission of electricity and establish a tough regulator to oversee the terms under which incumbents allow newcomers to connect to the grid. Such reforms have reduced prices and stimulated fresh thinking elsewhere. Opponents of deregulation in Japan make two arguments. First, that giant monopolies guarantee a stable supply of power. Second, that TEPCO, the power supplier for Tokyo and the north-east, needs a steady stream of profits to compensate those whose lives were affected by the nuclear accident at Fukushima.

Neither argument is persuading. Multiple suppliers should create a more reliable supply. And there are plenty of ways to compensate the afflicted without blocking competition. In truth, the survival of dinosaurs like TEPCO owes more to their political clout than the quality of service they deliver. Mr Noda should end the privileges of the power monopolies. It would be just the jolt that Japan needs, and a sign that its new leader is not content merely to preside over slow decline.

Alternatives to TEPCO and Nuclear Power

Norimitsu Onishi and Martin Fackler wrote in the New York Times: In a direct act of rebellion against Tokyo Electric Power Company, which owns the crippled Fukushima nuclear plant, the local government in Tokyo is moving swiftly to build a huge natural gas facility that would generate as much electricity as a nuclear reactor. [Source: Norimitsu Onishi and Martin Fackler, New York Times, November 17, 2011]

The plant would ensure a stable supply of electricity for the capital in the aftermath of the nuclear meltdowns in March at the Fukushima Daiichi plant. But more important, the city government says, it could spur desperately needed change in Japan. By weakening Tokyo Electric, or TEPCO, reformers hope to finally break the linchpin of the collusion between business and government that once drove Japan’s rapid postwar rise, but that now keeps it mired in stagnation.

“Now’s our chance,” said Naoki Inose, Tokyo’s vice governor, invoking an ancient proverb about attacking a wild dog only after it has fallen into a river: “On March 11, TEPCO became the dog that fell into the river. Only then can you fight against such a formidable foe.”

TEPCO’s Power and Japan’s Failure to Deregulate Its Utilities

Norimitsu Onishi and Martin Fackler wrote in the New York Times: It is difficult to overstate the influence of TEPCO, which rivals the American defense industry in its domestic reach. Thanks to a virtual monopoly and a murky electricity pricing system, it has become one of the biggest sources of loosely regulated cash for politicians, bureaucrats and businessmen, who have repaid TEPCO with unquestioning support and with the type of lax oversight that contributed to the nuclear crisis. [Source: Norimitsu Onishi and Martin Fackler, New York Times, November 17, 2011]

Government policies are at the heart of TEPCO’s power. Japan, almost alone among industrialized nations, has not deregulated its energy grid, so utilities have a stranglehold on both the generation and the transmission of electricity. What is more, power companies are allowed to set electricity rates according to a complex system that includes a vast range of often unclear expenses. The more a utility spends, the more it can charge.

The policy, which was meant to further a national strategy of developing nuclear power, had the predictable effect of encouraging TEPCO to overspend, according to a 230-page report released last month by a government panel investigating TEPCO’s management. The panel found that TEPCO — whose net income was $1.7 billion in 2009 and whose 192 plants powered a third of Japan — had a vast network of related companies to which it doled out inflated contracts. Some of those companies, in turn, arranged deals with large manufacturers, allowing them a share of the wealth. “It’s an incredible system,” said Kaichiro Shimura, the author of “The TEPCO Empire” and a former newspaper reporter who covered TEPCO. “The only losers are the consumers.”

Japanese, in fact, pay on average double what Americans do for electricity. Perhaps worse, critics say, TEPCO became Japan’s biggest “cash box.” Besides paying inflated costs to other members of Keidanren that provided it with equipment or services, the company donated copious amounts to political fund-raisers, made generous donations for academic research and bought advertisements in the news media, even though it had no real competitors. TEPCO also offered lucrative postretirement jobs to bureaucrats from government ministries and the national police.

In return, few challenged TEPCO’s practices, even as it became the main player in Japan’s nuclear establishment, known as the “nuclear power village.”“TEPCO lies at the center of collusion,” said Takeshi Sasaki, the former president of the University of Tokyo. “You can’t reform the nuclear power village without first fixing TEPCO.”

Efforts to Deregulate Japan’s Utilities

Norimitsu Onishi and Martin Fackler wrote in the New York Times: At the hear of Japan’s effort to deregulate its utilities is separating power generation and transmission, which would automatically create more companies and competition. A previous failed attempt at change is often cited as evidence of the control wielded by TEPCO and its allies. In the mid-1990s, after most industrialized nations split the two halves of the business, a small group inside the Economy Ministry tried to do the same. [Source: Norimitsu Onishi and Martin Fackler, New York Times, November 17, 2011]

TEPCO and the other utilities pushed back fiercely. They reached out to the then-governing Liberal Democratic Party, said Taro Kono, a lawmaker in the party and one of its few critics of nuclear power. TEPCO and Keidanren handpicked a former TEPCO vice president, Tokio Kano, for one of the legislative seats the party reserves for Keidanren (Japans’ main business organization), and he helped quash the ministry renegades.

On paper, much of Japan’s power industry has been deregulated in the past decade. The emptiness of that deregulation, which has become increasingly evident since the Fukushima disaster, underscores the difficulties faced by current challengers. The history makes clear that though the protection of TEPCO and the industry began under the long-serving Liberal Democrats, it has continued under the Democratic Party of Japan, which grabbed power in 2009 with promises to untangle the ties between business and government.

In one effort to break the utilities’ virtual monopolies, 60 percent of Japan’s electricity market was opened up by 2005 to so-called power producers and suppliers, companies that act as brokers, buying electricity (mostly from manufacturers that generate their own) and selling it to commercial customers. A market, the Japan Electric Power Exchange, or JEPX, was established to allow wholesale trading. But despite offering rates that are often a third cheaper than utilities’, the companies, which must depend on utilities’ transmission lines, have captured only 2 percent of the market. Reluctant to lose customers to the new companies, the utilities make it difficult for them to access their transmission networks.

Under another past attempt at deregulation, the other utilities were allowed to compete against TEPCO and one another. But they demurred, preferring to keep their monopolies intact. And since the Fukushima disaster, the other utilities have rallied strongly behind TEPCO, clearly afraid that its breakup would mean the same for them. Those with nuclear plants even agreed to contribute $90 million to TEPCO’s bailout, one of the clearest indications yet that the web of influence the company wove over the years remains intact.

Mismatched Power Frequencies and Other Problems with Japan's Electrical System

Electricity shortages faced by Tokyo and its vicinity after several power plants were damaged by the earthquake and tsunami in March 2011 have shed light on the weaknesses of the nation's power distribution systems. Ten electric power companies have virtual monopolies in their respective regions. Plus, Japan is divided into two zones with different power frequencies. On these points Japan's power industry differs from its counterparts overseas. [Source: Yomiuri Shimbun, April 25, 2011]

According to a Yomiuri Shimbun article: Japan’s electricity grid is effectively split in two by mismatched power frequencies — the supply is 50 Hz in eastern Japan, and 60 Hz in western Japan. The "electricity border" runs from Itoigawa in Niigata Prefecture to the Fujigawa river in Shizuoka Prefecture. This incompatibility severely limits the transfer of electricity from western Japan to the Tokyo metropolitan area, where it is currently in short supply. It is rare for a single country to operate on two different power frequencies. Most modern electrical appliances are compatible with both frequencies, but until the mid-1990s, products were often compatible with only one.

“The split originated in the Meiji era (1868-1912), when two power companies introducing generators to Japan decided on different models. Tokyo Dento Co., a predecessor of Tokyo Electric Power Co., chose a German-made 50 Hz generator, while Osaka Dento Co., a predecessor of Kansai Electric Power Co., introduced a U.S.-made 60 Hz generator. Switching to a common frequency was debated after World War II, but efforts were instead concentrated on the more urgent task of increasing power supply to facilitate postwar reconstruction. Frequency-conversion facilities were later built that enable electricity to be shared between east and west.”

“In 1965, Electric Power Development Co., commonly known as J-Power, built a frequency-conversion station in Shizuoka Prefecture. TEPCO installed a station in Nagano Prefecture in 1977, and Chubu Electric Power Co. established a station in Shizuoka in 2006. However, the three stations combined can only convert 1 million kilowatts of electricity at a time — too little to make up for TEPCO's power shortfall, which was nearly 10 million kilowatts immediately after the March 11 earthquake.”

“Calls to unify the nation's power network under a single frequency remain strong. But doing so would require a major infrastructure overhaul — including facility upgrades and land purchases — that would cost up to tens of trillions of yen, according to experts. Realizing unification of the nation's electricity grid could depend on the government taking the lead, as it did on the digitization of terrestrial TV broadcasting.”

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Thermal plant

Smart Grids and Legislation to Buy Clean Energy

Japan is a leader in “smart grid” power transmission, technology. A next-generation power network that will optimize supply to residential and other properties, smart girds are efficient power transmission networks that can handle fluctuating power generated by solar and wind power and other renewable sources. They are expected to encourage the use of renewable energy such as solar and wind because they give stability to the output of electricity supplied by such fluctuating natural power sources.

A bill submitted to the Diet in 2011 for a special measures law on renewable energy sources includes a system that obliges power firms to purchase electricity generated from clean energy sources such as solar and wind power. If the bill is passed, natural energy generation is expected to create huge business opportunities, even though the cost of generating such power is significantly higher than that of nuclear power generation, observers said.

Next-generation "smart grid" power transmission is considered integral to Japan's energy efficiency. By using a network utilizing information technology, the amount of residential and corporate electricity consumed can easily be checked and more efficiently managed. The government is also considering developing an energy storage system and expanding the use of light-emitting diode equipment.

The renewable energy special measures bill is intended to promote the use of electricity generated from renewable energy sources, by obliging utility firms to purchase electricity from such sources.The envisaged law would make it easier for individuals and corporations to make back the initial investment of installing power-generation facilities that use renewable energy. [Source: Yomiuri Shimbun, July 15, 2011]

Under the system envisaged in the bill, power firms will from fiscal 2012 be obliged to purchase all electricity generated from solar, wind, geothermal and biomass facilities that have been constructed by businesses and other organizations. The power firms will also be obliged to purchase surplus electricity generated by private households that have their own solar power generators.

The obligation on utilities to purchase renewable energy-derived electricity from companies will remain in effect for 15 to 20 years, and for 10 years for solar-generated electricity from private households. Power firms already purchase surplus electricity from private households with solar panels. But under the new system, the government-set purchase price will initially be raised to a much higher level, before being gradually lowered over time.

The increased costs imposed on power firms will be passed on to their customers in the form of higher bills for electricity consumption. According to government calculations, an average household's monthly electricity bill be 150 yen to 200 yen higher for 10 years following the new system's introduction.

The bill was approved at a Cabinet meeting in the morning of March 11, hours before the Great East Japan Earthquake hit. Originally, the main focus of the bill was to promote renewable-energy technology that does not emit greenhouse gases as a replacement for thermal power generation, to help slow global warming. However, after the outbreak of the crisis at the Fukushima No. 1 nuclear power plant, the focus of the bill was changed to promote renewable energy as a replacement for nuclear power.

Marubeni and Google are developing a large-scale submarine power cable network to deliver power produced wind power stations to inland electricity system.

Smart Grids Eyed for Tokyo Offices

In November 2011, the Yomiuri Shimbun reported: “The Tokyo metropolitan government has decided to introduce a smart grid to supply power to Tokyo's business districts, to avoid the power supply problems that developed as a result of the crisis at the Fukushima No. 1 nuclear power plant. The smart grid is intended to achieve a more efficient balance between demand and supply through the use of information technology. [Source: Yomiuri Shimbun, November 8, 2011]

“The government aims to reduce its dependence on utilities through the efficient control of power used by office buildings, which account for 35 percent of the total energy consumption in the metropolis. The smart grid is expected to be introduced in areas with many high-rise office buildings, including Marunouchi, Otemachi and the Shinjuku subcenter. Eligible buildings include ones that are more than 20 stories high and have a total floor space of over 10,000 square meters.

“The IT-aided smart grid automatically determines the most efficient source of energy at a given time from among such options as utility company power plants and smaller-scale producers of renewable energy, including solar power. When electricity from solar power is brought from outside Tokyo, it would be used preferentially during sunny hours or stored in batteries if there is a surplus. If the power supply from utilities is suspended, unnecessary electric appliances will be switched off and the electricity shortfall will be compensated for by utilizing the cogeneration system that supplies both power and heat generated by city gas.

“It's very important to promote the smart grid system to enhance Tokyo's disaster-response capabilities. Tokyo is the national capital, so the repercussions of a power shortage there would be extremely serious," said Hirohisa Aki, leader of the Energy Network Group at the National Institute of Advanced Industrial and Science Technology's Energy Technology Research Institute. "It's also essential to limit the purchasing costs for renewable energy, which are usually high," Aki said.

“In October 2011, the Asahi Shimbun reported: “Mitsubishi Electric Corp. has begun full-scale tests of smart grid and related smart-community technologies at its production sites in Japan, the company said. The project is designed to develop and test products, including commercial systems, equipment and solutions for annual sales worth 1.3 trillion yen (about $17 billion) by March 2016. Mitsubishi Electric also said it intends to contribute to sustainable low-carbon societies by establishing an economic and highly-reliable power grid, even during emergency situations, as well as providing a system that enables consumers to visualize and control electricity consumption for optimized energy use. The full-scale testing will focus on four main areas: demand-supply balancing; distribution network management; total grid operation for the future; and specific operations for independent micro-grid, such as island or partially connected regions. [Source: Asahi Shimbun October 19, 2011]

Smart Cities and Japan

The Yomiuri Shimbun reported: “The concept of a smart city refers to urban designs that maximize conservation of the environment by utilizing such renewable energy sources as solar and wind power, based on the introduction of a next-generation power supply control technology called a smart grid. [Source: Yomiuri Shimbun, January 16, 2012]

“Urban development plans inspired by the smart city concept have been spawning a wide range of new demand for technologies such as rechargeable batteries and electric vehicles. In the wake of the March 11 Great East Japan Earthquake, smart cities are considered to be a crucial part of the government's energy-saving policy. Such projects are already under way overseas, particularly in urban developments in newly emerging economies.

“The market for smart city projects worldwide is expected to expand to about 160 trillion yen in 2015 and 230 trillion yen in 2030, according to estimates by Nikkei BP Clean Tech Institute.

Panasonic and Japan’s First Smart City

Miki Tanikawa wrote in the New York Times, “Introducing plans for Japan’s first smart city to be built “from scratch” in May 2011 could not have been better timed for Panasonic, the driving force behind the project to build an eco-savvy town in a Tokyo suburb by 2013. The Tokyo area had just gone through multiple blackouts following the shutdown of nuclear power plants in Fukushima after the disastrous earthquake and tsunami in March. And calls from the general public for greater reliance on non-nuclear or renewable energy had never been louder. [Source: Miki Tanikawa, New York Times, November 27, 2011]

“The smart-town project in Fujisawa city, 40 kilometers, or 25 miles, southwest of Tokyo, which will build 1,000 houses on vacant land, began in 2009, said Teruhisa Noro, a Panasonic director for systems and equipment who is responsible for the project. “We had closed a factory there, wondering what to do with the emptied land,” he said. “And ended up setting up an eco-town.”

“A number of companies are joining Panasonic on the smart-town project, including Tokyo Gas, the real estate firm Mitsui Fudosan and Accenture Japan. The town, on a parcel of 19 hectares, or 45 acres, will be the first of its kind in Japan to be built from the ground up. Not surprisingly, it will display high-tech devices made by Panasonic.

“The project in Fujisawa will be using Panasonic devices like solar panels, storage batteries and light bulbs based on light-emitting diodes, or LEDs, along with air-conditioners, washing machines and floor heating that will communicate with each other to maximize energy efficiency. In a model house, Panasonic has installed ceiling LED lighting that twinkles down as natural light from outside dwindles. For central coordination, the house features a portal that can be viewed from any terminal through which residents can monitor and adjust internal electricity use.

“Haruyuki Ishioh, Panasonic’s director for energy solutions, said that in this view, having a housing company in its group, Pana Home, has worked significantly to Panasonic’s advantage. “We have designed homes, for example, that have air-ventilation systems on the walls near the floor that are designed in unison with the air-conditioning system, which resulted in saving 20 to 30 percent of energy,” he said.

“Masahito Sugihara, a consultant with Accenture Japan and a project manager for the smart town, said that Japanese smart cities tended to be initiated and led by private-sector companies, in particular technology firms. He said this contrasted with many smart cities in other countries, where such projects tended to be led by municipalities or by public power companies. Activism on the smart-city front by Japanese technology companies is encouraging, said Hajime Enomoto, a senior researcher at the Research Institute for High Life, a privately financed nonprofit research institution.

“This was especially so, he said, given that Japanese municipalities tend not to have the authority or the budget to initiate such projects. In other countries, “I.T. vendors and technology firms don’t come along until the very end of the phase, after all the city planning is over,” Mr. Sugihara said. The Fujisawa project inverts that process, he said, allowing Panasonic to consider things like how to install solar power systems and storage batteries first and then to come up with the best layout in terms of wiring and architecture “in order to maximize energy efficiency.”

Smart City Projects and Some Problems That Go with Them

Miki Tanikawa wrote in the New York Times, Panasonic is not alone. Similar ideas had been hatched and recently disclosed by other high-technology companies in Japan like Honda, Hitachi and Toshiba. They are working, respectively, with municipal bodies in Saitama, Yokohama and Kashiwa, all near Tokyo, to reduce carbon emissions through an intelligent network of electricity grids and new equipment. Projects in Yokohama and Kashiwa mostly work with existing infrastructure. [Source: Miki Tanikawa, New York Times, November 27, 2011]

“The Yomiuri Shimbun reported: “Hitachi, Toshiba Corp. and other major electronics makers are increasingly turning their sights toward "smart city" projects designed to create eco-friendly, energy-efficient communities. Foreign electronics companies, including General Electric Co. of the United States, are also gearing up to enter the smart city market, intensifying competition for orders. [Source: Yomiuri Shimbun, January 16, 2012]

“Hitachi plans to take part in smart city plans in Dalian, Liaoning Province, northeastern China, as well as one in the city of Kashiwa, Chiba Prefecture. To ramp up its smart city development activities, Hitachi is considering setting up an in-house group specializing in smart city planning that would be self-supporting and responsible for its sales and profits. The company has set a sales goal for its smart city department at about 350 billion yen for fiscal 2015, up 50 percent from fiscal 2010.

“Toshiba plans to participate in 20 smart city projects in various parts of the world, including a demonstration model in Lyon, France. With the aim of winning large number of smart city contracts, Toshiba established a department for planning information technology services under the direct supervision of the firm's president. The company set a sales goal for its global smart city-related business activities for fiscal 2015 at about 900 billion yen, more than double the projected sales for fiscal 2011.

“The smart city concept is also being incorporated into recovery projects for areas struck by the March 11 earthquake and tsunami. Hitachi plans to help create an eco-friendly, energy-efficient city in Sendai, while Toshiba plans to realize its smart city ideas in the city of Ishinomaki, Miyagi Prefecture.

“On his company’s smart city projects, Hitachi President Hiroaki Nakanishi told the Yomiuri Shimbun, “Urban development projects must be able to factor in changes over time in traffic volume and demographics of the areas concerned through the use of simulations. Making the best possible use of our rich IT-related capabilities, we are resolved to boost our marketing activities for specific smart city plans. As it would be inefficient to have various departments in our company engaged in selling devices separately, we will study the feasibility of establishing an in-house company responsible for its profitability. The concept of a smart city has become mainstream in urban developmental projects in China. India has been forging ahead with its smart city plans as a state project. As European countries have emphasized the need for more eco-friendly, energy-efficient cities, the global smart city markets have continued to expand.We are considering purchasing companies in various parts of the world to bolster our smart city initiatives.

“Toshiba President Norio Sasaki said, “One of the most important features of smart city systems is a next-generation electric power meter or "smart meter," which is integral to the smart grid system. In this respect, we are in an advantageous position. In 2011, we took over Landis & Gyr AG, a Swiss company that has more than a 30 percent share in the global smart meter market. Operating in 30 countries, the company can meet a great range of requirements for smart city projects of different governments and municipalities. Toshiba is also strong in the production of power supply control systems and voltage inverters. We hope to devise a business framework to enable the toshiba group as a whole to provide comprehensive smart city services that take into account differences in the industrial structure and lifestyles in each region.

Problems with Creating Smart Cities in Japan

Miki Tanikawa wrote in the New York Times, But the projects do raise certain questions, Mr. Enomoto said. The technology companies are using the smart-town projects to promote their energy systems and the standards that come with them. “You might end up having multiple systems that are not compatible with each other,” he said. “The need for harmonization is going to be a major task ahead.” [Source: Miki Tanikawa, New York Times, November 27, 2011]

“Smart towns that purport to empower residents to optimize their energy use face another major challenge. Japanese laws regulating generation and distribution of electricity forbid sales of electricity between homes, eliminating the potential for exchange among households to optimize energy use. Individual households may sell electricity only to one of 10 monopolistic regional power companies. “Under the current law, you cannot channel your excess electricity to households that want it,” said Mr. Noro of Panasonic.

“Mr. Enomoto said this left a major hole in the system. “It is almost pointless having an eco-town without the possibility to engage in an exchange among households in the neighborhood,” he said. “It would appear that changing the regulation is almost inevitable,” he added. The regulatory setup in Japan, in which power companies can monopolize the generation and the distribution of electricity, has translated into a sense of dependence among consumers regarding home energy management, rather than demands for deregulation, experts said.

“Takejiro Sueyoshi, a special adviser to the U.N. Environment Program, said that there was little concept among the Japanese of planning their home energy use, in part because energy had always just been there when they plugged something in. But then came the earthquake and the nuclear power crisis in March that disrupted supply, something that experts say could change attitudes. “Previously, people thought electricity was something that was given to them from above,” Mr. Enomoto said. “But they might begin to think electricity is something you can produce yourself and then give it to friends and neighbors. That would be a natural progression.”

Image Sources: 1) Jun from Goods in Japan 2) 3) Japan Nuclear Power Program 4) 5) 10) 13) 14) TEPCO 6) Doug Mann Photomann, 7) 8) Osaka Gas, 11) Office of Prime Minister of Japan, 12)

Text Sources: New York Times, Washington Post, Los Angeles Times, Daily Yomiuri, Times of London, Japan National Tourist Organization (JNTO), National Geographic, The New Yorker, Time, Newsweek, Reuters, AP, Lonely Planet Guides, Compton’s Encyclopedia and various books and other publications.

Last updated August 2012

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