Digital solutions for power markets: Big in Japan

Japanese utilities are investing in innovation start-ups as the liberalised electricity market creates opportunity for more competition.
Published: Tue 13 Aug 2019

Japan is ramping up measures to modernise its electricity sector and adopt digital technologies now that both the generation and retail markets are deregulated and feed-in tariffs for renewable energy will be drastically reduced starting this October.

Japan’s deregulation process started in 2000 but the market fully opened in 2016, five years after the Fukushima nuclear disaster left the country heavily reliant on fossil fuels and with high electricity prices. With electricity consumption of more than 900TWh/yr, Japan is the world’s fourth largest consumer with a market worth over $150 billion. The deregulation process has been slow and steady, but it is already creating enormous opportunity in the electricity sector and disrupting many traditional business models.

International market players such as Shell are entering the wholesale market, and other non-energy companies such as SoftBank Group and Toshiba are considering it. Japan's Ministry of Economy, Trade and Industry sets solar and wind energy from major power companies at a predetermined price but a competitive bidding system will start next year. As all households will no longer qualify for the solar feed-in-tariff from 2023, demand for batteries will increase, and Shell recently entered the battery market with its purchase of Sonnen.

Traditional utilities have lost nearly 6 million retail power customers since 2016, and they keen to embrace digital solutions and enter into partnerships with start-ups to keep pace with new competitors. The Japan Energy Challenge held in London last week picked KiWi Power, Connected Energy and EVBox, which are all members of ENGIE’s Distributed Energy Resource System, to work with companies in the Japanese energy sector who are looking to innovate.

 

“Japan’s energy market is undergoing massive change and there is huge scope for our technology to help Japanese energy companies stand out by offering valuable new products to their customers. Winning the Japan Energy Challenge is valuable recognition of our platform’s unique capabilities and will help us to accelerate its deployment in the Japanese energy market,” said Nima Tabatabai, international market development leader at KiWi Power.

KEPCO, the second largest utility, has just completed a five-month trial of Power Ledger’s peer-to-peer (P2P) blockchain-based platform in Osaka. The trial simulated prosumers selling their excess renewable energy to fellow consumers. “Although there are still many challenges like amendments of relevant laws for commercialization, Power Ledger’s product presents significant opportunities for prosumers to sell their excessive energy at more advantageous prices and for consumers to buy it at more affordable prices,” said Fumiaki Ishida, KEPCO representative general manager.

Japanese energy users could save more than ¥2 trillion ($18.5 billion) a year by using the P2P platform, according to Power Ledger. The tariff of around ¥40/kWh is passed through to the public, who have spent more than ¥10 trillion ($92.8 billion) since the tariff's introduction in July 2012.

The largest utility TEPCO participates in the start-up accelerator the Free Electrons programme, and has invested in the UK’s Moixa which has developed smart energy-management software for domestic batteries. TEPCO is also looking at artificial intelligence systems for predictive maintenance.

Japanese energy services and trading company ENERES is working with US software firm Autogrid on what it says will be the largest storage virtual power plant in the world by asset volume, aiming to add more than 10,000 assets to the VPP between by 2021, with rapid scaling in subsequent years.

"As solar and storage costs continue to decline and new capacity markets open, DER and DR resources are becoming a key component of our daily operations," said Masahiro Kobayashi, president and representative director of ENERES. "AutoGrid Flex gives us a proven, AI-driven comprehensive distributed energy management solution that allows us to fully leverage our own DER and DR resources and those of our customers in real time."