The Journal The Authority on Global Business in Japan

EMBASSY | HEALTH & ENERGY

SEPTEMBER 2014

Full Charge for Bilateral Commerce

By Andrew Wylegala

In last month’s article, we previewed the health sector portion of U.S. Secretary of Commerce Penny Pritzker’s October trade mission to Tokyo.

This month we turn to energy, the other half of the mission. Just as deregulation and promotion policies are injecting life into Japan’s life sciences sector, electric power restructuring and feed-in tariffs for renewables spell vast potential for US–Japan energy commerce.

The stakes are high for Japan.

Over the summer—the first without nuclear power—the average usage of available electricity hovered at around 90 percent. While utilities have applied to restart 20 nuclear reactors, only two have cleared the daunting approval process.

Blackouts have been averted, but challenges loom, from supply pinches and rate hikes. Although the “hangover” from the 2011 triple disaster lingers, new paths forward are emerging.

As Silicon Valley legend and C3 Energy CEO Thomas Siebel commented at a recent embassy event, Japan has always been a “model pupil in the school of energy.” It survived the oil crises in the 1970s and developed energy-saving technologies in the ’80s.

The government of Japan’s New Strategic Energy Plan, approved in April, calls for simultaneously decreasing Japan’s dependence on nuclear power and increasing renewable power generation.

While Japan has yet to fully implement electricity and gas market liberalization or hit its targets for renewable energy, the new plan recommits the country to power and gas sector reforms.

Secretary Pritzker’s October trade mission could not be better timed. The market for “smart power,” from production to retailing, will be a lucrative one for US companies such as C3 Energy, which offers end-to-end solutions.

Liberalization of the retail power market (one-third of total demand) is scheduled for April 2016. From 2018 to 2020, we will see the separation of power generation, transmission, and distribution—hence the busting of regional monopolies.

To ensure competition, a public body, the Organization for Cross-regional Coordination of Transmission Operators, will be established this month.

Liberalization should make utilities receptive to efficiency-enhancing technologies, while so-called new power companies will seek “leapfrog” technologies to break into the market.

Japan’s feed-in tariffs for renewables, although lowered twice, feature an attractive ¥36/kWh rate for offshore wind power. Renewables account for only 6 percent of energy in Tokyo today, but the goal is 20 percent by 2020.

We are also championing US renewable energy solutions beyond the October mission. For February’s World Smart Energy Week in Tokyo, we will add a wind power pavilion to one for hydrogen fuel cells.

The 2014 show, which Ambassador Caroline Kennedy opened, attracted worldwide attention, and this year’s US contingent will be even larger.

We look forward to the U.S.–Japan Renewable Energy Policy Business Roundtable, the second Fukushima Recovery Forum, and the New Orleans Association Conference (held in Tokyo) for Japanese utilities, all in spring 2015.

Hydrogen market heating up
Toyota Motor Corp. has announced the 2015 commercial debut of its fuel cell vehicle in Japan. Over 100 refueling stations are planned, and government and industry are collaborating to showcase hydrogen during the 2020 Olympic and Paralympic Games.

Japan’s recently issued Strategic Road Map for Hydrogen and Fuel Cells seeks to make hydrogen part of a CO2-free energy supply system by 2040, while Nikkei BP Clean Tech Laboratory forecasts a $370 billion global market by 2030.

In good news for both the United States and Japan, shale gas-based LNG may be imported into Japan as soon as 2017, and Japanese entities will co-finance the first three projects (in the US cities of Cameron, Freeport, and Cove Point), totaling $10 billion.

Another $10 billion will be invested in 90 LNG tankers by 2020. In short, the business of health is energetic … and the energy business is healthy.


Strike while the jambalaya is hot!

With major electricity market reform on the horizon, Commercial Services Japan (CS-J) organized the 29th New Orleans Association Conference—CS-J’s largest energy matchmaking event—in late May, bringing Japanese electricity producers together with US product and service providers.

With an eye to pending electricity market liberalization, Japan’s large, regional power companies are eager to find new, innovative US technology and solutions to enhance their competitiveness against each other and new market entrants.

It’s a seller’s market, and CS-J successfully recruited 60 representatives of 24 US firms, connecting them to 39 Japanese procurement managers and directors from domestic utilities and independent power producers. The 30th annual New Orleans Association meeting is slated for May 21, 2015.

Wylegala

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Andrew Wylegala is the Minister Counselor for Commercial Affairs at the Embassy of the United States Tokyo.

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