Massive Transformation of Japanese Electricity Market Calls for Flexible Energy Management
Partnerships with local market players will bring AutoGrid Flex to regulated and deregulated electricity companies in Japan
As AutoGrid continues its strategic trajectory into international growth markets, it should come as no surprise that we’re scaling up our presence in Japan.
Since 2016, the Japanese electricity market has undergone a massive transformation through deregulation. Final phaseout of regulated tariffs is scheduled for 2020. Already, more than 450 competing deregulated energy retailers are offering products for management of distributed solar and energy storage. The largest traditional utilities have lost nearly 6 million retail power customers since 2016 and are projecting declines of between 2-5% of power sales in 2018/19, weighing on profit. But even as the competitive landscape is rapidly changing for the traditional utilities, consumers are also gaining choice in where their power is sourced.
To encourage changes to the generation mix, the Japanese government is promoting the installation of lithium-ion batteries for residential and industrial use by subsidizing the capital costs of the battery system. Allocating nearly 16 billion yen to the subsidy program between FYs 2014-2017.
Global cumulative storage deployments by country, based on power output
The growth and disruption in Japan have intrigued us for some time. Since early 2018, we’ve been seeing strong demand for our first residential energy storage–based Virtual Power Plant (VPP) deployment with Mitsubishi and Kansai Electric. Then in September, we announced a partnership with Macnica, a leading Japanese supplier of networking and software products to governments and enterprise customers.
The partnership with Macnica will further accelerate adoption of our technology platform and allow us to serve our customers in Japan more effectively. Macnica will focus on extending the VPP, Energy Storage Management System (ESMS), Distributed Energy Resources Management (DERMS) and Demand Response Optimization and Management System (DROMS) modules of the AutoGrid Flex platform to regulated and deregulated energy companies throughout the island nation.
Solving the ‘2019 Problem’
One important driver of residential behind-the-meter storage sales in Japan has been dubbed the “2019 problem” by Bloomberg New Energy Finance. The issue refers to nearly 547,000 Japanese households that will come off their buyback program for rooftop PV in late 2019, and more than 100,000 every year thereafter. This will create a significant market opportunity for behind-the-meter residential storage retailers.
In response to these changes, major Japanese utilities and energy companies, including Tokyo Electric Power Co. Holdings Inc. and Chubu Electric Power Co., have set up new subsidiaries that will sell solar and storage to households. They anticipate that between 2018 and 2050, Japanese households and businesses will add around 128 GW of small-scale PV.
Already Japan’s renewable sector has been growing by 29% year on year for the past several years. Japan is targeting significant increases for renewable energy generation by 2030.
Also, negative demand growth and strong consumer uptake of small-scale PV and batteries should make Japan one of the more decentralized power systems in the world, with more than one-third of installed capacity found behind the meter. These changes represent a significant opportunity for us to help Japanese energy companies integrate renewables by extracting maximum value from flexible assets.
What’s happening in Japanese electricity market is happening around the globe. As the world decarbonizes, decentralizes and digitizes energy systems, it will need a way to manage that complexity. Put simply, that’s what we do.