IEEJ：October 2017○ｃIEEJ 2017
Special Bulletin
A Japanese Perspective on the International Energy Landscape (347)

October 27, 2017

Digitized/Electrified Society and Energy Security
Ken Koyama, PhD
Chief Economist, Managing Director
The Institute of Energy Economics, JapanOn October 26, a symposium titled “AI/IoT-realized Super Smart Society and Energy Network”
took place at the Tokyo Institute of Technology. Sponsored by the International Research Center ofAdvanced Energy Systems for Sustainability (AES Center), Institute of Innovative Research, Tokyo
Institute of Technology, the symposium dealt with how artificial intelligence, the Internet of Thingsand other advanced information technologies would transform society and the energy world andwhat business chances and challenges would emerge, as indicated by the title.
The symposium consisted of three parts – Part 1 “National Strategy and Outlook on Super
Smart Society,” Part 2 “Super Smart Society and Energy Technologies Seen from Academia,” andPart 3 “Panel Discussion – Social Implementation Led by the Private Sector.” In Part 1, Kazuo
Kyuma, a member of the Council for Science, Technology and Innovation, Jun Takashina,
director-general of the Energy Conservation and Renewable Energy Department at the Agency for
Natural Resources and Energy, and Katsuya Watanabe, director-general of the Telecommunications
Bureau at the Ministry for Internal Affairs and Communications, made reports on government
initiatives for the super smart society, based on their expertise. In Part 2, AES Center Professors
Takao Kashiwagi (director of the AES Center), Hiroshi Asano and Ken Koyama (author, named AES
Center professor in April 2017) presented reports. In the Part 3 panel discussion, panelists from NTT
Facilities Engineering, Inc., JXTG Nippon Oil & Energy Corp., Tokyo Gas Co., Toshiba Corp.,
Hitachi, Ltd. and Mitsubishi Corp. discussed relevant initiatives at their respective companies andfuture challenges.
What is the “super smart society?” This is an interesting question. In Part 1, it was argued thathuman society historically transitioned from a hunter society to a farmer society, an industrial
society and an information society, or from Society 1.0 to Societies 2.0, 3.0 and 4.0, before a new
economic society comes as Society 5.0 or super smart society. The new society was explained as asociety in which AI, big data, IoT and other advanced technologies would be fully used to achieveboth economic development and the resolution of social challenges facing the world. The supersmart society was also described as a society in which AI, big data and dramatically advanced
information technologies (electronics, communications and data processing) would be fully used tointegrate cyberspace with physical space to produce new values.
An important challenge in energy and environment areas would be to build a low-carbon
society and very efficient energy supply systems using renewable energy, storage batteries, hydrogen,advanced next-generation vehicles, distributed energy systems, demand response systems, virtual
power plants and other technologies. AI, big data, IoT and other advanced technologies would befully used to digitize and expand the energy world in the new economic society. The symposium
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IEEJ：October 2017○ｃIEEJ 2017
gave me an opportunity to find a new concept of the energy world. It was an interesting, stimulating
opportunity. As a matter of course, the super smart society and energy’s expected roles in suchsociety represent long-term strategic challenges, with any specific path to such society remaining
uncertain. There may be numerous problems to be resolved for realizing the new society.
Nevertheless, initiatives to overview social transition and transformation from a broader perspective
and depict and pursue the future society we should build are very significant and valuable. We will
have to closely watch future initiatives to realize the super smart society and energy’s roles in suchsociety.
Based on matters of interest to me and my expertise, I presented a report from a viewpoint thatwas different from those of other presenters. While other presenters focused on the image of thesuper smart society and on expectations and visions on energy’s roles in such society, I argued thatas the super smart society would be digitized and electrified, energy security (particularly, powersupply security) would be the key to realizing and managing the super smart society. Then, I madethe following three points on new risks that we would have to consider in regard to energy andpower supply security while digitization and electrification would make irreversible progress.
The first point is the impact that the substantial expansion of renewable energy includingintermittent solar photovoltaics and wind power generation would exert on power supply systems.
Storage batteries, grid enhancement measures, auxiliary fossil power generation and other measures
are required to cover the intermittency of solar PV and wind power generation. This means
additional costs. While solar PV and wind power generation costs are remarkably declining, theadditional costs are required for integrating such intermittent renewable energy into power supply
systems and may not necessarily be negligible. As intermittent power sources’ share of the powermix expands further, the costs for integrating these sources into power supply systems will grow.
Power supply security and the integration costs could be challenges.
The second point is related to cybersecurity. As social and economic systems grow more
dependent on stable power supply due to further digitization and electrification, they are likelt tobecome more vulnerable to cyberattacks. As cybersecurity problems are growing more complex,
diverse and serious, cybersecurity measures must be updated in response to the fast-changing
situation. So far, cyber problems have not become as serious as the oil crises that globally shook
energy and power supply. As stable power supply becomes the most important challenge in thedigitized society, however, we should recognize cybersecurity problems as a major potential risk.
The third point is a stable power supply problem related to investment in deregulated markets.
In Japan, power and gas system reform will be implemented to deregulate markets more and morethrough the beginning of the 2020s. In globally known cases, there are many cases where investment
costs in power sources has failed to be recovered in deregulated power markets, leading to theso-called “missing money problem”. The classic “missing money problem” has transitioned to amore complex problem as wholesale power market prices have declined due to the large scale inflow
of renewable energy power generation promoted by policy support and cost reduction. In response,the introduction of the capacity mechanism is being considered or implemented. In the digitized andelectrified society, how to secure investment and stable power supply in liberalized markets witj
renewable energy expansion trends may be a key challenge.

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While great expectations are placed on the realization of the super smart society, or Society 5.0,
there are many challenges to tackle in the energy world. In the new economic society in which
advanced technologies are fully used, energy is likely to take an even more important position
instead of staying at its present level of importance. Energy security will thus remain an old and newissue.

Contact: report@tky.ieej.or.jp
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