Community Projects in Japan: Challenges and opportunities
for realizing the potential as a strong driver for energy transition,
climate policies and local community revitalization
German-Japanese Symposium
Panel session on “Climate Policies and Regional Economic Development”
2 November, 2016

Prof. Hironori Hamanaka
Chair of the Board of Directors
Institute for Global Environmental Strategies

Introduction• Community energy projects have been increasing in Japan,
particularly after Fukushima nuclear power plant accident.
• Many municipalities are moving forward with projects to promotelocal production of electricity/heat from renewable sources ofenergy for local consumption, while also addressing other priority
socio-economic issues like de-population, aging society, and theneed to bolster local economy and create jobs.
• Promoting community energy projects has the potential to driveenergy transition, advance climate policies and revitalize localcommunities.
2

Maniwa City: Aiming at becoming self sufficient withbiomass-energy• Maniwa city (population of 48,000) set the goal of supplying substantial
part of its energy needs with the area’s most abundant resource: wood.
• The city has 30 lumber mills, and their leaders jointly established abiomass power generation company, together with the forestry
cooperative association and the municipal government.
• The company set up its own biomass
power plant in 2015, with the capacity Biomass power plantof 10 megawatts, enough to power
22,000 typical homes.
• Energy business is expected to becomea new engine of growth for the area,
thewith the saved fossil energy cost getting
circulated within the area, helping tobolster the local economy.
Source: Noboru Ohta, Maniwa City Mayor, 2016, and Toru Ishii, Asahi Shimbun news article, December 23, 2014.

Iida City: Making steady progress toward achieving independent
local change through introducing renewable energy• Iida city (population of 100,000) is moving forward with the multi-faceted
implementation of renewable energy projects, with the cooperation ofcitizens, public purpose energy corporation, a local bank and local businesses.
• The Ohisama Shimpo Energy Corporation is promoting solar power
generation utilising the roof of public buildings with citizen funding.
• The Corporation also plays a key role in planning and running the projectcalled Ohisama Zero-yen System, meaning "a solar power system for free,"with the company installing a solar power generator at no initial cost on
the roofs of households applied to the scheme and approved.
• The municipal government provides technical and financial support tothose renewable energy projects by citizen organisations recognised as
being contributing to sustainable city development, under a recently
introduced local Ordinance.
Source: Katsumi Tanaka, “Renewable energy policy of Iida city by utilising local financing”, 2013, Japan for 4Sustainability Newsletter No. 101, January 2014, and ICLEI Local Governments for Sustainability

Miyama City launched its own electricity retail business• Miyama City has become the first local government in Japan toestablish a company that sells electricity to households--and at rates
cheaper than regional monopoly Kyushu Electric Power Co.
• Miyama Smart Energy, set up by the city in collaboration with Epco, anenergy consultancy, and a regional bank in 2015, with the goal ofachieving energy self-sufficiency by locally generating and consuming
power with renewables. The business started by supplying power topublic entities such as city offices, schools and libraries, and began
targeting ordinary households in April 2016.
• The company plans to invest the profits into local industries, such as
agriculture, forestry and tourism. For customers, it provides an elderlywatch and health-check services using electricity consumption, room
temperature and humidity data.
Source: Masanobu Higashiyama and Kenichiro Sakai, Asahi Shimbun news article, March 27, 2015, and Japanfor5
Sustainability Article , May 5, 2016

National policies to promote renewable energy inJapan• National energy policy in Japan has long been aiming at securing stablesupply of energy, as well as achieving economic efficiency of energy
supply.
• Since 1990’s, environmental consideration began to be incorporated,particularly to respond to the challenge of climate change.
• National strategy to promote biomass energy was adopted, andnational support to local governments started in mid-2000’s.
• National programme to support local governments to build “Environment
Model Cities” and “Environmental Future Cities”, which incorporates theapplication of renewable energy systems, began in 2008.
• Feed-in-Tariff scheme was introduced in 2009, and expanded its scope tocover renewable energy other than solar PV in 2012, with the enactment ofFiT Act in 2011. This has led to rapid and massive development of solar PVsin Japan.
6Challenges for promoting community energy projects (1):Expected amendment of FiT Act
The pace of PV installation may be slowed
down in Japan since the amendment of FiT Act
expected in 2017 will include followingchanges:

Installed capacity by FIT as of April
2016
Biomass,5.3Wind, 5Unit: MW• Bidding system for solar power producers willSolar(smallscale), 40.3
be introduced.
• Rule for grid access will be provided bySolar(large scale),“Electricity Utility Industry Act”, not by FiT Act.
242.8=> For renewable power producers, thisamendment poses the challenge of lower
purchasing price and uncertainty regarding
Source: Agency for Natural Resources andaccess to the grid.
Energy(2016)7

Challenges for promoting community energy projects (2):Limited volume of electricity transaction available through
JPEX (Japan Electric Power Exchange)
10 major power company
J-power and JAPC
Others7%15%78%Total 268 GW
Source: Agency for Natural
Resource and Energy (2016)
Generation capacity by power
producresAround 85% of capacity is owned by 10 major
power company, J-power and Japan Atomic
Power Company (JAPC).
Share of transaction through JPEX (Japan ElectricPower Exchange) is only 2% of total electricity
generation.

When new power company wants to expand its
business, it would face the imbalance risk due tothe very small volume of electricity transaction
available through JPEX.
8Challenges for promoting community energy projects (3):Inflexible business model focusing on power supply
Typical local energy initiatives have focused on electricity supply to public sectors, but not onelectricity distribution and demand management. If institutional/ technical barriers (lowerFiT price/ limited grid access) become more serious, this would make currently prevailingbusiness models less effective.
Comparison of three local energy companies established by local governments
Tottori Citizens Electric Power Nakanojo Electric Power
Supply side
PV owned by local gov
PV owned by local gov
Purchased from JPEX
Purchased from JPEX
Demand side
Public facilities
Public facilities(Consumers)
Power generation
500 kW
5 MW
outputApproach to expanding Increase capacity of power
Increase capacity of power
activityplantsplantsRegulating supply and Balancing group (Itochu Enex) Balancing group (V-power)
demandKitakyushu Power
Waste incineration power plant
owned by local gov
Purchased from JPEX
Public facilities, Small-Medium
sized enterprises
5 MW
Increase capacity of power plants
Balancing group (F-Power)

Source: IGES (2016) Involvement of the Local Government in the Local Production for Local Consumption of Energy

9Approach to further expand community renewable energy (1):Miyama Smart Energy as decentralized initiative by local government

Miyama Smart Energy is creating an independent business model, which is not
significantly affected by policy changes at national level.
Miyama Smart Energy
Supply side

Demand side(Consumers)

PV owned by local gov
Residential PVs
Purchased from JPEX
Public/private facilities
and households

Power generation 5.5 MW
outputApproach toLinkages with nearby
expanding activity local governments

Regulating supply Carried outand demand
independently

Developing private transmission line(under consideration )Balancing electricity
system using demand
response with HEMS

Roof-top PV(surplus )Large scale
MiyamaPV (GroundSmartmounted )EnergyBiomass powerincluding nearbycity
Import hydro andbiomass electricity fromnearby local governments

Households
HEMS Small
facilities

Source: Miyama Smart Energy (2016) Activity on local energy production and consumption in Miyama city

Publicfacilities
Commercial
facilities
10Importance of highlighting benefits to justify investment in community
energy projects : A case of Ohisama Shimpo Energy Corp. in Iida City
1 Million JPY

Ohisama Shimpo
Energy Corp.:
PV power project
ESCO project
Solar and biomass
heat supply

Creating jobs for 9persons

Total added value

Profit for
projectdevelopers
Subsidy

Salary for employees

Tax revenue for city

The result of the analysis by Prof. Raupach indicates that overall public benefit exceeds the amountof subsidy within 10 years’ time, and justify Iida City’s investment in Ohisama Shimpo Energy Corp.
Source: Raupach (2016)11Summary and way forward• Community energy projects is growing in Japan, as people’s awareness on energy
security, safety and environment was heightened and national policy support
strengthened, particularly after Fukushima nuclear accidents.
• However, modification of rules and institutional framework for electricity market
will pose new challenges for promoting community energy projects:
 Limiting grid access by renewable power producers,
 FiT Act to introduce bidding system resulting in lower purchasing price, Insufficient capacity of electricity transaction through JPEX
• Initiatives by local governments involving local stakeholders are helpful for further
promoting community energy projects:
 Highlighting benefits of renewable energy projects, partnership andcooperation with other local governments, etc.
• Knowledge sharing and lessons learning through international cooperation is also
beneficial.
12Thank you for your kind attention

German-Japanese Symposium
Panel session on “Climate Policies and Regional Economic Development”
2 November, 2016

Prof. Hironori Hamanaka
Chair of the Board of Directors
Institute for Global Environmental Strategies
hamanaka@iges.or.jp

Reference data:
Installed capacity of renewable energies in Germany, UK and Japan
45.00040.00035.000MW

30.00025.00020.00015.00010.000
5.000
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015200620072008
2009
2010
2011
2012
2013
2014
2015
2006
2007
2008
20092010
2011
2012
2013
2014
2015

0

Germany

solar

offshore windUKonshore windJapanbioenergy

Source: Author, original data from IRENA (2016), “Renewable Capacity Statistics 2016”14