JFS Newsletter No.96 (August 2010)
The phrase "smart grid" can be heard everywhere these days. In this issue of the JFS Newsletter, we will explain what a smart grid is and how it may affect individuals, companies, municipalities, the national government and society. In next month's issue, we will introduce specific developments, including demonstration experiments being carried out in Japan.
The world is now facing the major problem of global warming. For Japan, however, energy security may be a more imminent concern than global warming. Energy is essential for our daily lives, for the economy and for the functioning of society. However, Japan is too dependent on fossil fuels including oil, coal and natural gas as the primary energy source for 80 percent of its energy needs, and imports nearly 100 percent of its fossil fuels.
Fossil energy is exhaustible. Although energy production has been able to meet global demand so far, attention has recently focused on "peak oil"--the point when oil production hits its peak and begins to decline. In the world after peak oil, a rise in oil prices will be inevitable because demand continues to grow while supply declines. As for the forecasts of geologists and research institutions, some say we have passed the peak while others say we aren't there yet. The most prevalent forecast is that we will reach the point of peak oil within a few years.
As noted above, Japan imports nearly 100 percent of its fossil fuel supplies. Energy imports cost Japan about 5 trillion yen (about US$ 56.2 billion) in 1998, and jumped to about 23 trillion yen (about US$ 258.4 billion) in 2008. Of this total 2008 cost, about one trillion yen (about US$ 11.2 billion) was the result of increased consumption, but the remaining 17 trillion yen (about US$ 191.0 billion) was due to higher prices for fossil fuels. Japan's long-term prospects for energy supply and demand are calculated based on prices of 56 dollars for one barrel of crude oil in 2005, on 121 dollars in 2020 and on 169 dollars in 2030. This indicates that there is potentially a twofold to threefold increase in payments to the overseas market, even if consumption stays flat. In view of Japan's current financial condition, such an increase will not be economically reasonable.
So, what should Japan do? If we describe the current situation, not by forecasting, but by backcasting -- a method of working backwards from a desired future to the present -- we can see that we need to reduce energy consumption as much as possible, and to switch from imported energy to domestically-produced low-carbon energy. Technologies to support such changes, such as energy conservation and renewable energy, are making progress. The major technological infrastructure system that ties together and incorporates all of the various individual technologies to attain a desirable future is the smart grid or smart energy network.
Smart grids appear to be key to the global solution as the world shifts from a fossil fuel-dependent society emitting large amounts of carbon dioxide (CO2) to a society centered on renewable energy and low carbon emissions. Countries around the world, including not only Japan but European countries and the United States, as well as major cities and industries are all engaged in a fierce competition to lead the technology in order to become the de facto standard.
So what exactly is a smart grid? As its name implies, this system uses electric power in a well-organized and clever way by employing information technology, which enables consumers and power companies to exchange information about the best way to use, generate and store electricity, and also about achieving a better cost balance among energy sources.
Among the various reasons and objectives that nations and cities adopt for promoting smart grids, the main reasons are: 1) to provide a stable supply of electricity by reducing power failures, 2) to change ways of energy consumption through energy saving and peak shifting, 3) to introduce renewable energies on a large scale, and 4) to develop infrastructure for next-generation vehicles, including electric and plug-in hybrids.
European countries consider energy issues to be a geopolitical risk factor and are working to establish a framework to establish energy supplies as far as possible within the European Union (EU) rather than having to rely on imported energy. By consolidating its energy supply among EU countries through an energy network, the EU is working towards a "triple 20" challenge for 2020-- improving energy efficiency by 20 percent, increasing the share of renewable energies in energy consumption to 20 percent, and reducing greenhouse gas emissions by 20 percent--as measures against climate change. At the same time, if substantial supplies of renewable energy are introduced in one area of the network, the shared power grid makes it possible to stabilize the overall energy supply of the entire EU. Meanwhile, some countries seem to be planning to implement systems in which energy users pay a precise rate for their consumption based on monthly meter reading, though such systems are taken for granted in Japan.
In the United States, on the other hand, aging power grids have been posing problems. Frequent power outages, which occur several times more often than in Japan, result in heavy losses to the US economy and complicate people's daily lives. Therefore, securing stable electric power networks is an urgent issue for the US. President Barack Obama pledged to reduce crude oil imports from the Middle East and Venezuela to zero, and the US intends to use domestic energy resources as efficiently as possible, while attempting to encourage a fresh start by the US automobile industry, which has lagged behind in developing electric and plug-in hybrid vehicles.
Meanwhile, many emerging economies including India and Brazil think that smart grids will be a necessary part of their social infrastructure if they are to meet new demands for power.
Many noteworthy smart-city initiatives are also going on around the world. Various types of energy sources such as gas, heat, hydrogen and steam, in addition to electricity, are needed to manage a city. These initiatives aim to create a smarter city by integrating not only the energy infrastructure itself but also by integrating this infrastructure with related sectors such as transportation, waste disposal system and so on. Some cities are also thinking of exporting smart-city know-how as intellectual property.
So, what is the situation in Japan? Since electricity supplies have been stable and power demand is not expected to grow considerably in the future, large scale introduction of renewable energies is one main purpose for promoting smart grids, or smart energy networks in Japan.
Among renewable energies, Japan is now focusing on solar power generation. Unlike European countries where mega-solar power generation facilities are increasing, Japan has adopted the approach of significantly increasing the number of residential photovoltaic (PV) systems. In its mid-to long-term roadmap for the target of reducing greenhouse gas emissions 25 percent by 2020 compared to 1990 levels, the Japanese government set a goal of having 10 million residential PV systems installed by 2020. Although the capacity of each individual installation is small, if this goal is met, PV systems will account for more than 25 percent of total electricity generation in Japan. This means that extremely advanced systems and techniques will be required to maintain voltage stability while controlling a network of widely scattered residential PV systems.
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Moreover, about a half of the energy consumed in Japanese households is for room and water heating, both of which require low-temperature heat energy. Converting homes to use only electric energy has been actively promoted recently in Japan, and electricity is becoming the only energy source for room and water heating in many households. However, energy efficiency drops each time energy is converted from some other kind of energy into electricity, then from electricity back into heat. Under these circumstances, there is a move to promote the use of solar thermal power to meet low-temperature heat needs in households. The Tokyo Metropolitan Government is promoting solar heat utilization through the implementation of the Green Heat Certification System. A smart grid or smart energy network can also be helpful to optimally control such thermal energy.
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In this way, various efforts are being undertaken to develop "smart houses" and "smart buildings" using information technology. However, such efforts will not suffice without additional efforts to make sure there are "smart people" living in these "smart houses." In some approaches, smart grids or smart energy networks have been found to help facilitate behavioral change in people.
One such approach involves enabling consumers to clearly visualize household energy consumption and estimated charges. Such visualization can influence electricity demand, for example, by encouraging consumers not to use electricity during peak hours by charging high electricity rates for those hours. Another approach is to set up virtual communities in which members can learn together and exchange information to facilitate and promote changes in consumption behavior and lifestyles. So far, the development of smart grids and smart communities in Japan has been focused on the technological aspects, but it is also important to include human behavioral aspects in such systems.
What kind of society would be possible with a functioning smart energy network? As a way of opening the discussion on this topic, I would like to introduce the scenario that I have envisioned.
The society I imagine is the one that can minimize energy consumption and CO2 emissions while maintaining comfort and convenience. Such a society can be achieved by changing the behavior of users through visualization and encouraging the optimal use of home electric appliances that have the best possible energy-saving performance that reflect the energy use pattern of the household. This can be achieved when the appliances have a learning function, or through pre-setting by users. For example, by using room lights that automatically turn off the light when no people are in the room and refrigerators that adjust themselves to cool less at night when users are less likely to open the door -- such systems make it possible to secure the necessary comfort while minimizing energy consumption.
An energy-smart society would enable each household to generate and store electricity and heat from solar and wind energy, and use the energy when necessary. Surpluses or shortages of electricity would be adjusted through the smart grid connecting neighboring smart houses. A collective of smart houses would form a smart community. There would be various smart communities utilizing regional characteristics such as wind power generation in windy areas, biomass energy in areas with forests, etc. Various smart communities with different core renewable energy sources would have independent energy systems while cooperating with other communities, finally forming an energy-independent Japan.
Once an energy-smart society is realized, we can have a stable economy and live stable lives with respect to energy supply, even at times of difficulty caused by external incidents -- no matter if it rains and disturbs solar power generation, no matter if the wind does not blow, no matter if large power plants stop operation due to earthquakes or hurricanes, no matter what happens in the Middle East or elsewhere, and no matter if the price for oil skyrockets to U.S. 300 dollars per barrel. In such a society, we would not feel guilty about exacerbating anthropogenic climate change, and would live in and pass on an energy-secure society to future generations. Moreover, if Japan could create this type of society and promote it as a model to the world, Japanese industries could use it as a resource to build competitive advantage and promote this model throughout the world. This is the type of future for Japan about which I dream.
Written by Junko Edahiro