Team Finland Future Watch Report: Further research on smart city market in Japan

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Team Finland Future Watch Report: Further research on smart city market in Japan

  1. 1. Further Research on Smart City Market in Japan
  2. 2. Organization Members Research and Consulting Division, Japan Research Institute 2-18-1 Higashi-gotanda, Shinagawa-ku Tokyo 141-0022 JAPAN PHONE :+81-3-6833-0900 FAX :+81-3-6833-9480 Project Leader Koji YAMAURA (Associate Senior Consultant) yamaurakoji@jricojp +81-3-6833-5369 Adviser Hideyuki ASAKAWA (Senior Consultant) asakawahideyuki@jricojp +81-3-6833-2815 Project Members Yohei KOTAKE (Consultant) kotakeyohei@jricojp +81-3-6833-6333 Yuki KUWABARA (Consultant) kuwabara.yuuki@jri.co.jp +81-3-6833-6587 Assistant Takako IMAI (Assistant) imai.takako@jri.co.jp +81-3-6833-1562 Contact information Tekes – the Finnish Funding Agency for Innovation Tekes is the main public funding organisation for research, development and innovation in Finland. Tekes funds wide-ranging innovation activities in research communities, industry and service sectors and especially promotes cooperative and risk-intensive projects. Tekes’ current strategy puts strong emphasis on growth seeking SMEs.
  3. 3. 2 Macro Analytics: Government policy Smart City is one of the subtopics of the growth strategy of the government policy, "Abenomics". So, in Japan, it is regarded as an important theme. Specifically, in the "Realization of clean and economic energy supply-demand plan", Japan’s government aims to create industries related to environment and energy, and build a clean and inexpensive energy society through various and bidirectional networking. Its concrete measures are "Expansion of smart community and establishment of energy management industry", "Enhancing energy-saving standards for buildings" and "International standardization". In the "Expansion of smart community and establishment of energy management industry plan", Japan’s government aims to introduce smart meters to all households by 2020. In addition, in order to apply various charge menu, experiments are carried out in the four key demonstration areas. In the "Enhancing energy-saving standards for buildings plan", Japan’s government aims to introduce fuel cells to 5.3 million households by 2030. That is 10% of all households in japan. In the "International standardization plan", international standardization of battery and charge control will be promoted. [Figure] Government policy on Smart City (Smart Community) (Source) The Japan Research Institute summarized from “The Reconstruction Strategy in Japan (JAPAN is BACK)”, The Cabinet Office 1.Society where clean and economical energy is supplied 2.Society where efficient energy distribution is achieved through competition 3.Society that consumes energy wisely problem Direction of the resolution Since the Great East Japan Earthquake, energy costs have gone up No competition between power companies (regional monopoly) Infrastructure with high consumption efficiency is still developing Strict use of renewable energy Power system reform (Fundamental reform for the first time in 60 years) Energy supply and demand management through the proactive participation and contribution by consumer Three social images Realization of clean and economic energy supply-demand Japanese government aims to create industries related to environment and energy, and build a clean and inexpensive energy society through various and bidirectional networking. concrete measure * Feed-in Tariff Scheme * systemic reforms * upgrading of the Grid * Changing the electrical power system * Development of storage batteries * Development of power devices * Expantion of Smart community, establishment of energy management industry * Enhancing energy-saving standards for buildings * Development and maintenance of fuel cell, next- generation vehicles, the hydrogen infrastructure * International standardization DetailLocation * Monetary policy * Fiscal policy * Growth strategy Three arrows * Industry Revitalization * Strategic Market Creation * Strategy of Global Outreach Three action plans * Extension of "healthy life" * Clean and economic energy supply and demand * Construction of the next generation infrastructure that is safe, convenient and economical * Implementation of regional community Four themes Abenomics Large policy
  4. 4. 3 Macro Analytics: Ministry policy In Japan, many innovative projects about Smart City have received financial supports from the government. To commercialize the results of those projects, government supports are still needed. Therefore, in order to predict the Smart City future trends in Japan, it is necessary to understand the concepts of the ministries and agencies. Especially, "Environmental Future City" by Cabinet Office plays a major role. In addition to the ministries below, Reconstruction Agency, MEXT (Ministry of Education, Sports, Science and Technology), MLIT (Ministry of Land, Infrastructure and Transport), Ministry of the Environment are making various efforts to Smart City projects. [Figure] Policy of the ministries related to Smart City (Source) The Japan Research Institute summarized from public information METI METI Ministry Cabinet Office MIC MAFF EV・PHV Town (2009) Smart Community (2009) Concept (Year) Environmental Future City (2011) ICT Smart Town (2012) Smart Village Widespread use of EV and PHV Construction of a system for managing overall energy including Electricity, Heat, Transportation Goal Creation of best practices to overcome aging and environmental issues as an environment future city To solve problems by ICT disaster risk reduction and disaster prevention Regional issues Building an integrated management system for renewable energy in units of local area about 200 million euro per year (Clean energy vehicles) about 100 million euro per year Budget about 5 million euro per year *** ***
  5. 5. 4 Macro Analytics: Policy of the Cabinet Office "Environmental Future City" by Cabinet Office plays a major role to drive Smart City demonstration projects in Japan. In 2008, the Cabinet Office selected 13 cities as "Environmental Model City" which would challenge the progressive approach to realize a low carbon society. Currently, about 50 cities have been selected. In 2011, the Cabinet Office selected 11 cities as "Environmental Future City" which would create human-centered new values to support the environment and ultra-aging society. Environmental Future Cities are intended to create unique and best practice in the world whithin the domains of technology, socio-economic system, service, business model and town development. After that, the best practices will be expanded onto domestic and international market to achieve sustainable development of economy and society in Japan. The government provides strong support for the "Environmental Future Cities". In particular, centralizing government budgets and reforming regulations are provided. By creating successful cases continuously, the government aims to establish ecosystems that are not dependent on subsidies. [Figure] Smart City policy of the Cabinet Office (Source) The Japan Research Institute summarized from public information 2008 2011 Environmental Model City <Large city> Kitakyushu, Kyoto, Sakai , Yokohama, Niigata, Kobe <Local city> Iida, Obihiro, Toyama, Toyota, Tsukuba, Amagasaki, Matsuyama <Small > Shimokawa-cho, Minamata, Miyakojima, Yusuhara- cho Mitake-cho, Nishiawakura Village Environmental Future City <Affected areas of the earthquake> * Ofunato, Rikuzentakata, Sumita-cho * Kamaishi, Iwanuma* Higashi-Matsushima*Minami Soma* Shinchi Town <other areas> * Shimokawa-cho* Kashiwa* Yokohama * Toyama * Kitakyushu Environmental Future City Environmental Model City <<Environmental Future City>> Careful selection * Environment (Low-carbon, waste ,natural) * Low birthrate and longevity (Medical, nursing care, child care) *Economic growth * International expansion * Low carbon * Local revitalization supports for advanced cases and international expansion indirect supports for self-motivating efforts of the city In 2008, The government selected 13 cities as "Environmental Model City" which address environmental issues as pioneers, in order to realize low carbon society, for example reduction of greenhouse gases emissions. In 2011, The government selected 11 cities as "Environmental Future City" which would create human-centered new values to support the environment and ultra-aging society. 40 to 50 Concept of Environmental Future City <<Environmental Model City >>
  6. 6. 5 Macro Analytics: Market Trend It is predicted that the total Smart City market in the world in 2030 will reach 282 trillion euro. The investment ratios for EV/PHEV, Stationary storage battery and Power transmission equipment are large. The increase of the number of Smart City projects in the world and the expansion of its market will continue until 2030. The number of Smart City projects in emerging countries is larger than that in advanced countries. Because Smart City market will spread mainly in emerging country, it is difficult to say that Japanese market will be attractive. For this reason, the final goals of these Smart City projects are often overseas expansion. [Table] Smart City market size and number of projects in the world (Source) The World Smart City Pandect, Nikkei BP, Oct. 2011
  7. 7. 6 Macro Analytics: Market Structure In Japan, Smart City projects are enforced by the cooperation of multiple players. For example, in the Yokohama Smart City Project (YSCP), which is one of the largest Smart City demonstration projects in Japan, various players of public and private sectors are in it, and "YSCP Company" integrates them. In 2009, organization called "Smart City Project" was launched by eight companies in private sector. Under the "Smart City Project", participating companies will collaborate with each other based on the open innovation system established to help the companies freely share information and exchange opinions. Through this system, the companies will establish a “one-stop total solution” for the total optimization of the city.[Figure] Market structure in Smart City (key players) (Source) The Japan Research Institute summarized from public information
  8. 8. 7 International Standardizati on: In Abenomics, international standardization is described in various locations, so it is regarded as one of the most important themes. Japan’s government aims to expand infrastructure exports to 30 trillion yen. Three pillars of efforts for expanding infrastructure exports were presented. The pillars are top sales, strategic economic cooperation, and international standardization. Specifically, Japan’s government leads the international standardization of smart grid and energy-saving infrastructure etc. Japan has strength in these areas. Ministry of Economic, Trade and Industry (METI) aims to increase the budget to drive international standardization drastically. METI would like to make 2014 the step- up year for strengthen the efforts for the international standardization through public-private sector joint efforts. [Figure] Efforts of International Standardization(1) (Source) The Japan Research Institute summarized from public information Four themes of "Industry Revitalization plan" Enhancement of science technology innovation -> Strengthening of the intellectual property strategy and standardization strategy -> Reforming of the standardization and certification system for international expansion * Establishment of strategic trade relations and Promotion of strategic economic partnership * Strategic initiatives to gain overseas markets * Development of infrastructure related to financial and human resources Three themes of "Strategy of Global Outreach plan" * Monetary policy * Fiscal policy * Growth strategy Three arrows * Industry Revitalization * Strategic Market Creation * Strategy of Global Outreach Three action plans Abenomics Large policy Location 17億円 64億円 2013年 2014年 (概算要求) 12.1 45.7 0 10 20 30 40 50 2013 2014 (million euro) Policy budget for international standardization 10兆円 2013年 2020年 30億円 71.4 214.2 0 50 100 150 200 250 2013 2020 (billion euro) target amount of infrastructure system for export Reference
  9. 9. 8 International Standardization: Institutional Change and the Result In order to strengthen the efforts of international standardization, domestic system has changed. The name of this system is "Top Standard System". Under this system, the results are beginning to appear. Under the traditional system, a lot of time was needed in order to propose the international standardization, because there was necessity to build a consensus of the industry in Japan. To solve this problem, this scheme has been modified to make it possible to propose without industry consensus. TOSHIBA and HITACHI utilized this system, as a result, a TC (Technical Committee) on Electrical Energy Storage (EES) Systems has been approved. [Figure] Efforts of international standardization(2) (Source) The Japan Research Institute summarized from public information
  10. 10. 9 Case Study: Examples of Demonstration Phase Project In Japan, demonstration projects in four cities below are representative. However, demonstration experiment has been carried out in many areas. The number is 150 or more. These projects are getting lots of assistances from the government. These four projects have been promoted from the time Japan’s government began to focus on Smart City project. They were selected as "Next-generation energy and social system demonstration area" by METI in 2010, and "Environmental Future City" by Cabinet Office in 2011. Smart City demonstration will be promoted with focuses on these four projects in Japan, in the future.[Figure] Representative Demonstration projects in Japan (Source) The Japan Research Institute summarized from Japan Smart City Portal Name of city City of Yokohama Toyota City Kansai Science City City of Kitakyushu Area 434.98km2 (August 2012) 918km2 (April 2012) 150km2 (April 2012) 488.78km2 (October 2011) Population 3,697,426 (August 2012) 422,830 (April 2012) 244,872 (April 2012) 971,924 (August 2012) Locations for the operational experiments City of Yokohama as a whole, with a focus on three districts - Minatomirai 21 - Kohoku New Town - Yokohama Green Valley The Higashiyama and Takahashi districts for trials of HEMS and EDMS, and Toyota City as a whole for trials of a low-carbon transport system The Seika and Nishi Kizu districts - Kyotanabe City - Kizugawa City - Seika Town The Higashida area in Yahata-Higashi ward Area covered by the operational experiments 435km2 (August 2012) 918km2 (the entire area of Toyota City) 7.7km2 (April 2012) 1.2km2 Number of households involved in the operational experiments * 2 housing complexes (16 and 24 houses), one apartment complex (177 apartments), 83 houses for technology verifications * 4,000 houses and apartments for social verifications * 67 newly constructed residences * 160 existing residences * 102,024 (April 2012) * 225 households (August 2012) Number of workplaces involved in the operational experiments * 4 office buildings * 2 commercial buildings * 1 large-scale factory * 2 commercial buildings * 1 distribution center * 1 Toyota Ecoful Town (showcase) Introduction of BEMS: 1 facility (Keihanna Plaza; April 2012) * 50 (August 2012) Other perspectives Number of EV/PHV involved in the operational experiments Targets for introduction of PV generation, etc. Number of households involved in the operational experiments Number of smart meters installed * 50 EV for demand response verifications * 61.2% rate of renewable energy * 4,000 next- generation vehicles * 14 households for HEMS * 100 households for systems to render energy use visible * 700 households for power demand response (April 2012) * 225 (August 2012) Target for introduction of photovoltaic generation, etc. *** Number of EV/PHV involved in the operational experiments Level of introduction of photovoltaic generation, etc. * Photovoltaic generation: 27MW * HEMS: 4,000 households; * EV: 2,000 vehicles * 60 (April 2012) * Storage batteries: 800 kW; * Photovoltaic : 400 kW; * Fuel cells: 110 kW
  11. 11. 10 Case Study: Examples of Commercial Phase Project At the Panasonic’s factory site in the Fujisawa, Kanagawa Prefecture, a Smart City will be started in the spring of 2014. The project name is "Fujisawa Sustainable Smart Town". Fujisawa has been prepared to build a Smart City by "basic design" and "basic study" from 2011. Characteristic of the city is that the generation-storage linked systems are installed to all households. "Fujisawa Sustainable Smart Town" which sells 1,000 single-family houses is one of the largest projects at this time. ("Smart City Kashiwa-no-ha" which sells 2,000 houses is also one of the largest projects, but it sells multi-unit family houses.) In the future, the number of commercial phase projects like Fujisawa city might increase. [Figure] Smart City project at the stage of practical use "Fujisawa Sustainable Smart Town" (Source) The Japan Research Institute summarized from Panasonic webpage
  12. 12. 11 Case Study: Project of the stage of practical use "Smart House", "Smart Community Solar", "Smart Spot", "Smart Next Town Area", "Smart Station" is located in the Fujisawa Sustainable Smart Town. [Figure] Images of "Fujisawa Sustainable Smart Town" (Source) The Japan Research Institute summarized from Panasonic webpage
  13. 13. 12 Suggestions in Smart City Market Japanese companies and Finnish companies should develop cooperative relations for the purpose of global development rather than development in Japan. For foreign companies that do not have bases in Japan, it is difficult to obtain the assistance of the Japan’s government. In many cases, the purposes of acquisition or alliance between Japanese companies and foreign companies are global expansion. The best way for Finnish company that plans to get a presence in Japan would be contacting JETRO (Japan External Trade Organization). It promotes matching between domestic and foreign companies. For example, in "International Smart Grid EXPO", JETRO provides the "JETRO Zone" to hold business meetings that foreign companies can seek Japanese companies as business partners through the introduction of their products and technologies. [Figure] Suggestion for Finnish Company in Smart City market (Source) The Japan Research Institute summarized from public information Company Date Formation Company Content Target Market Fuji Electric Holdings February 2011 Joint venture General Electric(USA) Development and sale of Mart meter Japan Toshiba May 2011 Acquisition Landys+Gyr(Germany) Completion of energy management technology Global June 2011 Alliance Hewlett-Packard(USA) Joint business and joint research and development in the field of smart community Global January 2014 Acquisition Vijai(India) Manufacturing base of the power and distribution transformers and switchgear Global Hitachi February 2012 Alliance Silver Spring Networks(USA) Providing solutions in smart grid business Global December 2013 Joint venture Johnson Controls(USA) Combine the advanced technology and sales network in the field of commercial air-conditioning Global Hitachi Consulting November 2011 Alliance Living PlanIT (Switzerland) Acquisition of Smart City-related business, based on Infrastructure software to support M2M Global Mitsubishi Electric May 2013 Alliance Echelon(USA) Strengthen overseas development of smart meter business Global Agency Date Formation Exhibition Content Target Market JETRO February 2014 Matching 4th International Smart Grid EXPO (JETRO attract Promotion Division) Matching of Japanese company and foreign company in the Renewable energy, energy management, element technology Japan Singleentryby Finnish companies Collaboration withJapanese companies Entryway Japan Global Target Market * Participationof foreign companiesislessinJapanese demonstration experiments * Cases areless * JETRO is attractingforeign companies *** * Many cases +++ -

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