Japanese Companies Devising Ways to Deal with Electricity Shortages Caused by the Great Earthquake and Nuclear Accident

JFS Newsletter No.106 (June 2011)

In the aftermath of the Great Eastern Japan Earthquake on March 11, 2011 and the subsequent accidents at the Fukushima Daiichi Nuclear Power Plant, operated by the Tokyo Electric Power Co. (TEPCO), came fears of possible electricity shortages this summer. As reported in this Newsletter in April, restrictions on electricity use at peak times in areas supplied by TEPCO and Tohoku Electric Power Co. will start on July 1, 2011, based on Article 27 of the Electricity Business Act "Restriction on Use of Electricity."

This national law requires large-volume electricity users to reduce electricity consumption by 15 percent compared to consumption at peak times last summer. However, approximately 30 types of businesses regarded as indispensable for stable economic and social activities are exempt from the Act, or enjoy a more lenient reduction rate. These include: medical institutions, nursing homes, facilities for disabled people, water and sewerage facilities, data centers, information processing systems operated by financial institutions, etc. and railways.

On April 15, TEPCO revised its estimated power supply capacity this summer up from 46.5 million kilowatts (kW) to 52 million kW, closer to former peak demand levels on an extremely hot day of 60 million kW. This significant upward revision was realized by counting in the potential power supplied by pumped-storage power generation, a type of hydroelectric power generation in which water is pumped up to an elevated storage tank at night using low-cost night electric power and released during the day to generate electricity. Figures for this type of source were previously not counted because of its unstable output.

This upwardly-revised power supply capacity can, however, only be achieved with full operation of all possible power generators. The original restriction on electricity use amounted to a reduction of 25 percent; this was revised downward to 15 percent and exceptions were allowed in response to demands from the industrial sector, and so there remain various uncertainties from the demand side as well.

Unlike large-volume electricity users, which are subject to control by the Act, low-volume commercial electricity users and households are not legally required to save electricity, and there are still many unpredictable factors. How hot will it be this summer? If it is extremely hot, will people be able to stand the heat without turning on the air conditioning, which accounts for a sizable proportion of peak demand? Whether blackouts can be avoided this summer remains in question.

Since commercial users (companies, plants, and other businesses) with contracted power supplies of 500 kW or more are required to reduce electricity consumption by 15 percent, they have carefully considered how they can save electricity in a way that will minimize effects on their productivity and business operations. As a result, Japanese bussinesses are introducing various measures; here follows information on some of them, obtained from official websites and media reports.

Companies Looking Hard for Clues

The first measure being currently taken is to introduce in-house power generators. Amusement facilities, including Tokyo Dome and Tokyo Disney Resort, are going ahead with the introduction of large-scale in-house, power generation equipment so that they will not have to suspend operations during summer, their busiest season.

As energy saving efforts are now needed to reduce peak demand at certain times of the day, many companies are promoting a shift in their working hours. While some firms will start business earlier in the morning by introducing their own summer time systems, others will schedule their most energy-intensive factory processes during the night or on days that are normally business holidays, while allowing employees to rotate their holidays. One of unique effort is being taken by the City of Ebina in Kanagawa Prefecture, which has decided to close city hall on Wednesday afternoons starting this July in order to save energy. Furthermore, various companies are promoting changes in employees' working hours or working style, such as allowing employees to work at home more.

For example, Komatsu Ltd., a major Japanese construction machinery manufacturer, has introduced a four-day work week at its headquarters in Tokyo during the months of July, August and September. Kewpie Corporation, one of Japan's major producers of mayonnaise and other processed food, is re-scheduling the holidays of its employees at its headquarters according to the office floors on which they work. Sumitomo Life Insurance Company, a leading insurance firm, will introduce a "store holiday system," in which employees will work on Saturdays and take a weekday off instead.

Some companies in the automobile industry will take their weekly holidays on Thursdays and Fridays rather than on Saturdays and Sundays from July to September this year. Every automobile company is also initiating its own particular program. Nissan Motor Co. Ltd. will shift plant operating hours to include a three-hour line stop during the daytime. Fuji Heavy Industries Ltd., known for its Subaru brand, is implementing various initiatives such as setting a summer factory holiday for 16 days, much longer than for most typical Japanese manufacturers, while aiming to recover losses by increasing production after the summer is over.

There are companies that are changing their base locations, as well. For example, software development ventures are now decentralizing, setting up new development bases in western Japan, rather than in northeastern or eastern Japan, where power shortages are expected. This movement is prompted by various factors. Software development firms usually do not have much equipment or other overhead, making it easier for them to relocate. Also, some municipalities, such as Gifu Prefecture and Osaka City, are offering preferential treatment for companies hoping to stay over the long term in their areas. Some companies decided to relocate their bases overseas after the earthquake.

One interesting example is a company that relocated its production sites underground in April 2008. Yamazaki Mazak Corporation, a major Japanese machinery manufacturer, successfully reduced power consumption at its plants by 90 percent by relocating them underground. All its assembly shops for laser processing machines are now located 11 meters below the surface of the ground. Air conditioning systems are not needed for these shops because the temperature of the surrounding earth modulates the indoor temperature. The initial purpose of constructing plants underground was to make the production environment clean and dust-free by creating sealed facilities. The plan not only served its primary purpose, but also brought about the unexpected effect of significantly reducing energy consumption due to the constant temperature underground.

Yamazaki Mazak Optonics Slashes Energy Usage by Going Underground
http://www.japanfs.org/en/pages/029198.html

In response to these efforts by companies, the national government is creating various new supports. For example, the Ministry of Health, Labor and Welfare, responsible for setting rules and regulations for working hours, is now putting in place a system that allows companies to change employees' working hours more flexibly in order to support energy-saving measures.

The Ministry of Economy, Trade and Industry is now considering the potential for wholesale power exchanges involving a market to trade electricity power saved by companies and other large energy consumers. The intention is to create an environment that encourages companies to conserve power by utilizing the market principle and awarding profits to energy-conserving companies in a market that buys and sells saved electricity.

Energy-Saving Goods in Special Demand

Prospects for possible power shortages this summer and the need to conserve energy has led to a rise in windfall demands for energy saving products throughout Japan. Many consumers are willing to pay for energy saving products, hoping to get through the hot summer as comfortably as possible while reducing electricity consumption.

For example, electric fans have long been overshadowed by air conditioners, but are now making a huge comeback. Energy-efficient lights are also selling well. Some energy-conserving products that were not much in demand before the earthquake are now selling well. One example is a clear "refrigerator curtain" that prevents cool air from escaping when the refrigerator door is opened. Also, hot-selling products in supermarkets include special underwear that is supposed to keep users cool even in summer, Cool Biz clothing (light, casual business wear), and cooling patches.

A major Japanese electronics manufacturer, Toshiba Corporation, started marketing a power-saving TV that works on a rechargeable battery in the daytime. Its remote control has a peak shift button to switch the source of power supply from the wall plug to the battery, which is charged at night. Toshiba has already been selling rechargeable battery TVs in emerging countries where blackouts occur frequently. So, responding to the March 11 earthquake disaster in Japan, the company made a quick decision to use its rechargeable battery technology to launch this type of TV in the domestic market as well.

In addition, the development and sales of large capacity batteries for households are actively being pursued. A number of companies, including Toshiba, Panasonic and Eliiy Power Co., a Japanese developer and seller of rechargeable batteries, have launched sales of this type of battery. As a way of overcoming possible summer power shortages, the Japanese government is also now thinking about providing grants to support the widespread use of large rechargeable batteries in households.

The need for energy efficiency and conservation were long ago identified as measures to tackle global warming, but generally, companies had not been actively engaged in promoting these measures. Prospects for this summer's power shortage, however, have spurred them into action, with a variety of results: they have been encouraged to make drastic changes in consumption patterns by reviewing work protocols and accelerate the development and commercialization of energy-efficient products. In the context of consumers' heightened energy-saving awareness and demands for energy saving products, companies and even entire industrial sectors are competing with each other to take advantage of the windfall demands for energy-saving products by developing new products and business models. This situation reminds me of a phrase, "Necessity is the mother of invention." Perhaps we can also say, "Necessity is the mother of implementation."

How will Japanese industries and the economy change in response to the restrictions on peak-hour electricity use that will start on July 1? How will Japanese companies deal with these restrictions, and what kind of opportunities and risks will emerge in the process?

We are facing "the limits of electric power," at least temporarily. Will this fact bring about changes in social and legal regulations and people's values that will eventually have an effect on future global warming measures? How will the awareness and behavior of ordinary consumers change?

Please look forward to our future newsletters, which will inform you of how these movements toward energy saving pan out.

Written by Junko Edahiro