Future Japan Electricity Demand Will Decline -- the Komatsu Example (Manufacturing)

Komatsu is a great example of a Japanese company that plays on the world stage.  In recent years over 80% of its sales are outside Japan.  But it is still a Japanese company, and still makes many of its core products -- such as the engines that go in most of its machines -- within Japan.  So it was subject to impact from high electricity costs and limited supply following the 2011 Fukushima accident and reactor shutdown.  Indeed, it must be companies like this that are the reason Japan needs to restart its nuclear fleet and build new coal generation plants.  It must be companies like this that are complaining about the high cost renewables, right?

Well, not exactly.

Komatsu is taking control of its own destiny, just as are many other large users.

In 2011, after the Fukushima accident, the then-President of Komatsu, Mr. Noji, set a goal for the company to reduce its electricity purchasing in Japan by 50% over 5 years.  And the idea was not to do so by shuttering facilities and shifting production overseas -- an obvious big corporate reaction when faced with such a challenge.  It also was NOT to conserve energy by "gaman" -- suffering through sweltering summer workplaces and freezing cold winter offices -- but if anything to improve comfort while conserving.

In March 2014, the company opened a renovated facility at its plant in Azawa, Ishikawa Prefecture. The plant's energy conservation features are shown at pages 29-33 of the current Komatsu English language annual report, downloadable here.

How much did the plant cut its electricity purchases as compared with the prior facility?

90%.  That is right, NINETY PERCENT.  Not 9% or 19%.  90%.

This was done by a combination of
(1) building and production facility design and layout improvements,
(2) better (insulating) building materials,
(3) cooling via ground water circulation,
(4) more efficient machinery (including recapture of energy in the same way that some autos now include regenerative braking),
(4) waste heat recovery, and
(5) a new, adjacent biomass plant that generates 40% of the facility's power needs.

Of course, Item (5) is not a conservation method, just distributed generation.  But it does shift the demand away from the utilities and big generation.  And it helps create a market for local forestry resources.

I heard Mr. Noji, now the Chairman of Komatsu, speak about this at an event last week.  A senior executive from Toshiba spoke up soon after, noting that Toshiba semiconductor fabs consume a huge amount of electricity, and that Toshiba had managed to cut use "only" 36% at its new major domestic fab.

These major Japanese corporations compete globally.  They will find a way.  And that way will NOT pay a huge markup over the costs their competitors face for power generated by the utilities in Japan.

If Japan's corporate sector can do this, who will buy the extra electricity generated once new coal plants are built and nuclear plants are restarted?

Now if only Japan would capture the "low hanging fruit" in its residential and commercial building sector -- higher standards (and consumer incentives) for insulation and double/triple glazed windows, for example.

According to the June 2014 BP Statistical Review of World Energy, Japan's primary energy consumption fell from 531.4 million tonnes of oil equivalent in 2005 to 474 million tonnes of oil equivalent in 2013.  Down 11% over 8 years.  Given demographic trends, and actions of the corporate sector, the smart money would be on further future declines in consumption.

(Note:  Large manufacturing facilities are already subject to exemption from the FIT surcharge.  So this energy conservation drive is not part of some effort to avoid the costs of solar and its FIT surcharges).