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).

Japan Auto Fuel Efficiency to Soar

The Toyota Prius Plug in Hybrid version.  Rated at 61 kpl of gasoline (143 mpg)

Japan's auto fleet has always been very fuel efficient.  In contrast to the U.S., where cheap gas and free highways and parking are (or were) in many areas considered basic human rights, akin to the right to bear arms (guns), Japan has always had very expensive 100% imported fuel, crowded roads with high tolls and, in metropolitan areas at least, very limited parking.  For someone who lives in Tokyo, the question is not so much "which car will I get" but "do I need or want a car at all"?

And of course the Japanese manufacturers first made in-roads into the U.S. market by having a fuel economy advantage over Detroit and its big "gas guzzlers".

Of course, Japanese conditions are not so different from some parts of Europe -- expensive gas and tolls, limited parking.  But the Japanese "Galapagos" industry structure has seen the automobile market evolve in a very different way than Europe -- for example, Japan has almost no diesel passenger cars, much more like the U.S. than Europe.  Only in very recent years has Mazda implemented a "clean diesel" version of its CX-5 SUV, and Nissan its X-Trail SUV.  Volkswagen is present in the Japanese market, ... but does not try to market its diesel TDI engines.

And of course, Japan has been the leader in introducing hybrid gas/electric vehicles, with Toyota and Honda very much in the lead in commercializing these technologies.

And within the past few years, MANY new Japanese cars now feature the "idling stop", with engines turning off and restarting automatically at intersections.

Another feature of the Japanese market is the widespread role of "kei" cars -- light cars with less than 1000cc displacement engines and meeting other requirements.  They are recognizable by their yellow license plates.  The kei cars are assigned significantly lower automobile taxes -- an incentive that foreign manufacturers have often complained about, since their models do not meet the requirements, and the requirements do not relate directly to fuel economy.  Japanese car companies such as Daihatsu or Suzuki are known primarily for their kei cars.  The major companies also have a large number of choices of kei models.

And, of course, there are a few electric-only cars in Japan, notably the Nissan Leaf and Mitsubishi i-MIEV.  To date these have only limited presence (range anxiety), despite efforts to implement networks of charging stations and despite the relatively short distances of average urban Japanese auto trips.

And just as in other markets, the government currently offers substantial incentives -- cash rebate, tax reduction, etc. -- for "eco cars" that meet fuel efficiency, emission and other requirements.

How far has Japan gone toward a post-modern, fuel efficient automobile fleet?

A few commonly available statistics should help:

In FY2012, approximately 40% of Toyota's Japanese passenger car sales were of hybrid gas/electric models.  For the first six months of the current fiscal year (April to September 2013) period, the top selling car models in Japan were:

1.  Toyota Aqua subcompact hybrid.  127,993 units.  Rated* at 35.4 km/L (83.26 mpg equivalent)

2.  Toyota Prius compact hybrid.  121,634 units.  Rated at 30.4 to 34.6 km/L (71.5 to 76.7 mpg)

3.  Honda N Box kei car.  110,155 units.  Rated at up to 24.2 km/L (56.9 mpg) with a small (less than 1000cc) advanced gasoline engine and continuously variable transmission (CVT).  List price from around 1.36 million yen (~$14,000).

4.  Daihatsu Move kei car.  107,591 units.  Rated at up to 29 km/L (68.2 mpg) with an advanced gasoline engine, CVT and list price between $10000 and $12500.

5.  Suzuki Wagon R kei car.  88,071 units.  Rated at 30km/L (70.5 mpg) with an advanced gasoline engine and, of course, idling stop (which kicks in when the car slows to under 13 kph).  Suzuki also heavily promotes its regenerative braking -- the car battery is charged largely by recapture of braking forces.  Even without a hybrid powertrain, mileage goes up when all the electronics, including A/C, get power from recaptured brake energy.

If these are the best selling cars in Japan, then imagine what the entire fleet's fuel economy will look like in 5-10 years time!

*Of course, the fuel economy ratings (using "JC08" mode--more conservative than "JC10/JC15" modes used in the past) are based on assumptions and do not necessarily prove out in real driving conditions.  I rented a Toyota Aqua hybrid this summer and drove it mostly on expressways, including some long climbs and descents and generally at speeds of 100 kph or so with A/C on for two days, and ended up with mileage of just under 25 km/L (58 mpg).

After leading the market with its near-experimental Honda Insight in the 1990s, Honda has trailed Toyota in the hybrid "race" in recent years, as it used a "weak" style hybrid in its Civic Hybrid and 2010 Insight (introduced around the same time as, and upstaged by, a new version of the Toyota Prius that had better fuel economy).

1990s Honda Insight

2010 Honda Insight

Honda has changed its approach and in June 2013 introduced a version of its mid-sized Accord Sedan that is rated at 30 km/L.  The Accord is a near-luxury car in Japan and will never reach the "top 10" sales list.  The Honda Fit, on the other hand, is Honda's main compact (by U.S. standards subcompact) model, and has often been a top seller.  Honda recently introduced a hybrid version of the Fit that is rated at 36.4 km/L (85.6 mpg), topping even the Aqua.   Look for the Honda FIT hybrid to return to the "best seller" list in short order.

Honda Accord hybrid - now with 30 km/L hybrid version

Honda Fit -- 36.4 km/L hybrid version available

Toyota's line-up of cars and small trucks sold in Japan now includes 16 different hybrid models, including the new best-selling Aqua and the plug-in hybrid version of its venerable Prius.  The Toyota Lexus brand includes another 6 hybrid models (though these are "performance" rather than "fuel economy" hybrids, with a flagship Lexus GS getting 18.2 km/L in the hybrid version versus less than 10 km/L for the GS350 non-hybrid).

The plug-in Prius will drive the initial 26 kms using only its electric engine, and so actual gas mileage can be infinite if you never drive further than that.  It is rated at 61 km/L using JC08 mode. (If that is not good enough for you, the plug-in hybrid Mitsubishi Outlander, an SUV-like model, if fully charged will go the first 60 km on its electric engine, and is rated at 67 km/L overall (not on the best seller list, but the family of one of Misako's friends has one).

Toyota hybrid models

Toyota's Lexus mark hybrid modeles

Honda's line-up includes 8 hybrid models, and another 9 models of "kei" mini cars with engines of under 1000cc displacement.

Nissan's line-up includes a dizzying mix of "eco cars", including the all electric Leaf, several hybrids, the 25 km/liter "eco supercharger" equipped Nissan Note.

Even Subaru now has a hybrid version of its SV "all wheel drive" small SUV.  Going from the regular 2.0L engine to the hybrid model boosts rated mileage from 15.8 km/L to 20 km/L (47 mpg).

Of course, there are some imported cars and foreign makes in Japan.  Mercedes Benz, BMW, and VW/Audi are doing well.  Then again, the Mercedes closest to me  (my next door neighbor) is one of these -- a Daimler/Mercedes Benz group Smart all-electric two seat car, with a 180 km range (measured in JC08 mode, more like 140 kms based on US/European measurements).

So even if Japan trails Europe in wind, solar and other renewables, its automobile companies are doing their part at the transition to a green energy future.

Conservation and Efficiency

A big part of the solution to the world's energy problems lies in efficiency.  On this most people can agree.  A shift from incandescent to LED lights cuts direct electricity consumption by 85 percent or more.  7 watts instead of 60 watts.  The same amount of light, but less heat so this shift also reduces the need for air conditioning.  Insulated walls and ceilings, double/triple glazed windows -- can cut heating and cooling usage by 50%.  Fewer big SUVs and more automobiles with hybrid electric or high efficiency diesel engines -- cut gasoline consumption by 20%, 30% or more over 15 years as the auto fleet is replaced.

The U.S. has little to teach the world on these topics, being the biggest consumer of energy by far over the past century.  On the flip side, this means that the U.S. will have easier gains from energy efficiency increases than many other countries.  Japan ... is somewhere in the middle.  It used to be the most miserly developed country in terms of energy consumption, but now my understanding is that much of northern Europe surpasses it in terms of efficiency.  So there is plenty of room for efficiency gains.

How much is really possible to save from increased efficiency and conservation?  The Washington Post reports on e2e,  a new effort at MIT and UC Berkeley that will try to marshall the evidence.  The key is to find areas where investments get the most "bang for the buck."

Japan has a number of very successful efforts -- its electric appliances are extremely high efficiency compared with many in the U.S., and shopping for a TV or refrigerator allows one to compare anticipated electricity consumption easily, figures prominently displayed.  But Japan sometimes seems weak in the "bang for the buck" choices, pursuing ideas that have the most corporate backing, the most interesting technology, or that have caught a powerful individual or lobby's attention.

One area where Japan has "low hanging fruit" available from conservation and efficiency -- building standards.  As I understand it, Japan has none when it comes to energy efficiency.  This is one reason why Japanese houses (and smaller apartment buildings) are notoriously cold in winter and hot in summer.

Another suggestion -- when planning new roads, why not implement roundabouts (traffic circles) instead of traffic lights?  Europe has done so, to the extent you can travel very long distances on secondary roads without ever stopping at a traffic light. ... whereas in Japan one ends up sitting at what seems like empty intersection after empty intersection.

UPDATE:  For a good example of the "low hanging fruit" available in the U.S., which is well behind Japan in the rotation from incandescent to compact flourescent to LED lighting, see this article in the October 6, 2013 CS Monitor.  A factory saves more than 90% of its lighting bill (from over $50,000 to under $5,000 a month) by implementing an LED system with a sophisticated monitoring system that provides light in the right amount where and when needed.  2 year full payback on the investment.