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Powerful Connections: Introducing U.S. Businesses to Unprecedented Opportunities in Japan’s Electricity Market

October 30, 2015

Lilian Lee is an intern with the International Trade Administration’s Renewable Energy team

The 2011 Tohoku earthquake and subsequent tsunami impact on Japan’s nuclear power sector revealed inherent challenges in Japan’s electricity market when metropolitan areas experienced rolling blackouts for the first time in half a century. These events spurred significant reforms in Japan’s electricity market, which until now has been dominated by the country’s 10 vertically integrated power companies. The reforms are opening new opportunities for U.S businesses to tap into the liberalization of a $67 billion Japanese retail market.

Earlier this month, the International Trade Administration (ITA) and the International Trade Center hosted members from the U.S. and Japanese public and private sectors in Washington, DC to discuss their perspectives on Japan’s changing electricity market and what the reforms mean for U.S. businesses.

Attendees heard about Japan’s roadmap for full liberalization of the retail electricity market and learned about resources available from both the U.S. and Japanese governments to assist them in engaging in this market.

Kaname Ogawa, Director of the Electricity Market Office in the Agency for Natural Resources and Energy in the Japanese Ministry of Economy, Trade, Industry, and Investment (METI), outlined the reform process that began April 2015. The first part of the reforms established an organizational body to facilitate power interchange among Japan’s 10 regions that previously operated as independent units. Participants noted that U.S. businesses will encounter the most opportunities when the next two phases are deployed—in April 2016, the residential sector will open up to full retail competition; and by 2020, the transmission and distribution sector will be fully separated from the generation and retail sectors.

Daiki Nakajima, a Project Manager at the Japan External Trade Organization (JETRO) shared information about some key resources available to U.S. businesses, including the Technology Partnering Program, interpretation services, free consultation, and office space. Skipping Stone, a U.S. energy consulting firm already operating in Japan, shared best practices and addressed myths about doing business in Japan.

As Maureen Smith, ITA’s Principal Deputy Assistant Secretary for Industry and Analysis, noted in her opening remarks, there are many ways for U.S. firms to partner with Japanese utilities, government, and businesses and lend their experiences and innovations in a deregulated electricity market. She commented on the opportune timing of this development, as the negotiations on the Trans-Pacific Partnership, of which Japan is a key member country, recently concluded in Atlanta, Georgia.

Peter Weigand, CEO and Founder of Skipping Stone, called Japan’s energy reforms an “unprecedented” market development opportunity. His comments were echoed by the Executive General Manager of International Business and Affairs at Tokyo Electric Power Company (TEPCO), Hirokazu Yamaguchi, who highlighted in his remarks the launching of the TEPCO Open Innovation program. This program is encouraging conservative energy product, service and technology companies from the United States to apply for partnerships with TEPCO to capitalize on this market opportunity and provide their advanced services and technology to consumers in Japan.

The Commerce Department is facilitating these partnerships and working on multiple fronts to connect U.S. businesses to opportunities in Japan. Commerce Secretary Penny Pritzker led a trade mission to Japan in 2014 that included U.S. energy companies looking to provide solutions to help Japan restructure its energy mix. Commerce has also increased cooperation to support the development of new and renewable sources of energy. For the past three years, the ITA has co-chaired the U.S.-Japan Renewable Energy and Energy Efficiency Policy Roundtable with Japan’s METI and the U.S. Department of Energy.

This month’s seminar discussion was well-aligned with the objectives of the Roundtable and trade mission. Japan’s energy reforms present significant opportunities for international business partners with interests in the country’s electricity market and smart grid development.  To learn more about opportunities in the Japanese electricity market for U.S. business, please see ITA’s 2015 Top Markets Reports on Smart Grid and Renewable Energy.

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