Basically, in this blog’s English posting, I personally try to “sell Japan” to global infrastructure sphere. Japanese companies are gradually ready to enter in the business field of infrastructure tenders or PPP projects initiated by foreign governments. We Japanese can easily access to abundant articles and documents describing such trends in local language, but when I search something on Google using English language, almost nothing can be obtained except for English version of Nikkei article. So, I thought if I could fill the gap.

Immediately after the devastating earthquake on March 11, I couldn’t continue to write English posting. I wondered how to sell infrastructure activities of this country where it’s own infrastructures were severely damaged, though in limited regions. Houses, office buildings, streets, schools, roads, bridges, power plants and ports for sea food industry were lost. That’s very huge.

But fortunately, an autonomous resilience works. After four months have elapsed, things changed much. Though rebuilding of infrastructures are on the way and some of them will take years to complete, economic activities as an organic network has more or less recovered. Japanese companies have found their way again under newly defined mission.

Obviously, a new theme of Japanese industries commonly shared without argue is environmental sustainability.
Facing with the worst power plant accident which tells the reality of un-sustainability (please consider the whole supply chain of nuclear fuel including post-generation debris handling), we have become more inquisitive whether our business object is environmentally sustainable or not.

In electric power field, using the word “smart grid” is becoming a boom among economic media. But in my understanding, it is a little bit superficial. Most proponents of smart grid don’t think about who will invest and what kind of return is projected.

Most measures of smart grid are in the sphere of electric power company business. Essentially, smart grid is about reducing power consumption, so it reduces revenue of power company at the end. Who will invest on the possibility that his or her own business becomes small? Proponents of smart grid should solve this. (“Decoupling” conducted in US is actually a thoughtful answer.) I think this will be solved if the scope of smart grid is applied to a certain community where a real estate developer will build self-sufficient energy eco-system as its own business. Invested money is reimbursed by long-term energy efficiency or price increasing of houses built there. Anyway, smart grid needs more refinement of investment model.

However, renewable energy has a different story. As readers may know, Japanese power generation capacity has become significantly lower than usual daily consumption due to Fukushima nuclear power accident and succeeding shut-downs of other nukes. Japan has 54 nuclear power plants in total. In addition to Fukushima Daiichi’s 4 plants affected by the accident, currently 37 plants are ceasing operation partly because the political leaders react to the accident and partly because periodical maintenance forced by law is underway. Overall, 10-20 % of peak power is at risk of under demand. So, rapid installment of series of new power plants are mandatory. Which power plant? Some think natural gas is better. But most people think renewables are much better as a natural emotional result of the nuclear accident.

Japan doesn’t have feed-in tariff law at present. Japanese government has prepared the feed-in tariff law to accelerate deployment of solar, wind, geothermal and biomass and the law is under discussion in the diet. As of today, passage of the law is a little bit uncertain, because opposition parties are against by an illogical reason.

Considering the fact that current share of renewable energy generation is only 1 or 2%, installation of renewables will continue to be low if feed-in tariff will not be available at the power plant investor side. But if the law passed, things will change greatly. CEO of Softbank, Masayoshi Son, who has become very ambitious on sustainability recently, revealed a bold plan to build 10 mega solar plants, each having 20MW capacity, all over Japan. This investment will bear a good return if proposed feed-in tariff is enacted. A major trading house is reportedly preparing another large renewable power plant. Potential investors of renewables would be numerous, considering the economy of feed-in tariff is favorable for anyone.

After Fukushima nuclear accident, everybody in Japan started saying opinions on energy. Prime Minister Naoto Kan is also eager to pursue the future of non-nuclear. But we should be more accustomed to a way of portfolio-thinking which counts on all the realistic and viable options.

Originally posted on Infrastructure Investment Journal authored by Daisuke Imaizumi, CEO of InfraCommons.