Sustainable Cities: Challenges and Opportunities in Japan

Thought leaders from across Japan’s energy sector gathered in Tokyo last week to discuss the role energy will play in adapting the country’s cities to a challenging environment of aging and declining population and increasing dependence on foreign sources for food and fuel. Tokyo-Yokohama, the world’s largest urban concentration, is already in many ways in the vanguard of the future of urban centers. What happens in this mega city is being watched closely across the planet for ideas to emulate or avoid. (Read more about the event here, and see video perspectives from the participants here.)

Japan as a whole has demonstrated extraordinary determination and resilience to conserve energy after shutting down its nuclear facilities in the wake of the March 2011 earthquake and tsunami, but everyone in the country knows more needs to be done for long-term energy security. Solutions lie on both sides of the demand-supply equation, a carefully balanced energy mix that embraces a spectrum of sources, innovative technologies and bold new policies to effect change. Also critical is a radical re-imagination of Japan’s cities to make them more compact and efficient and friendlier to people and environment.

The experts gathered to share ideas and consider Japan’s options were invited by National Geographic and Shell, partners in the Great Energy Challenge project, which has been sponsoring gatherings around the world to consider big energy questions. In Tokyo the Big Energy Question discussion focused on Sustainable Cities: Challenges and Opportunities in Japan. What follows is an edited transcript of highlights of the discussion.

Shigeo Otsuka, Editor in Chief, National Geographic Japan: Looking at the Earth at night, the Black Marble, one sees city lights as indications of human activity. It looks beautiful, but it is also an indication of energy consumption. Our lives are so dependent on fossil-fuel energy, and we are more desperate than ever to secure these resources.

The energy consumed by Tokyo is the same as that used by the Nordic countries, and much of Tokyo’s energy depends on sources overseas. What we are dependent on from overseas is not just energy but food supply as well. Of course, it is not only Japanese who need food. In order to supply food to the increasing population around the world, we need more sophisticated, concentrated agriculture. And to realize this, we need more energy than before. This will increase the burden on the environment.

Cities have many issues. But people continue to move to them in search of a better life. Expansion of cities often is not planned. Cities also need to diversify energy supply and use energy more efficiently, and there must be improved efficiency in mobility. We have to make wise choices. If we do this, our world will be more habitable for us and more friendly to the environment.

The choices and decisions made by Tokyo will receive global attention. That is why I am looking forward to this discussion.

First Session: What Makes a City “Smart”?

Clay Chandler, Director, The Barrenrock Group, and moderator of the Big Energy Question discussion: What is a smart city?

Toshifumi Yoshizaki, Vice President Smarter Cities, IBM Japan: I am in charge of smarter cities at IBM. We refer to the “smarter” city, not the “smart” city. We say “smarter” because we have to improve the existing infrastructure. We would like to use information technology to improve the infrastructure.

“Smart city” has two meanings. Literally, a city has to become smarter. We must improve the environment for citizens, and we must make their cities autonomous. So the perspective is always that of the people who are living there, and from their perspective the city environment must be improved.

Hidetomo Nagata, Vice President, Cities Solution Centre Japan, PricewaterhouseCoopers: Mr. Yoshizaki talked about how the residents are the focal point, but what sort of life changes can you deliver to each individual and resident? In order to rephrase the word “smart” we use the word “bespoke.” Rather than provide the same solution to all people, each individual has different needs, so we want to deliver the most optimal service to each individual, and we will utilize information for that — and that’s what “smart” means.

Hiroshi Komiyama, Chairman of the Mitsubishi Research Institute: When I say “smart” I always think about energy [and the] smart grid. But as I heard the two gentlemen speak, I think it’s more about giving consideration to residents.

If I may speak more about the future, we have an abundance of goods. People have cars. When I was a child, I really wanted a black-and-white TV. Everyone has a television now. What I wanted as a student was a car, but now people who want a car own a car. So when we have a lot of goods, how do we set our next goal? This is something that I don’t think we really talk about. Take for example learning. A city can continue to become smarter by learning – a city that has interactions and exchanges. It is said that in Tokyo by 2030, one third of residents will be living alone. And it’s possible that they will not be happy. But if they can have exchanges and interaction in society, I think they would be very happy. Interaction is very important and health is also key.

Chandler: I take two things out of this comment. One is that don’t just think of smart cities in the context of energy, because there is a whole broader range of problems. There are health problems, there are even just basic amorphous lifestyle questions. What is it that people want out of their cities that may actually be changing? So I think defining the problem for us is a little tricky and maybe it behooves us here to think about the whole range of problems that cities need to be smart about. How significant is energy and emissions? Is it a big problem on that agenda or is it just one of several smaller problems?

The other thing is that there’s a cultural aspect to the smartness of cities. So that it’s not just technology and software. This is one of the things that makes Tokyo one of the smartest cities in the world. If you don’t put out the right type of trash on the right day, the whole neighborhood will get after you. That has nothing really to do with technology, although technology might help it. It’s the culture. It’s this kind of software that I think makes some cities smarter than others.

Shuzo Murakami, President, Institute for Building Environmental and Energy Conservation (IBEC): We should not consider smart cities in the context of energy only. We are experiencing production and mass consumption, but we need to become more slim. We need new lifestyles and new values. And this must be provided in the city. That is akin to a smart city. Health is very important. Information and education are also important. Various services must be enabled by information technology and provided in a more lean and rational way.

Nobuko Asakai, Senior Manager, Accenture Japan: As everyone has been saying, what’s smart is not just limited to energy. It has to encompass our whole lives.

At Accenture and IBM, “smart” has been enabled by IT and there’s overall optimization. In the context of cities, it will mean what kind of services can be provided. For example, IT can be used to provide electronic voting, coordinate bus services, or integrate banking services. I believe this is one way forward to a smart city.

As Murakami-san has already mentioned, new values can be generated and new lifestyles can emerge by sharing. Open-sourcing and crowd-sourcing could also provide solutions.

Chandler: What was something that was a smart project that really worked for Yokohama?

Hideki Mori, Vice Executive Director, Climate Change Policy Headquarters, City of Yokohama: We have been trying to enhance the attractiveness of the city from various perspectives. When we talk about smart, in the area that I work in, in energy as well as low-carbon and environmentally modern cities, what we have been aspiring to become by living there, and by enjoying our lives, we can do by saving energy at the same time. By living there, we can place less of a burden on the environment.

Let me give you a specific example. In Minato Mirai [the central business district of Yokohama], an electric car-sharing initiative has been started. Now when we talk about saving energy as well as low carbon emissions, it is very difficult for residents and inhabitants to understand. But when they drive electric vehicles and when they see the use of electric vehicles, we are able to show the 3.6 million people of Yokohama that we have taken a proactive stance, and we can solicit people’s consciousness about that.

Chandler: Can you give us an idea of how far along that is, and is there a metric that you use to cite the success of that initiative?

Mori: Since we started implementing this a year ago, maybe 50 cars. But the number of users has exceeded 10,000. So there’s an attractiveness of the electrical car in itself and then also the initiative is being widely taken up, and it’s building awareness for the environment.

Masahiro Shirakawa, General Manager, Social Engineering Systems Division, Power & Social Infrastructure Business Group, Fuji Electric Co.: I have two comments. Like Yokohama City, based on the subsidy from METI [Japan’s Ministry of Economy, Trade and Industry], we have four demonstration projects in Japan which started before the earthquake 3.11: Kitakyushu, Yokohama, Keihan, and Toyota, and we are involved in the Keihan area with Nippon Steel. It’s an off-grid, regional smart grid. We are responsible for that.

And what’s different from others is that, because this is not a power company’s grid, we are able to do different types of tests and demonstrations, and one is dynamic pricing. So summer peak rates may be raised by 20 percent, 30 percent, and 50 percent. We hope that people will have electricity as a result of that. When we did this people just began to save and conserve energy. This is one of the very good lessons that we learned.

How could we replicate this nationwide? We were somewhat dubious, even though we were responsible for this project. But fortunately–or unfortunately, maybe this is not the right way to phrase it– there was the Great East Japan Earthquake and we had a nuclear power plant accident. By eliminating the electricity meter inspector, you know the lady who constantly checks on your meter, in order to save the cost of manpower, TEPCO [Tokyo Electric Power Company] decided to introduce smart meters in 27 million households. That will begin from this year, and in 7 years 27 million households will have smart meters. All 88 million households in Japan will have smart meters within 10 years. In the next 10 years I can expect a very large scale demonstration project to take place. This is a Japanese experience that we can share with the world.

Chandler: What are some of the initiatives that have worked in Tokyo and what are you learning about how this giant metropolis can become smarter?

Satoshi Chida, Director for International Relations, Tokyo Metropolitan Government Bureau of Environment: Fuji Electric’s Shirakawa-san has talked about the initiatives taken after the earthquake disaster. And based on the lessons learned, the smart energy city initiative is being promoted as low-carbon emission, livable and disaster-resilient in Tokyo. What we are concerned about is that after the earthquake disaster, we need to have more stability in the supply and demand of energy because we are the largest city in the world and we are also the center of the economy in Japan.

So the state-of-the-art urban functions must be maintained. Also the Tokyo government must preserve the lives and property of the residents. There are two initiatives: One is to be disaster-prepared, because within 30 years there could be a major earthquake occurring directly under the city. Ww have to be prepared and maintain urban functions; diversification of energy sources will be required as well.

Furthermore, globally we have to deal with the crisis of climate change and the perspective of cities. There are high expectations that cities will find a solution. Therefore energy conservation is going to be important and greenhouse gases must be reduced. We must take a proactive stance.

Chandler: The fundamental question is, are most of the smart-city strategies universal in their application? We all learn from each other around the world? Or do most of these strategies need to be very localized? Things that only work in Japan, or maybe even worse, things that work in Tokyo don’t work in Yokohama or don’t work in Kitakyushu?

Hironori Hamanaka, Chair, ICLEI Japan and Chair, Board of Directors, Institute for Global Environmental Strategies (IGES): A very difficult question. Cities comprise large cities, medium-size cities, so it varies even in Japan. If you look around the world, it is very diverse and there are two different contexts. First of all, let me put the question into the Japanese context from the point of view of smart cities which we were discussing earlier. What does it mean, what is the significance? In Japan we see nationwide aging and declining population, and a birthrate issue. Maybe in larger cities like Yokohama and Tokyo it is not as serious, but in rural cities this is very serious. You can see a decline in regional cities; they say these are cities full of shutters.

Also, industrial structures are changing. Kitakyushu is also suffering from that. The steel industry, which used to be the center of the economy and heavy chemical industry… because the production bases are shifting overseas, we see a decline or decaying in cities. There is less tax income and it causes a deterioration of the financial status of municipalities. You need to renew infrastructure or you need to invest in welfare and in health and medical systems. How do you pay for the administrative costs?

You have to adjust to this financial condition, you need to focus, you need to prioritize, and you need to be efficient. So how do you make a city more livable? How do you make investments? How do you generate money to invest? That is a great challenge. You have to look at the elderly population and you have to look at families, let them develop self-help so they can be in the community, and although public works are deteriorating and there is decline, we need to make sure that it is enhanced. For example in Toyama, there is a project that is underway where they are trying to increase accessibility, and I think this is true worldwide too. But you need to have a compact city and I think that is the direction it is heading.

In the end [you find] results when you become a compact city, because it is low-carbon, socially and economically sustainable, and it becomes an easily livable city. As Dr. Komiyama said, learning about opportunities for people to interchange and opportunities for health, these all come down to livability. So in the Japanese context how do you promote that? One of the directions to promote that is smart cities. Of course that is not a solution for everything, but that will be one important direction. In order to deal simultaneously with climate issues and social economic issues,  compact cities is a direction that everyone is looking at globally.

Chandler: When I started studying in Japan, the great catchphrase was Ezra Vogel’s “Japan is Number One,” because the economy was growing so fast. Then the economy had trouble, then a lot of naysayers said, “Japan is not number one anymore.” Prof. Vogel felt so defensive that he had to write another book that had the title, “Is Japan Still Number One?” That didn’t sell as many copies. But in many ways though, I think Japan actually is still number one. In economics, it is a question of how to reinflate an economy that has had an economic shock to it. It is one that the whole of Europe is struggling with. Japan is right in the forefront of that. Aging, which Hamanaka-san has talked about here, Japan is right at the forefront of that, how to figure that out, dealing with energy issues.

You may all have different views, there are certainly many things that are unique and unusual about Japan. But in my view, in many of the problems that we are raising here, Japan really is still right at the forefront. I am reminded of the famous phrase in this book that was so popular by William Gibson, “Neuromancer.” He became a kind of cult author in Japan with his famous comments about Japan. Whenever he wanted to see the future, he went to Tokyo, because that is the world’s future. I still think, not just Tokyo, but other cities in Japan, that that is also still very much true.

Second Session: What is the Right Energy Mix for Japan?

Chandler:  Shift gears a little bit if we can, and focus for a second on the energy question. It is been mentioned in some of our comments here. But the portfolio of Japan’s energy mix, and our sources of energy in Japan, is that the right mix, and if not, how does it need to change? Japan has had to wrestle with this question of the diversity of its energy supply more intensely than almost any other major economy, especially since 2011 and Fukushima.

As I look at the flexible way that Japan responded, I was astonished as an outsider, to think that you could say, “Take a component of the energy portfolio that is 30% of the supply,” and then suddenly forgo it to say that we will do without it, and in the space of a year adjust to that. There were some minor brownouts in the year that followed, but somehow this country learned to adjust. And I remember all the things that people were doing in their offices, you couldn’t use the air conditioner – all of you I’m sure lived through that, but that was one of the most amazing things that I’ve ever seen. It is hard for me to imagine another major economy that could’ve adapted that successfully to such a huge shock and its energy portfolio.

Let me just throw out a question to get us started here, which is what did we learn from that? Did we learn that Japan is actually way more flexible and resilient to shifts in its energy supply than we previously thought? Or is it that all the low hanging fruit was plucked? Can we assume that it could continue as if it is Moore’s law of semiconductors or something like that – just infinitely make progress of greater and greater reliance on other energy sources. Does anybody want to comment on what we learned about the energy sources since 2011?

Minoru Takeda, Country Chairman, Shell Japan: After the earthquake disaster, nuclear power generation, 30 percent [of Japan’s energy supply], was stopped. I was living in Singapore and people were amazed at how Japan could do without blackouts even though 30 percent was cut. The whole world was amazed.

Now centering on the efforts of TEPCO, in various ways surplus facilities were available to generate energy. Also, I’ve been involved in the LNG business – the gas business. And in 2010, 29 percent (of Japan’s energy supply] was accounted for by gas. Last year it increased to 43%. Therefore, there was an increase of 14 percentage points. For LNG, 70 million tons used in the past increased to 87 million tons, an increase of 17 million tons. That is about 8 percent of LNG availability in the world. So the demand-side and supply-side globally cooperated together and we were able to secure an emergency supply. There was a major ramp up, but we were able to accommodate this. But in the absence of this, we would’ve faced blackouts with the lack of supply, so we were lucky in that regard.

When we look toward the future, a resilient energy mix is necessary. We are relying on fossil fuels too much because we don’t have nuclear power generation. But we have to emphasize renewables as well. So centering on the efforts of the government, we have to think about the best energy mix and we have to be resilient against shocks. It could be another earthquake disaster or it could be some destruction in the Middle East, so we have to be able to deal with such shocks in terms of the energy mix as well as energy supply. That is required. We have to think seriously about the future in this regard.

Chandler: I want to recognize the entrance here of Nobuo Tanaka, formerly of the International Energy Agency, now with the Institute of Energy Economics. You were quoted in the Wall Street Journal just this morning talking about this very question of Japan’s future energy supply. Correct me if I am wrong, but your argument is, “Look, I know that nuclear energy is controversial, but Japan can’t do without it. And next year we have to start at least some of these plants.” And you kind of make the case for that, and that everything has to be in the equation. So what are the alternatives for you, in your view? For Japan, must it shift its portfolio mix? How much nuclear, how much coal? Can coal be a solution? How much of a role can gas play?

Nobuo Tanaka, Global Associate for Energy Security and Sustainability, The Institute of Energy Economics, Japan (IEEJ): It is most difficult to say how much…the current government is starting deliberation on these goals of the portfolio. The most important thing for energy security and also sustainability is the diversity sources. There is no silver bullet. Nuclear cannot solve everything, renewables cannot solve everything. We need gas and some oil in case of emergency, coal if we have enough technologies which help clean coal and sustainability. And energy efficiency conservation is also key. We need all of them. And the issue is the cost of the different sources. So we have to make a judgment and balance cost, sustainability, and energy security.

I think the IEA says that nuclear would be about 20 percent or something like that, but I think for the sustainability challenge, I still believe that the level before Fukushima, like 30 percent of nuclear, is a necessary level of nuclear power for Japan. But the government is saying that we need to reduce the share of nuclear. What they mean, in my interpretation, is reducing the share of the light water reactor, not nuclear. We need to replace it with a fast reactor or advanced reactor for the generation reactor, which is passive and safe and has less risk of proliferation and is much easier for high-level waste management. There is a solution already in the U.S., that is what I am arguing for. We have to do it in Fukushima. And Fukushima Dai-ni, the second nuclear power plant in Fukushima, is a place where we should demonstrate the technologies readily available within the U.S., with Korea maybe, because Korea is very eager to use this technology, as is Japan.

This is the way to turn the devil into prosperity. I know this is a really challenging, tricky job we have to engage in, but Japanese technology lost public trust, and the way to recover that is we have to show that we can deal with the Fukushima cleanup, and beyond Fukushima, the new nuclear technology, which is definitely necessary for peaceful use for more developing countries and for Japan in the future.

Chandler: Can you give us a sense of your read of politically where Japan is right now on that? Is that a message that policymakers could explain to the general public in Japan and would win recognition and acceptance?

Tanaka: They don’t want to change the paradigm of the current light water reactor system. All of the money, funds, technology, personnel, are in the current paradigm, and they don’t like to shift to a new technology, but there is no other way. We cannot convince the public by just saying, “We can go with the current technology, with light water reactors, we can go with [Japanese], we can lead with [Japanese].” No way, I don’t think so. We need something new which is manageable and already exists to convince the Japanese public, “Hey, nuclear may have a future.”

Chandler: Coal obviously would be one alternative that could be expanded, but what are the costs in the end and is the trade-off worth it?

Tanaka: Yes, coal is important for energy security. Coal is abundant. As a resource, it may be beyond 3,000 years of use. Resource-wise and security-wise, coal is a very important option. And the Asian growing economy is going to use it to a full extent; ASEAN countries, India especially, and China may try to reduce but will still continue to use coal. Japan should help these countries use coal as cleanly as possible, [using] cleaner coal technology which Japan already has — very efficient coal power plants — as well as some potential of carbon capturing and storage. We should demonstrate that this is possible. I am fairly cautious about expanding coal power in Japan and everywhere. Just limit the building or construction of coal power to where you can add carbon capturing and storage later. It is called CCS-ready. CCS-readiness is a condition to use coal power plants in Japan. Then we could demonstrate CCS with new efficient technologies, with a certain level of carbon price. This is an important way to transfer technologies to India or ASEAN countries the joint crediting mechanism, which Japan is proposing.

Hiroshi Komiyama, Chairman of the Institute, Mitsubishi Research Institute: In terms of the energy issue, I think you have to look at it as a global issue and you have to look at it as a Japan issue, but I think one thing you have to think about is the difference in the conditions of developing nations and industrialized nations. In industrialized nations, most of the population is saturated with goods. In Japan most people have homes; there are 8 million vacant houses in Japan. There are 58 million cars, and every year there is replacement, so gasoline consumption in Japan is declining by 2% each year.

In 2050 energy efficiency will improve by three times from today, on average, which means that for industrialized nations, just because of efficiency improvement, energy consumption will become a third of what it is now. When you think about it from that perspective – and I have a slightly different view on this – I don’t think we are in a place where we can build a new nuclear reactor. I think it is expensive and not good in terms of public acceptance – and it is getting to the point when a new nuclear power station and a new mega solar facility are about the same in terms of cost.

“By 2050 … the Japan model should be a 100% renewable energy mix.”

If you think about it on longer horizons, maybe by 2050, then I believe that the Japan model should be a 100% renewable energy mix. By then energy consumption will be one third of what it is today and we will be able to supply energy 100 percent from renewables, so this is where we should aim. By the end of the 21st Century hopefully that will be the picture of the world energy mix, and there will be no gas necessary. We are now in transition management, and transition management is extremely challenging, particularly as electricity systems are very big, so I admit that it is difficult. But in the future at least, we can go with renewables only.

Chandler: There are two sides to this. One is that we will overshoot in our predictions of what the demand-side is going to be in terms of long-term forecast. And then we underestimate what the potential is for renewable. So if Komiyama’s projections are right here, I think a lot of people around this table are going to be out of a job in not very long. Can renewables deliver on the challenge that Komiyama-san has just laid out for us? Can we expect that?

Teruyuki Ohno, Secretary-General, Japan Renewable Energy Foundation: I was very impressed by what Komiyama-san has mentioned. But let me fill the gap. After 3/11, Japan suffered significantly, but there were three good things coming out of that. One is that energy efficiency has improved. We are working toward energy conservation. Before, working in this organization, I was working for the Tokyo Metropolitan Government, there was a carbon dioxide reduction goal for Tokyo. From 2010 to 2014, that timeframe for major corporations in Tokyo, a reduction of 8% of carbon dioxide was the goal set, and we were criticized significantly and people said that could not be done. But in reality, we have reduced by 22%. So what we have prepared has been effective. After the Fukushima accident improvements have been made in energy conservation.

Next is that renewable energy has made progress. From 2000 and 2010, renewable energy only increased by 0.5 percentage points. However, in the past two years it increased by two percentage points. Renewable energy has been increasing in Japan.

The third point is that in terms of supply and demand of energy, supply was only by major utilities. But on the supply side we now have smaller players, so this is also a good thing.

I believe that these three advantages should be brought to the fore and promoted, but the government is not promoting this well enough. We are all still using coal-fired power plants and they are talking about restarting the nuclear power plants. Even though we have new changes, there is not much promotion made for renewables.

Shigeru Muraki, Executive Vice President & Chief Executive, Energy Solution Division, Tokyo Gas Company: Tokyo Gas may disappear in the future. In terms of energy policy in Japan, I think there is too much emphasis on the supply side. But going forward, we have to be focused on the demand side more than before. And I agree with what is been said, but in terms of the supply side, the best energy mix must be established for Japan and we must have nuclear power generation remain as well. In terms of natural gas, American shale gas will be developed in the Asian market and that will undergo significant change as well. It is going to be more dynamic. It is going to become more flexible. Natural gas is considered to be very expensive in Asia, but I think it will converge to a more reasonable price.

Against this backdrop, the pipeline from Russia will have to be taken into consideration as well. Therefore on the part of Japan, the supply side must become more flexible and more diversified. I believe this is important for Japan.

On the other hand, the demand side is also very important. To establish a smart city, we should not just have discussions in terms of energy, but also about infrastructure. It has to have an affinity with the environment. We have to have a resilient city and we have to think of ways to achieve this. I believe diversification is going to be very important; renewable energies are going to be very important in terms of the city context.

Third Session: Energy Efficiency and Conservation

Chandler: For the next segment, the focus is on questions of efficiency and saving. Again, here’s a category in which Japan amazed the world in the years after Fukushima with its ability to make all sorts of adjustments to achieve energy efficiency. This is the first time really that Japan has done it because if you remember in the 70s when the oil price shot up so high, this was a huge initiative and Tanaka-san and all of his colleagues at the ministry worked very hard to figure out a way that Japan could make do with less energy. In that first shock, the secret really was government working with industry. Something that is not widely appreciated by a lot of people outside of Japan, was that by officials like Mr. Tanaka really working very closely with the big manufacturers and power generators, it was very easy – that was the low hanging fruit. It was easy to make big, big gains, working with factories and manufacturers to get energy efficiency.

I remember reading the stories about how the Prime Minister was going around in short-sleeve leisure suits, but the consumer side was not really the secret to overcoming the first shock. It was what business did and what industry did. In the second shock, it was clear that consumers were a big part of how the adjustment was made, and that was really a remarkable thing. I am curious, has Japan really done everything that could be done? Have we exhausted all the possible efficiencies? We may still be underestimating Japan’s capacity for further efficiencies.

Murakami: For example, if you look at Tokyo’s power consumption per GDP or per capita, if you do a comparison with other parts the world, it is probably at the best. So as you say, Japan has become sufficiently energy-efficient. As Mr. Komiyama said, we need to have an argument from the demand-side. I totally agree. In 1973 after the energy shock, Japanese people went ahead of others in the world to become the most efficient energy consumption or usage structure. Under this system, have we been able to guarantee a high-quality life? Not necessarily, and that is a problem.

“We have a lot of external pressures like earthquakes and tsunamis, so we are very much exposed to a lot of crisis and disaster.”

In consumption, on the demand-side, Japan has become very efficient. And even going forward, in the midterm, we will still be ahead of the world. Even if we don’t do anything we will continue to improve. But on the supply side, because of the resilience issue after 3/11, there are a lot of new challenges. And when I say resilience, this is a resiliance of the supply system and also a strength against stress on the supply side. I’m not saying that Japan is weaker than other countries, but we have a lot of external pressures like earthquakes and tsunamis, so we are very much exposed to a lot of crisis and disaster. One of the issues of the Japanese energy system is building resilience, and so we need to put a lot of emphasis on protecting ourselves against disturbances.

Tomoaki Kobayakawa, General Manager, Corporate Marketing and Sales Department, Customer Service Company, Tokyo Electric Power Company (TEPCO): Everyone has been focused on what happened after 3/11, and I would like to express my regret for my company for causing such problems. Having said that, in terms of electricity generation, it has been criticized significantly nowadays, and it is considered to be a very old system. But I believe that Japan has to face the fact that we don’t have our own energy, so we have to rely on fossil fuels. However, we have to reduce the usage of fossil fuels. That is what we have been working on after the oil shock. Nuclear power generation has experienced an accident, but this is the ultimate way to generate energy without burning fossil fuels.

From our point of view, we don’t have a preference on using more LNG or more coal. We want to reduce the input of energy usage. But we have to generate energy to use in the cities. But we should not separate the supply and demand side, and this is very much relevant to the smart city concept as well.

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I would like to mention three proposals. First we have to overcome vulnerability. In terms of energy, the supply and demand, 60% is fossil fuels. This is the case for automobiles as well, almost 100% for which we depend on oil. In terms of heat or non-electricity energy, we have to reduce our dependence on fossil fuels. That is going to be very important. For example, in Western countries, central heating is being adopted, because without heating people will die. Therefore in terms of heat, we are relying on atmospheric heat and city energy. To do that we can increase the efficiencies.

In terms of primary energy, we can enhance efficiency by a factor of three by using heat pumps. In terms of technology, photovoltaic as well as other renewable energies will be introduced significantly.

Network is subject to constraints. There are two factors that we have to consider. Fuel cells as well as battery energy management are going to be very important. Murakami-san has already mentioned that the supply and demand being distant is a problem. We have to make sure that there is a compact alignment of demand and supply of renewable energy. This will also encompass the design of the city as well. I believe this can provide a solution for the future.

Chandler: We have heard this comment from several people now that we have to think of both the supply and the demand side of the equation. Do you think that the biggest gains in the next five years are going to look different than those of the last three years since Fukushima? Are the biggest solutions going to be on the conservation side or are they going to be on the supply side? Where do you look for the breakthroughs for the next round of answers?

Murakami: What I would like to emphasize first and foremost is that compared to advanced nations, the energy consumption per household is about half of Western countries. Therefore, we are leading a very simple life. We are doing without heating in many of the houses in Japan, cutting down on heating, but there is a lack of insulation performance in Japanese houses.

Fourth Session: Mobility

Chandler: We have one more issue on our agenda if I could transition us into that, and that is not just about how people live and consume energy in their households, or how manufacturers use energy, but how people use energy to move around – mobility – to get from one place to another.

Yoichi Hori, Professor, The University of Tokyo: The problem is, what can we do tomorrow and who does what? Right now the auto manufacturers are doing all the testing, but they are not an infrastructure developer so they don’t make roads. They are doing a good job with cars but we have to do something better with infrastructure. Wireless transfer [of energy] doesn’t need anything to be plugged in. It is a completely new technique. This should be realized within 50 years.

Chandler: You are describing a very different world than the world that we live in now, a world where we are used to understanding electricity, or you plug things in and charge them, or gas, or this type of fuel. But you’re talking about what seems like a very science-fiction realm, almost from movies, where you drive your car past something and energy wirelessly diffuses into your car or whatever it is your device is, almost like hooking up to a Wi-Fi spot in a Starbucks or something like that. But that partly requires infrastructure, doesn’t it? Investment in, to use the equivalent, the wi-fi hotspots, for diffusing this energy. How big is that expenditure likely to be? Will that expenditure be required?

Hori: Well in terms of cost, there is the second Tomei Highway, and 162 kilometers were opened. It was said that 2.6 trillion yen [U.S. $24 billion] was the cost that was incurred – that is about 150 million yen [1.4 million] per kilometer, and 1 million [$9,300] for 5 meters. On Tokyo subways, it is about 100 million for 1 kilometer of subway line. So, there are the infrastructure costs that have been incurred. Wireless transfer of energy is relatively easy compared to improving roads. The possible cost of several kilowatts of wireless transfer antenna is about 100 yen. I don’t think it can be practical in that sense, but it can be very reasonable. The infrastructure cost, which people think is going to be very expensive, is going to be relatively cheap when you put it into context. I think we should provide appropriate calculations. I will leave it there.

Chandler: If I read between the lines of Hori-san’s comments, the suggestion is that we are spending too much time worrying about batteries when we think about transport. What do you think about that?

Yutaka Matsumoto, Project General Manager, Toyota Motor Corp.: Wireless energy transfer for automatic driving is very important in our view as well. However, as already mentioned, this isn’t something that can be realized overnight. For the time being, lithium ion batteries will be very important for electric vehicles. We have to think of ways to utilize this technology in the interim. That is the practical way. At Toyota, I am working in the technology and engineering division. I am working on the strategy for next-generation cars. Let me share with you what we are contemplating.

The automobile cannot be considered a stand-alone product anymore. That is the context in which we have to think about the next-generation cars. In other words, it has to be combined with infrastructure. That is going to be the new world of next-generation cars. When we consider technologies, we have to link them with the social infrastructure. This will lead to smart communities, including cars. This is what we have to think about.

Ultimately, it is very much related to urban planning as well. Compact cities are a good case in point. We can provide mobility appropriate for compact cities. So, more and more, people who are thinking about urban planning, and people who are thinking about infrastructure will have to work in collaboration. This will be warranted in order to develop a new generation of cars for the future.

We are referring to this as smart communities, rather than smart cities at Toyota, because when we consider the word city, we think of big cities, but when we think about next-generation cars, it should also encompass rural areas as well. Isolated areas should be considered as well, not just the major cities.

Now, against this backdrop, the new generation of cars may have to deal with the aging issue as well. People who have reached their 70s and 80s, and continue to drive, are going to be the outlook for seniors in the future. So, for people who are living away from the cities, in rural, mountainous areas, we have to provide them with mobility. In that context, rather than simply low-carbon or energy, we have to think in the context of an aging society as well.

People have been talking about energy today, and this is very much related to a low-carbon society as well. When we consider this, we have to consider what the best energy supply for cars is. That is going to be very important for the next generation of cars.

As mentioned at the outset, the citizen’s perspective is very important. Even if we have outstanding technology, it has to be meaningful for society. It has to be low-carbon and energy-efficient. But that is not enough. If it is not welcomed by the citizens, it will not have any social significance. Therefore, as Hori-san mentioned today, the current electric vehicles, from the point of view of the consumers, for the majority of them it is not compelling enough in terms of technology. It has not yet reached that stage.

“Hydrogen energy can be seen as promising in terms of energy supply.”

Hydrogen energy can be seen as promising in terms of energy supply. That is the reason why companies are working on fuel cell cars as well as hydrogen-driven cars and electric vehicles. The challenges involving lithium ion batteries cannot be overcome.

During this time, before the wireless transfer is perfected, I believe that the various technology-driven cars will be introduced to the world. We are going to require technology to support that. In terms of high-speed charging, I believe that hydrogen is very promising for charging.

During this era, fuel cell cars will be introduced by our company. They will be able to run for several hundred kilometers, and several hours, but several minutes will be sufficient for charging, so it will be fun and convenient to drive. It will be practical. But what the issue will be is the hydrogen infrastructure must be improved in line with the number of cars on the road. Supply will have to be made available. However, we have to consider this in the context of infrastructure as well.

Chandler: One of the hot topics in transport, which Google is talking about, is the auto-drive vehicle. That has a lot of potential to save energy. Obviously, if there are no giant traffic jams, and there are cars that move in lock-step and ride sharing because they know where cars are going, it will be much more efficient. If you look just at Japan for example, are there big energy savings to be achieved or realized through auto-drive? How is Toyota considering that technology as it thinks about cars of the future?

Matsumoto: All manufacturers are developing auto-drive technology. Even Toyota has been working on it for a long time. When the environment is ready, I think complete auto-driving will be possible, at least technology-wise. So, maybe it would be good on a highway. If there are not pedestrians, or you are in an area where there is not much interference from other modes of transportation, then technically, it is possible to have come that far. However, it is inconceivable to imagine all driving shifting to auto-drive at once. People want to drive – there is that desire.

We are trying to partially mount auto-drive in some cars today. In terms of navigation, like GPS, it can be applied so it can instruct us as to the most efficient route. Or, maybe elderly people are not confident about driving, so it could be a drive-assist function. For example, it could brake in an emergency situation, or make sure that you stay in the lane. We will incorporate parts of auto-driving technology so that we can make existing cars more convenient and comfortable. I think this is something we will still have to work on for a long time.

If You Were Prime Minister …

Chandler: If you were elected Prime Minister and had almost unlimited power to set the agenda for Japan’s energy policy, what would your agenda be? What would be at the top of your priority list?

Komiyama: From 2050 – initially 2100, but it has been brought forward – I believe that we can depend only on renewables because energy consumption will be reduced by a factor of three. We should have alignment on this, and then control the transition towards this goal of 2050. So, for example, in Kyushu and Hokkaido where demand is low, and where these is significant photovoltaic energy, you need distribution lines. As a public sector initiative, the transmission lines should be constructed. There is a problem because the construction labor costs are increasing and there is a shortage of supply there. In terms of introduction of renewable energy, this is a difficulty. Public sector works can fill the gap. I believe that this is our most urgent priority.

Tanaka: I agree completely. First and foremost, what we must do in the energy sector is improve transmission lines. We must reorganize transmission lines. 50Hz, 60Hz is the difference between the east and west and we will have to integrate it so that Japan overall can become a large single energy market in complete alignment with Komiyama-san’s view. But we are not able to do this now. We should base the reforms on this kind of concept.

We should also consider this in the context of Asia as well, not just within the confines of Japan. That is also an important perspective to have, whether it is Korea or Russia. Masayoshi Son [billionaire entrepreneur] said that he wanted to purchase renewable energy from Gobi Desert. This is very interesting. Similar initiatives can also be considered from Russia as well. We can also import renewable energies from outside as well. It doesn’t have to be in the confines of Japan. As Komiyama-san mentioned, we have to improve the network in Japan so that it can be accommodated.

Ohno: In Japan, when we talk about energy we only talk about electricity. However, energy is not just electricity. There is thermal power too. Heat and electricity need to be produced together. Distributed co-generation needs to be increased. This is another big pillar. In 2030 – maybe that is too tight – but maybe beyond that, renewable energy and co-generation will be able to supply all energy. Maybe by 2050. I hope we are able to realize this by 2050.

Hamanaka: I am in complete agreement with what Komiyama-san and Tanaka-san said. In terms of energy policy infrastructure investment, the national government’s role is important, but at the same time, today’s theme is cities. Each local municipality is doing very interesting activities, so we need to share those experiences, learn the lessons, and aim for better things. That is where scientists and researchers will evaluate or maybe, in a different context, use that experience. So one has to look at transferability of experience. This is where scientists and researchers need to clarify the role they play.

As actors, the role that local cities and municipalities play is very important. I think a network organization, such as the one I represent, ICLEI, has members which include 1,000 cities around the world. This is part of what ICLEI does. We were talking about climate change issues, so one has to talk about carbon emissions and activities to prevent carbon emissions. So, what is the current status, and what is the action taken and how much have carbon emissions been reduced? That needs to be measured and reported. It needs to be validated and evaluated at the end. However, you must first measure and report – by doing so we will be able to compete with and learn from each other. This is important.

Chandler: Instead of prime minister, if I were to pick on some of our business participants and say what would your agenda be? If you were to try and build consensus, what would you do?

Shirakawa: In terms of global and local, we have to make sure there is alignment. We are an island nation, but we can share our experience globally. Japan can showcase to the world how we have resolved the energy issues so that we can have a coalition – we can make contributions globally. Manufacturers in Japan should work together to realize such an objective.

Muraki: In terms of the energy perspective, system reform is taking place. We have to liberalize and deregulate. We have to have more players in the energy sector so innovation can be brought to bear. We have to make sure that we do not become isolated, but make sure that the best model for energy usage can be developed and deployed globally. Innovation is going to be very important. Japan must make efforts in terms of innovation. It is the area of hydrogen where we should make an effort. Fuel-cell vehicles are a good case in point. In the area of hydrogen, Japan is leading the world, and we must make sure we make further progress in this regard so that it will lead to a low-carbon society where new technologies are developed.

Chandler: In moving back to the original topic, which was cities – Chida-san, let’s switch to being the Governor of Tokyo. What is on your agenda?

Chida: Tokyo will host the Olympics in 2020, so as I have said earlier, from the demand side we must further promote energy conservation as we have been promoting cap-and-trade for large users. Wherever we are advancing we will continue to promote.

The other area is the promotion of innovation, as was also mentioned earlier, so we can have new energy like hydrogen. As the public sector, we would like to promote use of hydrogen. I think the public sector will use it first and then we will invite the private sector to use it. Perhaps we will give subsidies to promote use and create a low-carbon society.

Nagata: The 2020 Tokyo Olympics will be a very important opportunity for us to make progress. The technologies could be showcased to the world – what we have accumulated in Japan. Low-carbon and resilience, green and smart aspects should be showcased. The city’s competitiveness can be enhanced at the same time. It would be wonderful if that would be achieved.

Chandler: Let me ask this question in one final different way. I will ask Hori-sensei. Let’s say that you are the head of a giant venture capital fund. You have billions of dollars at your disposal, and you are the energy equivalent to Bill Gates. You want to do the energy equivalent of solving malaria. You want to use the giant fortune you have to make a breakthrough. What are you going to invest in?

Hori: I was thinking about this for some time; I would like to electrify the Tokyo Highway. I think that 20 or 30 years down the road we can do this because Toyota will provide the cars.

Conclusions

Chandler: I defer now to the insights of Jefferson Edwards, our partner in this event from Shell. Before he became the general manager for natural gas here for Shell, Jefferson used to work at Cambridge Energy Research Associates with Daniel Yergin, who many of you will know. He has both macro-economic and a practitioner’s perspective on all of these questions. Tell us what you make of some of the conclusions or recommendations you have heard today.

Jefferson Edwards, General Manager, Global Gas and LNG Market Development, Shell: I would like to bring it full circle if I might. I was very struck by Otsuka-san’s presentation when he showed the National Geographic from 1964, with those wonderful pictures. He was flashing that by very quickly, but one phrase just jumped out off the page. It was “brains, skill, energy” as the qualities that Japan at that time was bringing to bear to meet the challenges in that generation. I think all of those qualities were on display today in equal measures. We certainly thank you for that very much.

The thing that I observed in Tokyo for the two years I spent here as a young man was the phrase that I think that Matsumoto-san used, which was not “sustainable cities,” but “sustainable communities.” Tokyo itself as a city is many, many communities. Every local community, but also communities of businesses, communities of academics, communities of friends. That really struck me.

In the years since, I left Tokyo. One of the wonderful things about the energy business is the opportunity to live in many places. I was counting this afternoon, and I have lived in 17 cities since Tokyo. Recently, I have taken part, in an effort at Shell, to look at what a sustainable city really means. We have done this in partnership with the Singaporean government and the Center for Livable Cities. We looked at 500 cities, and we broke them into six archetypes. The one thing that really struck me, was that we had to classify Tokyo as a “Sprawling Megacity.”

Another thing that strikes me is the challenge going forward. In Japan, this is tied to demographic change. As the demographics change, what we find many times in growing economies is that last kilometer of service – whether it is for energy, or water or road – in a developing economy, the cost of supply always goes down. In Japan, that last kilometer or service, because of demographic change – not necessarily in Tokyo, but in smaller or midsize cities and rural communities – the cost of supply goes up and up. What we have found, and I think another speaker has mentioned it today, is that cities will become more compact in Japan.

That has been the result of our study, looking at cities. Cities will become more vertical. The housing efficiency issue that was mentioned today is critical. The most efficient way, the best way, to capture housing efficiency is to cluster people in a more vertical city. You share heat between your walls. You share noise and other things as well, but that is perhaps the revival of housing stock in Japan. It is a significant challenge, but I have no doubt that when I come back in another 20 years or so, that combination of “brains, skill and energy,” will have met these challenges. I think the resilience – that has been the word of the day here – that Japan exhibited in the events of March 11 will continue to sustain it. I think all of the cities of Japan will continue to be leaders, not followers in terms of what a sustainable city means.

Participants in the Big Energy Question Discussion, Tokyo, October 16, 2014
-Nobuko Asakai, Senior Manager, Accenture Japan
-David Braun, Director of Outreach, National Geographic
-Clay Chandler, Director, The Barrenrock Group
-Satoshi Chida, Director for International Relations, Bureau of Environment, Tokyo Metropolitan Government
-Jefferson Edwards, General Manager, Global Gas and LNG Market Development, Shell
-Hironori Hamanaka, Chair, ICLEI Japan and Chair, Board of Directors, Institute for Global Environmental Strategies (IGES)
-Yoichi Hori, Professor, The University of Tokyo
-Tomoaki Kobayakawa, General Manager, Corporate Marketing and Sales Department, Customer Service Company, Tokyo Electric Power Company (TEPCO)
-Hiroshi Komiyama, Chairman of the Institute, Mitsubishi Research Institute
-Yutaka Matsumoto, Project General Manager, Toyota Motor Corp.
-Alex Moen, Vice President of Explorer Programs, National Geographic
-Hideki Mori, Vice Executive Director, Climate Change Policy Headquarters, City of Yokohama
-Shuzo Murakami, President, Institute for Building Environmental and Energy Conservation (IBEC)
-Shigeru Muraki, Executive Vice President & Chief Executive of Energy Solution Division, Tokyo Gas Company
-Hidetomo Nagata, Vice President, Cities Solution Centre Japan, PricewaterhouseCoopers
-Teruyuki Ohno, Secretary-General, Japan Renewable Energy Foundation
-Nobuyuki Ozaki, Ph.D., Senior Fellow, Railway & Automotive Systems Division, Social Infrastructure Systems Company, Toshiba Corporation
-Masahiro Shirakawa, General Manager, Social Engineering Systems Division, Power & Social Infrastructure Business Group, Fuji Electric Co.
-Minoru Takeda, Country Chairman, Shell Japan
-Nobuo Tanaka, Global Associate for Energy Security and Sustainability, The Institute of Energy Economics, Japan (IEEJ)
-Toshifumi Yoshizaki, Vice President, Smarter Cities, IBM Japan