March 27, 2015

City challenges Kyushu Electric, sets up company to sell power to households

http://ajw.asahi.com/article/behind_news/social_affairs/AJ201503270005

THE ASAHI SHIMBUN

MIYAMA, Fukuoka Prefecture--Miyama has become the first local government in Japan to establish a company that will sell electricity to households--and at rates cheaper than regional monopoly Kyushu Electric Power Co.

City officials said March 25 that the company, Miyama Smart Energy, set up in collaboration with the private sector, will start operations next month. It will initially supply power to public entities such as city government offices, schools and libraries, and begin targeting ordinary households in April 2016.

Miyama Smart Energy was founded in February with capital of 5 million yen ($42,000). The capital is expected to increase to 20 million yen.

The company expects to employ 25 workers and post sales of 1.3 billion yen four years later.

The main goal of the initiative is to bolster the local economy by consuming locally produced power.

“We have set out to achieve self-sufficiency in the energy field by locally generating and consuming power with renewables and create jobs for the local communities,” Miyama Mayor Chikashi Nishihara said at a ceremony marking the start of the project on March 25.

In spring next year, Japan will deregulate the power industry by allowing households to buy their electricity from suppliers other than regional utilities.

Miyama Smart Energy envisages purchasing electricity from the 5-megawatt, city-supported solar power plant in Miyama as well as from surplus solar power generated at ordinary households at a price 1 yen higher per kilowatt hour than buying from Fukuoka-based Kyushu Electric.

It plans to sell the electricity to households at rates cheaper than Kyushu Electric’s.

Tatsushi Isobe, a director of Epco, a Panasonic Corp.-affiliated energy consultancy in Tokyo that has invested in Miyama Smart Energy, expressed confidence in the initiative.

“Even if the new company buys power at a rate higher than Kyushu Electric and sells it cheaper, it will pay off since its investment and payroll costs are low,” he said.

According to the industry ministry, Nakanojo, a town in Gunma Prefecture, and Izumisano, a city in Osaka Prefecture, have already established power-supplying companies.

But their services are geared for public entities and do not include ordinary households. Miyama Smart Energy is the first to plan serving households from the outset.

The company will not follow Kyushu Electric’s policy of reining in purchases of solar power from generators on sunny days, when the energy output is higher.

Miyama Smart Energy, which has concluded a deal with another solar power generator in Miyama, should be able to cover all the electricity needs for the city of 40,000 people during daytime on sunny days, according to the municipal government’s estimate.

One challenge for the company is luring users away from Kyushu Electric. Currently, the residents are all paying the utility for electricity.

If they switch to Miyama Smart Energy, their fees will be recirculated within the city, helping to bolster Miyama’s economy.

To pitch the company, the city since last fall has provided devices to about 2,000 households in the city on a trial basis that enable them to see their electricity consumption levels at any time of the day on their tablet computers.

Consumers say Kyushu Electric’s bills do not have such a detailed breakdown.

(This article was written by Masanobu Higashiyama and Kenichiro Sakai.)