White & Case’s Tokyo office webinar series brings together the company’s partners and industry experts to explore how digital transformation (or DX) and green energy transformation (or GX) are likely to affect strategic business decisions in Japan, Asia and globally.
This article highlights the key points covered in the first session of the DX and GX series: How technology can accelerate the green energy transition.
Arthur Mitchell, Senior Advisor, was joined by Paul Harrison, Partner, Project Development and Finance and Dr. David Albagli, Local Partner, Intellectual Property, to explore the state of the energy transition as well as real-world applications of technologies supporting the green transition.
Overview: Will recent events cause GX to slow down or speed up in Japan?
The ambitious climate goals set at the recent COP26 summit reflect the significant push towards accelerating the energy transition in recent years. However, five months after COP26, the global energy landscape has changed dramatically due to major supply chain disruptions caused by recent global events.
As a nation that relies primarily on imports for its energy supply, Japan is reassessing its energy security plans.
“In 2015, METI announced that as part of its energy policy, Japan should adhere to the principle of 3E+S: andenergy security, andeconomic efficiency, andenvironment and ssecurity. While consideration of each of these elements has always been part of a “balancing act”, largely due to the war in Ukraine, increased weight is now given to energy security. …. While the reality is that the world is still 80% fueled by hydrocarbons, the falling costs of producing green energy (such as solar and wind) means that there is an alignment between economic efficiency and the environment,” noted Paul Harrison.
Paul went on to observe that while companies and nations will still be committed to GX in the long term, particularly to meet the 2030 and 2050 carbon neutral targets, in the short term there will likely be greater reliance on hydrocarbons. to meet energy security needs.
This view is consistent with emerging trends in other developed countries such as the US, UK and Germany, where looming demands for energy security are being met through a continued reliance on hydrocarbons, at least in the immediate future.
Green energy developments in Japan
Arthur Mitchell discussed with Paul the evolution of Japan’s core energy policy and legal regulatory framework for green energy, with a particular focus on recent key developments.
Paul noted that, “As a highly industrialized nation with a lack of hydrocarbon resources, Japan has always been dependent on imported oil and gas. After Fukushima, there was also a significant decrease in the country’s nuclear fleet. from around 30% to around 10% of the energy mix.While there was previously a strong focus on terrestrial solar, with the feed-in tariff scheme (FIT) being particularly effective in mobilizing the solar market, the focus has shifted to offshore wind with a number of the auction processes going on lately.”
Paul added that, “In terms of legal and regulatory developments, these can be viewed in light of the two parallel processes in the market. First, there are the different inputs into the energy mix, and second, there are considerations on how the generated electricity is sold to the grid.
Some notable recent developments discussed also included the following:
- The transition from the FIT scheme to the feed-in premium scheme (FIP) from 1 April 2022 aims to promote the use of green energy. The FIP is a payment received by the renewable energy supplier in addition to the price it receives in the wholesale market.
- There is more emphasis on the operation of the wholesale market, as around 30% of the country’s electricity is now sold on the JEPX wholesale market.
- The regulatory regime is being liberalized, making it easier to enter into corporate PPAs (long-term contracts where a company agrees to buy electricity from a power producer rather than from from a retailer).
- Significant research and development (R&D) efforts continue to be made by Japanese entities in the hydrogen industry (both upstream and downstream), supported by the Japanese government.
Considering these developments together, the market is seeing greater flexibility and creativity in terms of generating and purchasing green energy and a clearer path is emerging to achieve the 2030 and 2050 targets.
Blockchain and the energy industry
Although blockchain technology is most commonly associated with cryptocurrency, it will likely have a range of applications in the energy industry in the years to come. “There really is a lot more to block on the channel…than a lot of people in the market recognize,” David Albagli noted.
David highlighted the use of blockchain in a range of new platforms, including White & Case’s client MineHub, and SAP’s GreenToken, which help track and trace minerals and commodities. , including, for example, hydrogen molecules.
Additionally, there are an ever-growing number of applications for blockchain technology and smart contracts, which have the potential to revolutionize the way electricity is distributed and traded, from generation to consumption.
Some of the more notable uses of blockchain in the energy sector include:
- Validate the carbon credits or certificates generated by the exploitation of renewable assets, while improving the viability of the trade of these raw materials.
- Smart contract platforms, which enable the kinds of direct peer-to-peer and peer-to-peer trading activity that will underpin “smart grids.”
- Improve metering and billing, providing more accurate and transparent usage information to providers and consumers.
- Support for energy distribution and distributed control of networks. Blockchain and smart contracts, when used in tandem with software, can be used to manage grid distribution and storage systems, such as batteries, as well as support other services auxiliaries.
- Build greater trust with customers through verified and transparent supply chains, which will allow consumers to track energy from generation to consumption.
Supply chain and technology in Japan
Japan recently passed a new economic security bill that emphasizes supply chain resilience, security and reliability of critical infrastructure, public-private technology cooperation, and a system of non- disclosure for certain patent applications that may pose a risk to national security. This will cover critical emerging technologies such as artificial intelligence (AI) and quantum computing, as well as access to some raw materials that underpin the modern economy.
David offered his perspective on the challenges for Japan on the cutting-edge technology front: “When looking at cutting-edge technology, the first two areas that come to mind would be AI and the Internet of Things. objects (IoT)… They provide an interface from software to hardware, which brings its own unique problems But, nevertheless, we see these technologies advancing with many applications in robotics, autonomous vehicles and medical devices that are really advancing the frontier of technology.
The other side of cutting-edge technology is intellectual property, David noted. Fundamentally, AI is software and the question is whether typical forms of software protection – such as copyright, patents, trade secrets – are adequate for the software itself as well as for the new challenges that AI brings. For example, who has access to and who owns the training data and whether the output material may be copyrighted or patented, and if so, who is the author or inventor? These issues will be discussed in more detail in future sessions of the DX/GX series.
Focus on AI
In terms of AI, David noted that AI and the power of software is going to come into play in the energy industry to help with the integration of supply, demand and energy sources. renewables in the electricity grid. While new uses are constantly emerging, examples of AI applications in the energy sector currently include:
- Energy planning, control and demand management: To balance network stations, manage load demand requirements, enable network self-healing, negotiate actions, and facilitate new services and products.
- Load demand forecasting and supply management: David pointed out that AI has potential applications for “predicting or at least anticipating where things are moving in real time, to enable load shifting, load reduction or otherwise control. [a network] effectively in real time”.
- Predictive maintenance: Have AI-enabled predictive maintenance algorithms to analyze, collect and use data from different manufacturing sources such as sensors, machines and switches to better control how equipment is used and anticipate any failure.
Perspectives on GX and DX
In terms of integrating new technologies into the green energy transition, the Japanese government is taking the initiative to support various R&D efforts of Japanese companies. Taking the example of the hydrogen economy, Paul noted that governments and lenders need to make up their minds on which technologies to “back” as it is still unclear which technologies will succeed in upstream supply chains. and downstream.
Despite the short-term setbacks resulting from the recent energy crisis and resulting supply chain issues, the green energy transition is unlikely to lose its long-term appeal. Given this, multiple areas of new technologies continue to be integrated and utilized in the energy industry. Although GX, aided by DX technologies, is a gradual process, DX and GX are certainly moving in the right direction to have an impact, especially if coupled with the right legal and regulatory reforms and frameworks.[View source.]