Some smart talk about power would be nice to hear in Japan. That's especially true, given that the country's electricity supply faces months, possibly years, of shortfalls. That could hurt the country's recovery efforts, limiting companies' ability to make up for lost production after the March 11 earthquake, and discouraging consumers from spending.
For now, all the government is talking about is the need to curtail electricity use. That's understandable, as 18% of the nation's generating capacity may be offline by the end of next month due to nuclear reactors destroyed by the disaster, or shut down before and after the quake.
To prevent blackouts, from last Friday through Sept. 22, the government is legally mandating that large customers of Tokyo Electric Power (9501.TO), such as factories, cut their usage by 15% from 9 a.m. to 8 p.m on weekdays. It's asking others, including households, to do the same. Similar steps are being asked of Tohoku Electric Power (9506.TO) users. Together, the two utilities supply an area accounting for nearly half of the country's economic output.
But some conservation efforts--which were ongoing before Friday--aren't so smart. These include closing burger joints or department stores earlier in the evening, when in fact, peak summer electricity demand is in the mid-afternoon. Consumers don't need fewer opportunities to spend, and the electricity saved can't be reused the next day, like water.
Steps to improve the supply-demand balance include greater use of off-peak pricing to shift usage to times when demand is lower, much like cell-phone carriers or airlines do. Smart meters paired with displays showing customers their usage can reduce demand up to 20%, according a report by the Brattle Group consultancy. Meters coupled with price incentives can increase energy savings even more.
Other counties have already taken the lead in smart meters. New Zealand plans to raise the proportion of such devices to 80% by the end of 2013, from about a third in 2010. South Korea plans to raise the percentage to 100% over the next decade, from 14% last year.
Japan, meanwhile, is still only running pilot projects for smart meters, and offers no significant price differentials. Less than 5% of Tepco's residential and small-business customers use variable-rate plans--those with cheaper night-time rates. All other such users have plans that charge the same, regardless of when the electricity is used.
Longer term, Japan needs to separate power companies' transmission and generation units to bolster competition and integrate renewable energy like solar into the mix. It also needs to move faster on building smart grids to improve distribution and generating efficiency. South Korea estimates its smart grid will eventually cut power demand by 10%.
Moreover, Japan needs to increase its capacity to transmit power between the country's eastern and western halves, which require converters to bridge the two different frequencies in an emergency.
Japan has all the tools it needs to fix its electricity problems. But does it have the smarts?
