Structural Reform: Japan’s Radical Energy Technocrats Drive Smart Cities

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Energy is always at the heart Technocracy. In Japan, Technocrats are restructuring the energy industry in order to transform traditional cities into Smart Cities. The result will be control over every facet of living, ie., Scientific Dictatorship. Apparently, the Japanese citizenry has no idea what is happening right under their nose. ⁃ TN Editor

Japan’s December 14 general election is essentially a rigged referendum on Abenomics. Despite the dismal economic news, team Abe can hardly lose against the splintered and poorly led opposition parties at the national level. The hapless Democratic Party of Japan (DPJ) seems likely to gain some seats; but Abe has defined defeat as the loss of his parliamentary majority, which is simply not going to happen.¹ Electioneering per se is set to begin on December 2. It will almost certainly not feature substantive debate on the stark choices confronting Japan, meaning how to achieve resilient, decarbonizing, resource-lite growth in the world’s most rapidly ageing society. There will be no serious discussion of the fact that Japan faces among the direst threats from climate change, the developed economies’ most gargantuan public debt, extreme dependence on increasingly precarious fossil fuels, an unprecedented economic experiment (Abenomics) now clearly in deep trouble, dangerously poisoned relations with important neighbours, and a multiplicity of other challenges that collectively defy precedent. All developed and developing countries face dense clusters of “wicked problems,” particularly on the water-energy-food nexus in an epoch of climate crisis, but surely Japan’s are among the most daunting if one strips out the failed states.

Mainstream economic and business analysts are, of course, furiously pumping their bellows of gaseous advice. They insist that Japan can fix all the above by aiming the faltering Abenomics programme at opening markets via the Trans-Pacific Partnership and structural reform that gives large firms and megabanks more freedom to allocate capital in ever more unsustainable ways. By and large, the structural reformists want Japan to be more like post-Reagan America. Key elements of this vision have little appeal for most Japanese and have been thoroughly discredited by such astute students of comparative political economy as Sven Steinmo.²

However, while the rhetoric of Abenomics has dominated international discussion, Japan is already undertaking a radical and massive public-sector-centred structural reform of a very different variety. This reform is steeped in astute application of approaches most fully realized in Germany, and Japan is already at work renovating industry, building resilience, and bolstering local democracy. The most recent summary statement of this project is found in Smart Communities: A Smart Network Design for Local Government Infrastructure, an important new Japanese book, organized by Japan’s top mainstream energy intellectual Kashiwagi Takao, and published October 15, 2014.³ The book describes – especially its initial chapter, written by Kashiwagi – how Japan’s energy technocrats are using the feed-in tariff, stadtwerke (municipal business), power-sector deregulation and other key elements of Germany’s green energy transition as engines for something much more ambitious. And the Japanese are also hooking up their project to multiple firehoses of fiscal and financial policy. This is a sharp contrast to the Germans, whose energy shift is hobbled by fiscal austerians seemingly bent on sacrificing the PIGS (Portugal, Italy, Greece and Spain), the entire EU, and thus themselves as well.⁴

Smart Communities as the Growth Strategy

Even before 3-11, Japan’s growth strategies emphasized smart grids and other green innovation, focused on the urban contexts in which over half of the world’s population already live and which are growing apace. For example, on June 18, 2010, the Hatoyama cabinet approved a New Growth Strategy that emphasized green innovation, centred on smart communities, in order to build YEN 50 trillion in new green business and 1.4 million new jobs by 2020.⁵The METI “smart city” elite were clearly prominent among the technocrats designing this approach, as is evident from their very detailed December, 2010 presentation (in Japanese) “Policy Evolution Towards the Realization of Smart Communities.” Perhaps because of the strength of the nuclear-obsessed Tepco and other power-monopolies’ labour unions as the DPJ base, the Hatoyama cabinet itself was more enthusiastic about nuclear than the METI smart community technocrats. The latter’s documents of course include nuclear in the centralized baseload power mix (which was explicit energy policy at the time); but they exhibit far more interest in distributed generation, smart grids, power storage, smart meters and other devices that even then were core to the fast-emerging smart community paradigm. They also evince a keen awareness of developments in Germany and elsewhere as well as deep concern at the risk that Japan might build yet another Galapagos as it already had in electronics, energy, and some automotive technology.⁶

Working in the context of an archipelago, with minimal reserves of conventional fossil fuels, and desiring to maximize domestic energy independence, the pre 3-11 Japanese technocrats looked to expand nuclear and renewables as much as possible. The Fukushima disaster appears to have taken the nuclear role off the table, so far as smart communities are concerned. Hence, after 3-11 nuclear reactors tend to disappear from the smart-community power schemes, and renewables move to the fore. Though the technocrats do not write it out explicitly – and perhaps they never actually debated this – the logic of distributed power and resilient communities also leads away from nuclear. Unless one is prepared to offer the world smart communities with a small-modular nuclear reactor (SMR) underneath, low-carbon (or even no-carbon) smart communities mean green power. This claim is not tree-hugging craziness, but rather what makes economic and environmental sense. The US Navy’s Office of Naval Research is, for example, taking a central role (via a DC smart grid and other gear) in such projects as 100% renewable Chiang Mai World Green City (ASEAN’s first), with explicit aims to broaden that collaboration elsewhere in Thailand as well as Vietnam, and explicitly as part of the pivot to the Asia-Pacific.⁷

Of course, the enthusiasm for SMRs remains strong within the nuclear industry. Toshiba’s 4S (“Super safe, small and simple”) micro sodium reactor is said to be ready to be buried 30 meters underground and relied on to pump out several dozen megawatts of power.⁸ For its part, Hitachi has the GE Hitachi Nuclear Energy’s Power Reactor Innovative Small Module (PRISM) project.⁹ Yet even Toshiba and Hitachi’s corporate PR for smart communities emphasizes 100% renewable energy. So perhaps somewhere along the recent time-line the smart energy engineers, within those power-unit makers, kept the enthusiasts of underground mini-nuke from slipping an SMR in blue-chip Japan’s smart community design and thus making their offerings an unmarketable NUMBY (“not under my back yard”) waste of investment and opportunity..¹⁰

In his book Smart Communities: A Smart Network Design for Local Government Infrastructure, Kashiwagi deliberately and explicitly positions smart communities as the key item in Japan’s growth strategy. He has been doing this very assertively for well over a year, judging from dozens of articles and events that centre on him. Kashiwagi appears to have helped immensely to realize the June 14, 2013 New Growth Strategy’s explicit commitment to ICT-led growth as well as coordinate the expansion of smart-community projects and the increasing streams of finance flowing from the various ministries of the central government plus their allied quangos (Quasi Autonomous Non-Governmental Organization) such as the New Energy and Industrial Technology Development Organization (NEDO).

Kashiwagi seems able to do this because he is an enormously influential figure in Japanese energy policymaking circles. He plays multiple key roles such as specially appointed professor at Tokyo Institute of Technology, chair of Japan’s Hydrogen/Fuel Cell Strategy Council,¹¹ chair of the Ministry of Economy Trade and Industry’s (METI) new energy subcommittee of its Committee for Natural Resources and Energy, Project Leader of Tokyo Institute of Technology’s Advanced Energy Systems for Sustainability,¹²to name just a few. Aside from the content of his recent activism and writing, what makes Kashiwagi especially interesting is that he is both a core member of the nuclear village as well as an enthusiast for renewable energy.

Kashiwagi thus straddles both Japan’s deeply damaged paradigm of nuclear power as well as its rapidly emerging paradigm of distributed power and smart communities. He is not ready to dump nuclear yet, but neither does he write about its role in the smart community. With a technological imperative driving smart communities towards green, as well as the need to make smart choices in the midst of multiple constraints, Kashiwagi has evidently decamped from the nuclear village. Kashiwagi is the designer of Japan’s first smart community, a 100% renewable microgrid project, linking NEDO (New Energy and Industrial Technology Development) and other facilities, that went live at the 2005 Aichi World’s Fair,¹³ so he has a lot of emotional and intellectual capital invested in these initiatives.The power monopolies, with their focus on centralized power and control of the grid, as the core of their business model, stand in the way of a nationwide diffusion of smart communities. Hence true deregulation of the power sector is key to Kashiwagi’s argument. So also is the diffusion of distributed renewable power supported by the feed-in tariff (FIT). Kashiwagi argues that, for starters, Japan’s local governments stand to gain YEN 5 trillion of the YEN 15 trillion power economy through distributed energy supported by the FIT.

What has been missing from Japan’s – not to mention the global – debate on smart communities is an explicit statement that they are focused on energy and can provide a powerful engine for their diffusion. Japan’s smart communities stand out against their competitors elsewhere in being primarily about energy, whether in sustainable generation, smart and small-scale transmission, and maximizing efficiency on the consumption side. That only makes sense in an archipelago with minimal conventional resources, one that is still reeling from a massive shock to a deeply entrenched power monopoly.

As for the engine, Kashiwagi places Japan’s smart community initiative in the context of creating something akin to the German stadtwerke of municipally owned utilities. These agents were among the major winners from German power deregulation. Germany’s 900 or so stadtwerke are also increasingly recognized as key to that country’s ability to diffuse renewables, because they have the organizational, financial and other heft together with community demand for renewables.¹⁴ So Japan’s centring of smart communities on stadtwerke is not a model of building smart communities by stripping off functions and giving them to the private sector, together with the residents’ data.

Japanese cities have long had their utility functions, especially water, serviced by public agency, contracting with private companies for pipes, valves and other gear. But when it comes to power, postwar Japanese cities have been passive consumers of centralized and privately-owned power, delivered by Tepco and other monopoly firms that also dominated their catchment areas’ political economies. Going distributed, and fast, through smart public agency, is the surest way to destroy the old business model of the power utilities. The private utilities know this, which is why they are desperate to water-down the power-sector deregulation slated for 2016 as well as get their people in charge of the new agency to police the grid.

The power stadtwerke in Japan offer a mechanism that puts the incentives to champion revolutionary change into the hands of the cities and towns. The Ministry of Internal Affairs and Communications (MIC), a fortuitous blend of ICT enthusiasm and responsibility for local fiscal health, has in fact set a goal of establishing no fewer than 1000 local energy firms over the five years from 2015. The national government will not only allow the locals to finance investments in these firms, but it will pick up half the interest payments.¹⁵

The Japanese model of the stadtwerke is technocratic, to be sure. But it also does not require replicating the German experience of building a political movement for renewables over several decades. We have seen since 3-11 that Japanese people’s-power initiatives have been incredibly valuable in stopping nuclear (despite Abe administration pressures, as yet no nuclear power station has reopened), but they have not been very successful in leading an energy shift. The fact that an energy shift will not be an issue in the Abenomics election speaks volumes.

In the face of considerable inertia and a shortage of time to act on climate change and resilience, there is something radical in Kashiwagi’s vision and in what the MIC and others are doing. City walls are being raised again, not to stop commerce and control the community, but rather to ensure that the community’s interests are served by the composition of interests running its core lifeline infrastructures. Kashiwagi also stresses that deregulated power and the FIT are essential to the Japanese-style stadtwerke, because the aim is to strengthen inter-regional equity as well as sustainable growth. He also wants to build on this, very fast, and make it regional, encompassing East Asia and elsewhere.

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