Smart City Market and Energy Management in Smart Cities in Japan: Key Research Findings 2022

Market Size for Regional Energy Management Facilities and Equipment including that for CEMS Projected to Reach 81,000 Million Yen by FY2030

Yano Research Institute (the President, Takashi Mizukoshi) carried out a survey on the domestic smart city market, and found out the status of energy management efforts at smart cities, trends of major projects, and future perspectives. This press release discloses the market size for energy management facilities and systems that are to be deployed in the units of region or block.

CEMS Facility and System Market Size Transition and Forecast
CEMS Facility and System Market Size Transition and Forecast

Market Overview

The FY2021 market size of facilities and systems for energy management deployed for regional energy management in domestic smart cities, etc. is projected to reach 33,000 million yen, and 35,500 million yen by FY2022.

A smart city refers to a city or a district that solves various urban challenges and problems by utilizing data and new technologies including ICT and IoT. Based on the analysis of data collected, streamlining of operations of facilities and equipment and optimization of behavior patterns by people, etc. in the areas concerned can be expected.

Currently, in domestic smart city projects, the efforts on energy management that are combined with renewable energy or other powers that can be obtained within the areas and EMS (Energy Management Systems), smart grid, and/or microgrid systems have been planned or implemented. Energy management is expected to promote energy supply in ordinary times as well as during power failure, energy saving, and reduction of CO2 emissions.

Against a backdrop of concerns over energy crunch in summertime and wintertime and soaring prices of raw fuels, Japanese energy in 2022 has been facing prominent challenges of stable supply of energy and leveling of energy cost. In addition, the governmental target of “Carbon neutrality by 2050” has increased the significance of reducing CO2 emissions. Energy management in smart cities is expected to be the measurement model against these challenges.

Noteworthy Topics

Rooftop PV Systems Can Play Main Role in Energy Generation at Smart Cities

The most frequently implemented renewable energy in smart cities is photovoltaic power. Because solar power can be generated anywhere where sunlight is available (rooftops, flat land, water, etc.), it is easier to operate than other renewable energies, and many companies have the know-how to install it, making it cost-effective.

Of PV generation, rooftop PV systems are expected to increase deployment in smart cities. As a rooftop PV system can be installed on an any building if there is space on the rooftop, which can save installation cost and time when compared to new land development. In some smart cities where renewable energies have been proactively utilized, dozens and hundreds of residences installed with solar panels.

The electricity generated by rooftop PV systems is more likely to be used for private consumption or under corporate PPA (Power Purchase Agreement*1). It is because there is a potential economic advantage of power-cost leveling by the home use of and use under PPA model of PV systems, in a situation where electricity prices are rising.

*1) Corporate PPA (Power Purchase Agreement) refers to a system in which a PPA company establishes, owns, operates, and maintains a renewable energy power plant with its own funds, and supplies the electricity generated by that plant to demanders on a long-term basis at fixed prices (for offsite, via a power retailer). It is also called a third-party ownership model, for the power plant is owned by a third party other than electricity demanders.

Future Outlook

The market size of facilities and systems for energy management deployed for regional energy management in domestic smart cities, etc. is projected to reach 39,000 million yen by FY2023, 43,000 million yen by FY2024, 48,500 million yen by FY2025, and 81,000 million yen by FY2030.

In a short-term perspective, as the increasing introduction of renewable energy sources such as solar power generation of which the generation fluctuates, energy management will be important as a measure to adjust the supply and demand of electricity at the time of power crunch and to effectively utilize the electricity derived from renewable energy sources in the community. This can be the factor for market size expansion. In addition, the policy that encourages enhancement of community-based resilience and promotion of carbon neutrality hammered out by the government may be the follow wind.

In a mid-to-long-term view, the demonstrations aiming at utilization of green hydrogen are increasing, foreseeing the advent of hydrogen society and carbon neutrality, which may generate the needs for energy management. Green hydrogen refers to hydrogen that do not emit CO2 in its manufacturing processes as it is generated by electric decomposition of water by the use of electricity from renewable energy. It needs efficient energy management as it controls hydrogen manufacturing facility in accordance of renewable energy generated.

First, demonstration projects for manufacturing green hydrogen are to be commenced mainly in the regions at which renewable energy can be secured for manufacturing hydrogen. Then, the progress of stable supply of green hydrogen, reduction of its cost, verification of usability, etc. is likely to make it widespread to other multiple regions.

*2) Resilience refers to building of a community energy management system that can complete supply and demand of energy within the community by supplying electricity independently through the use of electric private transmission line at the time of power failure in the event of disaster, etc.

Research Outline

1.Research Period: July to October 2022
2.Research Object: Local governments, private companies planning or implementing smart city projects, private companies developing technologies or business for smart cities, others such as energy companies and industrial organizations, etc.
3.Research Methogology: Face-to-face interviews (online included) by expert researchers, and literature research

About Facilities and Systems for Energy management in Smart Cities

A smart city refers to a city or a district that solves various urban challenges and problems by utilizing data and new technologies including ICT and IoT.
Energy management facilities and systems in this research refer to the following two types: those “facilities and systems for energy management business” that control facilities and equipment or supply energy in an integrated manner in target areas by utilizing CBMS (Community Energy Management System), TBMS (Town Energy Management System, electric private transmission line, heat pipes, hydrogen pipeline, etc.; and those “Regional EMS-connected Equipment and Systems" such as energy-creating equipment connected to regional EMS (CEMS, TEMS), etc., with the market size calculated based on the expenses for building and deploying the facilities and systems in smart cities within the fiscal year.

<Products and Services in the Market>

Facilities and systems deployed to aim energy management in a smart city (Energy management system, electric private transmission line, heat pipes, energy generating equipment

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