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  6. Lessons on Smart Grids from Scandinavia:Diffusion of Renewable Energy and Liberalization of the Electricity Market

Lessons on Smart Grids from Scandinavia:

Diffusion of Renewable Energy and Liberalization of the Electricity Market

No.366
February 2011
Research Fellow Hiroshi Takahashi


ABSTRACT

Smart grids have begun to attract attention around the world. Smart grids are next generation power grids that use the power of information technology (IT) to connect suppliers and consumers in real-time and optimize the supply and demand of power in a decentralized manner. Smart grids are being developed in different places for different reasons: in Europe, renewable energy is being introduced to combat global warming; in the US, capital spending on energy production and transmission in the ever-expanding electricity market needs to be cut down.

In contrast, neither of these motivations is to be seen in Japan, since the electricity market shows no signs of growing and the spread of renewable energy is limited. In fact, Japan’s electricity system has become well established at a high level of reliability and electricity companies seem indifferent towards smart grids. However, Japan should be motivated to introduce renewable energy as Europe has; in particular it should learn from the efforts of Scandinavian countries and start working in earnest towards implementing smart grids, as I will propose in this paper.

Since the 1990s, the electricity markets of Scandinavia have been liberalized; however, the most important point to consider is that this liberalization is a prerequisite for the implementation of smart grids. In theory, the most effective method of optimizing supply and demand is to allow suppliers and consumers to freely trade electricity on the market. When applied in reality, this led to the flexible integration of what are normally unstable renewable energies across four countries, such as Norway’s hydro-electricity supplementing Denmark’s wind-generated electricity. Other countries are also planning to vastly increase their wind-generated electricity in the future, and it is therefore necessary to make consumers an active part of the power system by using smart meters in a smart grid as a way of stabilizing the power system against reverse power flow.

Japan has both the motivation and the technology base necessary to introduce renewable energy on a large scale. However, there is also a movement for a specialized “Japanese-style” smart grid that can deal with household solar electricity generation, which I fear would result in the Galapagos effect. Instead, Japan should learn from the lessons of Scandinavia and actively promote smart grids in keeping with the global standard. As a prerequisite to this, I believe that Japan must first liberalize its electricity market as soon as possible.

More Information

  • The full text is unavailable in English for this report.
    The original Japanese full text is PDF here [614 KB].