ENVIRONMENT-JAPAN: Big Business Warms to Energy Savings Plan

By Suvendrini Kakuchi Reprint | | Print |

Suvendrini Kakuchi

TOKYO, Mar 28 2004 (IPS) - Environmentalists have long struggled to convince businesses to invest in energy conservation, but their hopes of succeeding are being raised by the growing appeal of a trading system in which companies can install expensive energy saving technology – and pay for it later.

Under the system, businesses that belong to the Energy Saving Companies Organisation (ESCO) buy and sell advanced energy saving technologies for use in buildings.

ESCO members include various energy trading businesses: sellers such as electric power and gas companies; construction companies and office buildings; and manufacturers of energy-efficient technologies. Members combine efforts to invest in technologies for which they can pay later from financial gains made through savings on energy bills.

At least in principle, ESCO members also are expected to reinvest profits in new energy-saving businesses.

Hirokazu Kisaki, an energy expert at ESCO, said the program is making strides. ”Energy trading is proving a viable model both as a business and environment protection. The system is gaining popularity among business because of its profit-making incentive,” Kisaki said.

ESCO said that on average its members have achieved 10 percent cuts in power costs, for a combined savings of around 40.2 billion U.S. dollars per year. This, combined with predictions of robust growth in markets for environmental goods and services, has spurred interest in the ESCO model, the organisation said.

Some 4,000 companies, including 95 ESCO members, took part in ExEnergy 2004, an organisation-sponsored trade show in February. Participants displayed the latest trends in technology they said could cut corporate energy use – and utility bills – by up to 25 percent per year.

More than 50,000 visitors thronged the weeklong exhibition here before it moved to Osaka.

Innovations displayed included technologies to cut water use in toilets, low-power lights to replace fluorescent bulbs, and energy efficient air conditioning systems such as cold-water pumps.

ESCO member Bank of Mitsubishi said such technologies, introduced under a 10-year contract signed in 2002, so far had enabled it to cut energy consumption by 2.4 percent at its head office and by 6.4 percent at an adjacent annex.

Another exhibitor, Nippon Telegraph and Telecommunications, made and markets a computerised system that regulates energy use in office buildings by constantly gauging the temperature.

Likewise, Obayashi Corp spokesman Kazuhiro Takahashi said the company clinched a deal with the Osaka prefecture to reduce air conditioning and heating bills in a large public building. ”We promised the Osaka government savings up to 140,000 dollars annually, up to 30 percent of its current payments for power,” Takahashi said.

Japanese construction major Kajima Corp joined ESCO last year and has begun to offer technology to monitor and control energy use at factories and shops that have implemented energy saving technologies. If the facilities do not achieve set energy cost-reduction targets – typically around 10-20 percent – then the company and partner Kobelco Systems Corp have pledged to cover the shortfalls.

Payment for this service can be made from companies’ electricity savings. Kajima and Kobelco have applied for a business model patent for their ESCO service.

Takahashi, the Obayashi spokesman, said that continued progress hinged on strong financial results. ”Sustaining the business incentive remains vital for being involved in ESCO,” he said.

Even activists have welcomed the model, saying that by luring major corporate energy guzzlers, ESCO has the potential to help reduce energy consumption and related carbon dioxide emissions. Scientists have blamed the so-called ‘greenhouse gas’, emitted when oil, gas and other fuels are burned, for contributing to global warming.

”ESCO may not be directly involved in reducing carbon dioxide emissions, but it is certainly a driving force towards this goal,” said Yuriko Ayukawa, energy officer at the non-governmental group World Wildlife Fund Japan.

Even so, Ayukawa called for more government regulation of office buildings to keep up pressure on companies to reduce energy. ”Business models for energy cuts are important but for best effects, there must be the combination of tough government regulations,” she said.

Under the 1997 Kyoto Protocol, an international agreement to curb the release of gases that cause global warming, Japan must lower its emissions of all greenhouse gases in the period 2008-2012 to six percent less than the amount it emitted in 1990. The country is struggling to meet that target.

Households and small businesses account for one-fourth of the current total of four billion kiloliters of energy consumed per year. Industry accounts for half of all energy consumption, with banks and the services sector using up the rest.