Why is it Regional Decarbonization Now? Toward Promotion of the Regional GX

INDEX

• Why is decarbonization of the region necessary?
• What initiatives are underway in the region?
• What are the challenges in achieving regional decarbonization?
• How has PACIFIC CONSULTANTS been involved in regional decarbonization?
• What are your thoughts on future development? From declaration to implementation.

Why is decarbonization of the region necessary?

There are two reasons why regional decarbonization is currently attracting attention. The first is that regions hold the key to reducing greenhouse gas emissions. Until now, the main targets for reduction have been concentrated emission sources in one place, such as large-scale industries and power plants, and a certain degree of progress has been made. However, in order to further reduce emissions in the future, it is essential to take detailed measures targeting small, dispersed emission sources such as local small and medium-sized enterprises, the transportation sector, and households.

Another reason why regional decarbonization is attracting attention is that it is directly linked to regional growth strategies and has the power to simultaneously solve regional issues.
Currently, approximately 90% of municipalities pay retailers outside the region to secure their energy, resulting in an energy deficit (Source: "Decarbonized Community Development Support Site" (Ministry of the Environment)). If a region could secure its own electricity by utilizing its abundant local resources, such as solar, wind, large and small hydroelectric power, and geothermal energy, and then invest the funds gained back within the region, it would not only ensure energy but also lead to industrial development and job creation, and could also increase the security of people's lives by strengthening their resilience to disasters.
Regional decarbonization efforts involve making use of local resources to transition from a "consuming region" to a "producing region," which will create opportunities for new growth in the region.

What initiatives are underway in the region?

The government published the Regional Decarbonization Roadmap in June 2021. With the aim of starting a "Decarbonization Domino of Action" from regions with high motivation and feasibility, at least 100 decarbonization's leading regions will be selected by 2025, and subsidies of up to 5 billion yen will be provided per plan. The aim is to get promising decarbonization models on track by 2030 and spread them to other regions. Up to date, 82 proposals have been selected as decarbonization's leading regions, and the selected cities and towns are in 38 prefectures  (as of December 11, 2024).

In fact, since the first round of 26 proposals was selected in 2022, various initiatives have been underway across the country. Some of the initiatives that are progressing smoothly include bringing forward the goal of decarbonizing public facilities from 2030 to 2026, expanding budgetary measures to support the introduction of residential solar power generation equipment and storage batteries and to promote the decarbonization of industrial complexes, and even enacting unique ordinances to require the installation of solar power generation equipment, etc. (Source: Decarbonization's Leading Region Evaluation Committee, "Overall Review of the 5th Decarbonization's Leading Region Selection Results," September 27, 2024 (Ministry of the Environment)). The status of the efforts of decarbonization's leading region is reported annually, and detailed follow-up by the Decarbonization's Leading Region Evaluation Committee is also conducted to serve as a reference for subsequent local governments.

In order for local governments to follow in the footsteps of those that have already done so and move forward with regional decarbonization, they must first understand the current situation, such as how much Greenhouse Gas Emissions are in the region and which sectors have the most. Finding "hot spots" is the backbone of regional decarbonization efforts. Then they must understand the region's renewable energy potential, develop an action plan, and secure financial backing. The national government has prepared a variety of tools and support options to support this series of planning tasks.

What are the challenges in achieving regional decarbonization?

As regional decarbonization initiatives progress, some challenges are also emerging.
For example, when introducing renewable energy, there are cases where electricity rates are higher than when procured from traditional retail electricity suppliers, and when it comes to start the initiative, there are cases where voices of caution or opposition arise and the initiative stagnates. However, the introduction of renewable energy cannot be promoted simply by comparing rates, but must be viewed as part of an overall energy policy that looks at the entire region and its future. It is necessary to build an energy management system that aims for overall optimization, not partial optimization.

It also highlights the difficulty of reaching consensus among stakeholders at the planning stage.
Regional decarbonization initiatives are a complex project that combines a number of measures to effectively advance decarbonization while simultaneously revitalizing the region. For this reason, various departments within the city government are involved, and external private businesses also participate. Local residents are also important stakeholders. Each has their own ideas, and private companies have things they want to do as companies and must ensure profits. If each party only asserts their own opinions, the project will fall apart. How to reach a consensus, how to create an implementation organization, and who will be the command center - these are major issues in working on regional decarbonization, which involves many stakeholders.

Furthermore, local governments working on regional decarbonization often tend to confuse the purpose and the means. For example, if a region is selected as a decarbonization pioneer, it will receive subsidies, but before you know it, obtaining the subsidies and implementing the planned projects themselves tend to become the goal. It is necessary to always return to the future vision of the region toward 2050 and proceed while comparing it with it.

How has PACIFIC CONSULTANTS been involved in regional decarbonization?

Source: "Building a Regional Circulatory Symbiosis Zone through Decarbonization Innovation"
(Ministry of the Environment)

PACIFIC CONSULTANTS' initiatives are broadly divided into two parts. The first part is supporting the formulation of regional decarbonization promotion policies by the Ministry of the Environment and other national organizations. We are also responsible for producing guidebooks issued by the government. One of these is the Ministry of the Environment's "Guide to Getting Started with Self-Operated Microgrids for Local Production and Consumption Using Local Renewable Energy." We were commissioned to do this because we were recognized for our extensive experience in building and supporting microgrids. This document explains the key points to consider when considering distributed energy using local renewable energy to determine whether a self-operated microgrid is an option, the basic configuration and model examples of self-operated microgrids, how to proceed with business construction, and introduces reference cases.
We also produced a guide to introducing renewable energy to remote islands, "Guide to Increasing Self-Sufficiency of Renewable Energy in Remote Islands," published by the Ministry of the Environment. Electricity procurement on remote islands is almost 100% dependent on thermal power. This not only results in high CO2 emissions, but also in the risks associated with unstable fuel transportation from outside the island and the high fees reflecting procurement costs. Although improving self-sufficiency in renewable energy is a major theme, it is difficult to secure a large site for solar power generation, and salt damage prevention measures are also essential. In addition to solar power, a combination of geothermal, small hydroelectric power, and wood biomass is effective, but there are many remote islands with little potential for these. It is necessary to devise ways to ensure a stable power source, including the installation of storage batteries and the introduction of other systems. When commercializing, it is also necessary to consider business methods such as PPP/PFI, which utilize private know-how and funds, and this guidebook carefully explains these issues.

PACIFIC CONSULTANTS is also working on a variety of activities, including private line microgrid projects, to support the decarbonization of individual regions.
In addition to the decarbonization effect of the self-operated microgrid by introducing renewable energy to the region as much as possible, it is expected to have the effect of improving disaster prevention in the region and revitalizing the local economy by promoting energy projects in the region. PACIFIC CONSULTANTS has a long track record in supporting the construction of this microgrid. For example, in Mutsuzawa Town, Chiba Prefecture, the Local Governmental Power Producers and Suppliers (PPS) company "CHIBA Mutsuzawa Energy" was established through our group company - Pacific Power, to develop a gas engine cogeneration system using locally produced natural gas, and supply electricity and heat to roadside station and homes in the Smart Wellness Town through the microgrid. We also effectively use the exhaust heat from power generation to heat the groundwater after natural gas extraction, use it for hot springs, and supply it to the hot spring facilities at roadside station.

Development of Advancing Decarbonization Region in Shikaoi Town
Source: Shikaoi Town, Hokkaido

We also played a role in the implementation of microgrids in Shikaoi Town, Hokkaido. In recognition of its efforts to maximize the introduction of renewable energy and the creation of a unique network of heat and electricity, it has received various awards such as "New Energy Grand Award (Chairman's Award of the New Energy Foundation)". Specifically, facilities such as town halls, hospitals, welfare facilities, and heated swimming pools are networked by private lines and managed by an energy supply and demand control system using solar power generation and storage batteries, etc., which has had the effect of expanding the introduction of renewable energy, improving disaster response capacity (BCP), and reducing fiscal expenditures.
In addition, PACIFIC CONSULTANTS supports decarbonization efforts in six regions as leading decarbonization areas in the country, including Shikaoi Town. In some areas, we are supporting the management of the overall efforts of decarbonization leading regions. We support the smooth progress of multiple interrelated projects in a single region by checking the progress while considering the overall budget, and correcting and reviewing the course as necessary.

What are your thoughts on future development? From declaration to implementation.

As of September 30, 2024, 1122 local governments (46 prefectures and 1076 cities, towns, and villages) have declared that they will achieve "net zero carbon dioxide emissions by 2050." However, despite the declaration, many local governments have taken general measures such as introducing solar power generation and LED lighting to public facilities, switching official vehicles to electric vehicles (EVs), and providing subsidies for energy-saving measures at private business operators and houses, but are unable to see beyond that. Or, although they have drawn an image of what 2050 will be like, many local governments are struggling to formulate an action plan for how to actually achieve carbon neutrality. In addition, some local governments that have been selected as decarbonization pioneers are finding it difficult to implement their plans, and are declining to be leaders. Regional decarbonization initiatives have progressed from the declaration stage to the implementation stage, but it is not easy to actually implement them in local communities.

PACIFIC CONSULTANTS is familiar with both national guidelines and specific support measures, as well as the various concerns faced by local governments on the ground, and is able to provide on-site support.
It is necessary to consider the business method based on the circumstances of the power generation, transmission, and demand sides, such as which power source is best, solar power, hydroelectric power, or biomass, whether to use private lines or existing grid lines, where to place the power source, how to transmit power to meet what demand, what is the effect of decarbonization in that case, and who will enter into a contract with whom and what kind of contract will be concluded to operate the business. As a consulting company, we take a neutral and fair stance and do not assume the use of a specific business method or product, but present various options from the perspective of what is needed to decarbonize the region and solve problems, and we continue to consider the matter together while sharing the perspective of the field.
In order to further advance regional decarbonization, the key going forward will be coordination with local social infrastructure and the creation of a next-generation regional energy management system.
Regarding cooperation with local social infrastructure, the idea is to advance local decarbonization in cooperation with social infrastructure initiatives such as airports, ports, railways, water and sewerage facilities, dams and erosion control facilities, roads, and waste treatment facilities, for which decarbonization is currently being considered. PACIFIC CONSULTANTS has a track record of pioneering the promotion of decarbonization in these social infrastructure fields, and is building a pioneering decarbonization model that integrates these infrastructures with the surrounding areas, and is promoting decarbonization of the area as a whole.
The other point, the construction of a next-generation regional energy management system, is the creation of a mechanism for introducing and using renewable energy efficiently within the region, even with the constraints of the power grid. To create such a mechanism, the demand side, such as microgrids and renewable energy at individual facilities, must manage energy in coordination with the grid, so that more renewable energy can be produced and used throughout the region. PACIFIC CONSULTANTS is working on building such a system. By advancing these initiatives, it will be possible to build and realize a regional GX innovation model.

We will continue to leverage the comprehensive strength of PACIFIC CONSULTANTS GROUP and further strengthen our collaboration with group companies Pacific Power (retail and wholesale of electricity through Local Governmental Power Producers and Suppliers (PPS) businesses, renewable energy introduction businesses, etc.) and PE-TeRaS (solar power generation businesses, etc.), which are engaged in green society businesses, to contribute to regional decarbonization.