The promise of renewable energy has always been alluring. Now that the technology has caught up to the promise, record amounts of wind and solar are coming onto the grid both in Japan and throughout the world. 

But so far startups, especially Japanese startups, have been playing a very limited role in this transformation.

But that’s starting to change.

Today we sit down with Ken Isono, founder and CEO of Shizen Energy, and we talk about what it takes to succeed as an energy startup in Japan, and since Shizen Energy is rapidly expanding globally, what it takes to succeed as a startup in the global energy markets.

We talk about which renewables are working in Japan and which are not, what the real bottlenecks are, and more important, how we can fix them.

It’s a great conversation, and I think you’ll enjoy it.

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Show Notes

  • Why startups struggle in the energy market
  • How solar plants get built in Japan
  • How to find wind projects worth building
  • The importance of going local in a global market
  • Why the Japanese value land rights so highly
  • A deep dive into solar, wind, hydro, and geothermal energy in Japan
  • How Japanese communities are funding local renewable energy
  • Why so many of Japan’s startups come from Fukuoka
  • How Japan can transform into a free-energy economy

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Transcript

Welcome to Disrupting Japan, straight talk from Japan’s most successful entrepreneurs.

I’m Tim Romero and thanks for joining me.

It’s surprising at first, for all of the potential disruption in the energy industry, for all of the potential profits that can be made by doing things better and more efficiently in the energy industry, we don’t see that many energy startups, and as it turns out, there are good reasons for this. Generating and storing electricity at scale require skills that can’t be supplanted by new technology and innovation. Furthermore, most energy projects are long-term, low-risk medium return projects that are just not attractive to venture capital.

These projects require a different kind of financing. One notable exception, however, is Japan’s Shizen Energy who is bringing a lot of renewable energy onto the grid in Japan and around the world as well, and they’re doing it as a startup.

In just a minute, we’ll sit down with Ken Isono, Shizen Energy’s founder and CEO. He’ll explain how his little startup has worked with local governments and fought the incumbents to bring enough renewable energy onto the grid that Shizen Energy is not so little anymore.

We’ll talk about that growth, of course, and we also take a deep dive into the current state and the future prospects of the most important renewable energy technologies in Japan.

But you know, Ken tells that story much better than I can, so let’s get right to the interview.

Interview

 Tim: So, I’m sitting here with Ken Isono of Shizen Energy, and thanks for sitting down with me.

Ken: Thanks for the chance to speak.

Tim: Now, Shizen Energy, you guys are a vertically integrated renewable energy company. You guys do generation, your financing, and the retail side as well.

Ken: Yeah.

Tim: That’s a lot for a startup to do.

Ken: We started with solar but the three co-founders used to work in wind power generation company together for five years.

Tim: What made you guys decide to leave that company and start your own project?

Ken: So, actually, Shizen Energy, we found this company 2011, June, so three months after Fukushima accident. Before that, there was no demand from the market, from policy in renewables, but we knew that it’s going to change.

Tim: At first you were focused on large scale solar projects? Was it just the financing, the construction?

Ken: Yeah. So, we knew that this is very capital-intensive business and it’s really difficult for the startups to sustain the business. You have to keep on financing all the time, so our strategy was to be in the renewable business but start with the service. Started with the development of project. We also created EPC. It’s Engineering Procurement Construction. It’s basically the construction of the large-scale solar PV.

Tim: Okay, well, let’s walk through what an early project was like. So, were you using investors’ capital to build these plants or did you fundraise for each individual project?

Ken: So, we found the investor for the asset, but basically, we do everything for them.

Tim: So, an asset would be a single solar farm?

Ken: Yeah. Actually, feed-in tariff in Japan started 2012. So, when we found this company, there was no feed-in tariff yet and we didn’t know how much it’s going to be, so basically, there was no business model when we started. We just believed that there will be opportunity and there will be necessity of renewables. That’s it. So, after one year, we were looking for how we can build sustainable renewable business, and then the feed-in tariff came up.

Tim: So, did the projects make sense without the feed-in tariff? For our listeners at home, the feed-in tariff is the amount that the utility guarantees they will buy your electricity from you. Did these projects make sense economically even without the feed-in tariff?

Ken: Actually, it didn’t make sense at that time. The system cost was much higher compared to now.

Tim: You would raise funding for a specific project, you had the expertise in managing the purchasing of the materials and the construction, and then do you also manage the operations of the plant?

Ken: Yes, so we did basically everything, and we didn’t know that this business model exists around the world. After we started, we found out this is not like very new business model.

Tim: Actually, it’s very common in every country that has feed-in tariffs.

Ken: Yeah.

Tim: But now, as you mentioned, the costs have come down so much that in a lot of places, it makes sense without any kind of subsidy.

Ken: Yes. That’s true.

Tim: Actually, we’ll get into that a bit later, but tell me about your customers, so who finances this? Are these outside investors? Are these individual companies? Are these communities that want renewable energy for the community? Are they power companies?

Ken: It has changed over time. In the beginning, it was a very small project. So, basically, it was like local companies who wanted a new business or who sympathized with creating clean energy. Also, we worked, we co-invest with municipal government also, so we have a joint venture with the municipal government in Kumamoto, and as our team gets bigger and with more experience, we could work on larger projects, and then investors – financial partners have changed. We did with the trading houses like Mitsui Corporation. We created a fund with one of the largest real estate fund company in Japan. Now, we are working a lot with Tokyo Gas, yeah. If we create the right project in the world, there are more money than projects.

Tim: So, how do you find the projects? Do your partners bring you the projects or do you actively go out and try to locate sites that would be appropriate?

Ken: Yes, we do that. 20th century, it was like, globalization but in 21st century and 22nd century, we need how we can localize, like we commit to the local community. This is one of, I think, the reason we could grow with small capital is that we have the trust from the community that we are committing to long-term, so that’s why we get the land.

Tim: What does that mean, to commit to the local community?

Ken: Basically, the energy business is a very domestic business. Nobody wants people from outside. It’s about the land. Especially the Japanese, land is very tied to your family or your history. People feel that just selling the land for money, I think you have a bad reputation in that community.

Tim: So, how do you commit to the community?

Ken: So, one is we have a foundation called 1% for Community, and we basically invest 1% of revenue to that community. One project is that we made investments in local entrepreneurs who started business and education in that community.

Tim: Well, I think that is interesting because the energy business in particular tends to be very extractive. It’s large global companies that are often taking resources out of a community.

Ken: Yeah.

Tim: Well, let’s talk a bit about renewables in Japan. There are three basic types of renewables that you’re involved with and that I think are important for the future of Japan, which is solar, wind, and small-scale hydro. So, let’s talk about each of these. A lot of people outside Japan don’t realize how big solar energy is in Japan. In fact, until last year, Japan had the second most solar capacity in the world, and US just barely passed last year. What’s been driving this huge rollout for solar energy in Japan?

Ken: Biggest impact was feed-in tariff. I think from now on, it’s more like small scale, the price of the generation is going lower than the energy price from the grid. I think that will be the next driver for the –

Tim: For the mega solar projects, the big solar projects. The feed-in tariff, when we started out, was ¥42 per kWh, and now for residential, it’s down to about ¥26, and for large scale projects, it’s an auction, basically, right?

Ken: Yeah.

Tim: So, how much has that caused solar deployment and solar development to slow in Japan?

Ken: Yes, I think large-scale, I think it will slow down for a moment until solving the issue of the grid.

Tim: Looking forward, now that the end of the feed-in tariff – back in the good old days, it was ¥42 per kWh. It was actually kind of hard to lose money building solar plants in Japan, but right now, going forward, what’s the real bottleneck, is it the cost? You mentioned the permission to connect to the grid. What’s the real bottleneck for mega solar projects in Japan now?

Ken: I think it’s the grid connection cost. So, you have to pay some amount to utilities for the grid connection but basically, we cannot control the cost.

Tim: So how does that work? Do the utilities just come in and say, after you’ve built it, “We’re going to charge you this much a month to connect,” or is it a one-time fee?

Ken: It’s a one-time fee and they check how to upgrade their transmissions or their substations. It’s basically their cost. There’s no negotiation of the cost. Basically, that’s uncontrollable.

Tim: Is there a public formula that says this is how they calculated or is it just the utility says, “This is what you have to pay”?

Ken: Yeah. Basically, that’s – I mean, there is a logic behind it, of course, but we cannot –

Tim: Yeah, we can’t see that logic from the outside.

Ken: No. It’s project-by-project. So, one project we had, we had a 100-MW project, investment is $100 to maybe $120 million US, and the grid connection cost about $100 million.

Tim: Oh, my God. Really? That’s crazy.

Ken: We understand the logic, but there should be more transparency and innovation towards the costs that can be done, but it’s impossible for the others to get involved.

Tim: Yeah. I mean, the deregulation of the energy industry is really exciting in a lot of ways but transmission, distribution, that’s a natural monopoly. You’re not going to have competing companies stringing up two sets of transmission lines. I mean, of course, nobody knows looking from outside but how much of that cost do you think is these are actual costs and how much of the cost is just the grid operators don’t want to be bothered with all of these extra renewables coming on to the grid?

Ken: We build our own grid lines to the grid. We build 20 kilometers, 30 kilometers of the grid by ourselves. One time, the utility had offered us, if they build, the cost was three times higher than our cost. So, we did by ourselves, negotiating the land with the landowners and the cost was 1/3.

Tim: I mean, it does make sense. It’s very reasonable to have to pay the utility for connecting, but on the other hand, the utilities need to modernize their grid on their grid on their own anyway because the future is a lot more decentralized and a lot more local generation.

Ken: Yes. Yeah, I think so.

Tim: Let’s talk about wind. Wind energy has been extremely popular in the US and in some areas of Europe, but it hasn’t really taken off in Japan. Why do you think that is?

Ken: There’s less wind in Japan.

Tim: It’s just not a windy country?

Ken: No., it’s less stable wind. We have typhoons and strong wind but it’s like one-time thing. Wind generation, it’s better to have a very stable strong wind. Europe has, I think, more stable, and the continent has more stable wind. So, we have a project in Brazil. They have very good wind, so the generation cost is much lower than the cost in Japan.

Tim: You guys just completed a wind farm in Karatsu City, right, in Saga?

Ken: Yeah.

Tim: So, at least there are some good sites around.

Ken: Yes, we are looking for the good sites. We think that Karatsu is good, but we definitely have to lower down the cost. That project was feasible because there was feed-in tariff for wind. Without feed-in tariff, I don’t think that we could install there.

Tim: So, it’s kind of a small project?

Ken: Yeah, it’s a very small project. In Japan, the projects are much smaller than the US. The land where we can do big project is limited, offshore or the –

Tim: Well, offshore is difficult in Japan as well because the continental shelf drops off really fast. So, how did the project in Karatsu happen? Was it a community-driven project? Why invest so strongly in making a wind project happen when solar is simpler and more profitable?

Ken: Actually, our expertise was more in the wind because we were in the wind industry, and it’s very close to our headquarters in Fukuoka. Karatsu City is very focused in renewables. You find a land and there was big support from the local community, the agricultural organization, that we changed the land usage from the farmland to the land which we can install the wind turbines, and we are donating, actually, 1% of this revenue of the wind turbine to the local agriculture and we are creating the product together, and also, financing is very unique. There are three lenders and two of them are from the local banks.

Tim: That’s great. So, profit was not the main motivation for this particular project?

Ken: Of course, profit is important but –

Tim: Well, you don’t want to lose money.

Ken: Yeah, but I think we wanted to create new models, like a symbolic project for us and I think for the community and for the local banks, so that others who want to start wind business can copy what we’re doing.

Tim: So, is the next step for this project, are you hoping to take that exact same model and deploy more wind or perhaps solar in other small cities around Japan, or are you hoping to grow that wind farm to a couple of more megawatts?

Ken: Yes, so we are trying to copy that, not only Japan, around the world because as the renewables increases, it’s decentralized energy, so there will be many projects. I think everybody, especially in wind, knows that it’s very important to get along with the local community. Without that, you cannot develop projects.

Tim: It’s interesting, there’s no really – like for example, solar is very scalable. You can have a large 50-MW solar farm or you can have a little tiny 4-KW system on the roof of your house, but there’s no real tiny 4-KW scale wind generation yet, is there?

Ken: Yeah.

Tim: Do you think we’ll see something like that coming or is there something about wind that only works on really large scale?

Ken: The body of solar and wind is different. So, I think in solar, it’s much efficient to make it bigger and the body of solar is, it’s a set of solar modules, so you can have any size, so I think that’s very different.

Tim: It’s simpler, certainly, planning a project?

Ken: Yeah.

Tim: The third, small scale hydro, which I think is really interesting, so I mean, hydro is huge in Japan, and most of the renewables now are coming from large scale hydro.

Ken: Yeah, yeah.

Tim: But I think every river in Japan already has been dammed at least once or twice. So, where is the new hydro generation coming from? What do we do with these new micro turbines?

Ken: Actually, hydro, there’s not a big innovation of technology anymore because it’s a very established technology. The biggest difficulty in Japan was right to use the water. Some rivers are owned by so many people.

Tim: But isn’t that the problem of just building the dam in the first place?

Ken: Yeah, it takes too much time to develop project. That’s why it’s not growing so much.

Tim: Some of the hydro plants that are in use today were built 100 years ago. They just run if you keep them maintained, but there’s a lot of new turbines I’ve been reading about that are much smaller. They don’t generate as much electricity, but you could use them on smaller dams or in existing dams. Do you think we’ll see that deployed in Japan?

Ken: Maybe in the future.

Tim: But not yet?

Ken: Not yet, because energy, basically, it’s about the cost, so how can we create the lower cost energy than coal if there’s not a big demand? I think it’s very difficult to cost-down the turbines.

Tim: But I think a lot of it might go to what you were talking about before, is that everyone tends to be very shortsighted and look at the next quarter or the next year. Hydrogeneration, this will run for 100 years, but it’s very hard to finance anything based on a 100-year lifetime.

Ken: Yeah, and I think even very small turbines, maybe 50 people have to build.

Tim: Even to install a new turbine?

Ken: Yeah.

Tim: Okay.

Ken: So, I think the issue is more of this agreement of usage of the water. It’s not owned by the municipal government, so the project we started was these water rights were owned by the municipal government, so stakeholders won.

Tim: Okay, so it’s a political problem more than a technology or economic?

Ken: I think so.

Tim: What about geothermal energy in Japan?

Ken: Yeah. So, I think it’s a big potential too.

Tim: I know, I mean, we’re sitting on a whole chain of volcanoes. I mean, there’s lots of geothermal heat.

Ken: Yeah. I think it’s the same issue as hydro.

Tim: Politics?

Ken: Politics, yeah.

Tim: Getting people to agree?

Ken: Yeah, yeah, and it’s in a national park in some area with onsen, the hot spring, and hot springs also, it’s a right to the community, so it’s the same as water.

Tim: Just coordinating, getting all the agreement of 30, 40, 100 different parties is just difficult.

Ken: Impossible.

Tim: Yeah, well, that’s one way, impossible, basically.

Ken: Getting the agreement from 100 people is impossible.

Tim: Yeah. That’s a shame because hydro and geothermal especially in Japan, I mean, we’re sitting on a string of volcanoes, 80% of the country is mountains. It’s perfect for hydro and geothermal.

Ken: Yeah, yeah. I think it’s responsibility from our side, but also, I think we need to work with the government too, how can we really commit to solve this energy issue of Japan because in 10, 20 years, the nuclear cannot be re-operated. I mean, there is a time we need to stop operating. I think at this moment, there is no solution.

Tim: Yeah, and I don’t think there – I mean, turning the nuclear plants back on is one thing but I don’t think we’re going to be building new nuclear plants in Japan.

Ken: I think it’s very difficult.

Tim: So METI, they’ve already set and announced the target for 24% renewables by 2030, and right now, we’re at about 16%?

Ken: Yeah.

Tim: So, we’re not going to able to put in much new hydro, large scale solar is hard because the feed-in tariff has gone away, so how are we going to get to 24% renewable in the next 11 years?

Ken: We have the roadmap to 100% renewables. I think biggest impact will be offshore wind.

Tim: Really?

Ken: That’s a necessity in Japan.

Tim: What will change? Because before, you were saying there’s just not many good sites for it. what has to change to make offshore wind viable and profitable in Japan?

Ken: I meant there’s not many good sites onshore because population density is very high in Japan, so there’s a potential of the offshore if the cost goes down, and I think installer, I think it’s roof of the buildings.

Tim: For solar?

Ken: Yeah.

Tim: Yeah. The feed-in tariff is still pretty high for rooftop solar.

Ken: Yeah, yeah, yeah.

Tim: But it takes a lot of rooftops to make up for one mega solar project.

Ken: Yes, yes, yes, but I think that’s something we have to work on. Geothermal is, of course, important, hydro is also important. We think key technology is offshore wind.

Tim: Well, that makes sense on the generation side. On the consumption side, I know that Shizen Energy, you guys have been a big promoter of RE100. So, RE100 are companies who commit to using 100% renewable energy or buying offsets.

Ken: Yeah.

Tim: So, RE100 has been pretty popular in America and with European companies, but there are very few Japanese companies that have committed to RE100 yet.

Ken: Yeah.

Tim: Why, and how do we change it?

Ken: I think it’s a matter of time. I think energy is something everybody is not familiar with. I think there’s not enough information in Japan yet. If people get to know it, I think it will change.

Tim: So, what are some of the companies that are RE100 in Japan?

Ken: I think Sony and house-building companies like Daiwa House, Sekisui House, Ricoh, the copying machine company.

Tim: But I mean, it’s interesting, I think that environmental awareness is much higher in Japan than in America. There’s much higher support for recycling in Japan. People are willing to pay higher taxes to offset environmental costs, so I’m surprised that RE100 hasn’t been more widespread here.

Ken: Yeah, that’s true. I think it’s just people don’t know. I think the executives of big companies, I think they need the chance to learn what’s going on around the world.

Tim: Oh, okay, so there might be some tipping point in the future where if enough Japanese companies start doing it and there is a public awareness of it, there will be a very rapid adoption.

Ken: I think so. Once Japanese companies are good at copying.

Tim: Well, once the trend gets going, it tends to happen very quickly in Japan.

Ken: Yeah, I think it’s a matter of time.

Tim: Yeah, because I think renewable energy, we really need to solve it both on the demand side and the generation side.

Ken: Yeah, yeah, not only the companies but I think actually responsibility of us to promote to the individual household. Nowadays, the individual consumers, I think, has the strongest negotiation power. The reputation and perception create the brand.

Tim: Yeah, and if you look in America, the companies that adopted RE100, they did it in response to that exact consumer pressure. Consumers are funny that way. They won’t pay extra directly for renewable energy but they will pressure companies to use renewable energy and indirectly pay extra and they’re very happy doing that, so if that’s the approach that works…

Ken: Yeah, because I think energy, it’s about cost.

Tim: So, Shizen Energy is a Fukuoka company, right?

Ken: Yeah.

Tim: There’s so much innovation going on in Fukuoka. If you look at the population, a really high percentage of startups are coming out of there. Why do you think that is?

Ken: One is Fukuoka City is very committed to support the startups. It’s a good city. It’s not like huge cities, so we have maybe 200 people, over 30% is from abroad.

Tim: In the startup community there?

Ken: No, our company. We found out that people say that Tokyo is too big as a city. Not so many people have experienced living in the city of this size. They prefer to go to Fukuoka.

Tim: So just kind of quality of life?

Ken: Yeah. They have a good balance.

Tim: But the other thing I’ve noticed about Fukuoka startups, and you guys did this too, is that startups in most cities, if you look at, for example, Osaka, when a startup starts getting big, they’ll move to Tokyo, but Fukuoka startups tend to open like a branch office in Tokyo and keep their headquarters in Fukuoka.

Ken: Yeah, maybe that’s because people like Fukuoka and they don’t want to leave.

Tim: They don’t want to leave. Well, that’s important, I think.

Ken: Yeah, I think if it’s Osaka or Nagoya, it doesn’t make much difference with Tokyo. Fukuoka or maybe like Sapporo, they have different value.

Tim: But I think that kind of sense of place, that sense of community is really essential in developing a startup community. I mean, Tokyo is huge. There’s a lot of great startups here but it’s almost too big to have a startup community. There’s a bunch of different startup communities in Tokyo which is fantastic, and 20 years ago, I couldn’t have had imagined that, but Fukuoka, there really is, it’s small enough that there is a community and everyone kind of knows each other.

Ken: Yeah. Yes, I think so, I think so, yeah. People like to live there. There are very talented people who don’t want to work in Tokyo because of their parents or their wife. Now, people are not sticking to Tokyo, and Japan, everything is centralized in Tokyo, so we wanted to create the new business model to be global from Fukuoka or the local city in Japan.

Tim: Yeah, it doesn’t have to be Tokyo.

Ken: It doesn’t have to be Tokyo.

Tim: Alright, let’s predict the future here. No, no, I think when we’re talking about the future of energy, looking at how energy is being deregulated and broken up today, it seems a lot like when the telcos were broken up in the 80s, when they broke up AT&T and NTT, and there was this huge wave of innovation after that that no one could have predicted in the early 80s. I think in energy as well, this wave of innovation is starting. So, looking into the future, 10 years, 20 years, how are things going to be different?

Ken: So, I think basically, energy is going to be free.

Tim: Free? So cheap, it’s cheaper not to meter it?

Ken: Mm. So, I think business model will not be kilowatt hour business. There must be different service. I think that’s the value of renewables. The business change from fuel business to technology business and marginal cost is zero.

Tim: That’d be amazing if it happens, but energy, it’s almost like there can never be enough energy. People will always use it if it’s there.

Ken: Yeah, yeah, yeah. So, I think, basically, it’s free and then you can use any amount you want. I think that’s the future.

Tim: What is the main driver for that? Do you think it’s just going to be wind and solar, prices are going to keep dropping the way they have been for the last 10 years or so?

Ken: Yeah, for example, in Europe, sometimes, energy price is negative.

Tim: Yeah. In Germany, a few times last year.

Ken: Yeah, so that can happen.

Tim: Okay, so maybe it would be like cities and local governments would put up solar panels and wind turbines in the same way they maintain streets today, just a sort of a public good that everyone uses?

Ken: Yeah, like Japan where infrastructure is well-developed, it’s not a big difference, but I think bigger impact will be the area where the infrastructure is less developed. You don’t need a grid to have energy in that community.

Tim: Okay, so kind of a series of overlapping microgrids and mini grids?

Ken: Yes.

Tim: So, what happens to the big utilities in 20 years? What happens to the TEPCOs and the PG&Es?

Ken: The rule will definitely be different. For example, Skype, I think, was started 2000, right?

Tim: Yeah.

Ken: International calls became free. I think the same thing will happen in energy. People forget about it, the big change.

Tim: Yeah. Humans, we’re strange that way, like massive change happens and then a year later, we think it’s always been that way.

Ken: Yeah.

Tim: One of the things that I’ve been most impressed with is in Japan, how interested sort of the younger generation is in solving energy problems and solving environmental problems.

Ken: I believe in the younger generation too. So, we are trying to create energy company for millennials. Actually, one of our goal is by 2030, expand into 196 countries. There are many young millennials around the world coming to us.

Tim: Well, listen, Ken, before we wrap up, I want to ask you what I call my “Magic Wand” question. That is, if I gave you a magic wand, and I told you that you could change one thing about Japan, anything at all – the education system, the way people think about the renewable energy, the way people think about risk, anything at all to make things better for startups and innovation in Japan, what would you change?

Ken: Probably the banks.

Tim: The banks?

Ken: For the startups.

Tim: What would you change?

Ken: Mentaihosho. How do you say that? Guarantors? When an entrepreneur tries to start more capital-intensive business, you need to guarantee as individual to the bank. I did this for a while, like millions of dollars. Our company is big enough that I don’t need to do that anymore, but I think that is a big bottleneck for the entrepreneurs to get along.

Tim: Yeah, that’s taking on an incredible amount of personal risk.

Ken: Yeah, so basically, it’s limitless.

Tim: So, where is that gap? So, for startups in Japan, if you want to raise $50,000, $100,000, that’s relatively easy. Where is that range where above this number, you need to borrow from a bank and you need to personally guarantee it, but above this other number, it’s okay, your company is big enough and you can borrow without that guarantee. What’s that range?

Ken: Actually, I don’t know. So, maybe not only the amount of revenue or cash, maybe it’s amount of years, how long your company exists may have the impact on that. Once you start to get profit, I think there will be more chance to have no guarantees.

Tim: Yeah, that is a big hurdle for a lot of entrepreneurs.

Ken: Yeah, I think it’s changing because of more venture capital or equity for the startups, but if you rely on too much equity to the outside investors, your share will be lower and there will be more pressure from the investor.

Tim: Sure, sure, I mean, it reduces your profits but more importantly, reduces amount of control.

Ken: Control, yeah. So, sometimes, you need to debt to keep control.

Tim: Yeah, that makes sense. I mean, it’s really useful to have that as a tool, to have bank financing. That’s what it’s supposed to be for. Do you think the banks are changing their attitudes at all?

Ken: Yeah, but I think it’s changing because Japan population is decreasing. Everybody has to change for the better future, so I hope everyone is changing, bit by bit.

Tim: I hope so, too. Well, listen, Ken, thanks so much for sitting down with me.

Ken: Thank you. Thank you.

Outtro

And we’re back.

The Karatsu wind project is a great example of how renewable energy can ger rolled out locally. Now, the wind farm itself is quite small but the generation capacity is not the main point. This project is a template of how renewable energy can be financed, built, and consumed locally.

All over the world, the energy industry is becoming more decentralized, more local, and it’s largely because of renewables. Let’s face it, energy today is not a community-friendly industry. Profits are made by extracting value from communities, whether that extraction is literally taking something out of the ground and leaving the community with an empty hole or operating coal and nuclear power plants in poorer rural communities due to the risks associated with them.

Renewable energy, however, particularly when deployed as it was in Karatsu, has the potential to change that. Energy production becomes something controlled by the community and that provides most of its value to the community itself.

Now, I don’t know if we’ll ever reach Ken’s vision of energy so cheap that it’s free, but communities being able to plan for and profit from their own energy planning, yeah, yeah, that could happen. Maybe not in unlimited amounts, but I could certainly see a city deciding to make sure that everyone had enough free energy to ensure that no one was too cold in the winter or that no one was too hot in the summer.

The business model of the energy industry has been fundamentally unchanged for several hundred years, so it’s hard to imagine it being any other way, but things are changing, even in Japan. I’m involved with Green Tech Labs in Japan. It’s a program funded by Japanese energy utilities to encourage innovation and energy startups here in Japan. If you’re part of the energy and environmental startup scene in Japan or if you want to connect with them, send me an email and I’ll put you in touch.

Anyway, Green Tech Labs ran a startups weekend workshop, where participants worked over three days to develop new business models in energy. Participants ranged from middle school students to people in their 50s, and the winning team was led by two high school students.

Things are changing. The energy industry does not lend itself well to startup style disruption, but disruption is coming. It might not come with the bravado, swagger, and IPO billions that we’ve come to expect from tech startups. It might be a quiet revolution but it will be transformative.

If you want to talk about energy and renewables, Ken and I would love to hear from you. So, come to DisruptingJapan.com/show140 and talk to us. If you ask a question at the site, I guarantee you, I’ll respond and my guests have a pretty good track record in answering as well.

If you get the chance, check us out on LinkedIn or Facebook, but you know, even better, if you like the show, tell people about it. Disrupting Japan has grown not by social media marketing or advertising, but because listeners like you enjoy it and they tell their friends about it.

But most of all, thanks for listening and thank you for letting people interested in Japanese startups and innovation know about the show.

I’m Tim Romero, and thanks for listening to Disrupting Japan.