Sustainability

Japanese automotive supplier Denso acquires manufacturing license from British green hydrogen technology company Ceres

DENSO Corporation has signed a manufacturing license agreement with Ceres Power Holdings, a UK based developer of solid oxide cell stack technology. DENSO aims to advance the early practical application of Solid Oxide Electrolysis Cells that produce hydrogen through water electrolysis.

Denso has traditionally been a supplier to Toyota, a strong advocate of hydrogen fuel.

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Japanese shipping company NYK to invest in British-Irish sea urchin farming and biodiversity venture

Japanese shipping company NYK is investing in Urchinomics, a British-Irish venture which will feed up starving sea urchins so they can be sold for food – and also support biodiversity.

Kelp forests on the seabed are being eaten up by an overabundance of sea urchins. Kelp forests are “blue” carbon as they absorb and store CO2 from the atmosphere through photosynthesis and they also support marine biodiversity by providing a habitat for small fish and other aquatic life.

The lack of kelp food means that the sea urchins are not edible. Urchinomics will collect them, feed them on other natural food and then use the profits from sales of urchin (known as uni, a delicacy in Japan) to reinvest in collection of urchins but also restoration of the kelp forests.

A new job for the 21st century – urchin rancher.

Unidon photo By Totti – Own work, CC BY-SA 4.0, https://commons.wikimedia.org/w/index.php?curid=68677193

Italy’s heating and cooling economy

The European summer holidays have come to an end and although we only took short breaks to British locations, where the weather was cool and rainy, I was glad to have avoided the experiences of other Europeans, of unbearable heat.

My business partner in Germany had to cut short her family holiday in Sardinia because of the forest fires – joining the many tourists who were evacuated from Italian and Greek islands. This may have undermined Italian Finance Minister Giancarlo Giorgetti’s claims that the Italian economy could grow by as much as 1.4% in 2023, in expectation of a tourist boom in the first full summer season since the pandemic struck.

A slowdown in the Italian economy was already showing through in the second quarter (April-June) of 2023, with GDP unexpectedly contracting 0.3%. Economists attributed this to low domestic demand, high interest rates, persistent inflation and a lack of net export growth. Industry and agriculture were particularly hard hit, with factory production down in both June and July.

Japanese companies have nonetheless been expanding in Italy over the past year or two, as I discovered through my recently completed my research on the 30 largest Japanese companies in Italy – they now employ over 31,000 people, up around 8% from the previous year, and more than half of the 50,000 or so people in Italy who work for around 400 Japanese companies. This makes Italy joint 4^th in Europe alongside the Netherlands in terms of numbers of people employed by Japanese companies, after the UK, Germany and France.

The largest Japanese company in Italy is NTT, thanks to its acquisition via NTT Data of Italy’s Value Team in 2011 and also Spain’s Everis, which had substantial presence in Italy, in 2013. The second largest is Hitachi, which completed its acquisition of Ansaldo STS, an Italian rail systems company, in 2019.

The biggest growth in employee numbers recently, however, were at Daikin and Panasonic, thanks to their acquisitions of Italian HVAC companies. Italy has been more proactive than other European countries in giving tax credits worth up to 110 per cent of the cost of energy efficiency upgrades. This has boosted sales of heat pumps to be the seventh highest in Europe last year.

Other countries besides Japan have woken up to the opportunity that Europe’s wish to reduce dependency on Russia and tackle climate change brings. China’s Midea is planning to build a heat pump factory in Italy, and Germany’s Bosch and Vaillant are expanding. The USA’s Carrier Global has spent €12bn on acquiring Germany’s heating equipment company Viessmann.

Here in the UK there are grants available for heat pumps but the lowest take up in Europe for heat pumps. This is explained by low gas prices (which fires most of our central heating) relative to electricity, the need for planning permission for heat pump installations, a lack of skilled labour to install the pumps and our miserable weather, which means we are not so interested in the air cooling side of heat pumps.

This article by Pernille Rudlin was first published in Japanese in the Teikoku News, 13th September 2023

A list of the 30 largest Japanese corporate groups in Italy can be downloaded here

Fuyo General Lease to set up UK renewable energy investment subsidiary

Fuyo General Lease is setting up a subsidiary in the UK from April 2024 to invest in renewable energy, particularly offshore wind. It entered the European renewable energy business in June 2022, and in about a year and a half, the total amount of investment and loans exceeded 50 billion yen in Japanese yen. The company will also invest approximately 30 million euros (approximately 4.7 billion yen) in a fund managed by Danish investment company Copenhagen Infrastructure Partners (CIP).

Fuyo General Lease already has subsidiaries in the UK and Ireland focused on aircraft leasing and acquired British company Aircraft Leasing and Management in 2014. Other Japanese leasing companies such as Orix have already been expanding in Europe – Orix acquired Spanish renewables company Elawan Energy in 2020.

The opportunities for Japanese companies in European energy

It’s exactly 25 years ago that I went to Japan on a business trip and gave a presentation to the headquarters of the Japanese trading company I was then working for, on offshore wind power. I remember feeling deflated by the lack of enthusiasm for my recommendation that the company invest in this sector in Europe.

At that time, the main obstacle was the high cost of connecting the offshore wind turbines to the power grid, but I felt sure that in the long run the costs would come down and this kind of high value infrastructure project in renewable energy was an investment Japanese trading companies should be making.

25 years later, I felt vindicated to read that the recent announcement of $22bn Japanese investment in the UK turns out to be primarily composed of investments by Japanese trading companies in offshore wind projects. Actually this investment is not entirely “new” – Japanese trading companies have been investing in UK offshore wind projects and transmission infrastructure from around 10 years’ ago.

Nonetheless, Japanese companies are perceived to be late comers to European wind power, at least in terms of supplying wind turbines. European companies such as Denmark’s Orsted or Vestas or Germany’s Siemens are seen as the leaders. It’s not surprising, then, to see that many Japanese companies have teamed up with foreign companies and a significant proportion of the 542 members of the Japan Wind Power Association are companies headquartered outside of Japan.

As JWPA itself points out, while Japan’s share of wind turbine sales globally may be small, Japan excels in companies who supply the components for wind energy turbines, such as precision machinery and electric equipment. If these companies do not already have a presence in Europe, then I expect they will soon, as Japanese investment tends to bring a Japanese supply chain with it.

Unlike the 1970s and 1980s, however, it seems to me that this time it is not a case of “domestic first, then overseas.” Renewable energy is a huge global challenge, which needs to be tackled speedily and in a collaborative way, so that we can learn from each other.

The remaining obstacles are still very local, however. Most offshore wind projects in the UK are in the North Sea, on the eastern side of the country, where I live. There has been a vocal campaign by residents against the cables from the offshore wind projects running through picturesque countryside, or substations being sited near residential areas, which recently resulted in many local politicians losing elections.

Another challenge that runs right across Europe is the shortage of connections to the national grid, sometimes resulting in a 5 or 10 year wait. With increased electrification such as the EU switch to electric vehicles, and Germany’s controversial proposed ban on gas boilers, the grids themselves, rather than the equipment or connections, have become the bottleneck. Hitachi’s acquisition of ABB’s power grids business brings Japanese investment to this part of the energy chain too.

This article by Pernille Rudlin was first published in Japanese in the Teikoku News, 12th July 2023

The energy crisis

With warnings of train strikes in the summer and power cuts in the winter, and rising inflation, it really does feel like Britain has returned to the 1970s. I was a little girl, living in Japan, during most of the 1970s, but was still in Britain for a year or so when the first power cuts happened. I remember being quite excited about having to do everything by candlelight. I doubt the adults were as thrilled, however.

Memories of my childhood in Japan came back to me as I was looking for alternative heating for our house that was not reliant on mains electricity or gas. I discovered that Japanese manufacturers are selling wick type paraffin heaters in Europe, just like the ones I remember from my childhood in Sendai, only less smelly.

I shared this with one of my friends, about the same age as me, and she told me that her family home, in 1970s Britain, was also heated with paraffin heaters. They did not have any central heating, and, she added, the paraffin heaters were used to heat the bathroom on bath night. In those days, it was quite common just to have a bath once a week, often sharing the dirty water with other members of the family.

For many homes then, there was only enough hot water for two bathfuls a day, coming from an immersion tank, which ran on electricity and would often be set to switch on at night, when electricity was cheaper.

Now most British people shower once a day, getting their hot water “on demand” from a combination gas boiler, which also runs the central heating. Even before the threat of power cuts, the government has been considering incentivising households to switch away from gas boilers to air source heat pumps for their central heating and water heating. So far, however, there has not been a big take up.

One of the issues, apart from the high upfront cost of installation, is that planning permission may be required for an outside unit. This also caused difficulties in the uptake of solar panel installation. Many British people live in old houses, or conservation areas, where visible changes to the houses that are not in harmony with the surrounding environment cannot be made.

This may also prove to be an issue with the new home batteries that Japanese companies such as Toyota Motor have been introducing. Because they are also used to charge cars, they need to be outside – which is fine for those who have homes with a parking space incorporated. But many city dwellers park their cars on the road in front of their house, and this means that they have to run a cable out of their front door and across a pavement to charge their cars.

No doubt the energy crisis will eventually provide ingenious answers to this, but this winter I think it might have to be candles and paraffin heaters for many of us.

UAE and Japanese companies – diversity and decarbonization

A TV series called “Inside Dubai: Playground of the Rich” is currently showing on the BBC in the UK which features British people who have made Dubai their home, who are “soaking up the sun, glamour and tax-free benefits” of Dubai, “but must also follow the rules” of their host country and cope with “the frenetic pace of change.”

“Tax free luxury and oil” is the image most British people have of Dubai – particularly since the pandemic, when many British celebrities went to Dubai on holiday when allowed. They posted photographs of themselves enjoying the sunshine on Instagram with a backdrop of extravagant architecture behind them. But at the same time, there is discomfort that the British in Dubai are behaving in old fashioned colonialist ways, while many people of other ethnicities in Dubai are having a much tougher life. There is also a nervousness about human rights violations, and the strict rules on alcohol, adultery and homosexuality.

This image rather contrasts with the conclusions of a recent report from JETRO saying that Japanese companies were attracted to the Middle East as a place to develop business in renewable energy and decarbonization, with the UAE ranking second behind Saudi Arabia as the country of most interest.

I was already aware that the UAE was the biggest host of Japanese companies in the Middle East. I had visited there a couple of times a few years’ ago to provide cross cultural training to a Japanese bank there and spent some time trying to understand the cultural complexity of a society which has the highest proportion of immigrants in the world.

This knowledge came in useful recently, when I was asked by a Japanese energy company to support them in a diversity and inclusion training in the UAE. This was part of a wider initiative to be more inclusive, to listen to the ideas of all employees, regardless of age, gender or ethnicity, in order to encourage innovation, particularly with regard to decarbonization.

Dubai is currently hosting an Expo which is strongly emphasising ESG in its themes. There is a Programme for People and Planet, which is aimed at the “open exchange of new ideas and innovations,” placing equality, universal respect and human dignity at the centre of human progress.”

In preparation for being an expo host, and to encourage more foreign direct investment, the rulers in the UAE had already identified that a robust legal framework, which was more tolerant of diversity, was going to be necessary. There are now new laws on anti-harassment and anti-discrimination, particularly in the special economic zones, as well as a relaxation of alcohol laws and Islamic personal laws.

So I can now see why Japanese companies are feeling more positive towards the UAE again, both as a place to develop business, but also as country where the legal framework is coming more into line with the acceptance of the diversity that is needed for companies to change and evolve.

This article by Pernille Rudlin was first published in Japanese in the Teikoku News, 9th February 2022

The path Japan should take to zero carbon – former Hitachi president Kawamura Takashi

Kawamura Takashi is famous in Japan for being instrumental in turning Hitachi round after its largest ever loss in 2009. He has just finished 3 years as chairman of TEPCO (Tokyo Electric Power). Nikkei Business asked for his view on the Japanese government goal of achieving zero carbon by 2050. While more diplomatic than Mr Kobayashi of Mitsubishi Chemical, he points out that country level goals need to be translated into industry based goals, and this cannot be left up to individual companies. Government, electric power companies, manufacturers and citizens will have to unite to do this, he says.

This could apply to Japanese companies in Europe as well in our opinion. There is more scope for Europeans working in Japanese companies to network with each other to collaborate to achieve sustainable development goals, and not just leave it up to the Japanese exaptriates.

Kawamura points out that it’s tough for each company to go it alone. Equipment around the world for companies such as steel manufacturers will become obsolete if they were to switch away from current product methods. Chemical companies could no longer make plastic from petroleum but artificial photosynthesis has been worked on for decades and is still unsuccessful.

“But if it cannot be done, the earth will be destroyed first”. It may seem that the solution is for Japan to “choose the path of returning to the lifestyle of the Edo period (1603-1868) living quietly with a small population” but Kawamura thinks this is not a responsible thing to do when Japan has the third largest GDP in the world.

Hydrogen can be one solution but the problem is making it. It can be made from water with nuclear power but of course this is controversial. There are few regions in Japan where the efficiency of generation of renewable power is high enough to make hydrogen however. So it might be necessary to find methods of producing hydrogen from overseas renewable energy power generation and transporting it to Japan for distribution as energy.

Kawamura says Japanese business leaders are too emotional. They cannot cut business lines which have been developed in their companies over the years, so end up having to bring in foreign executives to do it. “It’s a lie that Japanese can’t do it. Japanese companies don’t want to make calm decisions based on economic rationality, but Japanese really should do this for themselves.”

Asked if he will stay on another 3 years at TEPCO to help with zero carbon he says that at 81 he is too old and he is wanting to do things that give him ikigai (a reason for living outside of work – see our Japan Intercultural Consulting video on this) such as taking his time to read books, which he said he could not do when he was an executive.

Last updated by Pernille Rudlin at 2025-01-24.

Category: Sustainability