Shizen Energy Inc.

Shizen Connect Inc.(Shizen Connect), a VPP platform developer, signed a capital and business alliance agreement with eight companies, including JERA Co., Inc. (JERA), Shikoku Electric Power Co., Inc. (Shikoku Electric), Shin Nippon Air Technologies Co, Ltd (SNK), Tokyu Land Corporation (Tokyu Land), Tokyo Gas Co, Ltd (Tokyo Gas), Nishi-Nippon Railroad Co. Ltd (Nishitetsu), Hokuriku Electric Power Company (Hokuriku Electric), and Hokkaido Electric Power Co., Inc. (HEPCO) on July 9, 2024 for the purpose of social implementation of VPP, and simultaneously raised a total of 860 million yen by raising funds from group companies.

Through this alliance, Shizen Connect will make further efforts to promote the social implementation of VPPs together with partner companies and contribute to the realization of a decarbonized society.

What is a Virtual Power Plant (VPP)
To achieve the government’s goal of carbon neutrality by 2050, the introduction of renewable energy power generation facilities is being expanded. However, since the output of these renewable energy power generation facilities fluctuates greatly depending on weather conditions, a system to balance the supply and demand of electricity is necessary to effectively utilize renewable energy, and VPPs are attracting increasing attention as a means to achieve this goal.

VPP is a system in which energy devices such as electric vehicles (EVs) and storage batteries owned by households and businesses are remotely controlled via the Internet like a single large power plant. For example, power supply and demand are efficiently managed by storing electricity when there is a surplus in the grid and discharging it when there is a shortage.

The main advantages of VPP are as follows:

• Homes and businesses: simply agreeing to allow remote charging and discharging of energy devices provides economic benefits, including rewards for cooperation in VPP control. There is very little disruption to daily life or business activities, as the control takes place during periods when the equipment has spare capacity.
• Manufacturers of EVs, storage batteries, etc.: the above economic benefits will promote sales of VPP-compatible EVs, storage batteries, etc., and also generate recurring revenue through remote control.
• Electricity Retailers: VPPs can be used to reduce electricity procurement costs. Electricity retailers can also offer VPP services and solutions to their customers, such as support for the deployment of VPP-compatible electric vehicles, battery storage, etc.
• Renewable energy companies: supply-demand adjustment by VPPs reduces output curtailment and improves profitability.
• Society: requiring no capital investment and no carbon emissions, VPPs enable the control of electricity supply and demand in a cost-effective, decarbonized manner. This in turn leads to lower electricity prices, more stable electricity supply, reduced risk of blackouts, improved energy security and a decarbonized society.

The size of the domestic market is growing rapidly and is expected to reach 73 billion yen by 2030 *2.

About Shizen Connect Inc.
Shizen Connect is a technology company that is a developer and operator of VPP platforms.

Through its proprietary energy management system, “Shizen Connect”, developed and operated by Shizen Connect, the company is engaged in the following R&D activities:  

• AI-based forecasting of electricity market prices and demand, and planning of charge/discharge control
• Control support for various energy equipment such as EVs and storage batteries from various manufacturers
• Provide the security that is required for the economic security of large scale VPPs

In business development, Shizen Connect does not directly contact individual homes and businesses, but it will expand its business through the following collaborations.

• Collaboration with equipment manufacturers: With the cloud integration of “Shizen Connect” with equipment manufacturers’ remote control servers, equipment can be controlled without additional costs such as communication hardware and communication costs.  In the field of residential storage battery manufacturers, Shizen Connect has already achieved cloud integration with a total of approximately 57%*3 of the Japanese market share. In addition, cooperation with manufacturers of EcoCute (electric heat pump water heaters), EVs, and other products will be further expanded.
• Collaboration with electricity retailers:  Electricity retailers provide services to their own customers using VPP technology, and Shizen Connect is responsible for controlling the VPPs. For example, “Shizen Connect” has been adopted for customer services such as “IGNITURE Storage Batteries” *4 by Tokyo Gas and “Eco & Energy Saving Challenge Equipment Control Option” *5 by TEPCO Energy Partners. To further expand services, Shizen Connect is conducting demonstrations with a number of major electricity retailers (Table 1).

VPP technology can be used to control not only consumer-side equipment but also grid storage batteries. For example, “Shizen Connect” has been adopted by companies such as NNR Shizen Energy GK and Tokyu Land Corporation for trading and operating their grid storage battery businesses *6, *7, and by Osaka Gas for its grid storage battery remote control and monitoring system*8, among others.

Shizen Connect is aiming to achieve sales of 10 billion yen by 2030.

Capital and Business Alliance and Financing
The purpose of this partnership is for the partner companies to utilize “Shizen Connect” as a common platform and to jointly realize the social implementation of VPP with a long-term perspective.

The benefits of this alliance include: 

• Partner Companies: R&D costs for the development of energy projects and related services can be compressed through the use of VPPs
• Shizen Connect：Can focus on R&D by entrusting the securing of control targets to partner companies

The devices controlled and the partners working together in this alliance are as follows: 

• EV, residential storage battery, EcoCute, etc.
  Shikoku Electric, Tokyo Gas, Hokuriku Electric, Hokkaido Electric 

• EV bus
  Shikoku Electric, Nishitetsu 

• Grid-scale storage battery, storage batteries located adjacent to RE power plants
  JERA, SNK, Tokyu Land, Nishitetsu 

• Storage battery for 24/7 CFE *9 service
  JERA, Tokyu Land 

As for financing, Shizen Connect raised a total of 860 million yen by raising funds through convertible bonds with stock purchase rights from alliance partners and simultaneously obtaining a loan from Shizen Energy Inc. (Shizen Energy), its group company. This brings Shizen Connect’s cumulative funding to 1.36 billion yen. The company will use this funding to strengthen its management base for growth, focusing on hiring engineers and investing in R&D.

Comments by Shizen Connect

Shizen Connect Inc.  Representative Director/CEO Munekazu Matsumura

The charge/discharge capacity of each EV or storage battery is as small as “dust” in terms of the power grid. However, when the number of EVs and storage batteries reaches hundreds of thousands or even millions, the charge/discharge capacity becomes very large. Our IoT/AI technology can ensure this technical capability, but obtaining permission from each customer to control their resource is something we can’t do on our own. It is a great step forward for Japan’s VPPs that major energy companies and others are now participating in this initiative, which can be related to a Japanese saying that “even dust, when piled up, becomes a mountain. We will continue to research and develop our platform to meet expectations and contribute to the supply of affordable, stable and decarbonized electricity.

Comments from partner companies (in Japanese phonetic order)

 JERA Co., Inc. Executive Officer, Head of the Financial Strategy and Planning Group Isao Okubo

The JERA Group is taking the lead in promoting 24/7 CFE in Japan amid growing societal demands for more effective CO2 reduction to achieve carbon neutrality, and storage batteries play an extremely important role in achieving 24/7 CFE by acting as electricity flexibility. JERA and JERA Cross Inc. will not only integrate the control and operation of storage batteries into 24/7 CFE through the partnership with Shizen Connect Inc., but will also contribute to the further decarbonization of society by continuously tracking the power attributes and charge and discharge quantities of storage batteries to further increase the transparency of power consumption attributes. We hope to contribute to the further decarbonization of society.

Shikoku Electric Power Co., Inc. Executive Officer, General Manager, New Business Planning Dept. Erito Takigawa

We have high expectations that the distributed energy resource platform provided by Shizen Connect will make a significant contribution to the future decarbonization of society. Through this capital and business alliance, we will accelerate our joint efforts including electric mobility field and contribute to the realization of carbon neutrality.

Shin Nippon Air Technologies Co., Ltd Senior Managing Officer Koichi Miyashita

SNK’s long-term vision, “SNK Vision 2030,” states that “SNK aims to be a group of engineers who use knowledge and technology to realize a sustainable global environment and increase the value of our customers’ assets.” By collaborating with Shizen Connect, we will further accelerate our contribution to the global environment by advancing service sophistication and business development in the field of energy management.

Tokyo Gas Co, Ltd General Manager of Behind The Meter Solution Project Dept. Hiroyuki Motohashi

By developing solutions that go beyond the boundaries of conventional energy, we aim to contribute to the sustainable development of society and deliver even greater value to our customers. As part of our efforts to achieve this goal, we believe we can add new value to storage batteries and contribute to customers and society by helping people use electricity wisely through remote control of residential storage batteries.This initiative includes not only retailers, but also aggregators, platform providers and many other stakeholders.We hope that this capital and business alliance will bring together a variety of stakeholders and further enhance the momentum of this industry. 

Tokyu Land Corporation Executive Manager, Environment and Energy Business Department 1, Environment and Energy Business Division, Infrastructure ＆ Industry Business Unit Makoto Fruta

Since entering the renewable energy business in 2014, we have developed and owned 108 projects nationwide with a total capacity of 1,761 MW (as of May 31, 2024) and are expanding our retail business. In addition, we are participating in the “grid-scale battery storage” business, which provides flexibility, and the “100% renewable energy data center” business, which can significantly reduce environmental impact, and we believe that it will be necessary to establish a more diverse and advanced energy supply chain in the future. We have high expectations for the optimal use of renewable energy and battery storage, leveraging the strengths of Shizen Connect’s aggregation and VPP businesses, as well as mutual cooperation in the field of 24/7CFE. 

Nishi-Nippon Railroad Co. Ltd General Manager of New Business Development Dept.  Yasuhiro Hayashida

Through NNR Shizen Energy GK, a joint venture with Shizen Energy, we are engaged in the corporate PPA business using solar power generation and battery storage for the grid. We are already partners with Shizen Connect in these businesses, and through this capital and business alliance, we aim to further expand our collaboration and together promote new initiatives such as the creation of businesses in the mobility field and the use of assets owned by the Nishitetsu Group for VPP, thereby contributing to the expansion of renewable energy and the stabilization of electricity supply. 

Hokuriku Electric Power Company Marketing＆Sales Division, Marketing & Sales Office, Manager of CN Business Development Team, Tomokazu Kanda

Through our capital and business alliance with Shizen Connect, we aim to promote the efficient and effective use of energy resources.In particular, we aim to optimize local energy supply and demand and provide sustainable energy solutions through DR services using EcoCute. Through this initiative, we expect to make a significant contribution to improving energy efficiency and promoting decarbonization in the Hokuriku region.

Table 1: Demonstration Projects with Major Electricity Retailers

*1 Virtual Power Plant (VVP): the remote integration and control of distributed power sources (power generation facilities, storage batteries, EVs, etc.) and demand-side equipment to make them function as if they were a single power plant
*2 source: “2019 Energy Resource Aggregation Business Status and Future Prospects” by Yano Research Institute Ltd. 
https://www.yano.co.jp/press-release/show/press_id/2283 (Japanese) 
*3 Calculations based on storage battery manufacturer market share on Smart House monthly magazine No.108（Feb. 2024 issue) 
*4 “Shizen Connect” selected as control platform for Tokyo Gas IGNITURE storage batteries（April 23, 2024 press release） 
https://www.shizenenergy.net/2024/04/23/shizen_connect_igniture_saas/
*5　TEPCO Energy Partner selects Shizen Connect for low-voltage VVP operation (June 21, 2024 press release) 
https://www.shizenenergy.net/en/2024/06/21/sc_tepco_adopt_dr_support/
*6 Nishitetsu and Shizen Energy enter grid storage battery business (July 19, 2023 press release) 
https://www.shizenenergy.net/2023/07/19/grid_scale_battery_nishitetsu/
*7 Shizen Connect selected by Tokyu Land Corporation for TENOHA Higashimatsuyama Grid Storage Battery Project (August 3, 2023 press release) 
https://www.shizenenergy.net/2023/08/03/shizenconnect_tokyu_grid_battery/
*8 Energy Management System ”Shizen Connect” selected for major city gas company’s grid storage battery business (December 8, 2023）
https://www.shizenenergy.net/2023/12/08/osaka_gas_adopt_shizen_connect/
*9 24/7CFE（Twenty-four Seven Carbon Free Energy): every kilowatt-hour of electricity consumption is met with carbon-free electricity sources, every hour of every day, everywhere

EMS “Shizen Connect”   https://www.se-digital.net/ (Japanese website) 
“Shizen Connect” is an aggregation energy management system (EMS).  It can provide individual control for storage batteries and EV chargers, control for microgrids connecting multiple buildings with their own private transmission lines, as well as control of VPPs for large scale energy resources. Individual control and VPP control tended to be separate, but Shizen Connect provides a one-stop service allowing energy resources to be used multi-purposefully, which also improves economic efficiency. The system can be adapted with any equipment supplier, allowing energy resources to be chosen freely without relying on a certain manufacturer.

Shizen Connect Inc. 
Head Office:  2-4-7 Nihonbashi-honcho, Chuo-ku, Tokyo
Founded: October 2, 2023
Shareholder:  Shizen Energy Inc. 100% 
Representative Director: Munekazu Matsumura 
Business: VPP platform, energy management service, IoT equipment sales, etc.
URL: https://se-digital.net (Japanese only)