TT-550 -- Lithium Batteries and Smart Grids, ebiz news from Japan

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A weekly roundup of news & information from Terrie Lloyd.

General Edition Sunday, January 24, 2010 Issue No. 550


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Given the tsunami of China competition on heavy industry
and the impact of recession and rising oil prices on internal
combustion automobiles, Japan is getting used to the idea
that its future in manufacturing lies in electrical devices
-- for the home, the car, portable entertainment, in your
body and medicine in general, manufacturing gizmos, retail,
government utilities, vegetable factories, down on the
farm... Just about any place inhabited by modern man.

The thing about electrical devices is that while they are
cheap for the benefits they bring, early in their technological
life cycle they require lots of R&D and advanced materials,
and typically cost boatloads of money to create the
factories needed to make them in enough volume to make
them cheap. Thus electrical devices are more resistant to
the predations of recessions and low-cost manufacturing
jurisdictions than are other industries.

Apart from ongoing basic refinements of components and
input/output devices, there appear to be four macro channels
of development needed to move Japan and its electrical
devices business up the food chain and further out of reach
of China and other players. These are: software, networks,
memory, and energy storage.

Of these, Japan is highly focused on two -- being memory
and energy storage, which we imagine is because both
sectors rely heavily on materials science and precision
manufacturing to produce product improvements, and both are
areas that Japan excels in.

In particular we find energy storage a promising business
sector, because not only are global consumers demanding
more portability and functionality, thus requiring higher
energy batteries, but because efficient energy storage is
also a strategic advantage that is worthy of substantial
future government funding. That is to say, Japan is
extremely reliant on imported energy, and it has every
motive to find more efficient means of using, storing, and
serving up electricity that is right now being fueled with
imported hydrocarbons.

High on this strategic energy agenda apart from solar cells
and wind turbines are Lithium Ion (Li-ion) batteries and
smart power grids.

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There is not much doubt that Japan leads the world in terms
of commercialization of battery-based energy storage. About
80% of the world's US$71bn market in batteries, both
primary (one-time use) and secondary (rechargeable) is
produced by Japanese companies, either in Japan or in
China. Needless to say there is plenty of competition
emerging from both Chinese and Korean firms, but it tends
to be for lower end products and right now the
competition still doesn't have the R&D muscle, finance,
or manufacturing infrastructure to be a threat to the
Japanese. No doubt that will change in the next few years.

Right now, the biggest producer of batteries by volume and
value is Sanyo and by virtue of the Sanyo buy-out last year,

Panasonic is especially hopeful about its prospects in
Li-ion batteries, and says it is already the largest
producer of such batteries in the world. Along with Sanyo,
Panasonic is in discussions with ten automakers around the
world to supply them with Li-ion batteries for both hybrid
and EVs. Accordingly, the companies plan to invest a
massive US$1.4bn through to the end of 2011 on production
facilities to double their Li-ion cell output.

Panasonic-Sanyo billion dollar investment is being mirrored
by other Japanese firms in the energy storage industry, and
we estimate that the nation's battery makers are
collectively investing more than one billion dollars a year
in new factories both here and abroad. This huge investment
coupled with ongoing technological breakthroughs -- such as
new electrodes being developed by Nissan to double energy
capacity, mean that the Japanese are likely to have this
market sewn up for at least another 3-5 years.

The market for batteries is huge, rising 40% from US$50bn in
2004 to more than US$70bn today. The Li-ion battery market
is also taking off and was worth US$8bn in 2008. According
to consulting firm AT Kearney, the Li-ion battery market will
grow to a massive US$21.8bn by 2015 and US$74.1bn in 2020.

The interesting thing is that while everyone is so focused
on the immediate goal of making an EV travel more than
300km on a single charge -- thus making EVs commercially
viable, there will be many other benefits to society as
high-capacity, long-life, 5,000 times rechargeable Li-ion
batteries start to appear around the nation.

One of these is the smart grid concept, whereby all parked
EVs and their highly rechargeable batteries are plugged into
and networked with a smart power grid, acting as a gigantic
virtual storage battery. This approach will one day save
the country billions in hydrocarbon fuels as well as
provide off-peak storage of alternative energy sources
such as wind and solar. Further, having such a massive
reserve power source will allow TEPCO to not have to power
up a coal or oil fired power generator whenever there is a
cold snap or an earthquake that takes a nuclear reactor off
line for a few hours.

Panasonic has big plans for smart grids, and will soon
switch on an experimental next-generation project in
Denmark. It will start similar experimental smart grid
projects in China at the end of this year and the U.S. and
Russia next year. In each case, the company is pairing with
local bodies and electricity companies -- providing it with
invaluable experience in how the real world operates and
allowing it to find out what new product opportunities there
will be.

With this in mind, we were intrigued by a recent
announcement by trading house Itochu, which was an early
investor in US-based storage battery company EnerDel.
Itochu in conjunction with EnerDel is going to kick off a
new business plan dubbed The Green Crossover Project. The
project involves networking EVs on to a power grid, rapid
charging the vehicles from solar and other alternative
energy, then recycling used Li-ion batteries after they
end their service life, into storage battery applications
in homes, elevators, vending machines, and other electrical

Itochu's smartgrid seems to miss out on the consumer supply
power buffering we mentioned earlier, but we assume that
since Itochu is working closely with TEPCO that this will
be on the menu as well.

Unlike Panasonic with its collaborative real-world approach,
Itochu seems to be going for closed system testing and an
effort to make its system a country (if not global)
standard. News reports say that Itochu's system competes
with Israel's Better Place (battery swaps rather than quick
recharges) and Coulomb Technologies (different charging
technology). The company seems to think that by virtue of
being able to roll out The Green Crossover project across
its many commercial real estate holdings in Japan (such as
the 8,000 Family Mart convenience stores) -- which would
host the proposed quick charge stations, that it will be
able to establish a standard for both smart grids and
recharging infrastructure in Japan -- then presumably
elsewhere in the world.

One might ask whether Itochu is talking to Panasonic?
Although they are both powerful companies, if we were to put
our bets on one of these horses, the company furthest along
the smart grid track at present appears to be Panasonic.
We think that Itochu would do well to team up with the Osaka
firm, and appeal to METI to make their combined business a
Japan-wide standard. This at least would speed along the
infrastructure build out needed to give Japan a smart grid
as well. Indeed, METI has just called for such a panel to
create a smart grid standard within the next 3 years.

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+++ NEWS

- Battery maker ups production 40%
- Housewives’ hesokuri savings drop 20%
- Possible new polar fiber optic connection to London
- Shiseido's 10pm curfew for employees
- Keio U. electric car consortium

-> Battery maker ups production 40%

The smart money is betting on a lot more electric and
hybrid cars. Apparently a Panasonic-Toyota JV, Panasonic EV
Energy is going to increase its nickel-hydrogen battery
output by 40% this year, from between 200K to 300K units.
Total product from the Miyagi plant will be 1.1m units a
year. This corresponds with Toyota's plans to produce 1m
or more Prius hybrids this coming year. (Source: TT
commentary from, Jan 23, 2010)

-> Housewives’ hesokuri savings drop 20%

You know things are bad when even the money housewives hide
from their husbands starts to drop. According to insurance
company Sompo Japan, a recent customer survey shows that
housewives’ hesokuri ("secret account") holdings --
typically stashed away to help in family emergencies, kids
education, and divorce -- fell about 20% last year due to
the poor economy. The typical housewife has about JPY3.7m
stashed away, compared to JPY4.6m in 2008. ***Ed:
Interestingly, as belts tighten, housewives are serving up
sprouts, tofu, and other low-cost traditional foods for
dinner -- meaning that this recession may actually improve
the health of the general population.** (Source: TT
commentary from, Jan 20, 2010)

-> Possible new polar fiber optic connection to London

Telecoms company Kodiak-Kenai is trying to raise funding
to install a new fiber optic cable between Tokyo and
London, to considerably increase data capacity between the
two financial centers. While this is run-of-the-mill news,
what's interesting is that global warming has meant that
the firm is seriously considering laying the cable on the
ocean floor of the Northwest Passage, above mainland Canada,
a seaway that for most years in the last 100 has has been
frozen with pack ice. Apparently if they can get the cable-laying
rights, and if the ice melt continues at its current rate, the firm
will be able to install a cable for about US1.2bn, substantially
less than if it had to use a U.S. overland route, or go
through the Suez Canal. (Source: TT commentary from, Jan 22, 2010)

-> Shiseido's 10pm curfew for employees

Interesting HR activity going on at Shiseido. Apparently
the company has set a curfew of 10pm for overtime, and will
escort anyone working longer than that out of the office.
Not only that, transgressors are supposed to write a
"gomenasai" letter to their superior if they break the
curfew. ***Ed: The company reckons it's trying to get
employees to return home to their families -- but the fact
is that unlimited overtime is really expensive.** (Source:
TT commentary from, Jan 22, 2010)

-> Keio U. electric car consortium

In a sign that VC money is hard to find, Keio University
spin-off company SIM-Drive has had to come up with an
innovative funding method for its revolutionary 4-motor
(one for the end of each axle) car. The company has said
that it has formed a consortium of 34 companies who will
help develop and use the breakthroughs created by the
company and passed to the consortium. Each of the members
is putting in a paltry JPY20m to provide the capital
needed. SIM-Drive reckons it will have a
300km-on-a-single-charge prototype ready by this summer.
***Ed: Where are all the U.S. companies? This is a bargain
basement deal for access to world-leading technology.**
(Source: TT commentary from, Jan 23, 2010)

NOTE: Broken links
Many online news sources remove their articles after just a
few days of posting them, thus breaking our links -- we
apologize for the inconvenience.

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