Launching a New Battery Energy Storage System Business Initiative in Japan

New Venture into Battery Energy Storage Business

EF Investment, a subsidiary of Environmental Friendly Holdings, has officially announced its new venture into the Battery Energy Storage System (BESS) sector. This initiative is in response to Japan's growing reliance on renewable energy sources, particularly solar power, and aims to address the fluctuating demand for electricity in the market.

Understanding Battery Energy Storage Systems (BESS)

The adoption of renewable energy in Japan has surged, leading to an increased need for storage solutions to ensure a stable electricity supply. BESS serves as a crucial mechanism to temporarily store surplus energy and release it during periods of high demand. With government initiatives promoting decarbonization, the market for energy storage systems is expected to expand significantly in the coming years.

Japan's power market is categorized into three distinct segments: the wholesale electricity market, supply-demand adjustment market, and capacity market. BESS plays a vital role in not just storing energy for future supply but also balancing the demand and supply gap that varies by time and season.

Business Models in the Power Market

1. Wholesale Electricity Market (JEPX)
In this scenario, batteries charge during low-cost periods and discharge when prices peak. By navigating the market effectively, energy storage operators can capitalize on price differences. Essential points include:
- Charging during low-price periods often occurring at night or when renewable generation is high.
- Discharging during day time peaks when electricity prices are elevated.

2. Supply-Demand Adjustment Market
This market is crucial for maintaining the balance between generated electricity and consumption. Energy storage systems can quickly adjust output to provide the necessary 'adjustment force' to stabilize the grid. BESS operators submit bids to the adjustment market, and when their services are called upon, they receive compensation.
- Contributing to grid stability.
- Receiving payments for standby readiness and actual adjustments made.

3. Capacity Market
This market ensures that there are enough 'capacity resources' available for future demand. Compensations are offered irrespective of whether the energy is generated or not, fostering a reliable supply capacity. Debates are held four years in advance, ensuring that grid operators can plan according to future needs.
- Recognizing the value of energy supply capacity.
- Establishing resources ahead of impending energy requirements.

Project Overview

EF Investment is set to finance the establishment of EF-BESS No. 1, a project which will operate in Ueda, Nagano Prefecture. The facility features an impressive output of 2MW and a capacity of 8MWh. The expected investment for this project is 480 million yen, with the anticipated start of trial operation in May 2026. Current preparations include foundational and electrical connection work, following which the facility will engage in the wholesale, supply-demand adjustment, and capacity markets sequentially.

The construction is entrusted to Nomuraya Holdings, a long-established company from Nagano, known for its solar energy projects. Their proximity to the construction site facilitates swift responses and efficient project management, ensuring high-quality construction standards.

Collaboration with NH-Amundi

With a robust demand forecast for energy storage in Japan, EF Investment partners with NH-Amundi, a prominent asset management firm, to leverage their expertise and foster a sustainable energy infrastructure model. This collaboration comes in light of the need for innovative financing models to support renewable energy initiatives.

EF Investment will lead project development while NH-Amundi provides financial support to investors. This partnership starts with the Ueda project, marking a pivotal point in their cooperative efforts with an estimated five billion yen per project target. Once cumulative investments reach around five billion yen, both parties may explore forming a dedicated Battery Energy Storage Fund.

Future Aspirations

The key vision for EF Investment includes strategic project accumulation and leveraging economies of scale to establish a stable business base in the energy storage market. Their objective is to create a market-driven, sustainable investment framework while enhancing the overall corporate value of the Environmental Friendly Holdings Group, independent of government subsidies and incentives.

For further details, visit the IR section of Environmental Friendly Holdings: EF-HD IR Information