Pioneering Energy Storage: Sumitomo Corporation's Future Vision Built Over Nine Years on the Koshiki Islands

Could you briefly explain what the Reused EV Battery Project on the Koshiki Islands is all about?

TakaradaRenewable energy sources like solar and wind that utilize natural power are heavily dependent on weather conditions. This makes it challenging to match supply with demand, as shortages, and conversely surpluses, are common. While searching for a solution to this problem, Sumitomo Corporation came to focus on "energy storage batteries" that enable us to store multiple energy sources and stabilize the grid.

However, the high cost of energy storage batteries has been a hurdle. To solve this, we worked with Nissan Motor Corporation to repurpose used EV batteries as energy storage devices, which reduced costs. After years of development, our pilot project using reused EV batteries for power storage officially began on the Koshiki Islands in 2015. At the time, energy storage for grid use in renewable energy was virtually unexplored, making Sumitomo Corporation a pioneer in this field.

Why were Kagoshima’s remote Koshiki Islands chosen as the location for this project?

TakaradaThe Koshiki Islands are part of the city of Satsumasendai in Kagoshima, about eight hours from Tokyo. The city is sensitive to energy issues, partially due to the presence of a nuclear power plant. Furthermore, the Koshiki Islands are vulnerable to natural disasters like typhoons and storm surges, and since they are cut off from the mainland power grid, maintaining a stable energy supply is a challenge. Sumitomo Corporation saw the islands as an ideal place to test the viability of energy storage systems. The local government was also on board, which made it a perfect fit.

Can you tell us about the Koshiki-shima Energy Storage Center that was built there?

SugiyamaWe installed containers equipped with energy storage batteries – equivalent to 36 EVs – on the athletic field of a former elementary school. We also built a solar power plant. On remote islands with low energy demand, introducing renewable energy such as solar power presents a challenge: fluctuations in supply need to be stabilized. That’s where energy storage comes in.

What makes this project particularly innovative is directly connecting the energy storage batteries to the local grid, helping to stabilize these fluctuations. Until 2023, such direct connection was not legally regulated in Japan, so this was a ground-breaking approach. The pilot demonstrated that energy storage systems could help stabilize the output from multiple renewable energy sources, including the solar power plant at the elementary school, wind power on the islands and solar panels on town office buildings.

What role do you both play in this project?

TakaradaThis is my fifth year with the company, but I’ve been involved with this project since my first year at Sumitomo Corporation. Since electricity is critical infrastructure, it’s important to be engaged with the local community for the long term – at least 10 years or more. In addition to inheriting the vision and experience of our predecessors who launched the project, we are managing it in response to changing local needs and working to achieve better results.

SugiyamaWhile Mr. Takarada is based mainly in Tokyo, considering the opinions from head office and driving the project forward, I am more focused on the local side. I work closely with Satsumasendai citizens, the Kyushu Electric Power Group that provides technical advice and island residents who support safe operation of the facilities.

How have the local residents responded to the energy storage project?

TakaradaInitially, many of the islanders didn’t think much about where their electricity came from – they just expected it to always be there. So, part of our work was educating them about how the energy storage system works, how it differs from traditional systems and the benefits it brings. Mr. Sugiyama, you’ve been very active in talking to the locals about the project, haven’t you?

SugiyamaYes. Every year I have the opportunity to speak about the project at energy-related events sponsored by the city and the prefecture. Additionally, I go to great lengths to explain the project to as many locals as possible, from ferry terminal staff to restaurant owners, souvenir shop workers and car rental staff. The people who started the project built really strong relationships with the locals by visiting frequently, and I don’t want to let those connections fade. I work hard to maintain dialogue and ensure that the project continues to be accepted by the community.

TakaradaI’ve been to the islands about 15 times, but Mr. Sugiyama has visited even more than that. He has become quite the local star and is very popular with the islanders.

SugiyamaYou’re too kind. But you’re pretty popular, too. Just the other day, someone asked, "When’s Santa coming to visit again? Can you bring him with you next time?" (laughs)

Did you encounter any challenges or setbacks during the pilot project?

After the success of the Koshiki Islands pilot, what’s next for Sumitomo Corporation’s energy storage business?

TakaradaIn countries like the United States and the United Kingdom, electricity markets where energy storage systems can play a key role have already been established. Sumitomo Corporation has been in discussions with the Ministry of Economy, Trade and Industry (METI) on how to make this a reality in Japan, considering regulations, operational methods and challenges. Now, Japan’s Supply and Demand Adjustment Market* has finally been established, and all markets menus officially opened in April 2024. At the same time, Sumitomo Corporation launched the EV Battery Station Chitose in Chitose City, Hokkaido, achieving its goal of participating in the Japanese energy storage market.

*This refers to the market for procuring the regulating power needed to control frequency and adjust the balance between supply and demand of electricity across a wide area.

SugiyamaNew developments are also taking place in Kyushu. In 2023, Kyushu Railway Company and Sumitomo Corporation launched a new energy storage project company called "Denki no Eki" (Electricity Station). This project involves installing energy storage systems, similar to the one on the Koshiki Islands, on idle land along the rail lines owned by Kyushu Railway Company. The aim is to provide a service that helps regulate electricity across all of Kyushu.

In the first project, we used the Koshiki Islands pilot project as a reference, and after extensive discussions with stakeholders, we introduced equipment that allows for more efficient development and operation (such as faster implementation and increased capacity). Furthermore, Kyushu Railway Company is a major infrastructure company rooted in Kyushu with a strong history of valuing the local community, which makes them a natural fit for collaboration with the Sumitomo Corporation Group. As we continue to advance the "Denki no Eki" project, discussions on collaboration with local governments are also starting to take place.

TakaradaIn addition to Chitose, we have battery stations in Namie town, Fukushima Prefecture and elsewhere. When setting up these systems, we must work closely with local governments and fire departments to acquire all the necessary permits. While the decision on permits is left to the discretion of each fire department, the track record we've built over nearly nine years on the Koshiki Islands has become a strong point in demonstrating the safety of our operations.

SugiyamaWe have done a lot of similar administrative work during the nine-year pilot phase, so as a company, Sumitomo Corporation has gained significant experience. Furthermore, in the renewable energy industry, the association of "Koshiki Islands + Sumitomo Corporation = energy storage" has become widely recognized, and this awareness is proving helpful as we expand into new areas. The knowledge we have accumulated from the Koshiki Islands is being fully applied to the Chitose project as well.

I understand that you’re also working on energy storage projects overseas, Mr. Takarada?

TakaradaYes, that’s correct. In fact, starting in April 2024, I handed over the Koshiki Islands project to my successor and joined a neighboring team focused on energy storage projects abroad. Right now, we are considering whether to expand into countries where markets already exist, like the United States and Europe, or to target other countries with high growth potential. We’re reviewing our experience in Japan and closely monitoring market developments as part of the decision-making process. Sumitomo Corporation has departments that are involved in overseas power infrastructure projects, so I would like to leverage those connections and explore all the possibilities.

Finally, what have you learned from your involvement in the Reused EV Battery Project on the Koshiki Islands?

SugiyamaIn an integrated trading and business investment company, we often work through indirect associations, but I really felt the importance of looking people in the eye and speaking with them directly. The way the project launch team tackled the work with passion and enthusiasm was truly inspiring. I’ve found great joy alongside the difficulties, even when faced with massive challenges.

TakaradaIt’s all about sticking to your convictions and communicating your beliefs without giving up. At the same time, the importance of listening to others can't be understated. Remain flexible, but committed to your core beliefs. This is the mindset I want to maintain going forward.