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Initiatives for Environmental City Projects

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In cooperation with its customers, Mizuho has been actively involved in environmental city projects led by the initiatives of Japanese companies, beginning from the development stages. These projects are enabling Mizuho to accumulate experience regarding planning, development, implementation, and management as well as consider and move forward with new financing structures. In each projects, Mizuho has been involved primarily in making assessments of economic evaluation and building business models, while also considering financial arrangements. In addition, Mizuho is performing the role of applying the experience gained from these projects in the newly emerging countries. Through structuring these "Japan–originated" environmental city projects, Mizuho aims to support the growth strategies of Japanese industries overall from a financial standpoint.

Environmental City Projects Mizuho Involved in

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Number Project Name Outline
1 India, Chennai, integrated town development project
  • Integrated town development centered around an industrial park
2 China,Tianjin, Economic–Technological Development Area, environmental city project
  • Developing energy conservation businesses
  • Creating "smart" urban and industrial area
  • Transition to gas cogeneration on coal–fired boiler (electric power supply system)
3 Remote island prototype of smart grid demonstration project in Hawaii, U.S.A.
  • Demonstration of smart grid on a remote island
  • Commercialization of infrastructure for charging electric vehicle
4 Myanmar thilawa Special Economic Zone (SEZ) development project
  • Integrated town development centered around an industrial park
5 China, Guangzhou Nansha environmental city development project
  • Development of an environmental city
6 Environmental monitoring project in Saudi Arabia industrial park
  • Introduction of environmental monitoring system to the industrial park
  • Development of businesses related to improving the atmospheric, water, and other environments
7 Demonstration phase of the Smart Community Project in Greater Manchester, U.K.
  • Introduction of aggregation technologies and systems that remotely monitor and control the operation of residential heat pumps and establishment of a business model

Participation in Smart Community Demonstration Project in the United Kingdom with the Aim of Structuring a Business Model Based on Japanese Technologies

Due to a global warming issue and the rapid rise in demand of energy resources, the wider use of renewable energy sources and improvements in energy usage efficiency have become urgent issues in the world. Amid these developments, the U.K. government has set goals of "raising the ratio of renewable energy usage to 15% by 2020" and "increasing the use of heat pumps for residential heating purposes to 30% by 2030." With these goals, efforts are being made to reduce CO2 emissions and shift a source of energy from gas to electricity.

As part of these activities, emphasis is being placed on promoting the use of renewable energy in each house. The U.K. Business Innovation and Skills Ministry, the U.K. Energy and Climate Change Ministry, the city of Manchester (Greater Manchester), and Japan's New Energy and Industrial Technology Development Organization (NEDO) are collaborating in the Smart Community Project in Greater Manchester, U.K. (hereinafter, the project). The objective of this project is to make use of eminent heat pump technology and ICT–related technology in Japan to promote the energy shift.

In February 2013, NEDO asked for bids from commercial businesses for a feasibility study to be followed by a demonstration project, and the consortium organized by Hitachi, Ltd. (Hitachi), Daikin Industries, Ltd. (Daikin), MHBK, and MHIR was selected. Reasons for the selection of this consortium included the high levels of technology of Hitachi and Daikin as well as Mizuho's accumulated experience in smart community demonstration projects. The consortium's proposal suggested the consideration of a business model that would benefit local governments, consortium participants, and other stakeholders, and this led to its positive evaluation and selection.

Balancing Electric Power Demand through Remote Control of Heat Pumps

The objective of this project is, first, to demonstrate the technologies and systems for aggregating the coordinated electrical power and to investigate the capacity for balancing the power supply–demand dynamics of residential power users, and, second, to establish a business model based on these technologies and systems.

Specifically, about 600 social housing properties will be equipped with heat pumps for heating and hot water to be provided by Daikin and Hitachi. These will replace the gas–fired water heaters these homes use currently, and they will use electric power to collect heat in the atmosphere as a heat source. Since electric powered heat pumps are about three times more energy efficient than gas–fired boilers, they are expected to make possible a substantial reduction in CO2 emissions. Also, the systems to be structured and operated by Hitachi and Daikin enable to remotely monitor and control a group of residential heat pumps. For example, these systems have a demand–response function that "enables the system to activate the residential heat pumps remotely before electric power demand rises and warm the rooms of the house, and then, as power demand rises to its peak, the heat pumps are turned off or temperature settings are turned down." In this project, the capabilities of the technologies and systems to keep homes comfortable and balance the supply and demand of electric power are demonstrated.

Structuring a Business Model that Will Generate Stable Earnings by Trading Load Balancing Capacity in the Market

The demand–response function that balances the supply and demand of electric power have been put into operation in many smart community projects, but the special feature of the project is that it is verifying a business model that sells the residential load–balancing capacity of the system into the electric power market. In the United Kingdom, which has been a pioneer in the electricity deregulation and separation of power generation from distribution and transmission, many market participants, including power generators, power distributors, and power aggregators (that balance the supply and demand for power), are able to sell a wide range of power trading products, varying by term and volume and ranging from medium– to long–term wholesale power to short–term transactions that enable covering power shortages with only 30 minutes notice as well as dealing with frequency change. In this project, it is assumed to restrain power consumption within a range that preserves home comfort and to sell load balancing capacity at advantageous prices. This business model is expected to be able to generate stable earnings.

Outline of the Business Model

In the feasibility study conducted from June 2013, MHBK and MHIR were in charge of structuring a business model, including consideration of financing schemes, and combining the know–how they have accumulated in smart community demonstration projects with their industry knowledge to assess the economic viability of the project. Beginning in April 2014, over a three–year period, the research and analysis on the acceptability of heat pumps to U.K. households and the policies to promote the use of heat pumps will be conducted. Also, the evaluation of the profitability of the power aggregation business that may encourage the participation of households in demand response will be conducted. In addition, the investigation (on the electric power market and power supply companies) will be conducted, and the policy recommendation to the U.K. government will be intended. Finally, the commercial feasibility of the system for balancing power supply and demand through the remote control of aggregated heat pumps will be evaluated.

If a sustainable business model can be developed in this project that helps to promote the energy shift and transition to a low–carbon society in consideration of energy policy requirements, it is expected that this system will be applicable to other areas in the United Kingdom.

Looking ahead, Mizuho will continue to participate actively in smart community projects both in Japan and overseas, and, applying Japan's top–level technology, this will contribute to maintaining comfortable living conditions as well as help to reduce CO2 emissions and bring about the low–carbon society.

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