How Gridshare and home batteries can drive a cheaper, greener, more resilient power system in Japan

Lunar Energy is paving the way for residential VPPs in Japan by demonstrating sophisticated control of home batteries for grid services and wholesale cost management.

Since 2021, energy prices have soared globally due to a combination of factors, affecting both wholesale energy prices and customer rates in many countries. Japan’s energy market relies on imports for its energy resources, so this has meant that power has become more expensive and scarce. This crunch has put pressure on energy retailers to look for innovative energy solutions. 

To help answer this challenge, we’ve been hard at work with our partner, ITOCHU, and four major Japanese power companies. We’ve proved that our Gridshare platform can control fleets of home batteries to provide reliable and affordable flexibility to energy retailers. This is critical to help them manage tight supply conditions and drive decarbonization in the Japanese power system.

The Opportunity: Proving the value of ITOCHU’s home batteries to the Japanese power system

ITOCHU, one of the largest Japanese general trading companies, has deployed more than 36,000 of its Smart Star Energy Energy Storage Systems (ESS) in homes across Japan. Each ITOCHU Smart Star battery is equipped with Lunar Gridshare, a cloud-based platform that maximizes energy savings while ensuring backup power in the event of grid outages. 

With around 750,000 devices installed, Japan is one of the biggest residential battery markets in the world. These batteries began to be installed in 2019 as customers started to come off their feed-in-tariffs. However, these batteries are currently unable to access grid services markets (which are limited to high-voltage assets).  Lunar Energy, together with ITOCHU, saw an opportunity to partner with the major power companies in Japan in order to understand how this growing reserve of home batteries could be used to reliably and effectively manage load peaks and provide grid management services. The goal? To show how smart control of batteries can help to reduce customers’ and energy retailers’ costs right now and how they could provide value to the grid in the future through ancillary services.

The Lunar Solution

Lunar Gridshare is a cloud-based, device-agnostic software platform for managing distributed energy resources (DER). Using artificial intelligence and machine learning, Gridshare optimizes DER behavior to improve the savings a customer gets from having a battery (14% beyond the default battery modes for Smart Star ESS). Uniquely, Gridshare is also able to co-optimize customer bill savings whilst delivering aggregate power through virtual power plants (VPPs), ensuring the best result for the customer and the broader power system. Today, Gridshare manages more than 73,000 home batteries across three continents, and it operates thousands of batteries across a dozen VPPs for Sunrun in the US. 

The Lunar team delivered six concurrent trials over an 8-month period with Japanese power companies Tokyo Electric Power Co (TEPCO), Chubu Electric Power Co, Kyushu Electric Power Co., Tohoku Electric Power Co. Inc, and Shizen Energy, as well as the C&I aggregator Eneres. The trials aggregated over 700 ITOCHU Smart Star batteries into 8 VPPs that could be dispatched by Gridshare for grid services – while still being optimized for their owners’ behind-the-meter bill savings. These trials were delivered with a mixture of private funding and support from the Ministry of Economy, Trade, and Industry. 

“TEPCO EP is working towards a carbon neutral society. We believe that Residential energy storage systems are renewable energy sources that play a very important role in suppressing fluctuations and providing a stable supply of energy. Through this trial with ITOCHU and Lunar Energy, we were able to find out the regulating power of utilizing residential ESS. We will continue to work together and look forward to utilizing distributed energy resources in the future.”

– Hiroyuki Nakazawa - Deputy General Manager, TEPCO.

Grid services 

Gridshare’s VPP engine was tested for its ability to provide flexibility for services in different markets. One was the nascent Balancing Market (ancillary services for dynamically managing system balance), and the other was the Capacity Market (which ensures security of supply with reserve capacity). 

Some of the trials required predictions of available flexible capacity up to 48 prior to the event, which Gridshare was uniquely able to provide, given its background in managing batteries for behind-the-meter savings. Every day, Gridshare creates bespoke machine-learning predictions of every home’s energy consumption and generation, across tens of thousands of homes. By adding the predictions for every home together, Gridshare is able to provide market-leading accuracy for residential VPP capacity.  

Reducing energy retailers’ exposure to wholesale price spikes

The trials also tested whether the VPPs could effectively and reliably deliver flexible load to reduce energy retailers’ exposure to wholesale price spikes. Taking into account day-ahead prices in the Japan Electric Power Exchange (JEPX) wholesale power market, Gridshare sent optimal control plans to each battery to minimize household consumption during the most expensive periods.

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What’s next?

Japan is facing the dual challenges of power shortages and the need to decarbonize its economy. These trials have shown that by using software like Gridshare to harness the power of DERs — such as home batteries — Japan can effectively reduce grid imports, generate savings for customers and retailers, and actively contribute to grid stability as more renewable energy comes on line.

“To date, Lunar Gridshare has successfully enabled ITOCHU customers to increase their self-consumption of solar power by approximately 75% in their homes. This empowers them to save money on their electricity bills, even in the face of rising prices. Our collaborations with power companies have demonstrated that the utilization of Gridshare-managed batteries for demand response services not only enhances the stability of the electricity grid but also ensures greater energy security. We firmly believe that distributed power supply is the way forward, and we anticipate even more compelling incentives for battery owners to share their stored renewable energy with the grid. We take great pride in leading the way of this transition in Japan.”

– Hiroaki Murase - General Manager, ITOCHU.