After recent typhoons ravaged Japan’s grid and disrupted power to almost 1.4 million customers, the government is encouraging homeowners to invest in storage systems, seeking to marry batteries with existing rooftop solar capacity to create backup electricity networks.

The backbone would be the 2.3 million rooftop solar installations across the country that have been selling power to the grid for years under long-term contracts. As those deals begin to lapse, with the first batch expiring this month, policy makers in Tokyo see an opportunity to create networks more resistant to disruptions, which are expected to become more frequent amid climate change.

“We need to make our power system more resilient to natural disasters,” said Takuya Yamazaki, a director of the new energy division at the Ministry of Economy, Trade and Industry. “Storms are becoming more powerful and the damage is getting more serious.”

A blackout in Minamiboso, Chiba, after Typhoon Faxai on Sept. 12, 2019.

Last month, Typhoon Hagibis, the most powerful typhoon to strike the country in decades, killed at least 91 people and left more than 400,000 customers in the dark. That came on the heels of Typhoon Faxai in September, which toppled two transmission towers and almost 2,000 power poles owned by Tokyo Electric Power Co. Holdings Inc., contributing to an outage that affected more than 900,000 customers.

METI plans to spend 7.5 billion yen ($69 million) in the year starting April to promote purchases of devices, including batteries and electric vehicles, that can help form the base for so-called virtual power plants, according to Yamazaki. VPPs aggregate distributed energy resources into a network large enough to serve a market.

A police officer inspects a fallen utility pole in the aftermath of Typhoon Faxai in Kamakura, Sept. 9. Photographer: Jiji Press/AFP via Getty Images

Contracts will lapse this year for about 2 gigawatts of solar capacity set up under the country’s feed-in-tariff system for homeowners, which paid as much as 48 yen per kilowatt-hour. Once the so-called FIT system ends, it would be more economical for homeowners to use the power themselves -- and store the extra for emergencies -- than to sell it, according to Yamazaki. That’s because buying power from utilities costs about 25 yen per kWh, while selling it would only earn homeowners about 9 yen per kWh, he said.

Freed Up

More of the 10-year residential solar contracts with utilities are scheduled to expire each year as Japan winds down the subsidized buyback program, which started in 2009 to spur rooftop solar capacity. In addition to the 2 gigawatts to free up this year, contracts accounting for about 9 gigawatts of capacity will lapse through 2029.

Read BNEF’s Report: Japan’s 2019 Problem a Boon for Storage and Green Tariffs

Expiration of the tariff won’t change the landscape of the distribution grid but it may offer opportunities for VPPs, according to BloombergNEF analyst Miho Kurosaki. Itochu Corp. and Moixa Energy Holdings Ltd. are already managing 100 megawatt-hours worth of storage capacity across 10,000 homes in Japan, which the U.K.-based company says is probably the largest single fleet of smart batteries managed globally.

A collapsed golf practice range fences crush a house and vehicles following Typhoon Faxai, Sept. 9. Photographer: Tomohiro Ohsumi/Getty Images

Japanese industry is also finding new uses for old infrastructure to support the grid. A unit of the Japanese telecom giant Nippon Telegraph & Telephone Corp. said this month it plans to invest 600 billion yen ($5.5 billion) to establish a power distribution network built around its existing infrastructure. Regulators are also considering letting non-grid operators enter the power distribution business to spur competition, according to METI.

The country aims to boost its clean energy output to account for 22-24% of its total by 2030, from 16% in the year ended March 2018. It still gets 33% of its power generation from coal and faces public resistance to restarting nuclear reactors after the 2011 Fukushima disaster.

The stability of the grid, as well as it’s ability to absorb new renewable sources, has been impacted by the slow pace of upgrades by the nation’s utilities. They’ve focused instead on the trillions of yen needed for safety upgrades at their nuclear reactors. And in the case of Tokyo Electric, the nation’s biggest utility, it still has massive cleanup costs at Fukushima.