Renewables vital to the global shift to a smart energy mix

Could you tell us how you see the Japanese economy up to 2020 and what are the key challenges it will face?

Obviously, the ageing population and the decrease in skilled labor is going to shrink the domestic market, so generally speaking, this is an issue all companies need to take very seriously. But talking about our company independently, being able to have a capable work force that carries out the common labor is crucial. The most important challenge to tackle right now is the decreasing labor force.

One of the central tenants of Abenomics is including more women in the work force, making it easier for females to be involved in economic activities, and this is something that as a company we are very serious about. We are taking measures; for example, the most important thing for us, as we’ve discussed with other newspapers recently, is creating a work style that is able to accept female employees by being in tune with their lives. Up till now, even though females were employed, once they were married, once they had a child, they would leave the company. Maybe they would come back as part-time but the majority would stay at home. So rather from that in the past, we’ve moved to a system where we’ve tried to have corporate and internal company policies facilitating women’s working conditions. When we look at surveys of Japanese women, and the way they are thinking about employment at the moment, a good share of them say they would like to work over the long term even if they get married, even if they have a child. Now that this mentality has been changing from the female perspective, I think the increase of women in the labor force is very important.

We started off by selling fuel briquettes, which are basically made by men in the factories and then sold by men to other men working in small retail shops. We then moved from oil to gas, which followed a very similar process: selling to small retail shops and retail owners who are men. So the business has been from man to man. Recently though, the deregulation and the liberalization of the electricity sector, regarding the sales of electricity and the sales of gas, has created new opportunities. For example, most of our B-to-B sales force in the electricity resale market is female. This has led us to run our business differently, making the sales process more detailed, more careful or gentler, which is something that we’ve found to increase our profitability.

So both the mentality of women, saying they would like to work more, and the structural reforms that are going to be implemented by Prime Minister Abe are helping to provide opportunities, and those opportunities allow us, as a company, to be able to retain and provide a happier and more enhanced work environment for female employees.

The 2011 nuclear shutdown and the infamous Fukushima Daiichi event re-called Japan’s energy landscape into question. How would you describe the effects of Japan’s nuclear meltdown on the energy sector and what impact does it have on Sinanen’s strategy and growth?

It was devastating for the country. We had plants in the Tohoku area and lost two of our employees, so it was something that was very personal for us. Furthermore, we sell to individuals, and the Tohoku area is very cold, so many of our consumers were freezing when the earthquake shut down the energy lines. We have resellers that have been working with us for a long time who still can’t go home because their homes are in the contaminated area. So even to this day we feel the effects of the nuclear meltdown, and this has really affected our company’s perspective toward nuclear energies.

Right now the national debate is 50% support and 50% against the restarting of nuclear power. But you know, as a participant in the energy industry, when we look at the energy mix that we currently have, if we are able to provide this steady stream of electricity for businesses and consumers without the restarting of these plants, I don’t really see why we would need to restart nuclear energy outputs.

Japan is very disaster prone; we have a lot of earthquakes and typhoons. Furthermore, the burning of fossil fuels necessary for the power plants is going to have some sort of impact on the environment, and these environmental changes are in our opinion another reason to not restart the nuclear plants.

A central tenant of Abenomics is to restart nuclear energy to support industry, but my personal feeling, our company’s feeling, it is not necessary that. Throughout the last two years we have been shifting our focus toward new renewable energies, whether it’s solar or electric generation, and we think that these kinds of undertakings are the energies of the future. Being able to realistically deploy these new technologies, these new renewable energies, as a replacement for fossil fuels is something that must be considered both a corporate responsibility and a personal one.

We as a company aim at becoming well known in the renewable energy sector, not just in Japan but in Southeast Asia as we expand and provide these technologies and developments to these different markets. This is something we are very much interested in and we’re planning stages of international expansion. So although the nuclear meltdown was a tragedy and a personally devastating event for us, we’re going to use it as a way to make the company grow while positively impacting the planet.

In light of the global environmental awareness issue, companies are held responsible for reducing their consumption and meeting international standards. How important is environmental friendliness to Sinanen? What products is Sinanen offering to increase renewable and eco-friendly energy production?

I am part of a holdings company, so we have many different subsidiaries that are involved in many different businesses. We started off selling charcoal for barbeques, this was our original business, and we have a very strong know-how in creating the moulds for charcoal and bringing in the actual ingredients together. For example, we tried to start the business to produce briquette fuel for barbeques using casing of sugar cane as an ingredient at the beginning, but casing of sugar cane became valuable due to the increase in bio-ethanol demand, and so our first intention was put in a difficult situation to continue. In fact, after you wring out the sugar cane, you’re left with the casings, which are usually thrown away and are very cheap. Instead, we included these casings as one of the ingredients in the charcoal for household barbeque use. But when we looked at the prices, they were going up and up and up, and we didn’t know what to do. Now, we’ve found a new type of grass that is available and prominent in North American and South American regions and we’ve successfully developed technologies that allow us to use this grass. What we currently do is we dry up the grass named “kappin” and harden it, then make it into charcoal. So this is a new technological development that helps the environment because you’re not cutting down the actual trees, it’s just the grass.

Another example is that we have a product called Fab-Heat. It is possible to weave electrodes into textiles using carbon nanotubes, and by putting electrodes into textile material you can produce an actual heating effect. In Japan, there are a lot of places where it snows. We succeeded in developing the new product with Fab-Heat to install in parallel with the solar module, and it produced an effect to melt the snow on the solar module. As the result of this success, it became possible to generate electricity from solar power even in those kinds of snowy areas.

So we came up with the idea of being able to melt the snow using these kinds of solutions. Even though the basic concept was to be able to melt the snow, there are now other implications. When it snows, the soil freezes; but if it had this kind of material that we developed infiltrated into it, you could have agriculture even when the weather is below freezing. So although these technologies are not going to have a direct impact on the profits of our company, over the long term, I think it will become a profitable added value. We just created the new technology in Yamaguchi prefecture. These advancements will have a wider and wider range of utilization both domestically and internationally.

In 2015, 82% of Japan’s crude oil imports originated from the Middle East. Compared with crude oil, Japan's LNG import structure is more diversified, but it still depends on the Middle East for 27% of total imports, as of 2015. How important is it for Japan’s energy companies to diversify their energy imports?

First, regarding the drop in oil prices, it is kind of a misconception that the drop in the price of crude oil has been beneficial to the industry. We are a wholesale distributer that sells through retailers; with the drop of the oil price, the benefices should actually come to the major domestic companies that import the oil and then refine it and sell it. But when you look at their books, what really happened is that the drop of the price of crude oil was a positive development for consumers. In Japan, one liter is around 180 yen, and before that, it dropped to 120. So from a consumer’s point of view, the merit was clearly beneficial. But for the oil majors who refined it and sold it to the wholesalers, all it did was increase the competition. One of the major problems in Japan is that there are so many wholesalers and so many retailers that competition is very high. The drop in crude oil price simply accelerated the negative impacts of intense competition, by creating a negative down-pricing competition. This is something that has been kind of unique to Japan and we as a company didn’t really post increased profits; there wasn’t any actual positive affect from the drop in the price of crude oil. Stability is what fuels profitability in our business, and the latter did not help in that regard. From the government’s point of view, it’s important to have a stable oil price and a stable currency exchange rate so that big companies and the government can plan for the future.

Regarding our dependency on the Middle East, as I’ve been saying, this dependence relies on fossil fuels. As the global movement against fossil fuels increases, so will the demand for LNG, a cleaner alternative. The ability to transport LNG tankers is therefore going to be enhanced, hence provoking a change in infrastructural demand. For example, the Panama Canal has just been reopened to accommodate LNG tankers.

Right now the biggest exporter of LNG is Qatar, so to a large extent we still depend on the Middle East in the short term. However, the recent deregulations of the industry have ushered us in a new era of competition. We are currently looking at importing LNG from countries like the USA and Nigeria. So in the very near future we will have an increased in competition based on cost from different areas from around the world and our company will be able to benefit from this.

LNG will be a big part of our company moving forward, and will help in the mid to long term to reduce our dependence on Middle Eastern imports.

At the end of 2015, the USA lifted its 40-year ban on crude oil exports. In May 2016, one of your main shareholders, Cosmo Energy Holdings, received a tanker of 300,000 barrels of West Texas Intermediate Crude. How important are US-Japan trading relationships for the energy sector, and for Sinanen?

Lifting the export ban is something that is very welcomed in the market from our point of view. Up until this day, the oil price and the oil market itself was run by the OPEC cartel, and this was not an open, free market. The USA is the land of the free market. So having a partner whose business model is based upon supply and demand is something that is very welcomed. And obviously, as Japan is a country with a positive relationship with the US, it is welcomed even more.

As I said, the USA and Japan have a very good relationship in terms of energy transaction, particularly in the renewable energy sector. Even though America is currently living its shale oil revolution, it is not going to last forever. So at the end of the day, the use of fossil fuels is not a long-term solution to any of these problems. The only sustainable solution is to focus on renewable energies. The USA has a very strong technological advantage regarding the renewable sector. However, Japan is catching up thanks to its own unique technology.

So rather than competition, we see a partnership opportunity between Japan and the USA. As global citizens of the world, we need to focus on the adoption and enhancement of the technologies that we have. Both the United States and Japan have signed the COP21. We must therefore ensure that we keep to our commitments regarding the use of fossil fuels and the amount of carbon dioxide in the air.

Sinanen is affiliated to more than 30 different companies, from retail energy to wholesale to real-estate management to anti-microbial agents. Can you explain to us your diversification strategy from 2011-2016? And what it will look like in the future?

We started out as a company that manufactured charcoal. We then moved into oil and gas on a wholesale and a retail level, and now we are moving into electricity resale. Our business model up until now has been based on mass consumption: how to get our customers to buy more of the products that we sell.

As we look forward into the future, it is not the amount of consumption per se that is interesting, but rather the ways of consuming it. We are moving from a mass consumption model to a smart consumption one. The window into our customer’s lives is energy consumption, and once you have this window opened, they will be using energy from the day they are born until the end of their lives. Once we have established this relationship, our clients start trusting us with their home facilities. We have diversified in order to integrate all our stakeholders’ daily energy consumption.

This is the kind of value-added services that we need to be able to provide and to become a fully integrated, smart-energy company.

One of Sinanen’s mottos is to deliver “to the future and to the world” by providing services and products adapted to its clients and to our changing world. What specific managerial actions are you implementing to prepare for the future?

As a company, we are shifting our focus toward renewable energy, and I think the technology and the know-how that we built for the domestic market is something that can be of great added value to the international scene. We have focused our efforts on developing innovative sources of renewable energy. I would like to leave an “Earth-friendly company” as my legacy for the future.