Energy Conservation Policy Measures in Japan Agency

Energy Conservation Policy & Measures in Japan Agency of Natural Resources and Energy (ANRE) Ministry of Economy, Trade and Industry(METI)

Table of Contents Page I. Situations surrounding energy consumption in Japan 1. Overall status ……………………………. . 1 2. Transition of energy consumption by sector……………. 7　　　　　 II. Energy conservation measures by sector 1. Energy conservation measures for the industrial sector………. . . 18 2. Energy conservation measures for the commercial/residential sector………………………………. . . 20 3. Energy conservation measures for the transportation sector………………………………. . 31 4. Development of energy conservation technologies………………. 34 　　　　　

I. Situations Surrounding Energy Consumption in Japan

I-1. Overall Status Transition of Final Energy Consumption (1) FY 1990 FY 2001 100 92 101 100 171 225 100 177 215 100 191 216 FY 1973 Industrial sector Commercial/ residential sector Transportation sector (Reference) GDP 1

I-1. Overall Status Transition of Final Energy Consumption (2) - Japan’s final energy consumption has almost consistently increased except immediately after the two rounds of oil crisis and in the recent economic recession. - The ratio of industrial: commercial/residential : transportation uses shifted from 4: 1: 1 (oil crisis) to 2: 1. 5: 1 (FY 2001). Million KL in crude oil equivalent) 450 Transition of Japan’s final energy consumption and real GDP trillion yen 600 408 million kl 550 400 500 350 Real GDP 287 million klｌ 24. 8% 300 400 16. 4% Transportation sector 250 350 28. 7% 18. 1% 200 Commercial/residential sector 300 250 150 200 46. 5% 100 450 62. 5% Industrial sector 50 100 50 0 19 73 19 74 19 75 19 76 19 77 19 78 19 79 19 80 19 81 19 82 19 83 19 84 19 85 19 86 19 87 19 88 19 89 19 90 19 91 19 92 19 93 19 94 19 95 19 96 19 97 19 98 19 99 20 00 20 01 0 Fiscal year (Source) General energy statistics, ANNUAL REPORT ON NATIONAL ACCOUNTS (Note) Note that the figures for FY 1990 onwards have been summarized in a different method than those applied to figures for preceding years due to a change in summarization method for general energy statistics. 2

I-1. Overall Status Transition of Final Energy Consumption by Sector - The amount of final energy consumption in the industrial sector has remained generally steady since the oil crisis. - On the other hand, those of the commercial/residential and transportation sectors have increased significantly. 250. 0 Index (FY 1973 = 100） 225. 0 Commercial/ Residential Sector 215. 6 Transportation Sector 200. 0 150. 0 101. 0 50. 0 01 20 99 00 20 19 95 19 90 19 85 19 80 19 75 19 19 73 0. 0 Fiscal year Source: Compiled by the Natural Resources and Energy Agency based on general energy statistics data 3 (Note) Note that the figures for FY 1990 onwards have been summarized in a different method than those applied to figures for preceding years due to a change in summarization method for general energy statistics. Industrial Sector

I-1. Overall Status Comparison of Energy Consumption against GDP by Country - Japan has a low rate of unit energy consumption per GDP compared to other industrialized nations. 2. 73 2. 05 1. 58 1. 50 1. 00 Japan U. S. U. K. France Germany *The above figures show final energy consumption (tons in oil equivalent) / Real GDP (against 1995 prices) (Actual figures for FY 2000) when the Japanese figure is set at 1. (Source) Compiled by the Natural Resources and Energy Agency based on energy and economic statistics data 4

I-1. Overall Status Rising Crude Oil Dependency on Middle East Countries - The rate of crude oil dependency on middle east countries has largely surpassed the rate at the time of the oil crises. 77. 5% (First oil crisis) 85. 3% (FY 2002) Transition of Crude Oil Dependency on Middle East Countries in Japan 　 　 Fiscal Year 5

I-1. Overall Status The Amount of CO 2 Emitted from Energy Utilization in Japan - The COP 3 (the 3 rd Conference of Parties of UN Framework Convention on Climate Change) held in December 1997 agreed on the reduction targets of GHG emission assigned to each developed country and issued its agreement as the “Kyoto Protocol”. Japan is responsible for reducing 6% of the total GHG at the average value in 2008 to 2012 in comparison with 1990 s. (US= -7%, EU= -8%) - About 90% of Japan’s greenhouse gasses is energy-originated CO 2. Breakdown towards 6% GHG Cut-Down Breakdown of Japan’s greenhouse gasses (2001) Hydro fluorocarbon　 1% 0%： Emission reduction of CO 2 arising from energy utilization. Nitrogen monoxide 3% (Maximize possible measures controlling energy demand & supply ) Perfluorocarbon 1% Sulfur hexafluorid 0% Methane　 2% Non-energy originated carbon dioxide　 6% Source: FY 2003 inventory 6 Energy-originated carbon dioxide　 87%

I-2. Transition of Energy Consumption in the Industrial Sector - Energy consumption in the industrial sector has been generally steady since oil crisis. - Energy consumption unit per industrial production index for the manufacturing industry suffered a sharp fall through to the 1980 s, but has been on a trend of slight increase since the 1990 s. - Japan’s energy consumption unit against GDP in the industrial sector is lower than those of other major countries. 120 Transition of energy consumption unit per industrial production index for the manufacturing industry Index (FY 1973 = 100) 110 100 90 80 70 60 50 40 Japan 73 74 75 76 77 78 79 80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 Fiscal year （Source） General energy statistics, annual report on industrial indices Note 1: The industrial production index is weighted with value added structure (1995 standard). Note 2: Since the industrial production index is affected by sales values, when a sales price drops, the index may go below the index of production volume. 7 U. S. U. K. France Germany *Final energy consumption (tons in oil equivalent) / real GDP (1995 value in US$) (both are actual figures for FY 2000), indicated in the ratio when the Japanese figure is set at 1. Source: Compiled by the Natural Resources and Energy Agency based on energy & economic statistics data

I-2. Transition of Energy Consumption in the Industrial Sector Energy Consumption Trend under the Nippon Keidanren’s Voluntary Action Plan on the Environment - Nippon Keidanren has drawn up a voluntary environmental action plan with the common goal of “reducing CO 2 emission from the industrial and energy conversion sectors to at least the FY 1990 level by FY 2010”. - Implementation of the plan has reduced CO 2 emission and maintained energy consumption steady against the FY 1990 level. CO 2 emission and energy consumption CO 2 emission Energy consumption 17, 619 16, 822 50, 000 17, 045 16, 566 16, 781 16, 493 17, 000 16, 299 16, 000 45, 000 50, 795 52, 423 1990 1997 49, 668 1998 50, 693 1999 50, 332 48, 964 2000 2001 49, 851 (10, 000 kl in crude oil equivalent) 18, 000 Energy consumption CO 2 emission (10, 000 tons-CO 2) 55, 000 15, 000 2002 Year Source: Nippon Keidanren (Japan Business Federation) data

I-2. Transition of Energy Consumption in the Commercial/Residential Sector - Energy consumption in the commercial/residential sector surged after the oil crisis and is still on the growth trend in recent years. - Japan’s per-capita energy consumption in the commercial/residential sector is relatively low compared to other major countries, but the difference is narrowing down. Transition of energy consumption in the commercial/residential sector Transition of Energy Consumption per Capita in the Commercial/Residential Sector 3 2000（Japan）＝ 1 2. 5 2 2. 37（U. S. ） 1. 5 1 0. 5 2. 01（U. S. ） 1. 41（Germany） 1. 32（France） 1. 28（U. K. ） 1. 00（Japan) 1. 53(Germany） 1. 27（France） 1. 09（U. K. ） Japan U. S. 0. 57（Japan） 0 1975 1980 1985 Year （Source） General energy statistics 1990 1995 2000 U. K. France Germany Source: Compiled by the Natural Resources and Energy Agency based on energy / economic statistics data 9

I-2. Transition of Energy Consumption in the Commercial/Residential Sector Example of Energy Efficiency Improvement in Home Appliances in the Residential Sector - While the consumption trend shifts toward large size, the industry has achieved energy efficiency improvement that compensates for the size increase. Annual Power Consumption per Litter 1981 236 L 1991 413 L 2001 442 L Fridge Size 10 Source: Japan Electrical Manufacturers’ Association

I-2. Transition of Energy Consumption in the Commercial/Residential Sector Transition of Per-Household Energy Consumption and the Number of Households - Energy consumption in the residential sector has made a firm increase due to changes in the social structure (e. g. increase in the number of households), lifestyle changes, and other factors despite energy efficiency improvements for individual appliances. (FY 1990 figure = 100) 118 116 114 112 110 107 108 106 104 102 100 1991 1992 1993 1994 Number of households 1995 1996 1997 1998 1999 Energy consumption per household 2000 2001 Fiscal year Source: Compiled by the Natural Resources and Energy Agency based on general energy statistics and resident register data 11

I-2. Transition of Energy Consumption in the Commercial/Residential Sector Trend in Standby Power Consumption - The amount of standby power consumed at households accounts for approximately 10% of the total household power consumption (equivalent to TV power consumption at all households). Breakdown of annual standby power consumption per household Standby power ratio of the total power consumption in households Power consumption while on standby 9. 7％ Household power consumption 437 k. Wh per annum per household Others 23% Telephone (extra handset) 3% VCR 17% Stereo System 11% 4487 k. Wh per annum per household Telephone (excl. units with fax function) 3% Gas Hot Water System 11% Multi-functioned Toilet Seat 4% Power consumption while in use Satellite TV Tuner 6% TV 5% 90. 3% Microwave / Electric Oven 5% Cooling / Heating Air Conditioner 6% Telephone with Fax Function 6% Source: FY 2002 study on standby power consumption, Energy Conservation Center, Japan *Standby Power Consumption : Power consumed while electrical appliances are not in use. （Power consumption for the timer function, remote controller receiver, etc. ） 12

I-2. Transition of Energy Consumption in the Commercial/Residential Sector Transition of Floor Space by Industry in the Commercial Sector - The energy consumption in the commercial sector is consistently increasing. This is attributed to a significant increase in total floor area for offices, business buildings, etc. Floor space by business type (Legend: Business type (ratio)) million m 2 1800 1600 Office / Commercial Building 26．2 Total floor area 1400 1200 24. 8 Wholesale / Retail 23．3 1000 22. 1 800 Others 11．9 11. 3 600 School 400 20．5 23. 7 Restaurant 3. 7 3. 9 200 1．9 5. 1 6. 0 Theatre / Entertainment 1．2 Hospital 5. 5 Hotel / Guest House 5. 6 Department Store / Supermarket 1. 3 2. 0 0 1991 2001 Fiscal year （Note） The figures in the graph represent each industry’s floor area ratio against the industry total. Note） Source: Energy and Economics Statistics 13

I-2. Transition of Energy Consumption in the Commercial/Residential Sector Status of Unit Energy Management (UEM) in the Commercial Sector Unit energy management is not implemented. UEM is not implemented because of low utility / fuel costs. UEM is not implemented due to the lack of human resource /know-how for the implementation. Energy conservation properties are examined & controlled only when individual machinery / equipment is introduced. UEM is not implemented because the time and effort for such management cannot be ‘justified’. UEM is not implemented because energy sales for the third body is our business. Unit energy management is implemented. （％） UEM is conducted by factory / by the bldg. UEM is conducted by factory / by floor. Total Respondents 16. 8 　Factories, etc. , 　Government offices 48. 5 23. 7 6. 3 n 0. 3 16. 5 53. 4 30. 1 0. 6 8. 8 0. 3 26. 7 51. 4 　Commercial Buildings 8. 4 6. 0 2. 7 0. 7 13. 6 0. 0 7. 6 3. 4 19. 3 0. 0 32. 4 2150 176 3. 5 4. 2 5. 6 1. 4 　Hotels 0. 1 2. 3 3. 7 3220 142 1. 4 47. 1 0. 0 27. 9 8. 8 4. 4 5. 9 68 1. 5 　Hospitals 21. 3 0. 0 44. 9 13. 5 7. 9 89 0. 0 2. 2 Laboratories / Institutes 10. 1 5. 5 52. 7 0. 0 5. 5 22. 0 8. 8 91 0. 0 　Schools 15. 3 0. 0 40. 3 18. 1 8. 3 0. 0 18. 1 72 0. 0 Department stores / Retailers 0. 4 　Others 49. 6 30. 0 3. 9 - According to the survey on　 Type 2 Designated Energy Management Factories, business establishments in the commercial sector have a lower rate of energy unit management than factories. 0. 0 0. 6 32. 8 32. 5 6. 7 2. 8 1. 2 15. 0 1. 1 11. 7 252 180 14 Source: FY 2000 current survey on Type 2 Designated Energy Management Factories Energy Conservation Center, Japan

I-2. Transition of Energy Consumption in the Transportation Sector - Energy consumption in the transportation sector surged after oil crisis and has leveled off in recent years. - Per-capita energy consumption in the transportation sector is on the increase in all major countries. Transition of energy consumption in the transportation sector Crude Oil Equivalent kl 120 Transition of per-capita energy consumption in the transportation sector 100 80 43 41 40 40 Freight 39 60 27 40 23 27 Passenger 24 20 55 20 17 0 41 2000 (Japan）＝ 1 3 1970 23 26 1973 1975 32 37 1980 1985 Source: General Energy Statistics 60 61 61 2. 92（U. S. ） 2. 5 2 1. 5 1 0. 5 0 61 2. 67（U. S. ） 1970 44 1. 21（France） 1. 19（U. K. ） 0. 74（U. K. ） 0. 70（France） 0. 68(Germany） 1. 10（Germany） 1. 00（Japan） 0. 53（Japan） 1975 1980 1985 1990 1995 Year Source: Compiled by the Natural Resources and Energy Agency based on energy / economic statistics data 1990 1995 1998 1999 2000 2001 Fiscal year 15 2000 Japan U. S. U. K. France Germany

I-2. Transition of Energy Consumption in the Transportation Sector Contributing Factors Increasing Energy Consumption in the Transportation Sector - Passenger vehicles contributed 90 % of the total energy consumption in the whole transportation sector increased during FY 1991 to 2001. - Passenger vehicles have poor unit energy consumption compared to other transportation. 輸送機関別エネルギー消費原単位の推移 Transition of unit energy consumption by transportation Contributing Factor Increasing Energy Consumption in the Transportation Sector (FY 1991 to 2001) 3 Total: 17% (%) 20 Car (Privately owned) (15) Ship (Passenger) (2) 15 Airplane (Passenger) (1) Airplane (Freight) (0) Train (Freight)(0) 10 Car (Freight) (0) Ship (Passenger) (0) Train (Passenger) (0) 5 Bus (0) Car (Business) (-1) Unit Energy Consumption （MJ/passenger-km) Increase ratio of energy consumption in the transportation sector (FY 1991 to 2001) 2. 44 2. 5 2. 21 2 1. 98 Car (Privately owned) 1. 5 Bus Train (Passenger) Ship (Passenger) Airplane (Passenger) 1 0. 67 0. 5 0. 21 0 0 90 91 92 93 94 95 96 97 98 99 2000 2001 Fiscal Year -5 Source: Energy and Economic Statistics Source: Compiled by the Natural Resources and Energy Agency based on energy & economic statistics data 16

I-2. Transition of Energy Consumption in the Transportation Sector Factors for the Increase in Energy Consumption for Passenger Vehicles 1. 2 1. 0 Units 65. 0 　　　　 Transition of passenger vehicle ownership per household Factors affecting energy consumption for passenger vehicles 59. 8 million kl (up 64. 0%) 60. 0 Actual fuel economy factor 55. 0 5. 1 million kl 0. 90 0. 93 0. 87 1. 09 1. 03 1. 05 1. 06 1. 07 0. 97 1. 00 0. 6 0. 4 0. 2 0. 0 21. 8% 50. 0 90 91 92 93 94 95 96 Fiscal Year 97 98 99 00 01 Source: Compiled by the Natural Resources and Energy Agency based on annual automotive transport statistics and energy statistics data Driving distance factor 45. 0 40. 0 0. 8 18. 3 million kl 36. 5 million kl 78. 2% 35. 0 30. 0 90 01 Fiscal Year Average Weight (kg) Fuel consumption (Million kl in gasoline equivalent) - Energy consumption for passenger vehicles marked a dramatic 64% increase over 11 years from FY 1990. - The trend is mainly attributed to the increase in household ownership of passenger vehicles extending the total driving distance and increased vehicle weights compromising the actual fuel economy. 1250 1200 1150 1100 1050 1000 950 900 Transition of average vehicle weight owned 1, 128 1016 1, 038 1, 061 1, 146 1, 160 1, 173 1, 182 1, 186 1, 187 1, 189 1, 186 1, 083 89 90 91 92 93 94 95 96 97 98 99 00 01 02 Year 17 Source: Compiled by the Natural Resources and Energy Agency based on Automobile Inspection & Registration Association’s automotive ownership data

II. Energy Conservation Measures by Sector

II-1. Energy Conservation Measures for the Industrial Sector Factory/Business Establishments Measures Under the Energy Conservation Law - The energy conservation law was revised in FY 2002 to enhance energy management in the commercial sector, whose energy consumption has surged. - Action plans initiated by Keidanren and other industries shall be formulated/followedup. (Support under the supplemental provisions are provided for achievement. ) Factories/business establishments with high energy consumption （Type 1 Designated Energy Management Factories） ） Factories/business establishments with medium energy consumption （Type 2 Designated Energy Management Factories） ） - Annual fuel (thermal) use: At least 3000 kl in crude oil equivalent - Annual fuel (thermal) use: At least 1500 kl in crude oil equivalent - Annual electricity use: At least 12 million kwh - Annual electricity use: At least 6 million kwh Factories Business Establishments Factories and business establishments Measures - Appointment of Energy Manager -Appointment of Energy Management Officer 　（Energy Manager Training Required） - Preparation & Submission of Periodical Reports (Mandatory to possess Energy Manager License) - Preparation & Submission of Periodical Reports - Formulation & Submission of Mid- and long- term Plans - Preparation and Submission of mid- and long-term plans (Participation of a Qualified Energy Management Officer Required) Business Establishments Factories 18 Department Store School Office Building Hotel

II-1. Energy Conservation Measures for the Industrial Sector Measures for Factories/Business Establishments Under the Energy Conservation Law 19 If the establishment refuses to comply Public disclosure / compliance order If the assessment result is less than 50 points If deemed extremely insufficient against judging criteria Rationalization plan guidance (2) Return (1) According to judging criteria, examine the status of energy management standards, records kept, maintenance checklists, etc. Inspection (1) Send a preliminary survey form On-site investigation Factory subject to investigation Flow of general inspection Local bureau of economy, trade and industry - On-site investigation (factory inspection) has been conducted since FY 2001 on Type 1 Designated Energy Management Factories. - Compliance to the factory/business establishments standards is investigated to assess the need for guidance based on objectively set criteria. - Establishments that have an extremely poor level of energy use rationalization are instructed to prepare/submit a rationalization plan, implement the rationalization plan, and take other relevant steps.

II-2. Energy Conservation Measures for the Commercial/Residential Sector Improving Equipment Efficiency with the Top Runner Program - The top runner program* was introduced in 1998 for energy conservation standards for 従来の省エネ基準 home/office appliances and fuel 新・省エネ基準 standard for automotives. economy Energy-Conservation Target for Specific Equipment Example of Top Runner Program Conventional energy conservation standard Fuel Economy (km/　) Energy conservation standard based on the Top Runner Program Stricter energy conservation standard The energy conservation effect is as compared with that of 1997 (and as compared with 1995 for automobiles, and 1998 for electric refrigerators / freezers). * Top Runner Program: The program seeks continuous improvement in energy conservation standard/performance among the latest products. E. g. Fuel economy standard of automobile, energy conservation standard for electric equipment etc. 20 Energy conservation effects in comparison with FY 2000（against FY 1999 figures for transformers）

II-2. Energy Conservation Measures for the Commercial/Residential Sector Energy-Saving Labeling System - The energy-saving labeling system has been introduced to inform consumers of energy efficiency of home appliances and promote energy efficient products. Examples of energy-saving labeling Energy conservation standard achievement percentage Target year FY 2004 155% Energy conservation standard achievement percentage Target year FY 2004 80% Annual power consumption 250 k. Wh/year Annual power consumption 690 k. Wh/year Label for the product’s main unit As of April 2004, the labeling is applied to the following 10 products: air conditioners, fluorescent lights, TV sets, electric refrigerators/freezers, space heaters, gas cooking appliances, gas water heaters, oil water heaters and electric toilet seats. The application is expanded to include computers, magnetic disk units and transformers in May 2004. 21

II-2. Energy Conservation Measures for the Commercial/Residential Sector Energy Efficient Product Retailer Assessment System - In order to promote energy efficient products, it is essential to introduce measures for “retailers”, who make the contact point between manufacturers and consumers. - Recognition should be extended to retailers that actively promote energy efficient products or provide appropriate energy conservation information. - The energy efficient product retailer assessment system was introduced in FY 2003. Logo - System target (large home appliance retailers) 　- Floor space of at least 1, 000 square meters 　- At least 50% of sales coming from home appliances - Top “energy efficient product promotion stores” are selected each year and publicized along with their rankings. - Stores selected as top retailers are authorized to carry a special logo. 22

II-2. Energy Conservation Measures for the Commercial/Residential Sector Promotion of High-Efficiency Boilers 従来の省エネ基準 - Energy demand for hot-water supply新・省エネ基準 about 30% of the total energy consumption in a dominates household. - A rebate system has been introduced to promote the proliferation of energy efficient hot-water systems. CO 2 Refrigerant Heat-pump Boiler Latent-heat Recovery Boiler Gas Engine Boiler Utilizing the principle of a heat pump used in an air-conditioner, it can be heated with energy of about 3 times more than input energy. This realized energy saving of about 30% compared to traditional combustion-type boiler. It recovers latent heat of exhausted gas, which was usually wasted. This realized energy saving of about 15% compared to a conventional combustion-type boiler. Use the gas-powered engine’s exhaust heat and power to provide heat (main) and electricity (sub) for approx. 10％ overall energy saving for a building. 23

II-2. Energy Conservation Measures for the Commercial/Residential Sector Reduction in Standby Power Consumption - Standby power consumption in the household sector accounts for about 10% of its total power consumption. - The home appliance industry has introduced a voluntary program for reducing standby power consumption. Outline of Voluntary Efforts by Relevant Industries - In regards to products that essentially require standby power, the relevant industries shall work toward the goal up to 1 W standby power by the end of FY 2003 (by the end of freezing year 2004 for an air-conditioner). - In regards to major home electrical appliances except for the above-mentioned products, the relevant industries shall also work toward the goal as close to zero watt as possible in standby power of the products’ bodies by the end of FY 2003. Industries concerned: Japan Electronics and Information Technology Industries Association (JEITA), Japan electrical manufactures’ Association (JEMA), and Japan Refrigeration and Air-conditioning Industry Association (JRAIA) Achieved by around 75% models by May 2003 24

II-2. Energy Conservation Measures for the Commercial/Residential Sector Promotion of Residence & Building with Superior Energy Conservation - By the revision of the Energy Conservation Law in 2002, the owner of the specified buildings (designated for the non-residential-purposed with the area over 2000 m 2) is required to notify its energy-conservation measures. - Promotion of labeling on energy performance. - Implementation of support measures for compliant houses and buildings Residence: From FY 2008, the rate of energy-saving standard conformity to build new residences shall be set above 50%. Building: From FY 2006, the rate of energy-saving standard conformity to build new buildings shall be set above 80%. 25

II-2. Energy Conservation Measures for the Commercial/Residential Sector Thorough Energy Management Utilizing IT Utilization and Facilitation of HEMS (Home Energy Management System) - Use IT technology to promote and facilitate a system that supports the energy demand management at home (energy conservation behavior), e. g. a system that ensures the optimum operation of home appliances (air conditioners, refrigerators, etc. ) or a real-time display of utility charges on energy use. Field test example Data Center Blind / fan / air conditioner Accumulation and analysis of collected data ・ Collecting power consumption monitoring 　 data ・Processing communications with AIGIS, etc. Making a coordinated control of blinds and fans to reduce air conditioner operation AIGIS terminal Number of monitors: 300 households (X: For limited monitors only) Motion sensor / air-conditioner Air-conditioner control with the motion sensor Monitoring the load current for each of the home appliances to identify appliance usage status and patterns in using such devices Action program for system promotion Monitors used since FY 2001 to FY 2005 Phase 1 : Field test verification - Further verification of energy conservation effect - Verification of the pricing mechanism / incentive functions - System standardization AV devices Cutting off standby power consumption with the use of an adapter Refrigerator Displaying the times of opening/closing doors and the power consumption 180 -degree camera Transmitting images to PHS, etc. for monitoring the status of the home (Example) Safety confirmation service for elderly persons living alone Several years later Phase 2: Full-scale system promotion In-house lighting wiring Information terminal Collecting data from various appliance adapters to display power consumption and charges. Also making a central control of various functions. Heat pump hot-water system Remote ON/OFF control and remote bathwater filling 26 - Home appliance manufacturers, information service businesses, security companies, power companies, etc. will form a consortium to provide the services to consumers.

II-2. Energy Conservation Measures for the Commercial/Residential Sector Thorough Energy Management Utilizing IT Promotion of Commercial Building Energy Management System (BEMS) - Use IT technology to promote and facilitate a system that supports the energy demand management for commercial buildings (e. g. , a system that ensures recognizing a real-time room conditions in buildings by temperature sensors and/or the optimal operation of lighting and air-conditioning responding to the room condition). Equipment Control BEMS Image Controls the blowing volume of air-conditioners upon direction received from the central monitoring and controlling unit. Humidity & Temperature Sensor Measures humidity & temperature in each floor/room and send the information data to the c entral monitoring & controlling unit. Human Detective Sensor Detects human presence/absence in each floor/room and send the information data to the c entral monitoring & controlling unit. Central Monitoring & Controlling Unit Based on the data from the humidity & temperature sensor and human detective sensor, adequately controls air conditioning and lighting. 27 Aggregates and analyzes the energy use data and estimates the future energy demand to reflect for the air-conditioning control.

II-2. Energy Conservation Measures for the Commercial/Residential Sector Promotion of ESCO Business What Is the ESCO Business? - A business that offers comprehensive services on energy conservation to clients, who in return will offer a part of their energy saving gains (saving on utility bill, etc. ) - The business has two forms: “Guaranteed savings agreement” where customers cover business costs and “Shared savings agreement” where the ESCO business covers business costs. These options enable service provision according to customer needs. *ESCO stands for Energy Service Company. Overview of the ESCO business Customer gain ESCO expenses Repayment Utility charge payment Guaranteed method Service charge サービス料 Guaranteed Interest Customer gain Leasing company Financial institution Initial investment Lease / loan Customer Energy saving guarantee ESCO Shouldering installation cost Utility charge payment Shared method Utility charge payment Shouldering installation cost No initial costs Customer Before the introduction of During the implementation ESCO business of ESCO business After the contract term completed Installation Service charge 28 ESCO Lease / loan Leasing company Financial institution

II-2. Energy Conservation Measures for the Commercial/Residential Sector Promotion of ESCO Business ESCO-Related Market Scale - ESCO-related markets have shown rapid growth in recent years with substantial room for market expansion. (FY 2002 purchase orders: Approx. 51. 5 billion yen) Scale of ESCO-related markets 100 million yen 600 - A research estimates its potential market size as 2, 470 billion yen. （Source: The ECCJ’s ESCO Introduction Promotion Study Group Report） - The market scale of the ESCO business in the US in 2000 is approx. US$ 2 billion. 500 400 515 52％ Commercial/residential sector 265 300 200 449 Industrial sector 170 186 48％ 100 0 1998 1999 2000 Fiscal year 2001 2002 Source: JAESCO (Japan Association of Energy Service Companies) survey 29

II-2. Energy Conservation Measures for the Commercial/Residential Sector Support for the Introduction of ESCO Business - Support, in the forms of partial subsidy for initial investments, low-interest loans, etc. , is extended to private enterprises and local governments implementing the ESCO business. - A model ESCO project will be introduced also at a national facility, i. e. METI building from FY 2004 onwards. Example of ESCO business introduction (at a hospital) Energy saving lighting * Energy 省エネ照明 conservation with a three-step lightmodulating inverter stabilizer 　　 蒸気ライン Steam line - Inverter control インバータ制御 　　 ■空調ファン･ポンプの 動力低減 - Reduced power for air conditioning fan/pump Reduced water use at トイレの節水 toilet 　　 Fluorescent lights 蛍光灯 　　 -　利用 drain used Steam as gray water ■断熱、統合 Insulation integration Gas driven absorptionガス吸収冷温水機 type hot water system ■最新のトップランナー 　　 Parking 駐車場 Boiler drain ドレン水 ボイラ 　　 - Toilet using gray water ■中水利用（トイレ） Power 冷温水機 電気室 Hot / cold機械室 water system. Machine Central disaster prevention room monitoring center 　 機器に更新 -Updating to the latest Top Runner qualified equipment Co-generation system コージェネシステム ■電気･熱の供給 - Supply of electricity / heat 　　 ■排熱有効利用 - Effective use of exhaust heat 30 Energy conservation effect by the introduction of ESCO: Approx. 25%

II-3. Energy Conservation Measures for the Transportation Sector Promotion of Cars with the “Idling-Stop” System - Idle-free driving can improve fuel economy by approx. 10%. 　Even greater energy conservation effect is expected in city areas, where idling frequency is high. - Partial subsidy for the purchase of cars equipped with the “idling-stop” system was introduced in FY 2003. - Promotion campaigns for the “idling-stop” systems are held in the forms of PR events, etc. Effects of the driving experiments by “idling-stop” cars Results of “The Idling-Stop 2002 Caravan throughout Japan” PR activities In October 2003, an event for “idling-stop” experiments took place at Tokyo’s Ginza and Osaka’s Shinsaibashi traffic lights. Nationwide (3719 km)… 5. 8% on average Or 13. 4% in city areas [The stop & “idling-stop” implementation time ratio in city area] Urban area Fuel Economy Reduction Rate Stop time ratio “Idling-stop” implementation time ratio 31 Idling-free promotional event (Osaka)

II-3. Energy Conservation Measures for the Transportation Sector Fuel Economy Disclosure and Labeling System for Vehicles - The system was introduced in January 2004 to deepen consumer interest/ understanding on fuel economy and promote cars with high fuel performance. - Disclose Fuel Economy Performance The disclosure is targeted for cars of which fuel economy standards are set based on the energy conservation law. Either the status of “fully compliant”or “plus 5% of the fuel economy standard” will be publicly displayed. - Label a Fuel Economy Identifiable Sticker Label a sticker on the body of a car that conforms either to “fully compliant with the fuel economy standard” or “plus 5% of the fuel economy standard”. Energy conservation law target year Vehicles subject to the energy conservation law FY 2010 Gasoline passenger/freight vehicles/ LP gas passenger vehicles Models plus 5% of the fuel economy standard Models compliant with the fuel economy standard 32 FY 2005 Diesel passenger/freight vehicles

II-3. Energy Conservation Measures for the Transportation Sector Traffic Management Measures - Adjusting automotive traffic demands through the promotion of TDM (Transportation Demand Management) measures. - Promoting ITS (Intelligent Transport System) by promoting ETC (Electronic Toll Collection) and VICS (Vehicle Information and Communication System) Promotion of TDM (Transportation demand management) trials Current Status Road Management ETC promotion measures Serious traffic congestion in city areas 　○ 12 trillion yen in economic loss each year 　○ Limitations to road development aimed for transport capacity increase Measures for managing traffic demand Raise the ETC usage rate to around 70% by the end of FY 2007 to alleviate congestions at toll gates. Local Police Roadside aerial Combination＝ＴＤＭ Park & Ride, etc. Experimental measures for alleviating congestion in partnership between local governments, the police and transportation businesses Verification Trial Measures for improving the convenience of public transports Control on illegal parking Government Support One-coin bus (100 per ride), etc. Transportation Business National Police Agency/Ministry of Land, Infrastructure and Transport certify and partially subsidize (1/3 of costs) for verification trials expected to gain effectiveness on congestion alleviating measures. 33 Two-way Radio Source: Organization for Road System Enhancement (What is ETC? )

II-4. Development of Energy Conservation Technology Promotion of Technological Strategy for Energy Conservation - In June 2000, “The Energy Conservation Technological Strategy” that clarifies the direction of technologies that may solve demand side issues was outlined. - By broadly soliciting seeds technologies and implementation of verification trials from the public (private organizations and such), support the development of energy such) conservation technology in line with the Energy Conservation Technological Strategy. Basic Policy of Technological Strategy for Energy Conservation Subject extraction from demand side Finding & selecting seeds technology to solve issues Government support Development facilitation in technological development phases Technology introduction and dissemination in the market 34 Facilitation of development & introduction Subject extraction from the viewpoint of demand side (energy consumers)

II-4. Development of Energy Conservation Technology Marketability New System for Developing Energy Conservation Technologies Market development - Data collection per actual product for those that are required to have their effectiveness and reliability verified to be introduced to the market. - Technological improvements, etc. n tio ica if er V Research and development on innovative and promising foundation technologies with high ripple effects on energy conservation ry rt to ppo uc su d tro tion In o m ro p Promotion of energy efficient appliances already developed and the public education on such products n tio a lic pp a al c cti a Research and development to support those of which practical ch Pr ar application is delayed due to lack of peripheral and product se e development technologies, and support the practical application of gr seeds technology which were found in previous research. in r ee ion P 35 Development steps

II-4. Development of Energy Conservation Technology Main Research and Development Projects for Energy Conservation - Cross-sector 　- Power electronics such as Si. C 　- Development of a highly efficient electrothermal conversion system 　- Development of ultra-low thermal conductive insulation materials using nano-scale control Lighting equipment - Industrial sector 　- Research and development of LNG thermal systems 　- Research and development of the reduction of bound energy in clean rooms Traffic signals - Commercial/residential sector 　- Research and development of next-generation energy efficient PDP 　- Research and development of highly efficient white LED 　- Development of triple-effect high-performance absorption-type hot water systems 　 - Transportation sector 　- Research and development of lightweight automotives using aluminum alloy, carbon nanofiber, etc. 　- Development of a diesel engine in the HCCI (Homogeneous Charge Compression. Ignition Combustion) system 36