Market Facilitation Organizations:A Case Study of the Renewable Energy Project by Ohisama-Shinpo-Energy

Abstract

Market facilitation organizations (MFOs) are a new concept developed as private public partnerships for promoting renewable energy markets. These public-private entities support the growth of particular markets through a variety of means, such as partner matching, information dissemination, and market research. Although the concept of MFOs was developed to facilitate renewable energy markets in developing countries, MFOs might also be effective in promoting renewable energy markets in rural communities in Japan. Just as in developing countries, Japanese rural communities are lacking many of the same resources, including know-how, financing, manpower, and policies, for renewable energy markets. In Iida, Japan, renewable energy has been promoted by the MFO called Ohisama-Shinpo-Energy Private Limited Company through a project which includes a photovoltaic (PV) promotion component and an energy-saving business component. This paper presents an analysis of Ohisama-Shinpo-Energy’s project and an evaluation of Ohisama-Shinpo-Energy’s accomplishments and effectiveness, based on interviews with the project members. This analysis focuses on the following questions: 1) What kind of functions does the MFO perform in promoting a renewable energy market? 2) What kind of barriers does the MFO face and how does it overcome them when it works on a renewable energy project? 3 ) Is the MFO successful in terms of its contribution to the promotion of renewable energy and economic sustainability? and 4) What insights can the MFO glean from its experience to improve its effectiveness? This paper revealed that the MFO, Ohisama-Shinpo-Energy, performs the following functions in its renewable energy project: market research, financing, partner matching, consulting service, information dissemination, awareness raising, training, and policy advice. Also, Ohisama-Shinpo-Energy addresses the following barriers: 1) high cost and low pricing leading to low profitability, 2) lack of a legal framework for independent power producers, 3) lack of credit and financing, 4) lack of manpower and skilled personnel, 5) lack of information about renewable energy among critical players, 6) inadequate business models, 7) lack of an appropriate business developer,

and 8) opposition from existing interest groups. By addressing these barriers and performing the functions above as an MFO, Ohisama-Shinpo-Energy realized some success in facilitating renewable energy by positively influencing the essential sectors for renewable energy markets: business, community (citizens), and policy (governments). In the business sector, Ohisama-Shinpo-Energy has successfully finalized the following projects: the PV project completed the installation of 207.93 kW of PV systems in March 2005, and the energy-saving project completed 15 Energy Service Company (ESCO) contracts, which will save 678,150 kWh of electricity, in March 2007. Both of the projects expect to expand in the future. In addition to its business operation, Ohisama-Shinpo-Energy has operated in the community sector to facilitate renewable energy through a variety of means: 1) raising awareness of citizens about renewable energy and energy conservation, 2) providing training opportunities for renewable energy entrepreneurs; and 3) disseminating information and know-how about Ohisma-Shinpo-Energy’s project. Moreover, Ohisama-Shinpo-Energy has contributed to the realization of the policy promoting renewable energy by assisting the local government to develop an innovative renewable energy project plan. Finally, this paper proposes several recommendations for the MFO to improve its effectiveness in the business, community, and policy sectors.