Transforming Energy Storage Into Core Infrastructure: New Storage Battery Challenges for Sumitomo Corporation in Hokkaido

To begin, can you tell us about the journey of Sumitomo Corporation's energy storage business?

OnoSumitomo Corporation's energy storage business began in 2010 when we established the joint venture "4R Energy" with Nissan Motor to explore repurposing used EV batteries. In FY2013, we launched the world's first demonstration of a BESS using reused batteries in Yumeshima, Osaka, the site of Expo 2025. Also beginning in 2015, we advanced grid-integrated energy storage system* experiments on the Koshiki Islands in Satsumasendai City, Kagoshima.

*Storage battery systems that are directly connected to power grids such as power plants and transmission lines to stabilize the grid in the surrounding area.

OnoAt the same time, we were engaging in long-term discussions with the government and relevant authorities to establish regulations and safety standards for the energy storage business. Following these discussions, in 2023 we began developing EV Battery Station Chitose, the first grid-integrated energy storage project by a non-electric power company in Japan. The project was successfully completed in September 2023, ahead of the launch of the ancillary market in FY2024.

What type of business model is Sumitomo Corporation shaping with its energy storage projects?

What kind of facility is the EV Battery Station Chitose, and why did you choose to use EV batteries?

OnoThis large-scale energy storage facility in Chitose was built with the goal of improving the supply-demand balance of electricity in Hokkaido and alleviating congestion in the power grid. The facility uses around 700 EV batteries with an output of 6 MW and a storage capacity of 23 MWh, which is equivalent to the electricity used by approximately 2,500 households per day.

MuraokaThe reason we chose to use EV batteries is because we aim to build an ecosystem that goes beyond energy storage. By repurposing used EV batteries, we not only contribute to reducing the cost of recycling these batteries as demand increases, but we also maximize the use of valuable resources such as rare metals in the batteries. In turn, this contributes to CO2 reductions both from the storage operation and from reducing CO2 emissions during the manufacturing of the batteries themselves.

Why did you choose Chitose, Hokkaido for this project?

MuraokaHokkaido has the best renewable energy potential in Japan, with excellent conditions for solar and wind power. However, one major challenge comes in the form of significant constraints on connecting to the power grid, which has been a bottleneck for further expansion. For this reason, we judged that energy storage could play a crucial role in solving this challenge. After visiting a number of sites in and outside Hokkaido, considering factors like location, environment, local government support and collaboration with transmission system operator (TSO), finally we chose Chitose as the ideal site to implement the project.

However, when we first approached Chitose City and TSO in 2020, energy storage was still an unfamiliar concept. At first, the response was, "Energy storage? What's that?" We had to start by helping people understand the system and the potential of energy storage. As the person in charge of coordinating and negotiating with local stakeholders, I visited the site frequently and engaged in discussions to explain the possibilities.

OnoDuring the COVID-19 pandemic, it was very difficult to communicate in person. Online meetings weren't as common at that time, and there were many points that could not be fully conveyed without face-to-face meetings. Yet through sheer persistence, we were able to push the project forward without delays. Even now, people from other companies tell us, "It's impressive you managed to discuss things in person during that time."

What were key factors in gaining support for the energy storage business?

How did you feel when the facility was finally up and running?

OnoI was fortunate enough to be encouraged by the people at the site to flip the "on" switch for the system. When I did, breathing life into the system, it was honestly an emotional moment. But at the same time, I reminded myself that starting the system is not the end – it's just the beginning of a long road ahead. Until then, previous projects had been a field trial, but the Chitose facility is now directly tied to the region's power supply, impacting people's daily lives. That's why I felt a renewed sense of responsibility and stronger determination to work even harder.

MuraokaWhen the system was switched on, I felt an overwhelming sense of gratitude toward everyone who had worked on the project. Honestly, when we first started, I wondered if this project would even come to fruition – after all, the market didn't even exist at the time. Having worked at an electric utility company before, I knew how difficult it was. But I saw how Ono and other project members lobbied the government persistently and communicated with other stakeholders, contributing to changes in market systems and even regulations. This project served as a lesson that made me realize if you keep pushing, it's possible to make your vision a reality.

What impact do you think the EV Battery Station Chitose will have on the local community and society as a whole?

MuraokaOur energy storage facility contributes to the stable supply of electricity, so it will be valuable not only in normal times but also as a backup in emergencies. With the ability to store a large amount of electricity – enough to power approximately 2,500 households for a day – the local government has expressed a sense of renewed security.

OnoIt's often said that integrated trading companies are invisible, because we're involved in things that are taken for granted. Electricity, for example, is simply expected to flow when you flip a switch. In a way, it's ideal that local communities don't even notice the benefits we're providing. Of course, as a business, it's important to make a profit. But only focusing on profit goes against the spirit of "benefit for self and others, private and public interests are one and the same" that Sumitomo Corporation stands for. Using the Chitose storage facility as a stepping-stone, we want to expand our business further, provide electricity to consumers as a matter of course, and contribute to the global environment by increasing the proportion of renewable energy. That's the kind of impact we want to have.

As an integrated trading company, are you considering cross-functional business development or collaborations?

OnoEven before the system started operations, we had already been working with group companies like SCSK and Insight Edge on software development for system operations. We've also established a specialized subsidiary, OPTECH ENERGY. Using the technology developed here, we're exploring the possibility of providing services to other companies. Additionally, we are currently accelerating discussions with other departments about collaboration across diverse units and subsidiaries. The electricity value chain has three key areas: upstream, midstream and downstream. What we are doing now, including the Chitose project, is in the midstream area, focusing on power transmission and the electricity market. However, as mentioned this area is starting to become highly competitive, so we are also exploring what we can do in the upstream and downstream sectors as well.

OnoIn 2024, Sumitomo Corporation undertook a large-scale organizational restructuring. This brought departments that focus on power and energy services onto the same floor at head office. We've been in frequent discussions with people in those departments, asking questions like, "Could we combine offshore wind power with energy storage?" We believe there's also potential for collaboration with Summit Energy, one of our group companies that owns power plants, to use energy storage to optimize power procurement and supply. Additionally, there are opportunities for collaboration with consumer-facing divisions like J:COM. Since all business is inherently tied to electricity, we want to explore every possibility and potential concrete actions.

MuraokaAs an integrated trading and business investment company, Sumitomo Corporation has immense potential, and we are determined to leverage that to the fullest. Now that we've acquired energy storage as a key tool, we're focused on figuring out how to use and apply it effectively. We want to engage in conversations with many companies and explore every available option.

Finally, how do you see Sumitomo Corporation's energy storage business expanding in the future?