Aiming for Growth in NAS Batteries amidst Business Restructuring
With regard to insulator business, due to the expansion of energy saving in Japan, electric demand is expected continuing decline, in addition, the continued constriction of capital investment among Japanese power companies, which will last until 2020 when legal separation of power generation, transmission and distribution starts, the demand of insulator for transmission and distribution will be sluggish for the time being.
For overseas markets, the continued stagnation in oil prices is prolonging austerity measures in the Middle East, while in North America investment is shifting towards IT measures and distribution area; thus, overall market conditions are expected to remain harsh.
Amidst all of this, in fiscal 2017 the NGK Group began restructuring North American business and scaling down the production system at the Komaki Plant, while in fiscal 2018 this scaling down will be extended to the Chita Plant, which will move to single-shift operation. Despite ongoing, positive results, such as securing OEM* status for some NGK products aimed at the North American market, the market conditions are more severe than were anticipated, and supplemental initiatives are being discussed.
In January 2018 we confirmed that, in some cases, insulators and related products did not undergo appropriate tests in accordance with agreements with customers. Upon taking steps to verify the quality of the concerned products, we have been working with customers to provide detailed explanations. We will work further to strengthen our quality control structures and make all members of the group aware of the importance of compliance in order to prevent reoccurrence.
Demand for insulators is not going to disappear. Our aim is to continue restructuring our business to put it in the black while also enhancing the quality of our products further to satisfy the trust that we have built up with our customers.
It will take time for full-scale demand for NAS batteries to be realized; however, we believe that latent need continues to rise.
In the Middle East, plans to introduce large-scale solar power plants are being implemented as part of efforts to meet the 2030 greenhouse gas reduction targets of the Paris Agreement. Also, in Europe there is a push to revise the 2030 renewable energy ratio targets upward. In Japan, as well, the push to avoid enhancing the transmission network and the push to use solar power generation for shifting peak power consumption times are fostering greater need for energy storage system offering long-term stability, which we foresee creating a surge in demand starting around 2020.
The power industry is entering an era of revolutionary change. Up until now, thermal and nuclear power were the base load power sources; however, as part of the fight against global warming we are increasingly moving away from coal-fired thermal power and shifting the base load more towards natural gas and renewable energy. One of the needs that is becoming more acute as a result of this transition is the need to shift the large amounts of solar power and other power generated during the day to the peak consumption periods during the night. Energy storage systems like NAS batteries are essential to achieving this.
Insulators have been the foundation of NGK business for 100 years, but NAS batteries will be what carries it through the next 100 years. Although the immediate future looks difficult, we are pushing ahead towards the flood in demand that is coming.
Another trend we are anticipating is the continued shift towards "local production for local consumption" for electricity as communities seek to reduce the distribution costs, which comprise so much of their power production and supply costs. With the ongoing decline in Japan's population, it is unrealistic to expect underpopulated areas to be able to maintain large-scale power distribution networks. For such areas, the zinc secondary batteries that we are currently developing would be a more suitable option at the power distribution level.
Our work on NAS batteries has revealed a host of new opportunities in business areas where batteries are needed, such as in remote surveillance and maintenance. By such means as partnering with companies that already provide established services in these areas, we can create new business while also contributing to reduced environmental impact through more efficient energy usage.
NAS battery systems
NGK developed the world's first commercialized battery system capable of storing hours of electricity. These systems, which enable a high output of electric power for long periods of time, have been installed in around 200 locations worldwide.