Japanese telecommunications group Nippon Telegraph and Telephone is about to drastically transform itself as the global trend of decarbonisation accelerates.
As part of its new strategy, NTT has tied up with the Iwate prefecture city of Miyako, whose energy networks were cut off in 2011 as a result of the devastating earthquake and tsunami. Learning from this bitter experience, the city now uses renewable energy sources to meet about 30 per cent of its electricity needs. It plans to raise the proportion to 100 per cent by 2050 through its tie-up with NTT.
NTT consumes 1 per cent of the electricity generated in Japan to run its huge telecom infrastructure. It now plans to use this infrastructure as part of its new businesses involving decarbonisation. For example, NTT is considering installing batteries at its 7,300 telecom service buildings across Japan so it can store electricity produced from local renewable energy sources such as sunlight and wind power. This offers a solution to the main weakness of renewables: their volatility and intermittency due to unstable weather conditions, causing difficulties in matching supply and demand.
Furthermore, if the more than 10,000 vehicles that NTT owns are replaced with electric vehicles, they can serve as back-up power sources for essential facilities such as hospitals during disasters.
“We will increase renewable energy on our own and play the role of adjusting supply and demand for energy in various parts of the country,” said Jun Sawada, president and chief executive of NTT.
Jointly with major Japanese trading house Mitsubishi Corp, NTT will also break into the business of virtual power plants, connecting distributed renewable energy through high tech. By fiscal 2030, NTT plans to be capable of providing renewable energy-based electricity on a scale comparable to a major electric power company, supplying businesses and local governments.
In addition to NTT, other big companies are flocking to the field of green transformation. Of the 225 companies whose stock prices are used to calculate the closely watched Nikkei Stock Average, at least 39 have implemented zero-emission targets. Together they account for some 20 per cent of the 225 companies’ combined market capitalisation.
The trend was triggered by Prime Minister Yoshihide Suga’s announcement soon after taking office last September that Japan would achieve net-zero carbon emissions by 2050.
The pledge was expected to bring opposition from manufacturers. Steelmakers, which produce a large chunk of Japan’s industrial carbon emissions, are close to the ruling Liberal Democratic Party and contribute large sums to LDP lawmakers’ political fundraising organisations.
But Mr Suga, among others, possibly calculated that the commitment will prompt structural changes in Japan’s industry and stimulate the economy while winning popular support.
His decision has pushed Japanese companies to join the bandwagon heading towards carbon neutrality. Around the world, the green transformation is already affecting the corporate values of businesses.
For example, major Danish electric power generator Orsted has already sold its domestic power and gas retail business in pursuit of becoming a company that earns its profit from renewable energy, especially offshore wind power.
In October 2020, Henrik Poulsen, then chief executive of Orsted, declared the completion of its conversion to a global renewable energy company.
Orsted used to generate electricity from fossil fuels. Mr Poulsen called it a typical company relying on “black energy” because it was responsible for one-third of Denmark’s greenhouse gas emissions.
Around 2009, Orsted began to push ahead with decarbonisation programmes under the slogan “from black to green” promoted by Mr Poulsen, who took the helm in 2012.
Although Mr Poulsen stepped down from the post at the end of 2020, Orsted is not changing its plan to spend DKr200bn ($33bn) on renewable energy over the seven years from 2019. The company aims to increase its generation capacity from renewable energy by more than 30m kilowatts and slash its carbon emissions by 98 per cent in 2025 from the 2006 level.
As investors have welcomed Orsted’s strategic change, its market capitalisation has increased roughly fivefold from 2016, when it went public, and topped that of BP, which used to be much larger.
In the US, the renewable energy company NextEra Energy temporarily surpassed ExxonMobil in market capitalisation.
The era has arrived when corporate growth strategies are greatly affected by investment aiming for zero carbon.
A version of this article was first published by Nikkei Asia on January 5, 2021. ©2021 Nikkei Inc. All rights reserved.