An Integrated Market and Non-Market Approaches for Promoting Green Transformation and Digital Transformation in Japan

However, these trends create challenges such as supply-demand mismatches and grid congestion, particularly as RE installations concentrate in peripheral areas while DCs cluster near demand centers.

Current grid enhancement measures involve substantial cost and long lead times, risking delays and loss of business opportunities. Furthermore, curtailment of RE—under Japan’s “Connect

& Manage” (J-C&M) framework—requires alternative generation, increasing costs and fuel consumption. Therefore, efficient solutions must combine grid reinforcement with demand-side flexibility and distributed energy resources (DERs).

This paper addresses these challenges through integrated market-based and non-market approaches. Market-based measures include establishing a Distributed Energy Trading Market using locational marginal pricing (LMP/DLMP: Distribution LMP) to reflect local supplydemand and congestion conditions. Price signals incentivize DER utilization and guide investment toward suitable areas, while discouraging excess generation/demand in congested regions. A dedicated platform is proposed to support DER participation by forecasting market prices, optimizing operations, and automating bids, ensuring efficient and profitable engagement.

Non-market approaches focus on guiding infrastructure development and siting. Initiatives include expanding “Welcome Zone Maps” to visualize grid availability, promoting DC siting in areas with available capacity, and creating GW-scale DC aggregation hubs with planned power and communication infrastructure. Additional measures leverage unused transfer capacity and demand-side control, enabling DCs to connect without costly reinforcements.

Concepts such as N-1 load shedding and workload shifting align computational loads with RE availability and low congestion periods.

To co-optimize electricity and digital infrastructure, Japan has launched the “Watt-Bit

Collaboration” framework, fostering coordination among the government as well as T&DSOs

(Transmission & Distribution System Operator), telecom operators, and DC providers. In the long-term view, discussions and technology developments for dispersing DC locations to ensure resilience and making more use of RE are on-going.

Looking ahead, the MESH (Machine-learning Energy System Holistic) model integrates cyber and physical systems for a reliable and efficient power grid operation. Using AI and machine learning, MESH predicts fluctuations in RE generation, demand, and cloud workloads, dynamically shifting them geographically and temporally while controlling DERs in real time.

This approach maximizes renewable utilization, alleviates congestion, and ensure system stability.

In conclusion, achieving a green and digital future requires both market and non-market strategies. Market mechanisms introduce transparent price signals to drive DER investment and utilization, while non-market measures enable rapid and economical deployment of generation and demand. Together, these approaches support efficient decarbonization and digitalization, contributing to a resilient and sustainable energy system for Japan.