By Michael Fitzpatrick
June 7, 2013

FORTUNE — Despite its high-tech reputation, Japan has some of the dumbest homes and communities among rich nations.

Profoundly unintelligent electricity grids deliver power down streets of unsightly utility poles and their sagging, exposed electric lines to homes with little or no thermal insulation. Housing and offices themselves are regarded as the ultimate in throwaway culture — the average life span of a building in Japan is 30 years. Free public Wi-Fi and bike or car sharing — pillars of smart communities — are as rare as buttered sushi. And now that all but two of the nation’s nuclear power stations are offline, following the Fukushima crisis, Japan is burning fossil fuels to generate power at a rate that can only be described as drastic.

But all this will be history soon, say technocrats and tech firms bitten by the same “smart communities” bug that has both developed and developing countries in its thrall as a way to cut emissions, improve the lives of citizens and, while they are at it, the bottom line. The shockwaves from the Tohoko earthquake have also goaded the country’s bureaucratic elite to announce they are finally to get serious about urban planning and sustainably powering communities and businesses. “The smart community is one of the most important sectors,” says Yuta Sakaki of the Smart Community Policy Office part of Japan’s trade and industry ministry, METI. “The market is growing, and the government will continue to support municipalities to promote it.”

Basically, depending on the definition, “smart communities” are networks of houses, buildings and other structures that efficiently produce and consume electricity. Characterised by the use of renewables and minimizing energy consumption, next-generation infrastructure will, the idea goes, connect homes and commercial buildings and transportation over IT networks to enable energy efficiency.

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Ahead of the pack, Panasonic is on course to finish a “smart town” from scratch this year, built on an old factory site between Tokyo and Mount Fuji at a cost of ¥60 billion. With Japan’s electronic titans floundering badly, it is hoped such projects might attract interest and orders from abroad, but so far it’s too early yet to say if Fujisawa and its like will be an effective model for sustainable living.

In a bid to reduce normal carbon emissions by 70%, there will be fuel cell generators for homes at Fujisawa, electric-car sharing, and smart appliances rigged to a local smart grid using IT to save power. It’s a showcase for what Japan is capable of smart living-wise. But according to William Galloway, professor and leader of the Environmental Innovators Program at Tokyo’s Keio University, what the country is offering so far is low-bore — mere window dressing.

“There are no big transformative projects in the works just yet in Japan. Which is to me, frankly, amazing. Given the scale of the recent disaster, and the kind of vulnerability we saw even in Tokyo of the energy infrastructure, there should be many more projects on the board than we are seeing,” he says.

With decades of reliance of nuclear power supplied by monopolies and a laissez-faire attitude toward developers outside of earthquake resistance regulations, Japan has a lot of catching up to do in the building-smart arena. The market can but grow.

Market research company Fuji Keizai estimates the market for innovative energy-saving equipment and products that support such communities in Japan will increase by 160% to ¥3.8 trillion in 2020. Globally the market will expand 2.5-fold to ¥40.6 trillion in 2020 from ¥16.3 trillion in 2011.

Even before the quake, some developers and electronics firms had singled out smart homes as potential for growth. Now, as the destruction in the tsunami-hit areas of Tohoku present something of a blank slate, Tokyo has promised six energy-efficient and energy independent “future cities” to be built soon.

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Three of the region’s obliterated towns will host the world’s first mega solar power project. Those sites will feature intelligent power meters. Remotely monitored and controlled homes, meanwhile, promise that these communities could be on their way to zero carbon emissions, say officials. However, Tohoku-based builder and developer Steve Yamaguchi is skeptical.

“If there’s Smart Community building going on in Tohoku, somebody forgot to tell me. I haven’t heard it mentioned a single time by anyone in any capacity. Certainly no fisherman gives a damn whether his electricity comes from a coal-burning plant or a solar panel.”

He points out that people living there are still waiting for basic amenities and jobs, never mind high-tech towns that will take longer to achieve it. “Being smart in terms of energy or ecology is entirely superfluous to meeting survivors’ needs,” he says.

Elsewhere private industry is promoting “smart living” where the latest products from the electronics sector work in tandem with smart systems to save energy and bid to make life more convenient and comfortable.

Here, Japan is something of a leader, as much of such smart living technology is focused on energy-saving gadgets that help make Japan one of the most frugal users of electricity in the developed world. The country excels at energy efficiency says the International Energy Agency (IEA). Despite uninsulated homes, Japan’s energy efficiency means by comparison to the U.S., it is nearly twice as efficient; burning an average of 8,400 kilowatt-hours compared to the U.S.’s 13,400 kilowatt-hours.

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Energy-efficient electronics help. Electrical appliances, developed in the wake of the energy shortages following the shutdown of the Fukushima nuclear plants and others, are highly inefficient when it comes to power consumption. Such smarter machines and practices could help with climate change says the IEA which claims that energy efficiency could reduce global greenhouse emissions by around 65%.

If Japan were to bring its poor building standards in line with the industrialized world, it could be a world leader in how to live smarter. And if energy efficiency is the best route to slowing climate change, Japan’s appliance makers, Panasonic et al, might unexpectedly save the planet alongside themselves.

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