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Electricity Market Reform in Japan: Fair Competition and Renewable Energy

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Risks and Regulation of New Technologies

Abstract

In Japan, the Great East Japan Earthquake prompted a major transformation in Japan’s power industry. Electricity market reforms have rapidly progressed to introduce fair and free competition. The reforms also had to respond to the shutdown of nuclear power plants and the need for expanding renewable energy. This chapter discusses reforming Japan’s electric power system to suppress carbon dioxide emissions amid fair and free market competition by introducing renewable energy while avoiding putting supply stability at risk. I first summarize the history of electricity market reform in Japan briefly. I then discuss current issues of the wholesale power market (power generation market) and the retail market from the perspective of fair and free competition. Finally, we discuss the issues of new measures designed to achieve 3E+S, focusing on a non-fossil fuel energy value trading market, a market for baseload power, and a capacity mechanism.

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Notes

  1. 1.

    The power source composition ratio to be realized in 2030 is 22–24% for renewable energy, 20–22% for nuclear power, and 56% for fossil fuels such as oil, coal and LNG. With the goal of reducing greenhouse gas emissions by 80% by 2050, the government is pursuing the challenge of decarbonization, such as aiming to make renewable energy the main power source.

  2. 2.

    The Agency for Natural Resources and Energy [1]. Kikkawa [17] explains the issue of private ownership of nuclear power plants in Japan.

  3. 3.

    The Agency for Natural Resources and Energy [2, 3].

  4. 4.

    Books on energy system reforms in Japan include Nomura and Kusanagi [21], Kibune et al. [18], Hatta [16], Yamauchi and Sawa [24], and Yamada [23].

  5. 5.

    Electricity and Gas Market Surveillance Commission [15], pp. 34–43.

  6. 6.

    A natural monopoly is a market wherein a single company can provide products or services to the entire market more cheaply than would be the case if there were two or more companies. A natural monopoly is created if investments in networks, such as transmission lines, require a large expense.

  7. 7.

    The Ministry of Economy, Trade, and Industry [19], pp. 186–187.

  8. 8.

    The Ministry of Economy, Trade, and Industry [20], pp. 181–182.

  9. 9.

    The Electricity and Gas Market Surveillance Commission [15], p. 7, Agency for Natural Resources and Energy [10], p. 2.

  10. 10.

    The Electricity and Gas Market Surveillance Commission [12], p. 38.

  11. 11.

    The Electricity and Gas Market Surveillance Commission [14], p. 5. The “constant backup” system is a mechanism whereby former GEUs make up for the supply shortfalls of PPSs within a certain limit at the average cost of all power sources.

  12. 12.

    The load factor is the ratio of average power to maximum power over a certain period of time. It is high in the field of industrial applications, such as factories, which operate without stopping, and low in the business field, where there is a lot of daytime usage.

  13. 13.

    The industrial demand ratio is 85% at extra-high voltage and 46% at high pressure (Q1, 2015; Electricity and Gas Market Surveillance Commission [12], p. 14).

  14. 14.

    Electricity and Gas Market Surveillance Commission [15], pp. 22–24.

  15. 15.

    Electricity and Gas Market Surveillance Commission [13], p. 3.

  16. 16.

    Agency for Natural Resources and Energy [10].

  17. 17.

    Agency for Natural Resources and Energy [5–8].

  18. 18.

    Agency for Natural Resources and Energy [11].

  19. 19.

    Agency for Natural Resources and Energy [9].

  20. 20.

    According to Oshima [22], the R&D cost of nuclear power is 1.46 yen per 1 kW, and 0.26 yen is spent on regional countermeasures. In addition, the Cost Examination Committee appropriates 0.5 yen for accident expenditures, which is part of the national burden.

  21. 21.

    Agency for Natural Resources and Energy [4], p. 9.

References

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Authors and Affiliations

  1. Kobe University, 2-1 Nada, Rokkodai, Kobe, 657-8501, Japan

    Takashi Yanagawa

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  1. Takashi Yanagawa
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Correspondence to Takashi Yanagawa .

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Editors and Affiliations

  1. Graduate School of Humanities, Kobe University, Kobe, Japan

    Tsuyoshi Matsuda

  2. Blavatnik School of Government, University of Oxford, Oxford, UK

    Jonathan Wolff

  3. Graduate School of Economics, Kobe University, Kobe, Japan

    Takashi Yanagawa

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Yanagawa, T. (2021). Electricity Market Reform in Japan: Fair Competition and Renewable Energy. In: Matsuda, T., Wolff, J., Yanagawa, T. (eds) Risks and Regulation of New Technologies. Kobe University Monograph Series in Social Science Research. Springer, Singapore. https://doi.org/10.1007/978-981-15-8689-7_10

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  • DOI: https://doi.org/10.1007/978-981-15-8689-7_10

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  • Print ISBN: 978-981-15-8688-0

  • Online ISBN: 978-981-15-8689-7

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