(originally published in Japanese on 21 August 2024)
In 2012, the situation on electricity supply in Japan was described as undergoing a “paradigm shift.” This was due in part to “the growing need to address global environmental challenges, the increasing pressure on global energy supply and demand, and the environmental changes following the Great East Japan Earthquake.” To address the structural problems such as the lack of competition in the market and other issues that have been revealed by the disaster, it was proposed that ensuring “stable electricity supply,” which had thus far been pursued through price regulation and regional monopolies, should instead be achieved through “choice” and “competition” to encourage creativity and management efforts among operators and consumers within an electricity system that is open to the public (Report of the Electricity System Reform Expert Subcommittee). In response, the Japanese government has embarked on a reform of the electricity system aimed at securing “stable supply of electricity,” “suppressing electricity rates to the maximum extent possible,” and “expanding choices for consumers and business opportunities.” The revised Electricity Business Act enacted in 2015 introduced several systems that would form the foundation of the new electricity system, including the expansion of interregional grid operations, full liberalization of electricity retailing and generation sectors, legal unbundling of the transmission and distribution sectors, and establishment of a regulatory body.
The revised act stipulates that conditions in the electricity industry must be reviewed within five years of the legal unbundling of the electricity transmission and distribution sectors, and the government is currently holding discussions on the review process.
The Electricity System Restructuring will serve as a foundation for advancing the energy transition that Japan now needs as it faces this paradigm shift. Leveraging the vast potential of Japan’s abundant renewable energy resources and accelerating the deployment of renewable energy will enable Japan to break away from its current dependence on imported fossil fuels for the majority of its energy needs, reduce greenhouse gas emissions, and achieve energy independence through the use of domestic energy sources. A more competitive and innovative electricity market will stimulate economic growth, generating industries and jobs in a variety of fields, including development of renewable energy, grid infrastructure, energy efficiency, and related technologies. The significance and anticipated effects of this Electricity System Restructuring can be summarized as follows:
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Competition and Efficiency |
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Consumer Participation and Greater Choice |
| Modernization of the Electricity Grid Reforms will be closely aligned with initiatives to modernize the electricity grid, including upgrading transmission facilities, investing in smart grid technology, and enhancing the integration of renewable energy sources. Modernization of the grid will increase its reliability and resilience, reduce the risk of power outages, and improve the overall performance of the system. |
| Risk Mitigation Diversification of energy sources and market participants will reduce the risks associated with overreliance on a single energy source or supplier, as well as strengthening energy security and reducing vulnerability to supply disruptions and price rises. |
| New Technologies and Business Models The introduction of new technologies will contribute to the reliability of electricity supply and facilitate more efficient price setting. |
| Environmental Contribution Promoting competition and the introduction of new technologies will accelerate the transition to cleaner energy sources as well as help reduce the emission of Greenhouse Gases and other pollutants associated with electricity generation. |
In conjunction with the Japanese government's discussion and examination of the Electricity System Reform, Renewable Energy Institute will present in this series of columns, a variety of perspectives and discussion points aimed at establishing an electricity system that can support Japan's energy transition. It is our hope that these insights and recommendations will contribute to the ongoing discussions on the Electricity System Restructuring and the formulation of the 7th Strategic Energy Plan.
[Column Series] Japan’s Electricity System Restructuring: Review and Points for Discussion
No.1 Toward an Electricity System Restructuring that Supports Japan’s Energy Transition: Foreword to the New Column Series (4 September 2024)
No.2 Evaluating Electricity Retail Liberalization (4 September 2024)
No.3 Assessment of Power Transmission and Distribution Unbundling (1): Utilizing the ITO Model (4 December 2024)
No.4 Assessment of Power Transmission and Distribution Unbundling (2): What the European ITO Model Aims to Achieve (4 December 2024)
