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Japan eyes electricity deregulation to boost competition
- 12 years ago (2012-07-14)
- David Flin
A panel set up by Japan’s Industry Ministry to look into structural weaknesses in the country’s electricity industry in the wake of the Fukushima nuclear disaster has submitted draft proposals to overhaul the power sector.
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The report advocates sweeping reforms, including unbundling the regional utilities’ monopoly on both transmission and generation of power, opening up the retail power business.
To encourage utilities to offer various price options under free competition, the panel also called for the scrapping of the current electricity price-setting system in which utilities are allowed to pass onto customers the costs needed to provide power, plus a certain profit margin. The panel also proposed revamping the power grid system, saying that utilities’ power generation and transmission operations should be separated and the latter should be spun off into separate companies or entrusted to different bodies. The separation is intended to increase the neutrality of electricity transmission grids owned by major utilities and enabling new entrants to the electricity generation market to have fair access to the grids. The panel said that unbundling was essential to promote competition and to boost the role of renewable energy.
The draft proposed two options for proceeding with unbundling. One option is to set up publicly run Independent System Operators (ISOs) to coordinate, control, and monitor the operation of transmission grids along similar lines to state-based organisations in the USA.
Another option is “legal” unbundling, in which utilities would be required to form holding companies and, under that, establish subsidiaries for generation and transmission.
A separate panel has proposed three options for Japan’s medium-term energy mix, with nuclear power’s share ranging from zero to 20-25 per cent by 2030. The Japanese Government has said that it intends to select one of the scenarios by the end of August.