Electricity Market Reform in Japan

Deck: 

Bumpy Road Ahead

Fortnightly Magazine - August 2016
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The tragic earthquake and tsunami in March 2011 were followed by the nuclear accidents at the Fukushima Daiichi plant. This led to a major re-evaluation of electric power market arrangements and infrastructure in Japan.

During that period, some areas of Japan experienced rolling blackouts. All nuclear power plants, which together provided around 25 percent of Japan's electricity, had been taken offline.

The Japanese electricity market was long dominated by 10 vertically integrated local electric power companies, EPCOs. There has been insufficient interconnection capacity between the different local markets to support a robust competitive wholesale power market,1 which is shown in Figure 1. The figure provides an overview of the 10 local markets, as well as the interconnection capacity between them.

Natural gas-fired generation, fueled by imported liquefied natural gas, LNG, replaced nuclear in the energy mix. This led to significant increases in the price of electricity for consumers.

According to the Institute of Energy Economics, Japanese industrial customers were charged 20.4 cents per kilowatt-hour in 2012 on average. Residential customers paid 29.0 cents.

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