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The cabinet has approved a bill to reform Japan's power industry in what will be the biggest industry shake-up in 60 years.
Economy, Trade and Industry Minister Yoichi Miyazawa told a news conference on Tuesday that the bill will remove a monopoly by regional utilities by separating power generation from transmission in 2020.
The main part of the reforms will be the opening up of the 7.5 trillion yen residential and small business market from March 2016, the centerpiece of the plan to boost competition, lower power prices and cut energy imports. Households will be able to choose among power companies.
After the Fukushima disaster crippled Japan's nuclear energy sector four years ago, the government then pledged the biggest shake up in the history of the fragmented electricity industry to boost competition and contain a surge in power prices.
Prime Minister Shinzo Abe's plan is to set up a national grid company to allow new suppliers to sell electricity to the residential sector. The original government aim was to set up a company that could guarantee equal access to all participants. But plans to give the nationwide grid management body more control over the system of distribution and transmission lines were scaled back, amid lobbying from power utilities.
The main remit of the grid company has been restricted to ensuring reliability of supply in emergencies.
The body's lack of power means the new company will be unable to force the country's 10 regional monopolies, which control generation and distribution within their regions, to boost interconnections to establish a true national grid.
The structural problems of the power grid were highlighted by the 2011 tsunami and nuclear shutdown, which left some regions with power shortages despite ample supplies elsewhere.
The government says the reforms are on track and it is committed to reducing the cost of electricity as much as possible.
Japan is the only country in the world with two electricity frequencies and needs transformers to switch power between east and west. Only 1.2 gigawatt can be transferred, about the capacity of one large nuclear reactor, and current plans are to increase this only by an extra 0.9 GW at a cost of 190 billion yen, according to a trade ministry official.
The shortcomings in setting up a national grid will make it harder to open up the power market to full competition, say officials at companies looking to enter the industry, while grid limitations could restrict the ability of independent power sellers to help drive down prices.
Independent power sellers, which often offer lower rates and consumer friendly plans, have been limited to 4% of the market by what they say are onerous operational restrictions.
The lure of selling directly to the retail market spurred more than 300 companies including Panasonic Corp and Nissan Motor Corp to register with the government to sell power independently since the Fukushima disaster.
They plan to either build their own generation plants or buy off others and act solely as retailers.
Tokyo Gas Co Ltd, for example, Japan's biggest city gas supplier, aims to grab a 10% share of the retail power market in the Tokyo metropolitan area by 2020, doubling its power generation capacity to 3,000 megawatts. The company already supplies power to larger customers after an earlier phase of liberalization.
The final stage of the reforms involves splitting up the generation and transmission units under holding companies but utilities won't be forced to shed operations under the current plans, creating further doubts about the scope of changes.
Adding to the grid body's difficulties, is the uncertainty over when and how many of Japan's 48 nuclear power plants will be restarted after the post-Fukushima shutdown.
© Japan Today/Thomson Reuters
16 Comments
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wtfjapan
wont change anything unless there are strict laws and penalties that stop anti competition practices by the larger suppliers/ I can just see it now, all the big power generators banding together in secret fixing high wholesale prices for the smaller players entering the market. unless there is a gov watchdog with strong powers nothing will change
SenseNotSoCommon
don't hold your breath
MGigante
@klausdorth,
What makes you say that? Abe recently tackled JA. He seems pretty committed to meaningful reform.
ramses68
National grid my ***. It'll never happen as long as the government kowtows to the utility Directors. Pray you're lucky enough to be on the side that has power, the next time that something goes majorly wrong.
warispeace
This shake-up registers only a 1 on the political seismic intensity scale. Real reform would follow more the model in Germany or other countries where even a municipality can take more control of its own grid.
SumoBob
What an incredible non-announcement by the national government. The title of the article should read:
Disillusioned
Cue the Robinson family's robot, "Warning! Warning!"
This just means they are shifting the power of the monopoly to a governmental agency. Cheaper electricity? Not bloody likely! This will just result in more under-the-table deals, kickbacks and subsidies for the power generating companies at the expense of the consumer.
dcog9065
This is good, hopefully we will be able to change power providers now..
harvey pekar
"Only 1.2 gigawatt can be transferred, about the capacity of one large nuclear reactor..."
Or the electricity Doc Brown needs to go back in time!
[running out of the room] 1.21 gigawatts! 1.21 gigawatts. Great Scott!
liarsnfools
One should be skeptical of a Japanese government that is deeply entwined with the entrenched electrical power interest groups that have essentially gridlocked the energy generation and distribution systems in Japan for their interests. That being said, there are paths to solutions that the government should take.
The government should first force the frequencies to be harmonized. The reason why there are two frequencies is because of the feudalization of the power industry into different fiefdom-monopolies controlled by regional generation and distribution companies. Such is the origin of TEPCO, KEPCO (Kansai), and the equivalents in Kyushu, Shikoku, Chubu, and Hokkaido. Without the harmonization of the frequencies, any distribution grid will necessarily stay bottle-necked and inefficient. Let us remember that a huge amount of energy is lost during its transmission.
There should be a special fund from the revenue of the existing monopolies to fund this harmonization, and then access to a harmonized grid should be on an open basis. This will allow existing electric utilities to continue in the generation basis but able to distribute elsewhere.
Most importantly an open grid distribution system will allow the entry of non-traditional power generating companies using a variety of technologies. Personally I do not like nuclear. The start up capital is huge, the construction slow, the operation and inspection mechanisms subject to incompetence and corruption, the decommissioning and waste disposal hugely expensive (but hidden until this stage is reached), and, of course, the seismic instability of this country.
I like solar and wind and even geothermal, especially given Japan's competitive advantage in battery technologies that even out the stability of generation issues.
Such a scenario, and there are far smarter people with lots of smart grid and smart generation ideas, would also help Japan become the leader in an energy revolution. Does Abe Shinzo actually have the vision and will to break up existing entrenched interests?
Ed High
It's a proven fact that electricity costs increase, in some case dramatically after privatizing electricity industry, as companies have to profit for share holders. In the case of Australia,the cost tripled and there are 1000's consumer claims against private electricity companies secretly increasing prices, offering dubious contracts, and manipulating costs!
jerseyboy
As usual in Japan, this is "reform" in name only. There will not be any true national grid, and the regional companies are not required to create interconections. Once again, the special interests/J-Inc. which are the back bone of the LDP have won out, and the consumer has lost.
B.B.Q.Demon
Why do I get the sickening feeling I'm going to be paying more for power...?
gkamburoff
Transformers change voltage, not frequency. It is harder than that.
turbotsat
Sorting the "Mains electricity by country" list on wikipedia by frequency indicates Caribbean Netherlands, Liberia, North Korea, Guyana, and French Polynesia all have both 50 and 60 Hz power.
https://en.wikipedia.org/wiki/Mains_electricity_by_country