[Press Release] A Look at Japan's Energy Industry Shakeup
Jun 02, 2016
MAY 26, 2016 - JETRO San Francisco hosted its second webinar in a multi-part series; the hour-long discussion focused on the liberalization of Japan’s electric industry, which saw major reform in April this year. The presentation was delivered by Yoshiaki Tojo, Chief Executive Director of JETRO San Francisco.
Originally, Japan’s market was a closed network of vertically-integrated power companies that competed against each other for a share of the grid. The most prominent of these was Tokyo Electric Power Company, also known as TEPCO. In an effort to encourage supplier competition, spur innovation, and to give control of the market back to the consumers, Japan broke up its monopolies by opening the market to new suppliers.
Japan’s liberalization process began in 2012 with the establishment of the Organization of Cross-regional Coordination of Transmission Operators (OCCTO) and the Electricity and Gas Market Surveillance Commission (EGC). The OCCTO reviews the EPCO supply and demand and orders power generation and transmission as necessary. The ECG ensures fair competition occurs for retailers who bid for these opportunities.
Japan’s electric market is unusual: for historical reasons, Japan’s east side (Tokyo, Kawasaki, Sapporo, Yokohama, and Sendai) runs at 50 Hz while the west side (Okinawa, Kobe, Osaka, Nagoya, etc.) run at 60 Hz. To transfer power between the east and west, Japan relies on frequency converters; although this solution works well in normal circumstances, it has struggled to meet demand in times of crisis.
In addition to policy changes, the industry is also seeing a shift in the type of energy suppliers that dominate the market. In 2010, nuclear-generated electricity comprised nearly 30% of the market. Now, it accounts for less than 2%. To fill the gap, coal, LNG, and renewable energy have begun to flood the market. In the last five years, renewable energy has tripled its market share.
As a result of the many changes enacted, the electric market has become a place of fierce competition. Some 300 suppliers have registered as energy retailers in the last few months, with more expected to join the $70 billion market. Already, some foreign companies are finding their spot in the market gap: in August of last year, Texas-based energy company Spark Energy formed a strategic partnership with a Japanese energy company. In October, European-based ABB formed a joint-venture company with Hitachi to improve the frequency transmission process. Other foreign companies entering the market include Skipping Stone, Inc., an energy consulting company, Green Charge Network, a California-based company that specializes in energy storage systems, and Toronto-based Solar Power Network, which entered Japan to install roof top solar systems on residential properties.
Japan has also established several feed-in tariffs to help renewable energy companies seeking to enter the electric market. These FiTs apply to various renewable energy sectors, including solar, wind, biomass, and geothermal. Projects supported by the FiTs include the second-largest solar installations in Japan between 2014 and 2015.
Ultimately, Japan hopes to make renewable energy suppliers 20% of the market share. In addition, Japan is seeking new ways to introduce energy conservation programs that will allow it to better manage its grid while lowering the overall demand for energy throughout Japan.
To learn more about Japan’s energy industry and the business opportunities in it, please contact the JETRO San Francisco office through the Contact Us page.
To download the slides used in the webinar, please click here (3722KB) .