Japan takes first step in power sector reform


Japan has taken the first step in its power industry shake-up with by establishing a nationwide grid management body on Wednesday, following the 2011 earthquake and tsunami that exposed the vulnerability of the nation’s power system and pushed up electricity prices.

The entity, called the Organization for Cross-regional Coordination of Transmission Operators, aims to coordinate power supply with demand across the country and help ensure the electricity supply remains stable in the event of emergencies.

The government of Prime Minister Shinzo Abe is pushing for a three-stage reform of the power industry through 2020, as part of his growth strategy. The centerpiece of the plan is the full liberalization in April next year of the retail electricity market, which has been largely dominated by regional monopolies over the past 60 years.

“The electric system reform has virtually kicked off. This marks a significant milestone in the history of the nation’s energy policy,” Yoshitsugu Kanemoto, president of the Organization for Cross-regional Coordination of Transmission Operators, said at a ceremony to commemorate its establishment.

All power suppliers are obliged to join the new body.

Japan has two different electricity frequencies in the country’s east and west. In the wake of the triple meltdown at Tepco’s Fukushima No. 1 nuclear power plant in 2011, areas served by the utility suffered power shortages despite ample supply in other regions.

The organization will oversee plans to enhance the national transmission grid to facilitate power interchange among suppliers.

Kanemoto said improving the power system to promote renewable energy is also one of the body’s most important missions. The central government has aimed to increase clean energy following the Fukushima disaster, but that goal has faced hurdles due to transmission capacity problems.

After the full opening up of the retail electricity market envisioned next year, regional utilities are expected to spin off their power transmission and distribution sections into separate companies by 2020, in the final phase of the reforms. That is intended to make power grids more accessible to new entrants and help boost competition.