End big power firms’ stranglehold on electrical grid

Limited access to the power transmission network has been deemed one of the factors hampering the growth of renewable energy in Japan. Major power companies that own the transmission network have often refused to buy electricity from solar and wind power generators on the grounds there was no spare capacity in the transmission system. That explanation has been challenged by a university professor’s research, and the government and the power industry are reviewing regulations to pave the way for renewable energy firms to use the surplus capacity. To significantly boost the power supply from renewable sources — as the draft of the government’s new Basic Energy Plan advocates — both the government and the power industry need to maximize efficient use of the transmission network.

Since the introduction of the feed-in tariff system in 2012, in which electricity generated by renewable sources is bought at pre-determined advantageous prices to promote their use, solar and wind power facilities have been launched in large numbers across the country — with solar power generation expanding sevenfold since before the FIT system was launched. Still, renewable energy including large-scale hydro power accounted for just 15.3 percent of Japan’s electricity supply as of 2016, compared with 26 percent in Britain and 30 percent in Germany in 2015.

The high cost of renewable energy in Japan is often cited as a major reason behind the slow growth: It costs ¥21 to generate 1 kilowatt-hour of electricity via solar power and ¥22 via wind power, compared with a global average of ¥10. Aside from the cost problem, renewable power generators have frequently been denied access to the power transmission system owned by major power companies, which monopolized the regional power supply before the electricity business was liberalized.

In response to the claim by the major power companies that supply could become unstable if they have to accept all electricity generated by renewable energy businesses — which can be volatile depending on weather conditions — the government has allowed the power firms to restrict supply from those sources as much as they like and without compensation.

In Hokkaido, Tohoku and Kyushu, where construction of solar power generation facilities have concentrated, many renewable energy companies have not been able to sell their electricity as the big power utilities said their transmission system has no spare capacity — or they have been told to share the cost of investing in additional transmission facilities. Consequently, some plans to build new solar facilities have been canceled, and 2017 saw a record number of bankruptcies of solar power-related businesses.

It has been left up to each power company to determine whether there is spare capacity in their transmission network. The companies reportedly calculate spare capacity on the assumption that all of their own power generation facilities, including nuclear power plants idled in the wake of the 2011 Fukushima nuclear crisis, are in full operation, while a certain portion of the capacity is set aside for use in emergencies such as when the network is hit by a natural disaster or even a lightening strike. Analysis by Yo Yasuda, a professor of electrical engineering at Kyoto University, based on data made available by the Organization for Cross-regional Coordination of Transmission Operators, showed that the average amount of electricity actually running through the transmission network is in fact well below capacity.

Now efforts are afoot to review the regulations and use the unused capacity for supply from solar and wind power operators. The issue highlights the need for more efficient use of the transmission network in order to expand the use of power from renewable sources. There are views that the current industry structure, where the major players own both the power generation facilities and the transmission network, hinder efficient use of spare capacity. Efficiency was widely pursued in European countries that have substantially increased the share of renewables in their power supply mix.

The government has set a target of increasing the share of renewable sources in the nation’s electricity supply to 22 to 24 percent in 2030. The government’s draft for a new Basic Energy Plan calls for making renewables a major source of supply over the long term. So far, attempts to promote the use of renewable energy through the FIT system has resulted in roughly ¥2 trillion in public burden, in the form of additional electricity charges to cover the cost of buying the power generated by renewable sources at fixed prices. That cannot continue forever, and measures need to be explored to boost renewable energy through more efficient investment. The most efficient use possible of the transmission network’s capacity will be essential.