Japan advances electricity reform

The Japanese government this week pushed forward with the first stage of its ambitious electricity market reform plans by formally authorising the establishment of an entity to assess power-generating capacity, oversee transmission system upgrades and help developers and utilities to connect renewable-energy projects to the grid.

The Ministry of Economy, Trade and Industry (METI) laid the initial groundwork for the establishment of the Organisation for Cross-regional Coordination of Transmission Operators (OCCTO) with the passage of the Act for Partial Revision of the Electricity Business Act on 13 November, 2013.

The OCCTO will be formally established on 1 April, 2015, METI said in an online statement this week.

The Act for Partial Revision of the Electricity Business Act is central to METI's plans to stabilise power supplies, lower electricity costs and encourage power-sector competition by liberalising the nation’s electricity market by 2020.

METI wants the OCCTO to play a role in adjusting electricity supply and demand, particularly in times of emergency, as the aftermath of the 2011 Fukushima Daiichi nuclear accident highlighted the weaknesses of Japan's electricity transmission system.

To this end, the ministry expects the OCCTO to facilitate the development of the country's inter-regional electricity transmission and distribution network.

METI also hopes the entity will also spur trading on the Japan Electric Power Exchange (JEPX).

The ministry plans to open the retail electricity market up to competition by 2016. METI sources indicate that by June, roughly 275 companies — including telecoms giant and ascendant renewables developer SoftBank — had applied for approval to sell electricity.

METI aims to unbundle Japan's transmission and distribution sectors by 2020, as the final stage in its planned series of reforms.

Earlier this week, the ministry said that it had classified a number of facilities owned by utilities Tokyo Electric Power (Tepco) and Chubu Electric Power as “important transmission facilities” for future development.

"It's a part of the reform of the electricity system,” a Tokyo-based lawyer familiar with the reform process tells Recharge, on condition of anonymity. “It’s a big push."

These facilities include the DC trunk line connecting Tokyo with the Chubu region on the island of Honshu, as the area between the capital and Osaka -- extending from Nagoya on the Pacific side of the country to a broad stretch of the central Sea of Japan coast -- is known.

Other facilities that METI has designated as “important” include the branch line for the Tokyo-Chubu frequency converter station and an AC/DC converter at the Shin Shinano substation.

"I assume this reinforces this commitment and may make financing the expansion and administrative issues easier. Especially if there is another disaster and there is a need to move large amounts of power over the interconnections that straddle the two frequency zones," Tom O'Sullivan, managing director of consulting firm Mathyos Energy, tells Recharge.

Japan's two power grids operate on different frequencies, with the western part of the country running on the 60Hz frequency and the eastern side on the 50Hz frequency.

The designated transmission facilities therefore play an important role in regulating the flow of electricity throughout the archipelago.