From the 1950s until the mid-1990s, Japan’s electric power sector was dominated by 10 regional companies that were responsible for all power generation, distribution and sales. Since then, the nation’s power industry has undergone a variety of significant reforms that seek to foster competition among companies selling electricity to end-users. 

In this article, Japan NRG reviews the current state of electricity markets that now involve 1,133 generation firms, 729 retailers and 55 transmission operators. We look at the main market structure in place today and how they are changing.

Background

Japan’s electricity industry and market reforms started in the early part of this century, but a full retail market liberalization had to wait until 2016. The goal was to create a more vibrant market that would naturally lower prices.

The reforms sought to ensure competitive neutrality on the basis of stable supply. But with the original 10 power utilities, known as EPCOs, still dominant and the government keen to protect households and big industrial energy users from price volatility, the power market has evolved into a hybrid structure that combines market trading and tariffs.

The government has also introduced more trading and auction platforms to mirror the fragmentation of the electricity industry across regions, generation sources, business models and consumer demands. And yet, disparities remain.