BY TETSUJI TOMITA
Sometimes the smallest technical decisions can change everything.
Buried in discussions of a working group under METI is a technical review that could tilt the direction of Japan’s power sector for the next decade. At issue is a measure known as Net CONE, short for the Net Cost of New Entry.
This benchmark helps determine the price at which new power capacity should be procured to ensure a stable electricity supply. In simple terms, when Net CONE is high, companies have a stronger incentive to build new power plants. If it is set too low relative to developers’ expectations, investment slows.
Capacity auctions in recent years suggest we’re at an inflection point. Despite growing electricity demand from semiconductor production facilities and data centers, auction results indicate that the benchmark underestimates the cost of bringing new generation online.
That has pushed policymakers to consider revising Net CONE – its first major reassessment since the capacity market framework was drafted in the late 2010s.
This revision carries risks. With incumbent utilities controlling nearly 80% of the power market, a higher Net CONE also translates into a significant revenue tailwind for existing fossil-based assets. This could end up “overcompensating” the depreciated older plants and inadvertently extending the lifespan of carbon-intensive generation, thus complicating Japan’s long-term decarbonization goals.