Japan Looks to Reform Electricity Markets To Accommodate Renewables. Again.

March 19, 2024|Electricity Market

The electricity grid always needs balance. As Japan looks to shift its power systems away from fossil fuels to renewable sources, achieving that balance has become an increasingly complex exercise. And yet, after years of tinkering with market rules, electricity trading, and policy to address this, the nation’s bureaucrats have decided to pause and take stock.

In August 2023, METI launched a comprehensive review of all electricity market reforms to date. This introspection aims to assess everything from how today’s various electricity market platforms perform, to operating conditions for renewables, to ways that the energy landscape will change with a planned multi-trillion-yen upgrade of the grid. The latter is a step to delivering more green power to central cities / industry from regions further afield.

The mother of all electricity sector reviews is chaired by renowned energy economist Kanemoto Yoshitsugu and has an 8-person core panel filled with some of METI’s most favored academics. It also carries 10 ‘observer’ members from the major utilities, energy brokers, regulators and trading platforms. Representatives from OCCTO and relevant ANRE departments complete the grouping, which has tentatively promised to complete the review by fall of this year. With such a scope and ambition, it would not be unusual to see the review process spill over into a third year. However, according to Japan’s largest business lobby, the Keidanren, there is little time to lose. The nation’s place as one of the leaders among industrial nations is under threat should it fail to transfer its economy to a cleaner footing by 2030. This invariably will require a reorientation of power markets and systems to allow for a greater contribution from renewables, along with other carbon- free power sources.

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