From next April, Japan will introduce a licensing system for companies that wish to run power lines. A revision to the Electricity Business Act will allow new operators to distribute electricity in a move that the government hopes will increase grid efficiency, speed up a shift to a more open power market and help to decarbonize the sector.

To date, all the electricity in Japan was transmitted by subsidiaries of the country’s 10 regional power companies. From April 2022, that will change, opening up the grid to new companies and business models.

The energy transition in power generation will now extend to power distribution.

The rationale

There are three reasons for the change, which was passed into law in June 2020. The first is to increase the grid’s resilience to natural disaster and emergency situations. Local grids need to become physically independent from the national transmission network so that they can function in case of emergency and in order to prioritize supply to local consumers. The second goal is to encourage competition in power distribution. Aside from the 10 regional power utilities …