Japan’s Electricity Market Reform and Beyond
July 7, 2015
Takuya Yamazaki
Director, Electricity Market Division
Director for Electricity Market Reform
Agency for Natural Resources and Energy (ANRE)
＜１＞
OVERVIEW OF JAPAN’S ELECTRICITY
MARKET
1
Electricity Market Overview
 10 Vertically Integrated Electricity Power Companies (EPCOs)
 2 types of frequency, 50Hz and 60Hz
Frequency in West: 60Hz
Frequency in East: 50Hz
• DC – Direct Current,
• FC – Frequency Conversion
Hokkaido
[2012]
5.52 GW
Chugoku
16.66 GW
[2012]
10.85 GW
5.57
GW
Kyushu
[2012]
15.21 GW
Okinawa
5.57
GW
Kansai
[2012]
26.82 GW
2.4
GW
DC
Tie line
1.4GW
Shikoku
[2012]
5.26 GW
Hokuriku
[2012]
5.26 GW
5.57
GW
DC
Tie line
0.6GW
Tohoku
[2012]
13.72 GW
BTB
0.3GW
Chubu
[2012]
24.78 GW
12.62GW
Tokyo
[2012]
50.78 GW
FC
1.2GW
2
Partially Liberalized But Still Very Low Competition
 While Japan’s electricity market has been partially liberalized since 2000, still big 10
EPCOs dominates the market.
 10 big EPCOs: 848.5TWh / 209GW = JPY 18.2 trillion ($ 151.7bn, € 134.8bn) (2013)
 Share of non- big EPCOs for over 50kW retail market = 4.2%
 Only 1.3% is transacted at Japan Electric Power Exchange (JEPX)
Total market volume: 982.4TWh/289GW
3
Problems Revealed by 3.11
The Great East Japan Earthquake on March 11 2011 revealed
negative aspects of regional monopoly system with 10 big and
vertically integrated EPCOs.
1. Lack of system which transmits electricity beyond regions
2. Little competition and strong price control
3. Little flexibility in changing the existing energy mix; hard to
increase the ratio of renewable energy
4
Electricity Price Goes Up After 3.11
(Yen/kWh)
26
24.33
24
Increased
25.2%
22
25.51
22.33
21.26
20
20.37
18
18.86
17.53
Increased
38.2％
16
15.73
14.59
14
For
Households
電灯
12
7
1995
8
1996
9
1997
10
1998
11
1999
12
2000
For
Industry
13.65
電力
13
2001
14
2002
15
2003
16
2004
17
2005
18
2006
19
2007
20
2008
21
2009
22
2010
23
2011
24
2012
25
2013
26
2014
Fiscal year
[Source] Created based on the “Electricity Demand Report” (Federation of Electric Power Companies in Japan) and the materials
concerning the power companies’ final settlement reports, etc.
5
CO2 Emissions Also Goes Up After 3.11
Non-CO2 emissions from
energy production
CO2 emissions from
energy production
CO2 emissions by general
electricity utilities
(Million ton-CO2)
1400
1,270
1,397
1,304
1,354
1,390
1,408
1200
1000
800
600
400
+65
+112
+110
FY2011
FY2012
FY2013
200
0
FY1990
FY2005
FY2010
6
＜２＞
ELECTRICITY MARKET REFORM
ROADMAP
7
1st step: Establish the OCCTO
 Established the Organization for Cross-regional Coordination of Transmission
Operators (OCCTO) in Apr. 2015
 OCCTO’s main functions include:
1. Review the EPCOs’ supply-demand and grid plans for changes in the plans (e.g.
tie line construction) if needed.
2. Order EPCOs to increase power generation and interchange if supply gets tight.
60Hz
Hokkaido
OCCTO
JEPX
(Power Exchange)
16.66GW
Generation
5.57GW
Kyushu
Kansai
Generation
TDSO
TDSO
Retail
Retail
2.4GW
Generation
Generation
TDSO
TDSO
Retail
Retail
Generation
TDSO
(Coordination of TDSOs )
Retail
Hokuriku
Generation
Chugoku
50Hz
TDSO
5.57GW
DC Tie line
Tohoku
0.6GW
Generation
TDSO
Retail
Retail
BTB
0.3GW
5.57GW
Generation
DC Tie line
1.4GW
Chubu
12.62GW
Tokyo (TEPCO)
Generation
TDSO
TDSO
Retail
Retail
Shikoku
* DC – direct current, FC – frequency conversion, TDSO – Transmission and Distribution System Operator
FC
1.2GW
8
2nd step: Full Retail Competition
• Expand retail competition to the residential sector in 2016
• Maintain regulation on retail tariff for under 50kW users to incumbent 10 big EPCOs at
least until 2020
Will be liberalized
9
3rd step: Unbundle Transmission/Distribution Sector
• Unbundle the big EPCOs’ transmission/distribution (T/D) sector by “legal unbundling” in
2020 to enhance neutrality and transparency of T/D sector.
• EPCO can choose either a holding company or an affiliated company format
Holding company format
Affiliated company format
Generation company
Holding company
Competitive
Transmission/Distribution
company
Generation
company
(System operation)
Regulated
Competitive
Transmission/Distribution
company
Retail
company
(Transmission/distribution
facilities)
Competitive
Retail company
(System operation)
(Transmission/distribution
facilities)
Competitive
Regulated
• Regional monopoly
• Regulation on network tariff
• Responsibility for maintaining frequency & providing
LR service
• Code of conduct for securing neutrality
10
Japan’s Electricity Market Reform: Roadmap
【1st Step】
Apr. 2015
【2nd Step】
Apr. 2016
【3rd Step】
Apr. 2020
1st reform
Establishment of OCCTO
(The Organization for
Cross-regional
Coordination of
Transmission Operators)
New
regulatory
authority
2nd reform
Full retail
competition
Period of transitional
arrangement for retail tariff
(The government reviews
competitive situations)
Abolishment
of retail tariff
3rd reform
Legal unbundling of
T/D sector
（※Within 2015:Transition to new regulatory authority）
11
Positive Signs of More Competition
 Non-EPCO companies s announce to enter the power retail market after 2016
• Gas company : electricity + gas,
• Telecom company : telecom + electricity, etc.
 Big EPCOs announce to start preparing for offering power retail business in other
EPCOs’ regions.
 Non-EPCO Companies start making new investments in power generation
• KOBELCO: 1.4GW (2019-2020), Saibu Gas: 1.6GW (2020), Ohgishima Power:
0.4GW (2016), etc.
 EPCOs promote partnership
• Tokyo EPCO and Chubu EPCO contracted to form comprehensive partnership
to jointly procure fuel, operate related businesses (upstream investment,
transportation and trading), construct and replace thermal power plants, etc.
12
＜3＞
ROAD AHEAD
13
Challenge
How can we secure stable supply and
achieve desirable low-carbon energy mix
while facilitating competition?
14
Japan’s Generation Mix Target (Preliminary)
100%
90%
Renewables
9.6%
Oil 7.5%
80%
70%
Oil
10.6%
LNG
29.3%
60%
LNG
46.1%
50%
40%
Renewables
12.2%
Coal
25%
10%
Oil 3%
LNG
27%
Coal
26%
30%
20%
Renewables
22-24%
Nuclear
28.6%
Coal
31.0%
2010FY
2014FY
Nuclear
20-22%
0%
2030FY
Coal
15
Nuclear Electric Power Plants in Japan (As of June 23rd, 2015)
25 units in 15 NRPs are under NRA’S assessment and inspections for resuming operation: NRA has decided to decommission 5
units in 3NRPs.
These 25 units account for 25GW out of total nuclear capacity of 46GW.
•
•
Tokyo Electric Power Co.１
Electric Power Development Co.-Ohma
Kashiwazaki Kariwa
２
３
４
１
５
６
３
７
Hokkaido Electric Power
Co.-Tomari
Hokuriku Electric Power Co.- Shika
１
２
Tohoku Electric Power Co.-Higashidori
１
２
Tokyo Electric Power Co.-Higashidori
１
The Japan Atomic Power Co.-Tsuruga
２
１
Tohoku Electric Power Co.-Onagawa
The Kansai Electric Power Co.-Mihama
２
１
Fukui
１
３
The Kansai Electric Power Co.-Ohi
１
２
３
２
３
３
Tokyo Electric Power Co.-Fukushima Daiichi
４
２
１
The Kansai Electric Power Co.-Takahama
１
２
３
４
１
２
３
１
１
２
３
４
４
Kyushu Electric Power
Co.-Sendai
３
４
３
Kyushu Electric Power
Co.-Genkai
２
２
The Japan Atomic Co.-Tokai Daini
Chubu Electric Power Co.-Hamaoka
１
６
Tokyo Electric Power Co.-Fukushima Daini
４
The Chugoku Electric Power Co.- Shimane
１
５
Shikoku Electric Power
Co.-Ikata
１
２
３
Output scale
＜500ＭＷ
５
：Under review by
NRA
：Decommissioning by
operator
運転中の原子力発電所
In operation
停止中の原子力発電所
Under suspension
＜1000ＭＷ
≧1000ＭＷ
建設中の原子力発電所
Under construction
RES integration
GＷ
45
Generated Renewable Energy
About
39GW
40
3.79GW
3.1GW
PV
78.84GW
15.01GW
Wind
2.29GW
0.33GW
Hydraulic
0.66GW
0.09GW
Geothermal
0.07GW
0.01GW
Biomass
2.03GW
0.22GW
Total
87.68GW
18.76GW
(non-residential)
9%
Average annual growth rate
5%
15
10
5
0
PV
(residential)
32%
30
20
Already
installed
before
2014FY
33%
35
25
Authorized
(up to the
end of
2014FY)
2003FY 2004FY 2005FY 2006FY 2007FY 2008FY 2009FY 2010FY 2011FY 2012FY 2013FY 2014FY
Biomass
Geothemal
Hydraulic
Wind
PV
FIT(only for surplus residential PV)
ＲＰＳ
FIT
17
Policy Under Consideration
How can we secure stable supply and achieve desirable low-carbon
generation mix while facilitating competition?
Challenges
 Maintain nuclear power generation in competitive environments.
 Promote cross-regional electricity supply.
 Set up a scheme to recover investments in grid reinforcement for RES integration.
Policy Plan
 Strengthen OCCTO’s influence over 9 TSOs to promote risk/cost sharing and
coordination for more cross-regional transmission and grid reinforcement.
 Prepare the scheme for neutralizing risks of nuclear investments
 Review FIT system.
 Introduce “Capacity Mechanism”
Thank you!
APPENDIX
Transition of Japan’s Generation Mix
100%
12% 13% 11% 13%
9%
9%
10%
9%
10%
11%
11% 10%
9%
13% 12%
27%
26%
10% 10% 11% 11% 10% 10% 10% 10% 11% 11%
9%
90%
80%
29% 26%
26% 21%
11%
12% 12%
14%
18%
24% 19%
70%
60%
22% 22%
50%
22%
23%
30%
20%
10%
23%
25% 26%
27%
28%
24% 26%
27% 28%
10% 10% 10% 11%
12%
7%
7%
14%
Renewables
39%
42%
12% 13%
11%
11%
18% 15%
29% 29%
23%
40%
10% 10%
22%
24%
26%
8%
9%
14% 14%
15% 15% 17% 18%
21%
22%
25%
24%
26% 25%
25% 25%
43%
46%
Oil
LNG
Coal
25% 25%
Nuclear
25%
35% 36% 37% 34% 34% 35%
32% 32% 34%
31%
29% 29%
29% 31% 30%
27% 28% 29%
26%
26% 26%
28% 30% 31%
11%
0%
2%
1% 0%
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Coal
21
History of Electricity Market Reforms in Japan
No competition in the electricity market before 1995:
10 vertically integrated EPCOs dominated and controlled the market.
METI embarked on a series of reforms...
No.
Year enforced
Overview
1
1995
• Opened the IPP (Independent Power Producer) market
• Allowed specified-scaled and vertically integrated power generators
2
2000
• Introduced partial retail competition
(over 2,000kW in 2000 [26%], over 500kW in 2004 [40%])
• Introduced regulation of third party access to grid lines
3
2005
• Expanded retail competition (over 50kW [62%])
• Established the wholesale power exchange (JEPX) and its supporting
body for transmission in wider areas
• Improved regulation of third party access to grid lines, and
introduced accounting separation of transmission/distribution sector
4
2008
• Modified the rule of wheeling rates
22
Future Design of Japan’s Electricity Market
Thermal plant
Hydroelectric plant
Nuclear power plant
Wind farm,etc.
Generation companies
220-500kV
220-500kV
220-500kV
Contract with
retailer to sell
electricity
JEPX
Super high voltage
substation
154-220kV
Transmission/
Distribution companies
Receive electricity from various
power companies
154-220kV
Primary substation
Transmission
66kV
Regional monopoly,
tariff regulation
66-154kV
Wheeling
contract
Substation for distribution
6.6kV
6.6kV
Distribution
100/200V
Meter
Meter
Meter
Meter
Meter
Retailers
Not necessary to
have assets
Retail contract with
consumers
Consumers
Large factory
Large building
Building
Medium factory
Small factory
Shop Household
23
People Want Reform
 54% people want to switch their electricity retailer if retail power sales is fully
deregulated.
 And even among those who do not think about switching, only 1% say they like the
current retailer.
Reasons why you are negative or neutral to switch
you retailer?
Do you want to switch your retailer?
Strongly
negative
2.6%
N/A
9.8%
Strongly
Negative
positive
6.1%
22.7%
54.4%
Neutral
27.1%
Positive
31.7%
Ask to people (36%) who answered as follows
• Neutral
• Negative
• Strongly negative
Source: Opinion research , Apr. 2014 , METI
Do not know which
company is good.
22%
Cannot think of
switching the retailer.
Procedures may be
troublesome.
23%
45%
37%
34%
18%
Don’t think the price
goes down
10%
18%
Satisfied with the
current retailer.
No particular
reason
9%
18%
Other
3% reasons
I like the current
retailer
14%
3%
1%
The most powerful reason
Less power reasons
24
Improve liquidity in the wholesale market
• Current rule (from March 2013):
• Self commitment by 10 big EPCOs to provide all
capacity except for adequate reserve margin into
JEPX
• Market monitoring by the regulator
• Further discussion including introduction of VPP
scheme etc. will be needed depending on the result of
market monitoring
Share of trading in JEPX to retail market sales (FY2014)
Trading in JEPX
1.6% (13.51TWh)
Breakdown of 1.6%
Trend of share of trading in JEPX
13.51TWh
to retail market sales
(+2.34TWh)
11.17TWh
(+3.50TWh)
7.67TWh
(+2.93TWh)
4.74TWh
0.5%
FY2011
0.9%
FY2012
1.3%
Others
Breakdown of 8.1%
Forward trading
4.0%
Source: JEPX
(837.67TWh)
Day-Ahead spot trading
91.9% (12.41TWh)
(0.04TWh)
New
Forward trading
(1.10TWh)
98.4%
FY2014
FY2013
Breakdown of trading in JEPX (FY2014)
8.1%
Others
1.6%
17.3%
(0.19TWh)
4 hour-Ahead
spot trading
78.8% (0.86TWh)
25
Cross-regional competition
• Avoid market separation and congestion of tie lines through OCCTO’s function for
reinforcing their capacities.
Eg.
Frequency conversion b/w Tokyo and Chubu : 1.2GW  2.1GW  3.0GW
DC tie line b/w Hokkaido and Tohoku: 0.6GW  0.9GW  ? ?
• Maintain the “postage stamp” cost allocation scheme for network fee, even after
introducing full retail competition.
Frequency in West: 60Hz
Frequency in East: 50Hz
Hokkaido
[2012] 5.52 GW
* DC – direct current, FC – frequency conversion
DC Tie line
0.6GW
Chugoku
[2012] 10.85 GW
5.57GW
Kyushu
[2012] 15.21 GW
16.66GW
2.4GW
5.57GW
Kansai
[2012] 26.82 GW
DC Tie line
1.4GW
Shikoku
[2012] 5.26 GW
Hokuriku
[2012] 5.26 GW
BTB
5.57GW
Tohoku
[2012] 13.72 GW
12.62GW
0.3GW
Chubu
[2012] 24.78 GW
Tokyo
[2012] 50.78 GW
FC
1.2GW
26
Switching support system
• Establish an one-stop system for switching support until 2016.
• New retailer X can obtain necessary customers’ information for the switching, which are
standardized, from TDSOs through the system.
• New retailer X can complete a switching process including changing a wheeling contract b/w
retailer X and TDSOs through the system.
• Time line: “automatically and instantly”
make up
an estimate
Retailer A
Retailer B
consumers
apply to
switching
start to
supply
request for
consumer
information
provide for
consumer
information
Retailer C request for changing
wheeling
contract
TDSO A
OCCTO
Switching
Support
System
TDSO Ｂ
continuously
linked
TDSO C
Retailer D
･
･
finalize to
change
wheeling
contract
※ Information interchanged through this system will be standardized and provided for retailer instantly.
･
･
･
27
Ensuring electricity security in Japan’s EMR project
1. Regulation for T/D companies to secure frequencies and to maintain
investment on the grid
2. Obligation for all retailers to secure adequate capacity <2016>
- Ensure procurement of enough quantity in the electricity market
3. Auction for the long-run generation capacity by OCCTO <2016>
- Prepare for the possible shortage of long-run capacity as a safety net for the
electricity market
4. Further discussion on capacity mechanism (capacity market etc.)
- Enhance the incentive to establish and maintain generation plant
28
Obligation for all retailers to secure adequate capacity <2016>
• All retailers are legally obliged to ensure adequate capacity (incl. reserve margin) to
match their demand.
• Government checks all retailers’ plans at both points of registering to enter the
market and of submitting 10-year supply and demand plan each year
• TDSO will balance the gap b/w actual supply and actual demand in the imbalance
mechanism.
Retailer A
Forecast the
demand as
‘100’
Purchase the
supply same as
forecasted
demand (=‘100’)
The demand
Increases to
‘110’, when
accident
happens.
TDSO
Reserve margin which
retailer A should have
secured for upward
demand
(additional supply
necessary for fulfilling
the obligation)
Compensate
the shortage
Compensate
the shortage
Buy the
surplus
・・・
Purchase Forecast
plan for the demand
supply
Actual Actual
supply demand
Some years or
months ahead
At the actual
supply and
demand
Actual Actual The gap
supply demand (shortage)
Retailer A
Actual Actual The gap
supply demand (surplus)
Retailer B
Actual Actual The gap
supply demand (shortage)
・・・
Retailer X
29
Auction for the long-run capacity by OCCTO <2016>
• OCCTO will call for bids when supply power shortage is likely to occur because of
insufficient investment.
• OCTTO will pay for their capacity (MW), through recovering from network fee.
• The detailed design is under discussion.
Pay the cost as
network fee
OCCTO
All Consumers
Call for bids for constructor of power plants
Decide the constructor by bids
Compensate part of the cost
Bid
Bid
Generation
company A
Bid
Generation
company C
Generation
company B
Construct the power plant
and sell the electricity
Revenue
Selling electricity
Retailers / Power
exchange
30
Smart Meter and the effects
Smart meter
 Reducing measurement cost and the future capital investment by launching Demand Response
menus, visualization of the electricity use, control of appliances and so on
 Creating future various services and businesses by utilizing ‘Big Data’ such as energy usage
Total image and the effects of Smart Meter and the related system
Retailer
Private company
(third party)
3) Controlling appliances in demand side for stabilizing girds
EMS
<Peak cut / Peak shift of demand>
Ｃ
EV
Power usage (30min.), etc.
MDMS
HES
EPCO
(transmission/distribution)
Stop/Stop-release
Change contract
Ａ
需要家
Request information
<Visualization of power usage
/ Control of home electrical appliances>
Power usage (30min.), etc.
Smart Meter
Ｂ
1) Remote metering and opening/closing for
efficient tasks
(Note) EMS: Energy Management System
MDMS: Meter Data Management System
PV
HES: Head End System
HEMS: Home Energy Management System
Home electrical
appliances
Customers
Storage
2) Utilizing data for declining energy and CO2 by
customers
31
Introduction schedule of Smart Meters
 The demand of each “Small and Medium-sized Enterprise” and “Low Voltage Consumer” is
small. However, the number is large.
 Based on the perspective of efficiency of Smart Meters as a supply and demand measure, a
transition to Smart Meters for commercial-scale utility customers will be initiated first.
 Smart Meters in high voltage sector (factories, etc.) are planed to complete installing in Japan
until FY2016.
 Smart Meters in low voltage sector (household, etc.) are planed to complete installing in Tokyo
until the end of FY2020 and in Japan until the end of FY2024.
 All EPCOs announced to exchange the current meters to smart meters promptly for consumers
who want to install according to the introduction of HEMS, etc. or switch their retailers.
Introduction schedule
Hokkaido Tohoku
High voltage
Low voltage
Tokyo
Chubu
Kansai Hokuriku Chugoku Shikoku Kyushu Okinawa
2016
2016
Installation will be
completed in
2016
Installation will be
started in
2015 Started Started 2015 Started 2015
2016 Started 2016
2016
Installation will be
completed in
2023
2023
2024
Completed Completed
2023
2020
2022
2022
Completed
2023
2016
2016
2023
Completed
2023
2016
32
EPCOs Plan to Introduce Smart Meters
The estimated number of smart meters introduced as of the end of each fiscal year
FY2014
Hokkaido
Tohoku
Tokyo
Chubu
Total
FY2018
FY2019
FY2020
FY2021
FY2022
FY2023
FY2024
Total
480
490
510
510
520
560
570
4,550
120
650
840
820
810
800
780
730
730
720
7,000
1,900
3,200
5,700
5,700
5,700
3,300
3,300
10
1,020
1,460
1,440
1,420
1,390
1,390
1,420
1,390
150
250
250
230
230
220
190
190
1,700
1,700
240
560
610
610
610
610
610
610
610
5,070
150
310
310
310
310
310
310
310
300
2,650
800
850
850
1,090 1,010(Note) 1,000(Note) 890(Note) 790(Note)
7,280
100
100
100
1,600
30
Kyusyu
Okinawa
FY2017
530
Chugoku
Shikoku
FY2016
380
Hokuriku
Kansai
FY2015
(Thousand)
10
28,800
10,940
1,870
160
15,600
1,700 1,500(Note) 1,300(Note) 1,300(Note) 1,200(Note) 1,100(Note)
100
100
100
90
90
3,660 7,500 12,250 12,260 12,020 9,640 9,530 6,080 5,870 3,240
(Note) Except the number in the table, some smart meters will be exchanged new smart meters because of reaching maturity of the verification
90
850
90 84,610
33