On April 1 2016 the retail electricity market in Japan will
be fully liberalised to enable all consumers, including those
in the household sector, to choose their preferred electricity
supplier. This reform of the power industry is one of the steps
taken by the government to address the vulnerabilities of the
previous system, which was almost completely monopolised by
regional electricity companies. These weaknesses were exposed
following the Great East Japan Earthquake and the resulting
nuclear disaster in 2011.
To secure a stable supply of electricity, suppress
electricity rates as much as possible, expand choices for
consumers and increase business opportunities, a bold reform
package is now steadily being carried out. This market reform
focuses on the following three stages:
- enhancement of nationwide system operations;
- full liberalisation of the retail electricity market and
power generation; and
- measures to secure impartiality of the
transmission/distribution sector from the generation and
retail sectors through the separation of legal entities.
The second stage of the reforms, which was approved in 2014
and will come into effect on April 1 2016, is to fully
liberalise entry into the retail electricity market in Japan.
In this regard, household consumers will be able to select
their preferred electric company, rate plan, and options
depending on the power source. Along with full liberalisation
of the retail electricity market, full liberalisation of power
generation is to be implemented, as well as initiatives to
raise trading volumes of electricity at wholesale power
After full liberalisation of the retail market is
implemented, power producers and suppliers will be able to sell
electricity to households, which will greatly increase their
pool of potential customers. Also, if the wholesale electricity
market is energised and the number of transactions in that
market increases, power producers and suppliers will be able to
procure electricity through that market. From this perspective,
new market opportunities for foreign investors may arise.
However, the electricity market in Japan is in a period of
great reform and it is important to understand the legal
framework and the relevant risks.