Before launching into the main topic of this article, it is prudent to give quick introduction the history of the country.
As Japan opened its borders to the Western World in the 19th century a rapid industrialisation occurred. In order to support the growth that was happening across the country, a need for vast quantities of energy emerged. Due to this, many Japanese corporations began to invest into energy supply – creating around 60 different private electricity companies in the early 1920s.
While the energy market rapidly rose and formed, the utility industry developed into a competitive and liberalised market in the early 20th century. It took the now infamous Kanto earthquake in the 1920s to cause smaller electric utility companies to integrate into larger and wealthier corporations. This trend continued until there were 5 major electric utility companies left.
To reinforce the electricity supply for the war, the Japanese government began to restrict and control the generation/distribution of electricity by private companies. In 1938, the National Mobilisation Law was legislated and all strategic industries fell under the control of the government. To put it simply, the electricity industry became nationalised.
After the 2nd World War, the Allied Powers completely reconstructed the Japanese system to be more similar to other nations’ political and economic systems. It was during this time that the 10 regional electric companies forming the Japanese electric industry were re-privatised. Competition was initially limited since companies were only really able to supply power in their respective areas.
The Timeline of Liberalisation
- March 2000: The beginning of market liberalisation for ‘Extra-High Voltage’
- April 2004/05: The expansion of market liberalisation for ‘High Voltage’
- April 2016: The full liberalisation of the market for ‘Low Voltage’
The structure of the modern energy market in Japan was finalised in April of 2016, but the reforms for liberalisation actually started almost 20 years ago.
It was as early as March 2000 that the first reform took place for entities that use massive amounts of electricity. Huge structures like hospitals and shopping centres were now able to buy electricity from other retailers besides the ‘Big 10’.
A few years later than this, in 2004/05 the market liberalisation expanded to include high voltage customers – such as small or medium-sized buildings and factories. The liberalisation continued again in April 2016 where households and small businesses got in on the action. They could now benefit from a competitive market which now allowed retailers to sell low voltage electricity to homes and small shops.
The now fully deregulated market in April of 2016 enabled customers at an individual level to choose their electricity provider in accordance to their budget and desired method of generation.
But, does this mean that the action of energy production in Japan is open to competition?
Liberalisation of Generation?
The Japanese electricity market includes four main steps. These are:
- Production and Generation
- Transmission
- Distribution
- Retail
From April 2016 the retail sector has been fully opened to competition that has allowed customers to choose exactly who they buy their electricity from. There is a long list of providers in Japan, each with their own unique strengths. For context, an individual in Tokyo can expect to choose from around 200 companies offering denki plans.
In stark contrast to this, the activity of transmission and distribution of electricity remains very much a regional monopoly with regulated tariffs. It is not so straight-forwards to deregulate this area of the market – it simply does not make sense to buy another network to distribute and transport current products. Network operators do still remain responsible for maintaining frequency and providing last resort services in case of an emergency.
The generation of power has been opened up to competition, with firms able to join freely. However, they do have to be registered according to a determined process.
The 10 Major Electricity Retailers in Japan
Up until the latest market reform in 2016, these 10 electric companies held vice-like monopolies in their local regions. To put it simply, they were the only companies allowed to sell electricity in their regions.
| Abbreviation | Full Name | Area of Operation |
| CEPCO | Chugoku Electric Power Company | Tottori, Shimane, Okayama, Hiroshima, Yamaguchi, Hyogo, Kagawa, Ehime |
| CHUDEN | Chubu Electric Power | Aichi, Mie, Gifu, Shizuoka, Nagano |
| HOKUDEN | Hokuriku Electric Power Company | Gifu, Toyama, Ishikawa, Fukui |
| HEPCO | Hokkaido Electric Power Company | Hokkaido |
| KYUDEN | Kyushu Electric Power | Fukuoka, Saga, Nagasaki, Oita, Kumamoto, Miyazaki, Kagoshima |
| KEPCO | Kansai Electric Power Company | Osaka, Kyoto, Hyogo, Nara, Shiga, Wakayama, Fukui, Gifu, Mie |
| OKIDEN | Okinawa Electric Power Company | Okinawa |
| TEPCO | Tokyo Electric Power Company | Tokyo, Kanagawa, Saitama, Chiba, Tochigi, Gunma, Ibaraki, Yamanashi, Shizuoka |
| TOHOKUDEN | Tohoku Electric Power | Aomori, Iwate, Akita, Miyagi, Yamagata, Fukushima, Nigata |
| YONDEN | Shikoku Electric Power Company | Kagawa, Kochi, Tokushima, Ehime |
Japan’s Clean Energy Strategy – Latest Developments in Japanese Energy
Perhaps one of the more important developments in the Japanese energy sector in recent years is the brand new Clean Energy Strategy.
The Prime Minister of Japan, Fumio Kishida, instructed his Cabinet on the 18th of January to draw up a new clean energy strategy for the country that will lay out the government’s vision to achieve a carbon-neutral society.
The Prime Minister plans to promote the development of nuclear technology alongside renewables, which he believes to be a key element of his flagship policy platform. He is calling this ‘New Capitalism’.
During a meeting with experts in the field held on the same day as the announcement he told the gathered officials that he would like to share with them the overall picture of changes occurring in the field –
“Climate change is an issue where negative aspects of capitalism, including a lack of sustainability, are concentrated.”
Kishida also added that he intends to at least double investment in this area.
Japan holds net-zero carbon emission goals by 2050, which will ultimately heap extra burden on businesses that use a lot of fossil fuel as part of their production process. These businesses must overhaul their operations or cease to exist.
There is hope to create an environment where companies are more willing to invest in decarbonisation by implementing a strategy that charts a path to achieving a carbon-neutral society. Although an incredibly difficult goal, they seek to balance both economic growth and sustainability. According to the Ministry of Economy, Trade, and Industry, nuclear power is one of the key issues in achieving this.
Other Ministry officials have also said that the government intends to promote research for next-gen nuclear technology. This will include small modular reactors (SMR) which have been developed in the United States with contributions from Japanese makers.
It is not just here that the government will focus efforts, but also on beefing up power grids to enable transmission of huge amounts of renewable energy which can make use of hydrogen and ammonia as zero-emission energy sources. It is hoped that the new strategy will be ready by June and will draw on assistance from other relevant ministries.
The Nuclear Revival
The new strategy comes as nuclear power plants around the world are undergoing something of a revival. In Europe, this is especially true.
France announced in November that they would resume construction of nuclear power plants and the European Commission announced that they will regard nuclear power and natural gas as energy sources that could help decarbonisation efforts.
The nuclear industry in Japan are certainly hoping that their country will soon follow suit.’
Kazuhiro Ikebe, the Chairman of the Federation of Electric Power Companies of Japan, spoke at a news conference on January 14th. He said he was very supportive in the European return to nuclear power.
“(The development in Europe) will impact non-EU countries, too. That includes Japan.”
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