Japan’s power monopolies face major reform jolt
TOKYO, March 31, (RTRS): Japan’s power utilities will lose their monopoly over electricity on Friday in an unprecedented shakeup that could give a much needed jolt to Japan’s long stagnant economy.
Already, a price war has broken out among many of the more than 260 companies that will be allowed to sell electricity in Japan’s $70 billion retail market.
From April 1, Japanese consumers will be able to buy electricity from suppliers ranging from telecoms conglomerate Softbank and trading firm Marubeni to travel agency H.I.S. and a Hokkaidobased supermarket co-operative that has branched out into solar parks.
They and others like Japan’s biggest city gas operator, Tokyo Gas, are packaging other services, offering loyalty programmes and even employing, in the case of Marubeni, the magic of Studio Ghibli, the Japanese animation powerhouse that won an Oscar for “Spirited Away.”
The new entrants are betting they can make money in a low-margin business by undercutting the monopolies brought low financially by the Fukushima disaster and saddled with a high-cost business model after decades of guaranteed profits.
The government is hoping increased competition in the final remaining restricted part of the electricity market will boost efficiency and innovation and cut prices that are among the highest in the world.
But the new entrants are competing for space in a market in long-term decline as the population falls and consumers from factories to households look to trim power use.
What is more likely to happen is regional monopolies would merge and relatively few of the newcomers would survive the coming battle for market share, according to industry officials and specialists, analysts and others contacted by Reuters for this article.
The regulatory overhaul will only add to the state of flux in the energy sector since the Fukushima nuclear disaster on March 11, 2011 shut down Japan’s 54 nuclear plants. Only two of the remaining 42 usable units are operating. The disaster led to rolling blackouts in parts of the country and helped build public support for the liberalization.
The overhaul leaves the question of atomic power hanging. Major utilities, which still control power distribution grids, are reserving some of that capacity for nuclear, according to a Reuters survey of the utilities.
Japan has seen explosive growth in renewable energy, particularly solar, since preferential rates were introduced in 2012. By last summer, solar contributed to 10 percent of peak power demand from almost nothing before 2012.
Wind power could get a boost as well from the regulatory overhaul. Local and foreign companies are stepping up investment with the government maintaining high guaranteed rates for this energy source but cutting those for solar.
Japan’s record use of coal is likely to keep rising, as companies such as Nippon Paper and trading house Mitsubishi Corp plan to build 43 new coal-fired units.
Liquefied natural gas will remain a key contributor to electricity production in the world’s biggest consumer of the fuel.
Tokyo Electric Power Co, owner of the wrecked Fukushima nuclear plant and the largest of the regional monopolies, is likely to be the biggest loser in the overhaul. Tokyo Gas and JX Holdings are among those targeting Tepco’s 29 million customers.
Six other regional utilities have announced plans to sell electricity to Tepco customers in the Tokyo area, because geographic boundaries among operators will be eliminated.
Anticipating competition, Tepco has dropped prices for some customers and targeted other regions in Japan. It is changing its logo and tying up with billionaire Masayoshi Son’s Softbank Corp to package mobile phone and electricity supplies.