Issues of Power System Reform
- From "Rationing" to Market Mechanisms -

Why is it Necessary to Reform Japan’s Power System?

The accident at the Fukushima Daiichi Nuclear Power Station made
manifest the problems inherent in Japan’s power system. Now we are able to clearly
see the latent problems in a system in which the majority of power is supplied by ten
General Power Utilities1 (‘GPU’) which hold what amount to monopolies over their
specific regions of the country, and in which power is supplied in each of those
regions in a form which suggests a system of rationing, with vertical integration from
upstream generation through transmission to downstream retail.

Let us consider some of these problems here.

(1) Japan has to date relied for the majority of its power on large-scale centralized
generation facilities, in particular nuclear facilities. The loss of the ability to make
use of these nuclear facilities has had a significant impact on society as a whole.
The cultivation of a broader range of supply channels, including the expansion of
the use of distributed power sources close to the site of consumption, can be seen
to be necessary.

(2) Given the existence of a developing national consensus regarding the
undesirability of an excessive reliance on nuclear energy, it will be essential to create
a business environment promoting the active involvement of a variety of power
producers in order to ensure a more diverse range of power sources, including
renewable energies. The present situation, in which businesses with power
transmission networks are virtually monopolized by GPUs, impedes the realization of
such a business environment...

Motoshige Itoh
President, National Institute for Research Advancement (NIRA) Professor, Graduate School of Economics,The University of Tokyo