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Economics of Energy & Environmental Policy
Volume 5, Number 1

Symposium on ‘Japanese Energy Policy after Fukushima’

What was the "discrepancy" in Japan’s energy policy after Fukushima nuclear crisis?

Kiyoshi Nishimura

DOI: http://dx.doi.org/10.5547/2160-5890.5.1.knis
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After the Fukushima nuclear crisis following the Great East Japan Earthquake of March 11, 2011, it is not correct to say that Japan decided to change energy policy dramatically from a fuel mix heavily reliant on nuclear power to one involving growing use of renewable power. Nor is it correct to say that Japan intends to expand renewable energy to such an extent that it becomes Japan's primary energy source. Japan has been facing two problems. The first is the destabilization of the energy market caused by the Fukushima nuclear power crisis and electricity market reform. The other is the destabilization of energy policy caused by the "discrepancy" between people's perception of electricity market reform in Japan and the structure of Japan's energy sector. The "discrepancy" means that the Japanese government has had an overly optimistic view on the crisis, believing that the rise in energy prices and energy market reform or supply shock were not serious problems for people's lives, and that the public could handle these problems. In addition, this discrepancy arose as a consequence of Japan's incomplete energy market liberalization which began in the 1980s, and also due to political factors under the administration of the Democratic Party of Japan. Currently, Japan's energy policy is discussed more logically and calmly because this "discrepancy" has been progressively eliminated. In fact, the Sendai nuclear power plant-owned by Kyushu Electric Power Co. restarted operation on August 11th 2015.

Electricity market reform in Japan after Fukushima

Mika Goto and Toshiyuki Sueyoshi

DOI: http://dx.doi.org/10.5547/2160-5890.5.1.mgot
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This study reviews the status, progress, and policy issues related to the reform of the Japanese electricity market undertaken in response to the disaster at the Fukushima nuclear power plant in March of 2011. The reform has three stages: (1) establishment of a neutral organization of network operation, (2) extension of retail competition to household consumers, and (3) legal unbundling of the transmission-distribution network sector. Currently, the first stage is underway and the Japanese government is preparing to implement the second stage for a fully liberalized retail market. This study employs government and company data to demonstrate the current and projected influences of the stages on numerous aspects of the reform. The results prove that resistance to nuclear power and promotion of renewable energy generation is expected to have a significant impact on consumer benefits, whereas new business alliances are expected to create new competitive energy markets. Periodic assessments of the status and progress of the stages of the reform are vital to achieving an efficient electricity market that benefits providers and consumers.

Wholesale and retail electricity markets in Japan: Results of market revitalization measures and prospects for the current reform

Kenta Ofuji and Naoki Tatsumi

DOI: http://dx.doi.org/10.5547/2160-5890.5.1.kofu
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This study provides an overview of the current status of the wholesale and retail electricity markets in Japan, with a focus on the results of market revitalization policies, such as the thermal power bidding system, regular backup, and partial supply system. This study also offers a perspective on the future of the Electricity System Reform policy currently under way. Throughout the history of Japan's electricity market reform, the implementation of full-scale retail deregulation and the unbundling of electricity generation from the transmission and distribution (T&D) sectors have been significant issues. The outcomes and issues generated by market revitalization efforts indicate that reforms have entered the crucial stage that determines whether consumers will actually benefit from them.

Responding to electricity shortfalls: Electricity-saving activities of households and firms in Japan after Fukushima

Osamu Kimura and Ken-Ichiro Nishio

DOI: http://dx.doi.org/10.5547/2160-5890.5.1.okim
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Japan has experienced a severe electricity shortfall since the Great East Japan Earthquake in March 2011 and the subsequent shutdown of nuclear power plants. Disruption to the supply-demand balance was especially severe in Tokyo and Tohoku in summer 2011, forcing the government to introduce mandatory rationing for large customers. Following intensive efforts, a reduction in demand of more than 15% compared with the 2010 level was achieved in these two regions. Surprisingly, most of the savings achieved in 2011 have persisted for almost four years. This paper examines the Japanese experience of saving electricity, based primarily on a detailed review of surveys of households and commercial and industrial customers we conducted each fall from 2011 to 2014. The paper analyzes major electricity-saving measures, energy users' perceptions and motivations, and trends from 2011 to 2014. The results show that the implementation rates of various electricity-saving measures are declining from the 2011 or 2012 levels, while the actual reduction in demand has remained at almost the same level. This seemingly paradoxical finding can be explained by the cumulative effect of replacing old equipment with newer, more efficient models and adopting new technology such as LED lighting.

Electricity demand response in Japan: Experimental evidence from a residential photovoltaic power-generation system

Takanori Ida, Kayo Murakami, and Makoto Tanaka

DOI: http://dx.doi.org/10.5547/2160-5890.5.1.itak
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We report on a randomized controlled trial used to examine the effect of dynamic pricing when applied to households with rooftop photovoltaic (PV) power-generation systems. Using high-frequency data on household-level electricity use, PV generation, purchases, and sales, we find that critical peak pricing induced significant usage reductions of 3-4% among households with PV systems, a quarter of the effect size seen among average households without solar PV systems. In addition, we investigate the influence of the amount of PV power generated on treatment effects and the potential heterogeneity caused by participating households' attributes. This is the first large-scale field experiment evaluating the demand response of households with PV generation capabilities.

Aiming at a Low Carbon Society in Japan by 2050: Impact of the Fukushima Nuclear Accident and CO2 Reduction Target

Tatsujiro Suzuki, Tatsuo Kobayashi, Hikaru Kobayashi, and Kazumasa Iwata

DOI: http://dx.doi.org/10.5547/2160-5890.5.1.tsuz
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Since the Fukushima nuclear accident in 2011, Japan has been struggling with its energy and environmental policy, without a clear picture of the future for nuclear power. The Government of Japan released its latest Strategic Energy Plan in April 2014, and announced its CO2 emissions target (24% reduction by 2030 compared to 2005 levels) and "energy mix" (the desirable composition of power sources) in June 2015. The objective of this paper is to assess Japan's energy mix and potential for CO2 reduction in the years to 2050, independently from such government policies, by analyzing changes in the energy demand and supply structure since the Fukushima accident. We find that Japan's energy structure could change dramatically in the next thirty to fifty years. On the demand side, with the combination of population decline and economic structural change, and assuming a constant fossil energy price increase through steady global demand, we estimate a 40% reduction in energy demand by 2050 relative to 2005. On the supply side, we believe zero-emission electricity is achievable from 2040 onward, assuming a significant increase in renewable energy share, the continued use of nuclear power and the introduction of Carbon Capture and Storage (CCS) from 2025. However, the total costs of carbon reduction do not differ substantially with or without nuclear power, and the contribution from CCS can be more significant than that from nuclear power. We found that a 30% CO2 reduction by 2030, and a 60% reduction by 2050 is achievable. To attain further reductions by 2050, assessment of emissions regulations and carbon pricing cannot be avoided. Our projections are based not only on the economic model, but also on interviews with leading experts from public/ private/academic institutions, and thus should not be considered as "unrealistic" but rather as the "best case scenario," applying the most advanced technologies and practices.


Assessing the viability of Energy-Only Markets with 100% Renewables

Jenny Riesz, Joel Gilmore, Iain MacGill

DOI: http://dx.doi.org/10.5547/2160-5890.5.1.jrie
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Abstract - Efficient wholesale electricity markets should drive preference revealing bidding where generators offer the majority of their power at their short run marginal cost (SRMC). However, most renewables have very low SRMCs, which in a competitive market is likely to lead to an increasing proportion of low priced periods. Combined with concerns around the variable availability of some renewable generation types, this has led to suggestions that energy-only markets may need to be augmented with capacity remuneration mechanisms as their renewable penetration grows. This analysis explores the operation of energy-only markets with high renewables, with a case study of the Australian National Electricity Market (NEM). Results suggest that existing energy-only market mechanisms have the potential to operate effectively in a 100% renewables scenario, but success will rely upon two critical factors. Firstly, an increase in the Market Price Cap is likely to be required. Preliminary analysis suggests this may need to increase from the present $13,500/ MWh in the NEM to the range $60,000 to $80,000 /MWh. Alternatively, comprehensive demand side participation could allow each customer to select their preferred level of reliability and associated cost, removing the need for an administratively determined Market Price Cap. Secondly, a liquid and well-functioning derivative contracts market will be required to allow generators and retailers to hedge increased market risks successfully.

The Effect of Community Reinvestment Funds on Local Acceptance of Unconventional Gas Development

Naveed Paydar, Olga Schenk, Ashley Bowers, Sanya Carley, John Rupp and John D. Graham

DOI: http://dx.doi.org/10.5547/2160-5890.5.1.npay
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A survey with an embedded experimental design is employed to determine whether local public support for an unconventional gas development (UGD) project is influenced by a policy that commits a portion of private revenues from UGD to the state or local government. The public opinion survey (N = 2,700) oversamples residents living in counties of six states where UGD is technically feasible or underway: New York, Illinois, California, Pennsylvania, Ohio, and Texas. We found that proposing a hypothetical UGD site about two miles from where the resident lives decreases support for local UGD, but this effect is attenuated when residents are informed that their community or state will receive benefits from "reinvestment" of a portion of the revenues generated by a developer. Further, the level of government receiving the reinvestment funds influences the level of local public support for UGD, such that reinvestment in local government is a much stronger predictor of public support than reinvestment in state government. Our findings have implications for understanding the social feasibility of UGD and can have implications for how reinvestment policies should be designed to influence local community attitudes.

Book Reviews

Book Reviews

Decarbonising the World’s Economy: Assessing the Feasibility of Policies to Reduce Greenhouse Gas Emissions, edited by Terry Barker and Douglas Crawford-Brown - Book Review by: Ying Fan

Natural Capital. Valuing the Planet, by Dieter Helm - Book Review by: Karsten Neuhoff

Innovation under Uncertainty: The Future of Carbon-free Technology, edited by Valentina Bosetti and Michela Catenacci - Book Review by: Henrik Klinge Jacobsen

Why are We Waiting? The Logic, Urgency, and Promise of Tackling Climate Change, by Nicholas Stern - Book Review by: Charles D. Kolstad

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