Carbon Neutrality Goals: Japan draws up plans to transition to next-generation power networks

The Japanese electricity sector is in a state of flux as it strives to achieve its carbon neutrality goals by 2050. De­carbonising the power generation base is one of Japan’s top priorities and it is increasingly positioning renewables as the main source of energy in the future. This is despite certain issues that are uni­que to the country – a high depende­nce on LNG imports due to the lack of fossil fuel resources; the unavailability of flat areas, which limits renewable energy expansion; and no cross-border transmission interconnections for power trade with neighbouring countries. Fur­th­er, the recent global surge in energy prices due to the Ukraine war has significantly im­pacted power supply in Japan. Therefore, it is planning to bring nuclear back into its fold to address energy security concerns. With the Japanese government targeting to increase the share of non-fossil fuel energy (renewable and nuclear) in total generation to 59 per cent by financial year 2030 from 24 per cent in financial year 2019, a major transformation is under way in the electricity sector.

The power transmission and distribution (T&D) segment has a vital role to play in supporting this objective as electricity networks need to be overhauled to strengthen Japan’s ageing power grid so that they can evacuate large-scale re­ne­wables while maintaining grid stability and resilience. To this end, the 10 general power T&D companies in Japan that make up the Grid Council have drawn up a plan, “Toward Carbon Neutrality by 2050 – Roadmap to the Next Generation of Power Networks”.

Power Line takes a look at Japan’s energy policy goals and plans to build power networks of the future.

Energy and environment policy goals

In October 2020, the then Japanese prime minister Suga Yoshihide announ­ced the ambitious goal of making Japan carbon-neutral by 2050. In April 2021, it was declared that Japan would seek to reduce its greenhouse gas emissions by 46 per cent by financial year 2030 from its 2013 levels, and would thereafter further strive towards a 50 per cent reduction. To meet these goals, the governme­nt approved the Sixth Strategic Energy Plan in October 2021, which stipulates that thermal power generation will be reduced from about 76 per cent in financial year 2019 to about 41 per cent by financial year 2030.

The “Green Growth Strategy toward Ca­rbon Neutrality by 2050” announced by the Ministry of Economy, Trade and In­dustry in December 2021 has set decarbonisation of the electric power sector as a major goal. It proposed a policy to promote decarbonisation of power so­ur­ces such as maximum introduction of renewable energy while promoting “el­ec­trification” in non-electrification of the industrial, transportation and hou­sehold sectors.

A new philosophy of S+3E (safety, energy security, economic efficiency and environment) was also introduced to strive towards the 2030 commitments by wor­king to make renewable energy the main source of power generation, restar­ting nu­clear power plants with a focus on safety, and reducing the dependence on thermal power generation as much as possible by phasing out inefficient thermal power generation.

Recently, in November 2022, the Japa­ne­se government proposed plans to allow some nuclear reactors to operate beyo­nd the current 60-year limit and develop next-generation innovative reactors that incorporate new safety mechanisms. To recall, after the 2011 earthquake-trigge­r­ed tsunami disaster at the Fukushima nuclear power plant, the operational life of Japan’s nuclear reactors was limited to 40 years with a possible one-time extension of up to 20 years, under stricter sa­fety protocols.

Electricity industry structure

Historically, Japan’s electricity system was fragmented into 10 areas, operated by vertically integrated electric power co­­m­panies (EPCos), which had a mo­no­poly in their own areas. There was one EPCo each for Tokyo, Hokkaido, To­ho­ku, Ch­u­bu, Hokuriku, Kansai, Chugo­ku, Shi­koku, Kyusyu and Okinawa regio­ns. Elec­tric Power Development Com­pany Limi­ted, or J-Power, is the only utility that op­erates at the national level. Al­th­ough independent generators have been allo­wed to operate since liberalisation in 1995, their participation has been low.

This was followed by a partial liberalisation of the retail sector in 2000-05, when power producers and suppliers were gr­an­ted the right to sell electricity to larger consumers using the EPCos’ transmission networks. The Japanese El­ectric Power Exchange was establi­sh­ed in 2003 to encourage greater po­wer exchange. However, competition re­ma­i­n­ed limited by regional boundaries with EPCos controlling both generation and distribution.

The Japanese government began a massive reform exercise of its electricity sector under three stages. The first stage of the reform policy was accomplished by April 2015, with the establishment of the Organisation for Cross-regional Coordi­na­tion of Transmission Operators to enhance control over the supply-dema­nd balance of electricity in both normal and emergency situations on a nationwide basis. The second stage of the re­form, which fully opened retail-level competition in the Japanese electricity market, was accomplished by April 2016.

The Electricity and Gas Market Survei­llance Commission (formerly Electricity Market Surveillance Commission, which was formed in September 2015 but cha­n­ged its name in April 2016 with the addition of the gas surveillance function) is responsible for granting electricity retailer licences and supervising electricity retailers to ensure their compliance.

The third and final stage of reforms, which called for the legal separation of transmission and distribution from generation and retail, was implemented in April 2020, resulting in the spin-off of new T&D companies from the former general electricity utilities. All EPCos have legally un­bundled choosing either a holding company approach and/or a format of affiliated companies. Since April 2020, the new electricity T&D companies act as transmission se­rvice operators and are responsible for grid management. Meanwhile, the retail market has over 700 retailers though the retail arms of former EPCos still dominate the retail market. However, the share of retailers is gradually increasing.

Focus on power networks

Japan realises that the transformation of electricity T&D networks is essential to support the decarbonisation of power generation. The 10 T&D companies that are part of the Grid Council – Hokkaido Electric Power Network Co. Limited; To­hoku Electric Power Network Co. Li­mited; TEPCO Power Grid, Inc.; Chubu Electric Power Grid Co. Limited; Hokuri­ku Electric Power Transmission and Di­stribution Co. Limited; Kansai Electric Power Transmission and Distribution Co. Limited; Chugoku Electric Power Net­­­­work Co. Limited; Shikoku Electric Po­wer Transmission and Distribution Co. Limited; Kyushu Electric Power Tra­ns­mission and Distribution Co. Limited; and Okinawa Electric Power Co., Inc.) have been working with the federal gov­er­nment as well as wide-area power ma­nagement agencies to develop a T&D grid that can accommodate the growing share of renewables and support the ele­ctrification of other industries. Some of the key measures identified for the deve­lopment of the next-generation power network are discussed below.

Removing grid constraints: Efforts to overcome grid constraints are essential to make renewables the main power source. Japan’s Agency for Natural Reso­urces and Energy (ANRE) is working on a master plan for the development of a wide-area interconnection system acro­ss the country to enable renewable pow­er evacuation and improve grid resilien­ce. An interim report of the master plan was completed in May 2021 and the plan is expected to be completed by the end of 2022. As per the interim report, grid en­hancements and new transmission infrastructure for about 45 GW of unev­enly di­stributed renewable energy sour­c­es (such as offshore wind) would requ­ire in­vest­ments of around JPY 3.8 trillion-JPY 4.8 trillion. Some key projects include Chu­go­ku/Kyushu enhancement (JPY 360 billion), Hokkaido/Tokyo new build (JPY1.5 trillion-JPY 2.2 trillion), Ch­u­bu/Kansai enhancement (JPY 50 billion), Tokyo area enhancement (JPY 380 billion-JPY 530 billion), operational ca­pa­city measures between Tohoku and Tokyo (JPY 700 billion-JPY 810 billion), Kyushu-Shikoku new build (JPY 580 billion-JPY 640 billion), and Shikoku-Kan­sai enhancement (JPY 130 billion). Also, there are plans to build interconnections between Hokkai­do Honshu, Toho­ku-Tokyo, and central To­kyo by financial year 2027.

Revenue cap mechanism: The Japanese transmission segment needs considerable investment to upgrade its ageing grid to deal with the changing generation mix as well as the increasing incidence of climate-related disasters such as typhoons and floods. With bidirectional flow of electricity anticipated in the coming years and the introduction of electric vehicles (EVs), it will be necessary to invest in next-generation digital technologies such as artificial intelligence and internet of things as well as strengthen cybersecurity measures. To promote investment in the segment, a new network tariff regulation system called “revenue cap” is planned to be introduced in financial year 2023. Under this, transmission service operators will be required to achieve both maximum cost efficiency and sufficient investment towards a resilient T&D network.

Application for transmission connectivity: Since building and strengthening transmission networks is a time-intensive process, ANRE began to accept ap­p­lications for “non-firm type connectio­ns” from January 2021 onwards to connect renewable energy plants to the grid. The grid connection, in these cases, is provided on the condition that the generation output will be controlled/re­stricted if there is congestion in the transmission network. However, going forward, as re­newables displace other sources of pow­er to become the main source, it will be necessary to review the connection pro­cess. With respect to application for connectivity to local grids, ANRE is planning to accept applications around the end of financial year 2022.

Digitalisation and distributed energy systems: Japan aims to adopt digital te­chnologies to build a next-generation power network that is stable, resilient, effi­cient and cost effective. There are pla­ns to deploy sensors for the operation and maintenance of T&D facilities, ad­vanced system operation and congestion management using distributed energy resources in distribution networks, smart meters, power distribution automation system, regional microgrid using digital technology, and adaptive under frequency relays (for avoiding blackouts). Fur­ther, considering the large-scale ad­di­tion of renewable energy and increasing electrification of the transportation sector, it is imperative to create a grid that supports such a distributed energy system. Steps are being taken in this re­spect by improving the resilience of local po­wer supply, deepening the business of local production and local consumption of regional renewable energy, and introducing large amounts of renewable energy efficiently. In the revenue cap sy­stem, a distributed energy system is listed as one of the specific “target ite­ms” that general power T&D companies sh­ould achieve.

The Japanese market is witnessing the gro­wth of aggregators that depend on a large number of distributed power so­urces (solar PV, EVs, etc.) and peer-to-peer transactions amongst consumers. To respond to these changes, it may be ne­cessary to create a supply and dema­nd adjustment market, reform the electricity metering system and streamline related regulations.

Congestion management: Currently, the first come, first served rule is appli­ed for congestion management in the Japane­se grid, that is, plants that are co­nnected la­ter are regulated first. Since power generation from coal-fired power plants has be­en connected to the grid for a long time, it is prioritised to renewable energy with non-firm connection. However, ANRE is now looking at introducing ma­rket-driven models for congestion management as well as review of grid usage rules.

Standardisation of facilities and systems: Since the development of next-generation power systems requires significant investment, standardisation of material/component specifications has the potential to expand economies of scale. This can help reduce costs by jo­int procurement as well as reduce ma­nufacturers’ cost of production associated wi­th individual specifications. Standar­di­sation also offers the benefit of exchanging materials/components in case of emergency/disaster or supply change issues. In 2019, the specifications of overhead transmission lines, gas circuit br­eakers and underground cables were standardised. Going forward, the specifications of pylons, electric wires, cables, transformers and co-ncrete poles will be standardised followed by gas-insulated switchgear and high voltage switches.

Others: To support each other in the event of a disaster, the 10 general power T&D companies will jointly prepare a plan for the early restoration of power outages, cooperate in the event of a disaster, and establish relationships with the local governments.


Japan’s roadmap for building next-generation power networks is still a work in progress, but those reforms and initiatives undertaken and planned so far are expected to aid in creating a resilient po­wer grid that can support the country’s decarbonisation goals.