Promoting Competition and Investment in Energy Market - November 2018 - APER Forum Meeting 2018
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APER Forum Meeting 2018
Promoting Competition and
Investment in Energy Market
November 2018
0Outline
1. Purpose of Energy System Reform
2. State of Competition in the Electricity Market
1. Retail market
2. Wholesale market
3. Past Initiatives to Promote Competition
1. Setting up and Revision of various Guidelines
2. Implementation of various Recommendations
3. Examples of Initiatives to Stimulate the Spot Market
4. Future Challenges
1. Retail market
1. Criteria for Abolishing the Regulated Tariff
2. Wholesale market
1. Ensuring investment in Electricity Supply in
competitive markets
3. Ensuring neutrality of network sectors
1. Legal Unbundling
11. System Reform in Japan
⚫ Main purpose of the reform from ‘95 was reduction of the electricity price.
1995 Independent Power Producers
2000 Partial Liberalization of the Retail Market (over 2,000 kW)
2003 Establishment of Japan Electric Power Exchange (JEPX)
Great East Japan Earthquake/Fukushima Daiichi Accident,
2011 resulting in scheduled load shedding in Tokyo Area
Establishment of EGC
Full Liberalization of the Retail Market,
2016 Imbalance Settlement, Open Procurement of Balancing Power
2020 Legal Unbundling of Transmission Sector
Regulated retail tariff might be abolished
2021 Establishment of Balancing Power Market
21.Reductions in Electricity Prices
⚫ Except a few years after the Great East Japan Earthquake, electricity prices net of Fuel
Fee and Renewable Energy Surcharge gradually declined after the electricity system
reform started.
(yen / kWh) ・Introduction of IPP and bidding system
22 ・Great East Japan Earthquake
21 ・Full liberalization
20
19.2 19.0 RE surcharges
19 Surcharge of RE
Fuel
fuelfees
18 2.3 fee
2.6 Other
otherexpected fuelfee・surcharge
expect fuel fees/RE surcharges
for RE
17
16
Electricity prices
15 net of fuel fees
and RE surcharges
14 5.1
▲5.71 yen/kWh
13
17.0 (▲34%)
12
11
10 11.3
9
1990 1995 2000 2005 2010 2015
1 USD=around 100yen 31. Purpose of Energy System Reform (2011-present)
Secure stable power supply
1 Promote the cross-regional exchange of electricity and improving
measures to adjust supply and demand. Promote development and
interconnections of gas pipeline networks.
Suppress tariffs to the maximum extent possible
2 Encourage competition among energy operators and entry from
other industries and areas for the maximum suppress of fees.
Expand Choices for Consumers and Business
Opportunities
3 Respond to customer needs with various options. Evoke innovation
through entry from other industries and areas and the utilization of
new technologies, etc.
• “Democratization” of energy systems
• Numerous and diverse participants
• Application of market mechanisms
• Regulations Ensuring These 4Outline
1. Purpose of Energy System Reform
2. State of Competition in the Electricity Market
1. Retail market
2. Wholesale market
3. Past Initiatives to Promote Competition
1. Setting up and Revision of various Guidelines
2. Implementation of various Recommendations
3. Examples of Initiatives to Stimulate the Spot Market
4. Future Challenges
1. Retail market
1. Criteria for Abolishing the Regulated Tariff
2. Wholesale market
1. Ensuring investment in Electricity Supply in
competitive markets
3. Ensuring neutrality of network sectors
1. Legal Unbundling
52. Share of Non-Regulated (Liberalised ) Tariffs
• Although the market share of New Entrants is rising steadily based on the number of
contracts, the share is still low.
30%
26%
Retailers 10 → App. 530
25% New entrants are from other industry
such as gas, oil, and construction.
20%
18%
15%
10% 8%
5%
0%
Apr
4月 Jun
6月 Aug
8月 Oct
10月 Dec
12月 Feb
2月 Apr
4月 Jun
6月 Aug
8月 Oct
10月 Dec
12月 Feb
2月 Apr
4月 Jun
6月 Aug
8月
2016 2017 2018
Share of Incumbents’
新電力のみ
Share of New 旧一電新メニュー
Non-Regulated Tariffs 旧一電新メニューと新電力合計
Share of
Non-Regulated Tariffs
%:Based on number of contracts
Entrants’ Tariffs (under 50kW)
62. Switching from Incumbents to New Entrants
45%
40%
35% France: Full
仏：全面自由化（2007）
liberalization (2007)
30%
UK: Full
英：全面自由化（1999） 25% UK
25% liberalization (1999)
20% France
15% 10% 12%*
10% Japan
3%
5%
0%
Year 0 Year 1 Year 2 Year 3 Year 4 Year 5
%:based on the gross sum of switched contracts from incumbents
*referring to the index of August, 2018.
(under 50kW)
72. Structure of Holders of Electricity Generators
⚫ Incumbent operators hold 83% of the capacity.
⚫ Capacity of PV increased from 5,000MW（2010）to 47,000MW(2017).
東京電力フュエル＆パワー(株)
TEPCO Fuel & Power, Inc.
42,763,000
関西電力(株)
Kansai Electric Power Co., Ltd.
2,166,320 中部電力(株)
Chubu Electric Power Co., Ltd.
2,260,000 東京電力ホールディングス(株)
TEPCO Holdings, Inc.
6,344,838 九州電力(株)
Kyushu Electric Power Co., Inc.
東北電力(株)
Tohoku-Electric Power Co., Inc.
7,957,405 電源開発(株)
Electric Power Development Co., Ltd. (J-POWER)
中国電力(株)
Chugoku Electric Power Co., Inc
8,075,198 北陸電力(株)
Hokuriku Electric Power Company
36,578,945
北海道電力(株)
Hokkaido Electric Power Co, Inc.
11,536,355 四国電力(株)
Shikoku Electric Power Co., Inc.
日本原子力発電(株)
Japan Atomic Power Company
沖縄電力(株)
Okinawa Electric Power Company, Incorporated (OEPC)
16,983,600 相馬共同火力発電(株)
Soma Kyodo Power Company, Ltd.
常磐共同火力(株)
Joban Joint Power Co., Ltd.
日本製紙(株)
Nippon Paper Industries Co., Ltd.
33,140,190
瀬戸内共同火力(株)
Setouchi Joint Thermal Power Co., Ltd.
18,231,017 ㈱コベルコパワー神戸
Kobelco Power Kobe Inc.
JFEスチール(株)
…
JFE Steel Corporation
18,849,521
新日鐵住金(株)
Nippon Steel & Sumitomo Metal Corporation
…
22,530,970
(Source) Based on "Electric Power Supply Survey Statistics" by the Agency for Natural Resources and Energy. Installed
capacity (MW) of power supply sources held by 96 operators generating 100MW or more. 82.Volume of Transactions in Spot Markets
• The volume of transactions at the Japan Electric Power Exchange (JEPX), an important means for new
entrants to purchase electricity, has consistently increased.
• Further growth will be expected in the future as a result of the impacts of the new rule for use of
interconnections, etc.
■Contracted amount (billion kWh) －Percentage of JEPX transactions in total demand (%)
7 35.0
31.8
6 30.0
5 25.0
4 20.0
3 15.0
2 10.0
1 5.0
0 0.0
May 2017
May 2018
Aug 2017
Nov 2017
Aug 2018
Dec 2017
Sep 2017
Sep 2018
Mar 2018
Feb 2018
Apr 2017
Apr 2018
Jun 2017
Jun 2018
Oct 2017
Oct 2018
Jan 2018
Jul 2017
Jul 2018
Note: figure for October 2018 is preliminary estimated 9Outline
1. Purpose of Energy System Reform
2. State of Competition in the Electricity Market
1. Retail market
2. Wholesale market
3. Past Initiatives to Promote Competition
1. Setting up and Revision of various Guidelines
2. Implementation of various Recommendations
3. Examples of Initiatives to Stimulate the Spot Market
4. Future Challenges
1. Retail market
1. Criteria for Abolishing the Regulated Tariff
2. Wholesale market
1. Ensuring investment in Electricity Supply in
competitive markets
3. Ensuring neutrality of network sectors
1. Legal Unbundling
103. Setting up and Revision of various Guidelines
Guideline on Sales of Retail Electricity
Examples of preferred actions Examples of problematic actions
⚫ Provision of misleading information to customers
⚫ Publication of standard menus and examples of average
monthly fees
⚫ Failure of the compliance with requirements to
explain and issue
⚫ Explanations of cancellation fee when switching etc.
documents to customers
Guideline on Proper Electricity Transactions
Examples of preferred actions Examples of problematic actions
⚫ Clear specifications of transmission and distribution
service fees on invoices for customers ⚫ Unfair bandling in set sales
⚫ Proactive use of Electric Power Exchange and selling ⚫ Setting unreasonably low prices for specific
bids customers
Follow-up surveys
◆ Five follow-up surveys have been conducted for business operators since April 2016.
113. Implementation of Recommendations
⚫ Since April 2016, the electricity market was fully liberalized, recommendations have
been made on 6 improper cases by four operators.
Date of Target Operators Business Details
Recommendations
October 11, 2018 TEPCO Energy Electricity, Gas Documents not delivered after contracts
Partner, Inc. (retail) concluded
August 2, 2018 F-POWER Inc. Electricity (retail) Failure to provide required explanations
May 16, 2018 Tohoku-Electric Electricity (TSO) Overcharged construction cost share
Power Co., Inc.
March 2, 2018 TEPCO Energy Electricity, Gas Documents not delivered before
Partner, Inc. (retail) contracts concluded
November 17, TEPCO Energy Electricity (retail) Market manipulation at JEPX
2016 Partner, Inc.
June 17, 2016 TEPCO Power Grid, Electricity (TSO) Late notification of electricity usage
Inc.
123. Examples of Initiatives to Stimulate the Spot Market
⚫ EGC has been encouraging the incumbents that hold the bulk of
power generation capacity to contribute equal footing of new entrants
and incumbents.
✓ The whole surplus electricity (surplus of the
Supply of the Whole
incumbents’ demand, excluding power adjustment
Surplus Electricity to
and bidding constraints) will be bid to the JEPX
the Market
market in the price of marginal cost (from 2013).
✓ Internal trades between generation section and
Gross Bidding retailing section of the incumbents are supposed to be
done through the JEPX market(from 2017)
13Outline
1. Purpose of Energy System Reform
2. State of Competition in the Electricity Market
1. Retail market
2. Wholesale market
3. Past Initiatives to Promote Competition
1. Setting up and Revision of various Guidelines
2. Implementation of various Recommendations
3. Examples of Initiatives to Stimulate the Spot Market
4. Future Challenges
1. Retail market
1. Criteria for Abolishing the Regulated Tariff
2. Wholesale market
1. Ensuring investment in Electricity Supply in
competitive markets
3. Ensuring neutrality of network sectors
1. Legal Unbundling
144. Criteria for Abolishing the Regulated Tariff
⚫ Regulation tariffs remain to prevent unregulated monopolies.
⚫ Standards to abolish regulations will be set through comprehensive assessments from
three perspectives: (1) consumers' situations, (2) existence of adequate pressure of
competition, and (3) sustained competition.
✓ How much interest do consumers have in switching
Consumers’ situations electricity?
✓ How will switching by consumers change in the future?
✓ Probability that there will be pressure from competitors
Existence of adequate on price increases by incumbent utilities?
pressure from competitors ✓ Is there any obvious pressure from competitors on price
increases by incumbent utilities?
✓ Is a switching environment being developed?
Sustained competition ✓ Is a sustained competitive environment being
maintained?
154. Securing Investment in Capacity in Competitive Markets
⚫ The predictability of power supply investments declines due to expanded transactions
in the wholesale power market and expanded introduction of renewable energy along
with the FIT system, etc. In the medium- to long-term, there is concern that it will be
difficult to newly establish and maintain facilities to secure the required supply and
adjustment capacity throughout the entire country.
⚫ Capacity market will be set from 2020 and EGC is expected to monitor new markets for
appropriate trades.
FY 2017 FY 2018 FY 2019 FY 2020 FY 2021
Start of Introduction of
gross bidding indirect auctions
Spot Market
Start of base Start of base load
load transactions shipping/receiving
Forward Market
Start of transactions
Start of transactions (All non-fossil fuel-
(FIT power supply based
only) power supply)
Non-fossil Fuel
Value Market
Start of Capacity contracts
transactions enter into force
Capacity Market Start of publicly-
offered Creation of
power coordination Balancing Power
operations Market
Procurement of
Balancing Power
Target
Aim
Source: Partial excerpt from materials by the Agency for Natural Resources and Energy 164. Overview of Capacity Market
Revenue after creation of capacity market (image) Transactions in capacity market (image)
Guaranteed capacity Guaranteed capacity
contracts contracts
Capacity Capacity (provisional name) (provisional name)
auction auction enters into force concludes
Power generation costs Income from power generation
Time
Mechanism that can be N-4 ・・・ N-1 N (Actual supply/
used to earn a certain (4 years prior) (1 year prior) demand year)
level of income according
Revenue from to capacity (kW) to reliably Successful bidders (electric power operators, etc.)
Variable costs electricity sales supply electricity at peak
(Fuel costs, etc.) (only when in times (not to cover all kW value kW value Payment
operation) fixed costs) Secured at one time Secured at one time
Market managers (OCCTO※)
Fixed costs
(depreciation costs, etc. Revenue from capacity market
Invoice Collection
Retail electricity utilities and general transmission and distribution operators
In operation Not in operation In operation Not in operation
※Organization for Cross-regional Coordination of Transmission Operators 174. Secure Neutrality of Network Sectors: Legal Unbundling
⚫ From April 2020, general power transmission and distribution operators need to be separated from
generators and retailer (legal unbundling).
⚫ Mainly, there are two methods that can be considered as ways to execute legal unbundling: (1) holding
company and (2) power generation/retail parent company.
①Holding company ②Power generation/retail parent company
➢ Establishment of power transmission and ➢ Establish transmission and distribution
distribution company and retail company under a company under a power generation
holding company (TEPCO voluntarily implemented company and retail company
a spin-off using this system in April 2016)
Holding company
Power
Retail
generation
Power
Power generation
transmission and Power
distribution transmission and
(Power transmission distribution
Retail
and distribution (Power transmission
facility) and distribution
facility)
(Power system
operation) (Power system
operation)
*Also possible to create a power generation * Also possible to create a power generation
company and retail company as the same company and retail company as separate
company. companies, one of which becomes a
subsidiary of another 18Thank you for your attention!
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