Regulation of electricity utilities – power generation

Authorisation to construct and operate generation facilities

What authorisations are required to construct and operate generation facilities?

Starting on 1 April 2016, all power producers are required to make certain filings with the Minister of ETI before engaging in the power generation business, unless such power producer satisfies certain requirements (such as total power producing ability of facilities owned by a producer being lower than 10,000kW), which are provided by rules of the Ministry of ETI.

For the construction of a power plant, prior filing of the construction plan with the Minister of ETI is generally required, unless the output of such power plant is below certain thresholds. With respect to the construction and operation of nuclear plants, the EBA requires approval of the construction plan before construction and the inspection of construction before operation by the Nuclear Regulation Authority and the Minister of ETI. In addition, installation of a nuclear power reactor requires the approval of the Nuclear Regulation Authority.

In addition, construction of a thermal power plant, a hydropower plant, a wind power plant or a geothermal plant (whose generating power exceeds certain thresholds) or a nuclear plant requires prior environmental impact assessments.

Grid connection policies

What are the policies with respect to connection of generation to the transmission grid?

A general transmission utility (a general electricity utility until March 2016) must allow connection of generation to the grid and provide a wheeling service, unless there are justifiable grounds to refuse it. Examples of justifiable grounds include the non-payment of service fees by the applicant and the inability of the general transmission utility to provide the service without new construction of transmission facilities that impose a heavy burden on the business operation of the general transmission utility.

A general transmission utility also must allow power producers to connect with its transmission facilities, unless there are justifiable grounds for refusal such as there being the risk of causing electrical or magnetic disorder on the transmission lines. Power producers are generally required to incur costs for constructing or strengthening the lines to avoid such disorder.

Alternative energy sources

Does government policy or legislation encourage power generation based on alternative energy sources such as renewable energies or combined heat and power?

In July 2012, a feed-in tariff (FIT) for electricity generated from certain renewable energy sources (renewable energy electricity) was introduced. Under FIT, transmission utilities must purchase renewable energy electricity from the producer (which obtained certification on the business plan from the Ministry of ETI) at a fixed price for a fixed period. Solar photovoltaic (PV), wind, small and medium-sized hydro, geothermal and biomass are the renewable energy sources eligible for FIT.

The purchase prices and periods differ depending on the type of renewable energy and the scale of the plant and are decided by public notice issued by the Minister of ETI, who takes into consideration the opinion of the Calculation Committee of Purchase Price. The purchase prices and periods are renewed every year, and the set price and period applies to a project as of the date on which the certification on the business plan is issued. From April 2018 to March 2019, the price is between ¥12 and ¥55 (excluding sales tax) and the period is between 10 and 20 years depending on the type of renewable energy and the scale of the generating power.

As most projects since the introduction of FIT in 2012 have been solar PV projects, by an amendment of FIT which became effective in April 2017 a public bidding system for mega-solar projects was introduced to control the entire volume of electricity output from such solar projects. The public bidding system became applicable to certain types of biomass projects in April 2018.

As from April 2018, commercial operation commencement deadlines of between three and seven years, depending on the type of renewable energy sources, have become applicable to all types of renewable energy electricity generating facilities. Delays of commercial operation dates result in the shortening of applicable purchase periods under FIT.

Climate change

What impact will government policy on climate change have on the types of resources that are used to meet electricity demand and on the cost and amount of power that is consumed?

FIT, which was introduced in July 2012, has facilitated and will facilitate a substantial number of new companies to enter the electricity generation market and is expected to increase the amount of electricity produced by solar PV, wind, small and medium-sized hydro, geothermal and biomass sources. From April 2012 to March 2018, total capacity expanded by approximately 39.1 million kW from new renewable power plants (approximately 36.7 million kW of such additional capacity comes from solar power plants).

The costs of FIT will be ultimately borne by electricity consumers as a surcharge, but is arranged so that the costs are spread equally throughout Japan by the Surcharge Adjustment Organisation.

Storage

Does the regulatory framework support electricity storage including research and development of storage solutions?

There are subsidy programmes to support the introduction of electricity storage batteries, some of which are for households and others for business enterprises, provided by some local governments. The provider, scope and amount of subsidy programmes change year to year.

Government policy

Does government policy encourage or discourage development of new nuclear power plants? How?

The Japanese government continued to position nuclear power as an important base-load electricity in the Fundamental Energy Plan promulgated in July 2018, and tries to develop an environment that is supportive to electricity utilities restarting existing nuclear plants (all of which stopped operations after the Fukushima accident, and some pressurised water reactor type plants have restarted operations as at 1 September 2018) once the utilities obtain the approval of the Nuclear Regulation Authority. The Minister of ETI plans to develop a favourable environment for nuclear power plants. However, for political reasons after the Fukushima accident, it is difficult to construct new nuclear plants.