Electricity retailers Japan: 750 apply for US$67bn market

Japan electricity market watchdog
New electricity retailers must pay a consignment charge to supply customers through transmission lines owned by regional utilities

In East Asia, Japan has more than 750 applicants seeking to become electricity retailers since the Economy, Trade and Industry Ministry opened a register for new market entrants in August 2015.

More than 750 applicants, from rice farmers to billionaire Masayoshi Son’s mobile carrier SoftBank Group Corp., have signed up to become electricity retailers and compete with the existing 10 regional monopolies, reports Bloomberg.

The move comes as part of Japan’s programme of electricity liberalisation in a bid to improve grid reliability and drive consumer prices down.

The country will open up the electricity retail market, valued at US$67 billion, in April 2016.

Under the rules governing the unbundling programme, participants must pay a consignment charge to supply customers through transmission lines owned by regional utilities.

New energy retailers must also find their own customers.

Small-scale energy producer

Bloomberg reports that one of the entrants is Japanese rice and grain grower Arima, a 10-person operation on the island of Shikoku about 600 kilometres (373 miles) west of Tokyo.

The company registered as a power supplier because it’s considering installing solar panels in unused fields, said Yoji Arima, the sales manager.

On the subject of whether electricity liberalisation will be effective in driving down retail costs, Bloomberg New Energy Finance estimates that increased competition will result in 15% cuts.

Tokyo-based analyst Ali Izadi-Najafabadi said competition between new and existing suppliers may combine with lower commodity prices and the restart of nuclear reactors to drive down retail electricity rates when the power market for households and small businesses opens in April.

Monopoly clectricity retailers

Incumbent utilities that have held monopolies in their areas should also stand to benefit from the changes by offering dual-fuel services, according to the analyst.

For example, Tokyo Gas Co., the nation’s largest city-gas distributor, plans to enter the electricity business in April and target sales in the Kanto region of Japan, which includes Tokyo, and which has been dominated by Tokyo Electric Power Co. (Tepco) for decades.

Mr Izadi-Najafabadi of Bloomberg New Energy Finance said: “If you’re Tokyo Gas, you already have a residential customer base in Tokyo, so all you’re doing is going back to those customers and saying, ‘You are buying gas from me now, how about you buy electricity from me?’.”

Meanwhile, Tepco, Japan’s largest utility, is looking to bundle electricity with other services.

Tepco is in talks with SoftBank and Tokai Holdings – a city gas supplier for the Tokai region – to offer a discount plan for customers spanning electricity, mobile phone and gas services.

Other major utilities KEPCO and Chubu Electric Power Company are also considering tie-ups with communications providers.