Japan’s Chubu Electric prepares for electricity liberalisation

Japan electricity liberalisation Chubu Electric deal
The deal between utility Chubu Electric Power and Inpex is one of many that will come in the next few months as energy suppliers gear up for the benefits and challenges of electricity liberalisation

In Japan, major electricity supplier Chubu Electric Power Co. this week confirmed a basic agreement with Japan’s largest oil and gas exploration and production company ahead of electricity liberalisation early next year.

Chubu Electric Power has sketched out a framework with Inpex Corp that would see the two companies jointly marketing electricity procured by Diamond Power Co., a Tokyo-based unit of Chubu Electric, to city gas suppliers in the Tokyo metropolitan area that currently buy natural gas from Inpex, The Japan News reports.

The tie-up capitalizes on the full liberalisation of electricity retailing in Japan scheduled for April 2016.

The gas companies are expected to launch bundled sales of electricity and gas following the market liberalisation.

Chubu Electric is hoping to expand into the metropolitan area through the partnership with Inpex.

As of the end of March this year, Inpex had sold natural gas to 33 gas companies in Tokyo and eight nearby prefectures.

Japan’s electricity liberalisation

The announcement comes as Japan is at the starting point of an ambitious electricity liberalisation programme.

In April 2015, the country took its first step towards breaking down regional electricity monopolies with the creation of a nationwide grid management body.

The Organization for Cross-Regional Coordination of Transmission Operators, which was officially launched this week, will coordinate power supply with demand across the country to ensure a reliable supply in all areas of the country, reports The Japan Times.

The move follows the Great Eastern Earthquake in 2011 and tsunami, which left parts of Japan’s largest utility Tepco’s service area with widespread blackouts and high electricity prices, while other regions had surplus supply.

All power suppliers are obliged to join the new body, which also has a remit to promote renewable energy.

After the full opening up of the retail electricity market envisioned next year, regional utilities are expected to spin off their power transmission and distribution sections into separate companies by 2020, in the final phase of the reforms.

That is intended to make power grids more accessible to new entrants and help boost competition.

Smart meters Japan

As part of the electricity reform, Japan is also seeking to install 80 million smart meters by 2025.

Tepco, the utility that serves the greater Tokyo area, has stated it will deploy 27 million residential smart meters within its service territory by the time the Japanese capital hosts the Olympic Games in 2020.

Hiroshi Yamaguchi, executive vice president, chief technology officer at TEPCO, said the utility planned to complete both the establishment of a real-time electricity market and the installation of smart meters across its Tokyo service area before the city lifts the curtain on the Olympic Games.

Mr Yamaguchi, in a speech on how Japan’s electricity deregulation will affect the traditional utility business model, said TEPCO was undergoing “drastic reform” that will see the it split into different companies including a smart meters operation, governed by a holding company.