Japan’s Cabinet has approved a proposal to revamp its troubled electricity industry and foster more competition by obliging utilities to split power generation and distribution into separate businesses.
The plan is meant to encourage more innovation and modernization of the power grid as the country grapples with its energy policy following the shut-downs of almost all its nuclear power plants after the March 2011 tsunami disaster at the Fukushima Dai-Ichi plant.
The plan approved Tuesday requires parliamentary approval. First proposed years earlier, it was included in a slew of economic reforms being discussed by Prime Minister Shinzo Abe’s administration that are intended to improve Japan’s competitiveness.
The power companies face soaring costs for imported fuel and for maintaining nuclear plants closed for checks after the Fukushima disaster.
Abe told a meeting of his economic advisers that he wants to expedite restructuring of Japan’s industries to eliminate bottlenecks and facilitate more business activity and investments, according to a summary of the meeting posted on the government’s website.
Such reforms are part of Abe’s three-pronged strategy for revival of the stagnant economy, along with more aggressive monetary easing and stronger government spending to stimulate growth.
Abe instructed Industry Minister Toshimitsu Motegi to submit the power reforms bill to the parliament as soon as possible.
He also urged Motegi and Environment Minister Nobuteru Ishihara to work together on strengthening environmental impact assessments to promote use of environmentally friendly and high-efficiency thermal power.
Abe said the next five years would be a time of “emergency structural reforms” for Japan. “We plan to commit as many resources as possible” to that effort, he said.
In the worst nuclear disaster since the 1986 Chernobyl catastrophe, reactors at the Fukushima nuclear plant suffered meltdowns after the facility’s power system was disabled by the earthquake and tsunami that ravaged Japan’s northeastern coast on March 11, 2011.
Abe has indicated he favors restarting reactors if they meet new, stricter safety requirements, though the government is also rushing to increase use of other forms of energy such as solar, wind, and geothermal power.
Such efforts have been slowed by the structure of the power grid, which was designed solely to meet the needs of the quasi-monopoly regional utilities. The proposed reforms would encourage greater use of renewable energy through increased competition, experts say.
The reform aims to “expand choices for users and business opportunities for operators,” according to a statement by the Ministry of Economy, Trade and Industry.
The reforms would be carried out in three phases in 2015-2020. As a first step, the government intends to create a framework to balance regional power supply and demand. It would fully liberalize power sales and generation by around 2016, aiming to fully separate the power generation and transmission arms of each utility in 2018-2020.
The politically powerful utilities have resisted such reforms but have little choice given the parlous state of their finances. Tokyo Electric Power Co., the country’s biggest utility and operator of the Fukushima plant, was nationalized after its finances deteriorated due to rising costs from the nuclear disaster.