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Country Competition Japan- rEVISED.doc

Country Competition Japan

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Institution conditions and transitions

The structure, organization and governance of major public utility industries have been changing or rather undergoing transformation in the recent past. Countries have for instance privatized state owned utilities in an attempt to enhance their efficiency. Various governments have also seen private utilities either wholly or partly deregulated in what has been claimed as an attempt to control of the industry players for the good of the citizens. Increased competition in the utility industry has also been a contributing factor to these changes that have been experienced by both developed nations and the emerging economies. Japan has not been left behind either as its public utility industry has for example undergone tremendous transformations.

The study of public utility industry in Japan can be traced long before the Second World War in what was known as the Meijji era. Research in this area of interest started in 1930s which saw the establishment of Japan Society of Public Utility Economics (JSPUE) later in 1949. This was in an attempt to enhance research which was deemed necessary especially because Japan was emerging as a new democracy after the war. It was therefore necessary in order for her to improve the livelihoods of Japanese. By then, JSPUE had a total of 156 individual members and 30 corporate ones. However, today things have changed In terms of its membership and its roles as well. Today, JSPUE enjoys membership of 426individual members and 75 corporate members. Its roles have also evolved and it does the following in today’s competitive utility industry. One, it researches and holds annual meetings to discuss its findings with all the members. Two, it holds seminars to educate members of the public about public utility facilities. Thirdly, JSPUE publishes a journal on public utility economics on a quarterly basis.

JSPUE also conducts exchanges with other nations with regard to public utilities to come up with required literature about the same. JSPUE assembles scholars to examine the nature and other important aspects of electric power, gas, transport, water and other public utility areas that are of interest to Japan.

This has further changed in Japan’s public utility industry as evidenced by the fact that the industry is no longer considered as a domestic entity as it were decades ago. Japan therefore agrees that changes in other countries affect its utility industry directly thanks to globalization. Among such changes that affect the utility industry include deregulation policies of trade partners, competition enhancing policies and privatization of public utilities among other key factors.

The telecommunication industry has also undergone transition over the years. Japan has separated its telecommunication services to improve efficiency in this public utility. There are now several regional separate telecommunications companies under one Holding company. With each of these companies having its own subscribers, competition has been enhanced which has been beneficial to members of the public. Its main aim however, was to enable new entrants in the industry to compete favorably with other firms. Today, no single entity is allowed to either exercise control or even own more than one broadcasting station.

Another area that has seen undergone transition in Japan’s utility industry is its power sources. Japan has a number of sources for its power ranging from fossil fuels, electricity, solar energy, and gas among other sources of energy. All these sources appear to be competing to provide energy to this ever developing economy. Listed as the major sources of power in Japan include; thermal electricity, hydroelectric power, and nuclear power. Since 2005, Japan has also been generating electrical energy from ocean wave technology known as GWAVETM technology. Due to its real-time adjustment to wave conditions, it has proven to be advantageous than numerous other energy sources.. As compared to fossil fuels, this type of energy is safer, cheaper, less pollutant and has significantly more stable market prices. It therefore competes favorably with other sources.

After being stricken by an earthquake and a tsunami in 2011, Japan now largely depends on coal, natural gas and oil for almost 90% of its energy sources. This was a major transition from its previous sources which were majorly relying on nuclear sources. The country is now planning on a move to shift from nuclear energy, from where it used to acquire a third of its energy supplies, to embrace renewable sources of energy.

It is in its interest to triple power from renewable sources by 2030. This will include wind and solar energy creation. Though this plan has faced challenges from various critics, it is one of the major strategic plans Japan is considering to power the economy. However, the future of nuclear power still remains uncertain and Japan is therefore likely to face a big challenge as it struggles to adopt renewable energy sources at the same time deregulating this utility market.

A closer look at the shift in Japans sources of power shows that in the early 1970s, the main sources of energy in Japan was electricity which was generated from liquefied natural gas, petroleum products and coal. However, the use of electricity in Japan can be traced a lot earlier in 1878 at the Institute of Technology in Toranomon, Tokyo. Growth for its use was motivated by the need to have a safer and cleaner source of light. Later, people started using it as an alternative source of energy, replacing steam energy in households and industries. By the end of the Second World War, Japan was majorly relying on electricity as a utility source. It is after world war two that the country saw electricity demand become even higher, prompting the restructuring of the electricity utility industry. This led to a massive transformation of the economy as nine more private electric utilities were formed, that is, Hokkaido, Tohoku, Tokyo, Chubu, Hokuriku, Kansai, Chugoku, Shikoku and Kyushu Electric Power Companies which were charged with the responsibility of supplying electricity to each of the nine Japanese regions (Fepc.or.jp, 2015). Today, there are about ten private vertically- integrated electricity power companies operating competitively in Japan that generate, transmit and distribute electric energy. They have to work under strict guidelines and written agreements that have to be approved by the Ministry of International Trade and Industry (MITI).

Another major transition in Japan occurred in 2012 with the introduction of Feed-in Tariff (FIT). In this arrangement, households were allowed to sell excess solar energy they generated from their homes to the power company for preset price. This was likely to increase commercialization of solar energy. According to the Ministry of Economy, Trade, and Industry (METI) 2012, all retail electricity customers are charged some fees depending on the level of electricity usage, to fund the Fit in Tariff program(Financial Times, 2015). Today, the government has already reduced the FIT for purposes of cost control. It has also restructured the power industry thus providing more opportunities in this utilities sector. It has been argued that benefits of this arrangement are long term and will only be seen in future. At the moment, it has tripled the number of independent power producers (IPP) in Japan and the number is still increasing.

There has also emerged some retailers who are purchasing the excess solar energy at better prices that the Fit in Tariffs. They include Japanese Consumer Co-operative, which is one of the major green retailers in Japan (Costello, 2009).

Geothermal power is also common in Japan and around 70% of the global market for geothermal power is generated in Japan. This has increased competition as a source of energy with other sources, that is, solar and electricity. Institutions, industries and household are more likely to adopt newer sources of energy in future. The power industry is therefore still competitive despite the government’s attempts to popularize solar energy as its main source of power. As a result of continued nuclear power failure, Japan’s fossil fueled generation continues to compete with other sources of power. This trend can be traced from the 2012 destruction of the Tokyo Electric Power Company's (TEPCO)Fukushima Daiichi nuclear power plant and subsequent outages at other plants, (Forbes.com, 2015). This also saw the government nationalize the Tokyo Electric Power which owned the hard hit Fukushima plant. This nationalization saw a number of changes being implemented and was aimed at increasing efficiency of the power plant.

The Japanese government currently wants to shift to renewable energy sources and is undoubtedly working hard to achieve this by 2030 in its strategic plan. They are however being faced by several challenges. For instance, the government proposed the establishment of Cross-regional Coordination of Transmission Operators, or OCCTO, which will affect the expansion of renewable energy generation by 2016. Experts have expressed different opinions about this issue majority saying that I will be challenging to dismantle the already existing vertically integrated utilities to achieve this. There is also the challenge of transmission with Japan currently being incapable of large volumes of renewable energy from a variety of sources as the government is proposing.

The current trend in demand for power has now seen Japan’s Electric power companies attempt to combine power from various sources to enable them meet demand for power. They have tried combining thermal, hydro and nuclear sources to meet the rising demand, (Fepc.or.jp, 2015).

Japan’s utility industry has changed dramatically gauging from the situation in the industry a few years back and is in the process of changing even more. Major institutional developments have occurred making major transitions in the industry in what has seen major improvements in offering of utility services. With the ever increasing demand for utility services, more changes are still expected and the Japanese government is developing relevant institutional frameworks to cope with the challenge.

References

Costello, K. (2009). Electric-to-Gas Substitution: What's the Best Option for Regulators?.The Electricity Journal, 22(6), 8-28. http://dx.doi.org/10.1016/j.tej.2009.06.002

Fepc.or.jp,. (2015). History of Japan's Electric Power Industry - The Federation of Electric Power Companies of Japan(FEPC). Retrieved 18 October 2015, from http://www.fepc.or.jp/english/energy_electricity/history/

Fepc.or.jp,. (2015). History of Japan's Electric Power Industry- The Federation of Electric Power Companies of Japan(FEPC). Retrieved 18 October 2015, from http://www.fepc.or.jp/english/energy_electricity/history/

Financial Times,.(2015). Japan to overhaul power sector - FT.com. Retrieved 18 October 2015, from http://www.ft.com/cms/s/0/a2d1793e-9b54-11e2-a820-00144feabdc0.html#axzz3oudSLXzj

Forbes.com,. (2015). Forbes Welcome. Retrieved 18 October 2015, from http://www.forbes.com/sites/williampentland/2015/01/13/utilities-push-back-as-solar-industry-booms-in-japan/

The Japan Times,.(2015). Competition to grow in Japan's ¥10 trillion energy markets | The Japan Times. Retrieved 18 October 2015, from http://www.japantimes.co.jp/news/2015/03/04/business/economy-business/competition-to-grow-in-japans-%C2%A510-trillion-energy-markets/#.ViNuZL_6rIV