December 16, 2016 / 12:24 PM / in a year

Japan to create baseload power market to promote competition

TOKYO (Reuters) - Japan’s trade ministry panel on Friday agreed to set up a baseload power market to ensure equal access to cheap power supplies for new power retail companies as part of reforms to foster competition in the market.

The country’s retail power market was fully liberalized in April, but most of the power generated from nuclear, coal or large hydro plants is still in the hands of former regional power monopolies, limiting opportunities for new entrants.

The new entrants, lacking enough baseload power, mostly rely on higher-cost load from plants such as gas-fired facilities that adjust output as demand fluctuates.

The establishment of a baseload power market by 2019/20 is designed to ensure equal footing for all power firms, the trade industry panel agreed in an interim report on Friday.

The rapid rise in renewable power on the back of a feed-in-tariff scheme in 2012 following the Fukushima nuclear disaster, has reduced incentives to build new fossil fuel-fired plants.

To ensure that fossil fuel plants can maintain a stable income, the panel also agreed to set up a mechanism in 2020/21, similar to one in the United States and Europe, which allows power retailers to buy fossil plants’ power generation capacity.

The panel also aims to set up a market for non-fossil fuel fired power to fix the problem of limited opportunities for procuring renewable power.

Chairman of the federation of Japan’s former power monopolies, Satoru Katsuno, who also serves as Chubu Electric Power’s president, said on Friday the reforms would have a big impact on their businesses and asked for the government’s help in streamlining various measures.

The panel also agreed to spread widely compensation costs for the Fukushima nuclear disaster and pass on part of the costs, equal to up to 2.4 trillion yen ($20.32 billion), on power fees, over 40 years from 2020.

Japan’s government last week nearly doubled its projections for costs related to the Fukushima nuclear disaster to 21.5 trillion yen, including about 8 trillion yen for compensation, putting up pressure on operator Tokyo Electric Power to step up reform and improve its performance.

Reporting by Osamu Tsukimori. Editing by Jane Merriman

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