Security Issues of Electric Security Issues of Electric

Power Supply in JapanPower Supply in Japan

May 2005

Hiroshi Iwano

Agency for Natural Resources and Energy (ANRE),Ministry of Economy, Trade and Industry (METI),

JAPAN

2

Ⅰ. Introduction

Ⅱ. Energy Supply Structure and Portfolio of Power Supply Sources

Ⅲ. Transmission and Distribution System and the Governance of the System

Ⅳ. The Next Stage for the Establish- ment of Flexible and Robust Energy Supply System

3

ⅠⅠ. Introduction. Introduction1. Overview of the Japanese Electric Industry1. Overview of the Japanese Electric Industry

2. The Breakdown of Primary Energy Supply & Electric Power So2. The Breakdown of Primary Energy Supply & Electric Power Sources urces

3. The Current Balance of Electric Demand and Supply in Japan3. The Current Balance of Electric Demand and Supply in Japan

4. Introduction of the Bidding System for wholesale 4. Introduction of the Bidding System for wholesale SupplySupply

5. Partial Liberalization of Retail Supply5. Partial Liberalization of Retail Supply

6. Recent Regulatory Reforms in Japan 6. Recent Regulatory Reforms in Japan

7. The principle of the Regulatory Reform7. The principle of the Regulatory ReformⅡ. Energy Supply Structure and Portfolio of Power Supply Sources

Ⅲ. Transmission and Distribution System and the Governance of the System

Ⅳ. The Next Stage for the Establishment of Flexible and Robust Energy Supply System

4

1. Overview of the Japanese 1. Overview of the Japanese Electric IndustryElectric Industry

Alternating Current

50 Hz 0.6GW

Direct Current

60 Hz

0.6GW

2.8GW 1.3GW 4GW

0.3GW

1.2GW

0.3GW

0.9GW 1.4GW

1GW

Hokkaido

5.0GW

Tohoku

15GW

Tokyo

62GW

Kyushu

17GW

Chugoku

12GW

Shikoku

5.7GW

Kansai

30GW

Chubu

26GW

Hokuriku

5.4GW

2.5GW0.6GW

1.3GW 5GW

Alternating Current

Direct Current

Okinawa1.5GW

Okinawa1.5GW

10 General Power Utilities (GPUs), vertically-integrated generation, transmission and distribution segments, with their franchised areas under public service obligation.

Japanese network system does not form mesh network, and interconnection capabilities between GPUs are sometimes said to be weak.

Japanese network is isolated with no international connection.

Scarce indigenous resources brings about heavy independence on imported energy resources.

5

発電電力量シェアの推移（電気事業用）

2%13%

27% 30%

4%

4%

10%

22%

2%

13%

22%

26%

75%

54%

30%

12%1% 1%1% 1%15% 14% 11% 8%

0%

20%

40%

60%

80%

100%

1973 1979 1990 2002

再生可能・新エネルギー等揚水

石油等

LNG

石炭

原子力

一次エネルギー総供給シェアの推移

76%69%

54%47%

2%3%

4%3%

15%14%

16%20%

2%5%

10% 14%

1% 4%9% 12%

5% 6% 7% 6%

0%

20%

40%

60%

80%

100%

1973 1979 1990 2002

再生可能・新エネルギー等原子力

天然ガス

石炭

LPG

石油

(Source) Agency of Natural Resources and Energy

(Source) Agency of Natural Resources and Energy

（図１）（図１） （図２）（図２）

FY FY

2. The Breakdown of Primary Energy2. The Breakdown of Primary Energy Supply & Electric Power SourcesSupply & Electric Power Sources

Trends for Primary Energy Supply Trends for Electric Power Sources of GPU

Hydro,RenewableNuclear

Natural Gas

Coal

Oil

LPG

Hydro,RenewablePumped HydropowerOil

Coal

Nuclear

LNG

6

0

50000

100000

150000

200000

250000

Peak Demand Installed Capacity

Electric Demand and Installed Capacity (Summer, 2004)

Peak electric demand in summer 2004 was 175,820MW, and the installed capacity was 232,010MW. The reserve margin was 32%.Peak electric demand in summer 2004 was 175,820MW, and the installed capacity was 232,010MW. The reserve margin was 32%.

3. The Current Balance of Electric 3. The Current Balance of Electric Demand and Supply in JapanDemand and Supply in Japan

GPU

Wholesale

New Entrants (PPS)

MW

7

After 1995 【 Introduction of IPP bidding system】

Special Electric Company

Special Electric Company

Small to medium buildings, etc

Supply by its own transmission

Power Plants

Power Plants

Transmission Lines

General Power Utilities

Before 1995

Department Store, Large Hospital, Large Office Building, etc.

Large Factory

etc.

Household Small to Medium Factory, etc.

Office, Bldg,Shopping Arcade, etc.

Regulated Rate

Power Plants

General Power Utilities

Department Store, Large Hospital, Large Office Building, etc.

Large Factory

etc.

Household Small to Medium Factory, etc.

Office, Bldg,Shopping Arcade, etc.

Regulated Rate

Independent Power Producers (IPP)

Independent Power Producers (IPP)

BiddingBidding

4. Introduction of the Bidding System 4. Introduction of the Bidding System for Wholesale Supplyfor Wholesale Supply

8

After Partial liberalization (current system)

【 Starting March 21, 2000 】 Electric Power Company

General Power UtilitiesGeneral Power Utilities

Rate Control

Power Plants

Household Small to Medium Factory, etc.

Office Bld., Shopping Arcade, etc.

Introduction of Notification System when lowering Rates. Deregulation of Option Menu

Introduction of Notification System when lowering Rates. Deregulation of Option Menu

Before Partial Deregulation

General Power UtilitiesGeneral Power Utilities

Regulated Rate

Power Plants

Transmission Lines

Department Store, Large Hospital, Large Office Building, etc.

Large Factory, etc.

Household Small to Medium Factory, etc.

Office, Bld.,Shopping Arcade, etc.

Electric Power

Company’s Transmissio

n Lines

New EntrantsNew Entrants

Power Plants

（ Companies outside the supply area included)

Electric Power Company reports the wheeling rates to METI

Electric Power Company reports the wheeling rates to METI

Department Store, Large Hospital, Large Office Building, etc.

Large Factory, etc.

Free Rates (competitive

)

“Guideline for Fair Electricity Trade” compiled jointly by METI and the Fair Trade Commission

“Guideline for Fair Electricity Trade” compiled jointly by METI and the Fair Trade Commission

Large Consumers (about 30% of the total From April, 2005 60%)

Large Consumers (about 30% of the total From April, 2005 60%)

5. Partial Liberalization of Retail Supply5. Partial Liberalization of Retail Supply

9

generation

transmission and

distribution

Wholesale electric power

enterprises

Retail ( liberalized)Retail (regulated)

General Power Utilities

NewEntrants

(PPS)Wholesale

Power Exchange

I. Maintaining vertical coordination between generation and transmission

In order to secure a stable supply of electric power as well as to promote nuclear power generation, integrated operation and facility planning of electric power generation and transmission is needed.

Ⅱ. Securing the fairness and transparency of the network function

Implementation of the behavioral regulation

Establishment of neutral organization

Securing competitive neutrality under an integrated structure

6. Recent Regulatory Reforms in Japan6. Recent Regulatory Reforms in Japan

GPUs operate both power generators and the network system, offer ancillary service, and are still the last resort suppliers. Securing the fairness and transparency of the network is a key issue for the regulatory reforms in Japan.

GPUs operate both power generators and the network system, offer ancillary service, and are still the last resort suppliers. Securing the fairness and transparency of the network is a key issue for the regulatory reforms in Japan.

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7. The Principle of the 7. The Principle of the Regulatory ReformRegulatory Reform

(1) Conditions of Japanese Electric IndustryIsolated location with no international connectionScarce indigenous resources and heavy

dependence on imported energy resources

(2) Basic Philosophy of Regulatory ReformEnsuring the stable electric power supplyBalance the regulatory reform and the policies such as

energy security and environmental protectionHarmonizing free business activities with the system

securing stability and fairness based on the nature of electricity

Expanding retail choice

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ⅠⅠ. Introduction. Introduction

ⅡⅡ. Energy Supply Structure and . Energy Supply Structure and Portfolio of Power Supply SourcesPortfolio of Power Supply Sources

8. Regulations imposed on GPUs8. Regulations imposed on GPUs

9. Notification of the Plan for Power Supply & 9. Notification of the Plan for Power Supply & DemandDemand

10. Future Prospect of Japanese Electric 10. Future Prospect of Japanese Electric Industry Industry

11. Directions of Japanese Electric Industry11. Directions of Japanese Electric IndustryⅢ. Transmission and Distribution System and the Governance

of the System

Ⅳ. The Next Stage for the Establishment of Flexible and Robust Energy Supply System

12

8. Regulations Imposed on GPUs8. Regulations Imposed on GPUs

Business license, Construction plan approval,

Public service obligation,

Approval of terms and conditions for wheeling services, Supplier of last resort,

Behavioral regulation on wheeling,

Obligation on quality assurance of electricity,

Coordination among electric networks, and

Notification of the plan for power supply and demand.

The regulations imposed on GPUs are as follows;

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Each GPU submits its individual 10-year plan for power supply & demand by the end of every fiscal year.

The plans show power construction projects, transmission network investments, etc.

The Japanese government (ANRE, METI) checks the plans to ensure they meet requirements.

9. Notification of the Plan for 9. Notification of the Plan for Power Supply & DemandPower Supply & Demand

The Japanese government checks the GPUs’ long term investment plan to ensure adequate investment on electric facilities.

14

10. Future Prospect of Japanese 10. Future Prospect of Japanese Electric IndustryElectric Industry

0

50000

100000

150000

200000

250000

300000

2004FY 2014FY

Peak DemandInstalled Capacity

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2004FY 2014FY

HydroThermal (Oil)Thermal (LNG)Thermal (Coal)Nuclear

Outlook for Electric Demand and Supply Balance Outlook for the Share of Electric Power Sources

According to the plans for electric power supply and demand of GPUs, electric demand and balance in 2014, will still keep over 30% level as reserve margin.

Share of Nuclear power plants and LNG fired power plants in 2014 will increase from the current level.

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11. 11. Directions of Japanese Directions of Japanese Electric IndustryElectric Industry

The 　 appropriate portfolio in terms of power supply sources, including hydro, thermal and nuclear power, should be pursued continuously.

Nuclear power will keep its significant role in the future.

The effort to conduct conditions for Natural gas utilization should be initiated.

The incentive for load-leveling should be enhanced through covenant of electricity rate.

Energy conservation will be the ultimate and effective tool for rapid increase of energy demand in Asia and environmental protection.

Demand Side;

Supply Side;

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Ⅰ. Introduction

Ⅱ. Energy Supply Structure and Portfolio of Power Supply Sources

ⅢⅢ. Transmission and Distribution . Transmission and Distribution System and the Governance of the System and the Governance of the SystemSystem

12. The Role of NSO12. The Role of NSO

13. Outline of NSO’s Rule13. Outline of NSO’s Rule

14. Reliability Issues in NSO’s Rule14. Reliability Issues in NSO’s Rule

15. Monitoring of Inter-connection Lines15. Monitoring of Inter-connection Lines

16. The Mechanism to Expand 16. The Mechanism to Expand Interconnection LinesInterconnection Lines

17. To Ensure Reliability17. To Ensure ReliabilityⅣ. The Next Stage for the Establishment of Flexible and

Robust Energy Supply System

17

12. The Role of NSO12. The Role of NSOJapanese regulatory reform has maintain vertical coordination between generation and transmission.

Ensuring fairness and transparency in the transmission and distribution sector is one of the essential concept of it.

1. Designation Electric Power System Council of Japan (ESCJ) as Neutral System Organization (NSO), which formulates network rules and monitors their implementation, etc.

2. Implementation of the behavioral regulation.

Information firewalls, Prevention of cross-subsidizing and Prohibition of discriminatory treatments are enforced as legal obligations.

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13. Outline of NSO’s Rule13. Outline of NSO’s Rule

NSO’s (Neutral System Organization) main functions are; (a) Rulemaking (not regulation, but organization rules) :

-Construction of network facilities-Network access-System operation-Disclosure of network information

(b) Arbitration and dispute settlements between network users and the transmission/distribution segments of GPUs

(c) Providing a central dispatching liaison office(d) Operating OASIS

NSO is not a governmental organization, but a specified organization by the law. It consists of incumbent utilities, new entrants, other network users and academic experts.

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14. Reliability Issues in NSO’s Rule14. Reliability Issues in NSO’s Rule

Analysis is made on the condition of assumed severe contingency corresponding to each case.

Analysis is made on the condition of assumed severe contingency corresponding to each case.

NSO’s rule covers; - thermal limit, - voltage stability, - system stability, - system frequency maintenance, etc.

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15. Monitoring of Inter-connection 15. Monitoring of Inter-connection LinesLines

• NSO manages and posts the available transmission capability on interconnection lines between system operators each other.

• NSO determines the availability of inter-connection lines for each request of transaction through interconnection lines.

NSO manages the available transmission capability on interconnection lines.

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16. The Mechanism to Expand 16. The Mechanism to Expand Interconnection LinesInterconnection Lines

The mechanism to plan to expand and/or construct interconnection lines is supposed to be implemented by NSO in case the power flow on interconnection lines increases and the remaining capabilities become insufficient due to construction of new generators, increase of long-distance power trade, etc.

However, the interconnection lines will be constructed by GPUs, because they still possess transmission assets, and are responsible for reliability of the network systems.

22

17. To Ensure Reliability17. To Ensure Reliability

NSO prepares the reliability assessment of the network system twice a year. NSO carries out the 1st assessment this spring.

The assessment could contribute to maintaining or even improving the current level of reliability.

NSO will assess the reliability of power network system in Japan twice a year.

NSO will assess the reliability of power network system in Japan twice a year.

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Ⅰ. Introduction

Ⅱ. Energy Supply Structure and Portfolio of Power Supply Sources

Ⅲ. Transmission and Distribution System and the Governance of the System

ⅣⅣ. The Next Stage for the . The Next Stage for the Establishment of Flexible and Robust Establishment of Flexible and Robust Energy Supply SystemEnergy Supply System

18. Conditions of Japanese Energy Sector18. Conditions of Japanese Energy Sector

19. Outlook for the Future19. Outlook for the Future

20. The Next Stage20. The Next Stage

21. Future Energy Strategies Based on the 21. Future Energy Strategies Based on the Energy OutlookEnergy Outlook

24

18. Conditions of Japanese 18. Conditions of Japanese Energy SectorEnergy Sector

Limited gas pipeline network Limitation of thermal power

generators Location (Only along coast line)

Construction of new transmission lines

is difficult.

Most fuels for generators are imported in Japan, because Japan does not have significant gas or coal reserves.

NIMBY, Small & mountainous country

25

19. Outlook for the Future19. Outlook for the Future

レファレンスケース

低成長ケース

高成長ケース

0

2

4

6

8

10

12

14

16

1955 1965 1975 1985 1995 2005 2015 2025年度

千億

ｋＷ

ｈ

On the other hand, electric power demand in Japan is expected to increase moderately over the next 20-30 years.

26

20. The Next Stage20. The Next Stage

The study on full liberalization will start in 2007.

Our goal is the harmonization of ensuring energy security, environment protection and economic efficiency. The role of nuclear powers will remain significant. Investment of transmission/distribution lines and other necessary investment should be sustained. Effective use of distributed generations is also a key issue.

The study on full liberalization will start in 2007.

Our goal is the harmonization of ensuring energy security, environment protection and economic efficiency. The role of nuclear powers will remain significant. Investment of transmission/distribution lines and other necessary investment should be sustained. Effective use of distributed generations is also a key issue.

27

Development of international strategy focused on the increase of energy demand in Asia

Realization of the virtuous circle of energy conservation and environmental protection among the civil society and industrial circles

Strengthen the ability to adapt to any change by dispersion and diversification of energy supply

Establishment of the flexible and robust energy supply system

21. Future Energy Strategies Based on the Energy Outlook

28

Thank you.Thank you.Hiroshi Iwano

Director, Office of Electric Transmission and Distribution,

Electricity and Gas Industry Department,Agency for Natural Resources and Energy (ANRE),Ministry of Economy, Trade and Industry (METI),

JAPANiwano-hiroshi@meti.go.jp

Hiroshi Iwano

Director, Office of Electric Transmission and Distribution,

Electricity and Gas Industry Department,Agency for Natural Resources and Energy (ANRE),Ministry of Economy, Trade and Industry (METI),

JAPANiwano-hiroshi@meti.go.jp