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Future of Balancing Electricity Market in Japan: 2024 and Beyond

Author

Listed:
  • Hiroshi Ohashi

    (Faculty of Economics, The University of Tokyo)

  • Toshiyuki Yamamoto

    (Kansai Transmission and Distribution, INC)

Abstract

This paper focuses on the mechanism of balancing electricity market with a particular emphasis on the market reform in Japan. It compares the cost and benefit of two typical balancing mechanisms (decentralized system exemplified by Germany and centralized system by PJM in the United States). To avoid blackout, imbalance of electricity has to be resolved either by demand-side (i.e., a supplier) or supply-side (a transmission system operator), or both. This paper argues that decentralized system, which Japanese electricity market is currently aiming at, may not work well if it does not impose appropriate imbalance charges on suppliers. Otherwise, the system will be essentially degenerated to the centralized system. We consider several elements unique to Japan, including (1) the network connected solely within the domestic market; (2) high proportion of pump-up hydro in supply resources; and (3) long lead-time taken to carry fossil fuels. We conclude that we should keep the option of centralized market mechanism for future reform of balancing market in and after 2024, when the current market reform completes.

Suggested Citation

  • Hiroshi Ohashi & Toshiyuki Yamamoto, "undated". "Future of Balancing Electricity Market in Japan: 2024 and Beyond," CIRJE J-Series CIRJE-J-303, CIRJE, Faculty of Economics, University of Tokyo.
    • Handle: RePEc:tky:jseres:2022cj303
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    File URL: http://www.cirje.e.u-tokyo.ac.jp/research/dp/2022/2022cj303.pdf
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