Economic Analysis of Interregional Electricity Transmission Networks in Japan

Author Name KAINOU Kazunari  (Fellow, RIETI)
Creation Date/NO. December 2005 05-J-033
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The reform of electric industry regulations implemented in fiscal 2000 partially liberalized the power retail market, allowing power suppliers to sell electricity to certain large-lot users beyond their conventional service areas. To this day, however, hardly any systematic analysis has been made on the current state and formation process of inter-regional power transmission networks, creating a situation where there is no sufficient knowledge on which to lay the foundation for substantive discussion on electric industry regulations.

This paper attempts to economically analyze the current state and formation process of Japan's interregional electricity transmission networks based on information available in public statistical literature including "Denryoku-juyo no gaiyo (Summary of Electricity Supply and Demand)."

It has been observed that the capacity utilization rate for Japan's interregional electricity transmission networks stood around 27% on average in fiscal 2003 with the rate in August - the peak month for the nation's power demand - as low as 65%.

Meanwhile, based on correlations observed between the volume of electricity sent and/or received through interregional transmission networks and the composition of power sources in each region, models that estimate power generation and transmission costs (hereafter referred to as the "power source composition / location model") have been developed to analyze the situation of the Tokyo metropolitan and Kansai regions. Analysis results show that, in the both regions, cost minimization can be achieved when an LNG combined power plant is located roughly100 kilometers away from the city center, and a coal or nuclear power plant 200 kilometers away.