Development of Policy Impact Assessment Model for the Regulatory Reform Policy of Japanese Electricity Market

Author Name KAINOU Kazunari (Fellow, RIETI)
Creation Date/NO. March 2016 16-J-012
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After the Great East Japan Earthquake and Fukushima nuclear power plant accident in March 2011, the Government of Japan strongly began promoting regulatory reform policy of Japanese electricity industry including perfect deregulation of retail sales of electricity after April 2016. In the policy, they point out important aspects of regulatory reform such as promotion of wide range electricity transmission and trading, short-term competition based on merit order and long-term investment based on power generator investment, and consumer protection by interim regulation of electricity tariff cap, but it is important to provide tools to enable comprehensive and quantitative policy impact evaluation and assessment to support regulators.

The author established numerical simulation model that enables to quantify electricity equilibrium prices for regions, twenty four hours based on demand and merit-order supply, and also able to quantify investment return, power generation market entry feasibility, energy consumption and carbon emission. Then the author checked the model's accuracy with sensitivity analysis of world fossil fuel price change and regional electricity demand change.

The author finally tried policy impact assessment for interim electricity tariff regulation, nuclear reactor safety regulation for old reactors and "Feed-in-tariff" systems for solar photovoltaic cell origin electricity.