Congestion Management—Implications of the European Experience for Japan's Electricity Market Reform

Author Name HATTA Tatsuo (Faculty Fellow, RIETI)
Creation Date/NO. November 2020 20-P-028
Research Project Policy Issues on the Electricity Market Reform after 2020
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Japan's utilities originally constructed Japan's core grid based on the locations of the existing nuclear power plants. However, as the operating rate of Japan's nuclear power plants has dropped significantly, and new energy sources have been constructed in previously uncovered areas, power lines have become congested within the service areas of the transmission companies. Congestion management––methods of relieving transmission line congestion in a particular area––has become a policy issue.

This paper shows that Japan can achieve efficient congestion management by modifying the European congestion management system, the "redispatch system." Specifically, we offer the following combination of conditions for effective transmission line congestion management in Japan: (1) Adopt a redispatch system. (2) All new generators should be allowed to locate to congestible areas if they are subject to the imbalance settlement 3) If Japan sets the FIP subsidy rates higher than in Europe, modify the European style FIP system, which pays the subsidy to the scheduled output level, to new schemes proposed in the present paper.