Japan’s new energy rules could make it a paradise for renewables

Japan’s new energy rules could make it a paradise for renewables

Japan is a weird place. But not for any of the reasons you’re thinking. I’m talking in terms of energy, because among industrialized, consumer-ized, electronically-driven nations, Japan probably has the world’s worst portfolio of homegrown energy resources – it’s the second largest net importer of fossil fuels. But it gets weirder. This month, the island nation rewrote its energy rules to give consumers the power to choose which energy source it wants.

Before Fukushima, Japan got 30 percent of its power from nuclear energy. That would be significant even in a country with abundant natural resources. In lieu of coaxing a gas-filled meteor to fall into its lap, the Japanese government is hoping to use market forces to generate innovation in the energy sector. See, if electricity buyers get to buy from the lowest bidder, then those bidders will have to compete for ever-lower prices. Which doesn’t just mean lower prices for consumers: It could result in a boom for renewables.

First, a quick primer on how you get electricity. The stuff begins at the generator – a coal plant, hydroelectric dam, warehouse full of hotwired hamster wheels, whatever – and then enters transmission lines. Those electrons then go into local lines, pass through your meter, and finally get converted by your computer into the webpage displaying this article.

Traditionally, this whole process was operated by so-called vertically-integrated energy providers. They own the plants, they own the lines, they send you the bill. The price of electricity gets set by regulators, who base them on a company’s operating costs. “There is a downside, and that is a monopoly doesn’t allow for much competition and therefore it doesn’t allow for innovation,” says Mark Friedgan, chief information officer of Chicago-based Eligo Energy.

But Japan needs innovation to make up for the electrical capacity it lost when it switched off its nuclear power plants. Otherwise, the country keeps buying fossil fuels (mostly natural gas) from abroad. In a perfectly deregulated market, anybody can build a power plant, the transmission lines are free for all, and consumers can pick and choose who they want to buy from. That means stiff competition between energy providers to develop cheaper energy sources.

Obviously, that’s a boon for Japan. For a long time in the country, only 10 state-sanctioned monopolies were allowed to build power generating plants. Recently, however, the nation started allowing anybody (with the money and permits) build a power plant.

Source: Wired

Date: May 2016

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