The Future of the Electronics Industry

No.109
June 2001
Senior Fellow Reiji Takeishi

1.Results of Electric Power Industry Reform

One year has passed since the liberalization of the power industry in March 2000. In some cases, new power supply entrants have stolen customers from existing major power companies. Regardless, although some successful bidding prices have been reported-such as 20 percent reductions-new entrants occupy less than 1 percent of the total electric power supply.

2.The Gap Between Electric Power Companies

The data on the economies of scale for 10 major electric power companies reveals differences between each company. These differences were brought about by the way in which expenditure growth was controlled in comparison to the growth of supply and demand for electric power. In order to reduce the gaps between electric power companies, an increase in electric power transmission capacity is an effective measure. Presently, the quantity of electric power transmission for newcomers to the electric power supply industry is limited, and should be increased; a shortage of electric power transmission capacity is one of the causes of the power crisis in California. By using a new theory of transmission price calculation, it is easier to consider the electric power industry but as one part of a network industry.

3.The Future Image of Electric Power Companies

The existing 10 major electric power companies cannot generate full competition in the field of electric supply. It is predicted that a wholesale and a resale electric power market will appear gradually. The existing 10 major electric power companies should be separated by function into three parts: a power generation section, a power transmission section, and a power distribution/retail section.

4.The Future Image of the Japanese Electric Power Industry in 2003 and Beyond

Considering the European and American situations, full liberalization of the electric power industry is unavoidable in the near future. In response to this, Japan should pursue the following three measures as an energy policy : (1) For acquiring technical initiative, the development of an advanced network system for electric power transmission and distribution-which will make it easier to introduce a distributed power supply-should be promoted; (2) Japan should determine a clear schedule for the start of full liberalization of the electric power market starting around 2007, and should introduce so-called hybrid-type electric power markets, which allow the coexistence of two or more electric power exchanges and direct contracts between supplier and consumer; (3) At the time of the reexamination scheduled for 2003, high-pressure portions of 6,000 volts and higher should be liberalized.

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