Electricity procurement: Many local governments go back to big utilities and abandon new power producers

Four years have passed since April 2016 when the Japanese electricity market entered a new era of electricity liberalization due to market reform. One aspect was the introduction of “new power producers” (previously referred to as Power Producers and Suppliers, or PPS, which do not include monopolistic power utilities like TEPCO and in many cases use renewable energy). The Power Shift campaign, with FoE Japan as secretariat, has encouraged electricity users to shift to these renewable energy sources.

In June and July 2019, the Power Shift Steering Committee, Hitotsubashi University’s Natural Resources and Economics Project, Asahi Shimbun newspaper, and Institute for Sustainable Energy Policies (ISEP) conducted a survey of electricity procurement status and policies regarding the main government buildings and facilities of 47 prefectures, 20 major cities (“ordinance designated cities,” with populations of 500,000+ and special designation by government ordinance), and selected municipalities (particularly those that have municipally-sponsored new power producers).

The survey found that among the 67 local governments studied (47 prefectures and 20 major cities), 36 (i.e., more than half) had returned to the big power utilities like TEPCO for their electricity procurement, after briefly having contracts with new power producers. Hokkaido, Kanagawa, Nagano, Gifu, Shizuoka, Aichi, Osaka, and Fukuoka were among the prefectures that procured from new power producers briefly after the Fukushima nuclear accident but then went back to the major utilities. As one example, Kanagawa Prefecture procured 90% of its electricity for prefectural facilities from new power producers in fiscal 2013, but by 2019 it had shifted to TEPCO Energy Partner Inc. to procure electricity for all 394 of its facilities, including the main prefectural office building. Meanwhile, there is a growing trend nationwide for municipalities to establish their own municipally-sponsored new power producers. For example, in Yamagata Prefecture, most municipalities that have already established their own power producers are procuring the electricity for their main government buildings through voluntary contracts with those producers.