Renewable Energy in Japan: New Competition in the Energy Market after Fukushima

Abstract

The disaster at Fukushima has clearly illuminated some of the issues, which operating an energy market through regionally isolated monopolies give rise to. At the same time, a shift towards renewable energies is increasingly being perceived as necessary in Japan. In order to achieve this objective as well as improve the markets compliance and transparency, shifting the market towards a more competitive structure is desirable. However, established incumbents will often have an arsenal of methods available to discourage outsiders from entering the market, as well as inhibiting fringe firms growth. This paper examines the economical, political and legal barriers to entry in the Japanese energy market. The effect of the interwovenness of energy companies and political entities is examined. Furthermore, the efficacy of policies aimed at promoting renewable energies is explored. Finally, a model is outlined, in which the effects of the incumbents competition deterring capital is outlined and a tipping point beyond which the monopolistic incumbent becomes unchallangeable within the current regime is established. This paper confirms that a feed-in tariff, along with the lifting of restrictive regulation would improve conditions for fringe firms substantially. While such measures can not replace fundamental reform of the structure of the market, they constitute an important first step towards market liberalization.