A SPATIAL EQUILIBRIUM ANALYSIS OF JAPAN'S ELECTRIC POWER NETWORK

Abstract

A key intention of the regulatory reform of transmission charge schemes for Japan's electric power market was to promote inter‐regional competition between regional power companies by lowering long‐distance transmission charges with postage‐stamp pricing. Such a reform was expected to cause extensive use of inter‐regional links and cause congestion. Congestion segments the nationwide market into several regional markets, making the reform less successful. We develop a nine‐region spatial equilibrium model to simulate the reform during the peak‐load hours. We find that the reform would lead to significant increases of inter‐regional transmission and cause congestion at the links between the 50‐ and 60‐Hz areas.