Renewables Update

Revision of the Electric Utility Industry Law: What is Wide-Area System Operation? in Japanese

1 May 2014 Hiroshi Takahashi, Research Fellow, Fujitsu Research Institute

Under the Abe Cabinet, the electricity system reform is being implemented in three stages. The first stage is the revision of the Electric Utility Industry Law in November last year, and the establishment of the Organization for Cross-regional Coordination of Transmission Operators (OCCTO) is planned for next year. While the author believes that this is an extremely important organization, the term “cross-regional coordination of transmission operators,” or more generally “wide-area system operation” is not a familiar term in Japan, and there seems to be little progress in understanding what would happen under such an operation to begin with.

Wide-area operation of grids refers to viewing power systems in a broader region within which demand and supply of electricity is balanced. As the balancing principle operates in power systems, grid operators (utilities) are responsible for adjusting demand and supply. However, efficiency will be low if adjustments are made within a limited area. This is because flexibility increases when the area coverage is maximized to the extent possible in grid operations that combine various types of demand and supply. This is just like balancing the demand and supply of apples, which is impossible within Aomori Prefecture alone, but is easy in the whole of eastern Japan or within the nation.

For example in Denmark, not less than 30% of the electricity generated is from wind power. With this high concentration of variable power sources in an area as small as Hokkaido, it would become almost impossible to balance demand and supply. Hence, Denmark exports approximately 30% of the electricity generated in a year, and imports about the same amount. While it may sound ineffective at first glance, this is in fact a good example of international wide-area system operation. When wind blows, low-priced electricity is sold outside Denmark and when wind stops, low-priced electricity is bought from abroad. Electricity trading based on the market mechanism is the other side of wide-area system operation, and a large market linked with grids is required to enable such trading. This in turn facilitates the integration of variable power sources into the power system.

In other words, wide-area system operation contributes to the stable supply of electricity regardless of the ratio of variable power sources. There will be a variety of flexible power sources if the area is wide, and some consumers may also wish to offer “negawatts.” Accordingly, the significance of wide-area system operation is clearly stated in Article 28 of the Electric Utility Industry Law as well, as it stands now (prior to revision). However, in reality, under regional monopolies, there had been little incentive for utilities to undertake wide-area system operation. Utilities had been persistent in responding to demand fluctuations through the power sources within the region owned by them. Such a “small-area” system operation was a minor cause of the planned power outage in eastern Japan after the Great East Japan Earthquake.

The current state of small-area system operation in Japan will be a major disadvantage in introducing renewable energy. For example, deployment of wind power has just begun in Hokkaido, where wind conditions are good, but it appears that the situation has already been reached where additional wind power cannot be accepted from the point of view of stable supply. An upper limit for grid connection was also set last year for solar PV, which is another variable power source. Here, if the area for adjusting demand and supply is considered not to be Hokkaido alone but the whole of eastern Japan, the market would expand and become ten or more times larger in scale. Since the ratio of variable power sources is extremely small in the Kanto region, variation will be adequately mitigated even if such power sources are deployed in Hokkaido on a scale about ten times as large as the current scale. What Denmark is implementing in collaboration with its neighboring countries can be done in Japan within the country.

Utilities are also fully aware of these points. Demonstrations of wide-area system operation by three utilities in eastern Japan have begun under the guidance of the Agency for Natural Resources and Energy. Meanwhile, some argue that it is not possible to implement wide-area system operation immediately as the capacity of the interconnection line that connects Hokkaido and Honshu is too small. However in reality, the existing transmission capacity of 600 MW has hardly been used except for the interchange in support of eastern Japan immediately after the earthquake disaster ⅰ . There is a problem in the existing rules for grid operation, under which output variation of renewable energy within a day cannot be accommodated.

Hence, the role of OCCTO, which will be newly established, is extremely important. Regardless of whether regional monopolies would be eliminated or if electricity generation and transmission would be unbundled in the future, the situation of regional rivalry concerning grids will not change. What is needed is a bridge that links them. The author hopes that a sufficient level of authority, human resources that bear such authority, and neutrality will be given to OCCTO to develop rules for grid operation and plans for power supply and to implement wide-area system operation, in order to “maximize the speed of deployment of renewable energy” (the New Basic Energy Plan, April 2014).


 ⅰ The amount of electricity transmitted from Hokkaido to Honshu was only 0.7% in fiscal 2008, 3.4% in fiscal 2009, 8.2% in fiscal 2010 (of which March 2011 alone accounted for almost 80%), and 1% in fiscal 2012, compared to the annual amount of electricity transmitted in fiscal 2011, when the interconnection line connecting Hokkaido and Honshu was in full operation. Electricity Power Investigation Statistics, Agency for Natural Resources and Energy.