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June 21, 2014

[SSJ: 8589] Re: "Voodoo Abenomics" in Foreign Affairs

From: Paul Midford
Date: 2014/06/21

Congratulations to Richard Katz for his timely and incisive piece on Abenomics.

While I think Richard's conclusion that Abenomics'
third arrow of structural reform has been a major disappointment is right on target, there is one important aspect of Abe's structural reform agenda that has been generally overlooked: structural reform of the electricity sector.

Last year the Abe administration enacted a law through the Diet that moves to separate electricity generation from the grid that delivers it to customers, thereby breaking up Japan's regional electricity monopolies.
The new law will also give residential customers the ability to choose their electricity supplier based on price and the type of power (e.g. fossil fuels, nuclear, or renewable energy such as solar and wind) by 2018. This reform will introduce greater competition to Japan's electricity sector, facilitate the growth of domestic renewable energy sources, and prevent a repeat of the too big to fail dilemma the Japanese government faced with TEPCO. If there should be another major nuclear accident in the future, the bankruptcy of the plant operator will not therefore take the grid down with them; the operator will just be one of a number of competing producers. This reform could also help Japan to realize a more developed national grid, since regional power monopolies have tended to limit grid connections with other regional monopolists. This will not solve Japan's east-west power divide of 50 vs 60 hz, but it might encourage more investment in conversion capacity. It might also encourage the supply of electricity from Korea and Russia, which could give customers more options for lower priced power and would provide greater supply security. One interesting early result is that some regional power monopolies are moving to compete in each other's'
traditional fiefs.

It's worth noting, however, that Abe's early achievement of structure reform in the electricity sector has is actually based on a policy he inherited from Kan and Noda. METI has also consistently supported this reform, reflecting a turn away from being pro-electric utility and pro-nuclear policies that it pursued in the past.

Finally, in a related shameless plug, I want to note that these and many related issues are analyzed in a forthcoming book I am co-editing with Palgrave: The Political Economy of Renewable Energy and Energy
Security: Common Challenges and National Responses in Japan, China and Northern Europe

This volume should be out by late July, and you can pre-order with Amazon:

http://www.amazon.com/Political-Economy-Renewable-Energ
y-Security/dp/1137338865/ref=sr_1_1?ie=UTF8&qid=1403303
376&sr=8-1&keywords=Paul+Midford+Espen+Moe


Paul Midford
Director, NTNU Japan Program
Professor, Political Science
Norwegian University for Science and Technology

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