This document presents the meeting materials from the 3rd Institutional Design Working Group Following Power System Reform Verification held by the Agency for Natural Resources and Energy, Ministry of Economy, Trade and Industry, focusing on the current status and challenges of power source investment and the progress of simultaneous market introduction.
The working group was held on July 22, 2025, to examine new institutional designs based on the progress of power system reform. The meeting discussed two important themes for achieving both stable electricity supply and improved market efficiency.
Current Status and Challenges Surrounding Power Source Investment
Analysis by the Agency for Natural Resources and Energy reported that power source investment has stagnated since electricity liberalization. In particular, new thermal power plant construction has decreased significantly, and aging of existing facilities is progressing. While renewable energy deployment is expanding, maintaining and updating thermal power generation necessary as adjustment capacity remains a challenge, making institutional responses for securing long-term supply capacity urgent. The need for new investment promotion measures such as operational improvements to the capacity market and long-term decarbonized power source auctions was presented.
Progress on Simultaneous Market Introduction
The detailed institutional design progress for introducing simultaneous markets (markets that simultaneously trade energy, adjustment capacity, capacity, etc.) was reported. Currently, electricity trading operates through separate markets including the spot market, supply-demand adjustment market, and capacity market, but the aim is to achieve a more efficient power system by optimizing these in an integrated manner. While referencing precedents from Europe and elsewhere, institutional design suitable for Japanese power grid characteristics is being considered, with preparations underway targeting introduction in the late 2020s.
Future Challenges and Directions
The working group discussed responses to newly emerging challenges while considering the achievements of power system reform. Key discussion points included ensuring grid stability accompanying mass deployment of renewable energy, improving predictability of power source investment, and ensuring market transparency and fairness. Additionally, opinions were submitted by Observer Kono regarding ensuring appropriate electricity rates from a consumer protection perspective.
The article demonstrates that power system reform has entered a new phase, emphasizing the importance of institutional design aimed at achieving both further utilization of market mechanisms and stable supply.