Energy Transition of the Electricity Sectors in the European Union and Japan: Regulatory Models and Legislative Solutions 3030988953, 9783030988951

Citation preview

Energy Transition of the Electricity Sectors in the European Union and Japan Regulatory Models and Legislative Solutions Maciej M. Sokołowski

Energy Transition of the Electricity Sectors in the European Union and Japan

Maciej M. Sokołowski

Energy Transition of the Electricity Sectors in the European Union and Japan Regulatory Models and Legislative Solutions

Maciej M. Sokołowski Faculty of Law and Administration University of Warsaw Warsaw, Poland

ISBN 978-3-030-98895-1 ISBN 978-3-030-98896-8 (eBook) https://doi.org/10.1007/978-3-030-98896-8 © The Editor(s) (if applicable) and The Author(s), under exclusive license to Springer Nature Switzerland AG 2022 This work is subject to copyright. All rights are solely and exclusively licensed by the Publisher, whether the whole or part of the material is concerned, specifically the rights of translation, reprinting, reuse of illustrations, recitation, broadcasting, reproduction on microfilms or in any other physical way, and transmission or information storage and retrieval, electronic adaptation, computer software, or by similar or dissimilar methodology now known or hereafter developed. The use of general descriptive names, registered names, trademarks, service marks, etc. in this publication does not imply, even in the absence of a specific statement, that such names are exempt from the relevant protective laws and regulations and therefore free for general use. The publisher, the authors, and the editors are safe to assume that the advice and information in this book are believed to be true and accurate at the date of publication. Neither the publisher nor the authors or the editors give a warranty, expressed or implied, with respect to the material contained herein or for any errors or omissions that may have been made. The publisher remains neutral with regard to jurisdictional claims in published maps and institutional affiliations. Cover illustration: © Alex Linch shutterstock.com This Palgrave Macmillan imprint is published by the registered company Springer Nature Switzerland AG The registered company address is: Gewerbestrasse 11, 6330 Cham, Switzerland

To My Wonderful Growing Family

Foreword

The ongoing climate change has not only caused alarming forecasts about rising temperatures, rising sea levels and rising numbers of natural disasters, it has also forced the world community to abandon its traditional ways of looking at easily accessible sources of energy and electricity. When the weather systems change not even hydroelectric power stations can be guaranteed an infinite supply of water. Wind turbines are being built in increasing numbers, but the wind does not always blow when you need it. In a similar fashion, solar power, while often recommended as a necessary part of a country’s energy mix, has its challenges, not least the sheer scope needed for it to be efficient. Hardly anyone looks upon coal as a sustainable and attractive long-term source of energy, but it is still used, to the detriment of the global climate. Nuclear power is probably the most efficient way to produce electricity, but nuclear disasters have already occurred, and when they do, the effects are so frightening that several governments have already promised their citizens that it will not be a future option. While discussions about safety, costs, availability and efficiency are intensified all over the world, there is another major development going on, the electrification of our modes of transport. Car makers are switching to electric vehicles at a rapid pace, and the consumers are persuaded to alter their driving behaviour in very forceful campaigns. However, charging stations need to be increased for this option to be realistic, and the efficiency of the stations need to be increased. So far, the numbers and

vii

viii

FOREWORD

the time needed for charging vehicles do not correspond to the needs. The necessary infrastructure for a complete switch to the electrification of transport is clearly lagging behind in far too many countries. City commuters and travellers who wish to cover long distances are likewise persuaded to go by train instead of by air or by private cars. But trains run on electricity and if the source of that electricity is coal the benefits dwindle. The challenges which are still remaining are immense, and whatever future solutions are favoured by our governments, they will be facing increasing demands for quick actions, and they can also be certain that whatever paths they chose, there will be a sizeable opposition to what they do. Dr. Maciej M. Sokołowski, in this study, Energy Transition of the Electricity Sectors in the European Union and Japan: Regulatory Models and Legislative Solutions, has done a remarkable job in analysing and formulating conclusions concerning the necessary directions that the EU and Japan need to adopt. As he points out, competition has, over the years, changed into cooperation. The globe is today so connected that it is seldom an option to try to outsmart your competitors when it comes to energy sources and electricity production. It is better to cooperate and help each other. After all, we are facing common threats and need common solutions. Increasingly we also realise that it is better to get the wheel rolling rather than reinventing again and again. It is for that very reason that the EU and Japan have signed both the Economic Partnership Agreement (EPA) and the Strategic Partnership Agreement (SPA). The agreements not only strengthens the vitality that is needed in an efficient international economic landscape, but they also underline that it is democratic values and market economies that are the right foundation for the cooperation to become successful. Dr. Sokołowski, in his study, begins by outlining how the electricity sector in the EU and Japan has evolved over time and he continues by examining European and Japanese initiatives to reduce harmful emissions. He also looks at the history as well as the current situation for renewable energy sources, taking a hard look at the incentives and regulatory mechanisms used for the purpose of boosting renewables in the energy mixes of the EU and Japan. Policies cannot be adopted without at least the tacit agreement of the public, especially so when the public is asked to change its behaviour for the common good. The study therefore also discusses public incentives and legislative actions to increase energy efficiency, both from the

FOREWORD

ix

perspective of the industry and the individuals. The study furthermore looks at regulatory actions and areas where the EU and Japan need to strengthen their climate and energy partnership. It is a very timely and useful research, full of insights and rich in important information. Dr. Lars Vargö Head of the Japan Center the Institute for Security and Development Stockholm, Sweden

Preface

When asked why this book was written, why it is important, and so on, I could reply without hesitation that Energy Transition of the Electricity Sectors in the European Union and Japan: Regulatory Models and Legislative Solutions is the ‘result of my interest in the electricity sector, experience gained in various projects and institutions, willingness to participate in a discourse on Europe and Asia, numerous study visits and research grants, conversations with experts, and the importance of energy in the modern world’. Everything is undeniably true. But let us begin elsewhere. Notwithstanding my research interests and professional experiences, this book stems from a story of failure and success. The former concerns the efforts of a young Polish scholar who, a decade ago, wished to go to the post-March 2011 Japan and conduct research on the power sector but ultimately was not given a scholarship. The latter refers to his wonderful research-related interactions with Japanese colleagues, carried out for the purpose of the said (unsuccessful) application. These connections proved to be extremely useful when he was again applying—this time successfully—for another opportunity to conduct research on the regulatory models of the electricity sectors in the European Union and Japan. It is not difficult to guess that the person writing these lines is familiar with both events. I will never forget how, while conducting research in Switzerland and Canada, I built relationships with Japanese scholars in order to submit my application to one of Japan’s academic incentive

xi

xii

PREFACE

programmes; the emotions that overwhelmed me when I did not qualify for the chosen scholarship will stay in my memory forever. Following a Japanese proverb which states, ‘fall down seven times, get up eight’, in Japanese: 七転び八起き [nana korobi ya oki], I was able to successfully apply for another research opportunity—it took a lot of work and effort, though—fortunately—fewer than seven attempts. I will never forget the moment when I learned I had received a long-term research grant, allowing me to relocate to Japan with my family for the needs of this study. Once again, the classic adage of ‘never give up’ turned out to be true. Failures and successes are also part of the energy transition process in Japan and the EU. At the time of my first research proposal, Japan was in the grip of an energy crisis as a result of the Fukushima disaster, and the EU was in the process of implementing the Third Energy Package to ensure the functioning of the energy market. During my second application process, Japan was pursuing the Abenomics strategy, while Europe was debating new phases of energy market reform tied to climate action within the scope of the Clean Energy Package. All of these activities have been prompted by regulatory action, with public laws and policies influencing the energy sector, with the electricity business at the forefront. Some of these regulatory efforts have failed, while others have forced corrections and revisions; some have proven quite effective, garnering international attention. In Energy Transition of the Electricity Sectors in the European Union and Japan: Regulatory Models and Legislative Solutions, I attempted to highlight these issues as components of several processes aimed at making the EU’s and Japan’s electricity sectors more liberal (open and competitive), clean (using renewable energy sources and reducing emissions), and efficient (so more rational in terms of energy usage). I hope I have succeeded rather than failed, and that my book fills a void in the energy studies by examining regulatory regimes and their regulatory tools used for energy transition in the power sectors of the EU and Japan. Tokyo, Japan

Maciej M. Sokołowski

Acknowledgements

As is often the case, many people stand behind one, and the same is true with this book. Among them are Professor Fumio Shimpo and Professor Jun Arima, who provided invaluable assistance during my research stay in Japan at Keio University and the University of Tokyo. Thank you for involving me in intriguing debates and providing me with an opportunity to share the findings of my research at scientific conferences, seminars, and lectures. Thanks to Shimpo-sensei, my research perspective has been expanded, giving me a fresh new outlook on the prospects of using robots and artificial intelligence in the energy sector. With the help of Arimasensei, I was able to find parallels and differences between the EU’s and Japan’s climate and energy policies, and place them in the global climate discourse. I am very thankful to Professor David G. Litt (Keio University), Professor Shinichi Kusanagi (University of Hyogo), and Professor Satoshi Kurokawa (Waseda University) for their time spent reading and commenting on the first proof of this book. Their suggestions allowed me to improve the book and reconsider some of the early concepts. I truly appreciate your helpful assistance. Moreover, I will be eternally thankful to David for the care and friendship he offered me since my arrival in Japan. The same can be said for Kurokawa-sensei, who has never refused me his help. They, together with Kusanagi-sensei, have deepened my understanding of Japanese energy legislation, akin to Professor Marek Wierzbowski who taught me how to analyse public law regulation years ago. xiii

xiv

ACKNOWLEDGEMENTS

Furthermore, I would like to express my gratitude to all those who helped me with my regulatory research on the electricity sectors in the EU and Japan. Among them are Professor Hisashi Yoshikawa (University of Tokyo), Professor Hitoshi Ushijima (Chuo University), and Dr. Ken Koyama (Institute of Energy Economics, Japan) as well as many other academics and professionals, with whom I discussed and consulted my research work during my time in Japan. I also take this opportunity to convey special thanks to Professor Yuichiro Tsuji for all the support he has been offering me at Meiji University. In addition, I would like to sincerely thank Professor Kurt Deketelaere of KU Leuven for his continuous and ongoing guidance of my academic career, as well as Professor Nobuo Tanaka, former head of International Energy Agency for all his openness and support. I would like to convey my deepest gratitude to Dr. Lars Vargö, former Swedish Ambassador to Japan (2011–2014) for writing the Foreword to my book. I would also like to thank the book’s reviewers for their kind words and invaluable advice. Additionally, I am incredibly appreciative of all the encouraging remarks on this book from my distinguished colleagues from different parts of the world. Special thanks go to the Palgrave Macmillan and Springer teams, particularly Ms. Rachael Ballard, Ms. Punitha Balasubramaniam, and Ms. Chitra Gopalraj who handled this book professionally and timely. I am also grateful to everyone who aided me throughout the period of my research grant, during which time this work was completed (Mobility Plus funding received from the Ministry of Science and Higher Education of Poland, currently the Ministry of Education and Science). I would like to thank Professor Tomasz Giaro, Dean of the University of Warsaw’s Faculty of Law and Administration as well as Professor Jacek Jagielski, Head of the Department of Administrative Law and Procedure, who have shown me great support in maintaining my relationship with the Faculty and University, especially during the difficult times of the COVID-19 pandemic. I owe special thanks to the Faculty of Law and Administration and University of Warsaw’s staff, with Ms. Barbara Grzywinska ´ from the Faculty’s financial unit as well as Ms. Izabela Gregorczuk-Stasiak and Ms. Joanna Kukawka from the University’s research unit and Ms. Magdalena Syno´s-Skorek from the University’s human resources unit, who helped me greatly with financial and organisational matters regarding my research grant. Similar thanks go to Ms. Aneta Raczynska ´ and Ms. Anna Raniowska from the Ministry of Education and Science.

ACKNOWLEDGEMENTS

xv

Furthermore, I would like to thank the representatives of the Embassy of Poland in Japan, particularly Mr. Ambassador Paweł Milewski and Ms. Małgorzata Szmidt. I am extremely grateful for including me in a number of projects involving Polish–Japanese collaboration in the energy sector. Thank you for having me as a member of the expert delegation to the former Fukushima Daiichi nuclear power plant. I would also like to acknowledge the supporters of my professional activity in Japan: Mr. Nagayuki Kurita from Japan NUS as well as Director Jakub Gibek from the Ministry of Climate and Environment of Poland for offering me the possibility of joining global climate discussions within the framework of COP conferences. お疲れ様でした [otsukaresama deshita]. I am also truly indebted to Minami Gemma, Umemoto Yasuo, Kimie Hatakeyama, Katsutoshi Hori, Noguchi-san and Yamamoto-san, the Kotani family, Michał Haruki Yamazaki, Ichiro Sugisawa-sensei, and all the colleagues at Karate Ichibukai d¯ oj¯ o, as well as Hiroshi Hozumi-sensei and Uchida-san from my shamisen course—for their generosity, support, and advice throughout our time in Japan. My family and I are privileged to call them friends. Finally, I want to thank my family: my dad, mum, brother, and grandpa, for their everlasting support during my research stay performed in the midst of a pandemic, and for all the online conversations as well as gifts that reminded us of Poland. Last but not least, I am eternally thankful to the true heroines of this book—my beloved wife Kinga and daughter Felicja. Simply put: thank you for everything. Maciej M. Sokołowski

Contents

1

Introduction 1.1 Significance 1.2 Regulatory Background 1.3 Scope of Analysis 1.4 Methods Applied 1.5 Structure of the Book References

1 3 8 10 13 14 16

2

Making the Electricity Market Liberalised 2.1 Liberalisation of the Electricity Sector for the Energy Transition of Europe 2.1.1 First Energy Package (1996) 2.1.2 Second Energy Package (2003) 2.1.3 Third Energy Package (2009) 2.1.4 Fourth Energy Package (2019) 2.2 Liberalisation of the Electricity Sector for the Energy Transition of Japan 2.2.1 First Electricity Sector Reform (1995) 2.2.2 Second, Third, and Fourth Electricity Sector Reforms (1999, 2003, and 2008) 2.2.3 Fifth Electricity Sector Reform (2013–2020) 2.3 Summary References

21 22 24 27 31 35 40 42 44 46 51 61

xvii

xviii

3

4

CONTENTS

Making the Electricity Sector Emission-Free 3.1 Reducing Emissions in the EU’s Energy Transition 3.1.1 The 1970s Anti-Pollution Move and the 1980s Regulatory Action 3.1.2 The First European CO2 Action and Its Legislative Outcomes 3.1.3 From the 1996 IPPC Directive to the EU ETS 3.1.4 The 2020 3 × 20% Goals and the Packages for Climate and Energy 3.1.5 The 2030 Climate-Energy Framework and the Paris Agreement 3.1.6 European Green Deal and The 2050 Climate Neutrality 3.2 Reducing Emissions in Japan’s Energy Transition 3.2.1 The 1967 Basic Law and The 1970s/1980s Environmental Agenda 3.2.2 The Noordwijk Conference, The 1990 Action Programme, and The Earth Summit 3.2.3 The 1990s Climate Framework 3.2.4 Energy-Oriented Emissions CO2 Under the Kyoto Protocol 3.2.5 Pre- and Post-Fukushima Climate Action 3.2.6 From Abenomics to the 2050 Carbon Neutrality 3.3 Summary References Making the Electricity Sector Renewable 4.1 Renewable Transition in the EU 4.1.1 Energy for the Future: Renewables in the European Energy Policy of the 1990s 4.1.2 The 2001 Renewable Energy Sources Directive and the First Regulatory Framework 4.1.3 The 2009 Renewable Directive I and 2020 Climate Goals 4.1.4 The 2018 Renewable Directive II and the European Green Deal Ahead 4.2 Renewable Transition in Japan 4.2.1 The 1993 New Sunshine Program and the 1997 Act on New Energy

73 74 75 76 78 80 82 84 86 87 90 92 94 96 98 103 110 129 129 131 133 134 138 142 143

CONTENTS

The 2002 Renewable Portfolio Standard and Regulatory Flaws 4.2.3 The 2011 Feed-in-Tariff, Rural Renewables, and the 2016 System Revision 4.2.4 Energy for Carbon Neutrality: Renewables in the Japanese 2020s Policy Framework 4.3 Summary References

xix

4.2.2

5

6

146 148 151 155 163

Making the Electricity Sector Energy Efficient 5.1 Energy Efficiency in Energy Transition of the EU 5.1.1 Joule, Thermie, and SAVE Programmes 5.1.2 The 2000s Framework on Energy Efficiency 5.1.3 Cogeneration in the EU Action on Energy Efficiency 5.1.4 The 2020 Goal for Energy Efficiency 5.1.5 The 2030 Framework and Beyond 5.2 Energy Efficiency in Energy Transition of Japan 5.2.1 The 1979 Act on Rationalisation of Energy Use 5.2.2 The 1990s Agenda on Energy Rationalisation 5.2.3 CHP in Japan’s Energy Efficiency Agenda 5.2.4 Energy Efficiency and 2050 Carbon Neutrality 5.3 Summary References

175 175 177 179

Conclusion 6.1 Baseline for Energy Transition 6.2 The EU—Japan Regulatory Approaches and Policy Correlations 6.2.1 Timing 6.2.2 Step-by-Step Approach 6.2.3 Evolution of Regulatory Tools and Models 6.2.4 Actors and Stakeholders 6.2.5 Technologies 6.2.6 Policy Targets and Priorities 6.3 Regulatory Models of Electricity Sector in the EU and Japan 6.3.1 No Regulation as Usual 6.3.2 No Deregulation at All Cost (No Total Deregulation)

215 216

180 183 186 188 189 191 193 195 197 205

218 218 219 221 225 227 228 229 229 230

xx

CONTENTS

6.3.3

No Regulation to the Max: (No Total Regulation) 6.3.4 Convergence of the European and Japanese Regulatory Models 6.4 Moving Forward While Looking Back References Index

231 232 233 237 239

Abbreviations

ACER AI BAT CDM CFC CHP CO2 Commission Community COP Council DPJ DSO e.g. ECSC ECU ed. EDF ED I ED II ED III ED IV edn

Agency for the Cooperation of Energy Regulators Artificial Intelligence Best Available Techniques Clean Development Mechanism chlorofluorocarbons Combined Heat and Power carbon dioxide Commission of the European Communities/from 1st December 2009 Commission of the European Union European Economic Community/from 1 November 1993 European Community Conference of Parties Council of the European Communities/from 1st November 1993 Council of the European Union Democratic Party of Japan Distribution System Operator for example European Coal and Steel Community European Currency Unit editor Électricité de France First Electricity Directive (1996) Second Electricity Directive (2003) Third Electricity Directive (2009) Fourth Electricity Directive (2019) edition xxi

xxii

ABBREVIATIONS

eds EGMSC EMR ENEL ERGEG ESCJ EU EU ETS EUR FIT Act

GHG GW GWh GWPH i.e. IoT JEPX JI JPY ktoe kV kW kWh LNG METI MITI Mtoe N2 O NDC NEDO NOx OCCTO OECD Offshore Act

Promotion Act

R&D

editors Electricity and Gas Market Surveillance Commission Electricity Market Regulation Ente Nazionale per l’Energia Elettrica European Regulators’ Group for Electricity and Gas Electric Power System Council of Japan European Union European Union Emission Trading System euro (e) Act on Special Measures Concerning Procurement of Electricity from Renewable Energy Sources by Electricity Companies (2011) greenhouse gas gigawatt gigawatt-Hour Global Warming Prevention Headquarters id est [that is] Internet of Things Japan Electric Power Exchange Joint Implementation Japanese yen (¥) kilotonne of oil equivalent kilovolt kilowatt kilowatt-hour liquefied natural gas Ministry of Economy, Trade and Industry Ministry of International Trade and Industry Megatonne of Oil Equivalent nitrous oxide Nationally Determined Contribution New Energy Development Organization nitrogen oxides Organization for Cross-Regional Coordination of Transmission Operators Organisation for Economic Co-operation and Development Act on Promoting Utilisation of Sea Areas for the Development of Marine Renewable Energy Power Generation Facilities (2018) Act on Promoting Generation of Electricity from Renewable Energy Sources Harmonised with Sound Development of Agriculture, Forestry and Fisheries (2013) Research and Development

ABBREVIATIONS

RED I RED II REI RPS Act RWC SAVE TEPCO TPA TSO UNFCCC US USD vol. VPP W

xxiii

Renewable Directive I (2009) Renewable Directive II (2018) Renewable Energy Institute Act on Special Measures Concerning the Use of New Energy by Electricity Companies (2002) Renewable-Waste-Cogeneration Specific Actions for Vigorous Energy Efficiency) Programme Tokyo Electric Power Company Third-Party Access Transmission System Operator United Nations Framework Convention on Climate Change (1992) United States United States dollar ($) volume Virtual Power Plants watt

List of Tables

Table 2.1 Table 2.2 Table 4.1 Table 4.2 Table 4.3

Opening of the electricity market in EU-15 by the early 2000s (Commission, 2000, p. 13) The 1990–2000s electricity sector reform in the EU and Japan (see Ogasawara, 2005, p. 4) The 1990s renewable energy targets in the selected EU-15 Member States (Commission, 1996, pp. 8–9) Shares of RES in the EU-15 in the 1990s (Commission, 1996, p. 12) The 2005 shares and 2020 national overall targets of RES in the EU-27 (RED I, 2009)

26 53 132 133 135

xxv

CHAPTER 1

Introduction

Energy transition is a process. Nothing occurs right away. Energy transition takes time. It necessitates supplies and resources. It requires actors, will, decisions, efforts, and actions. Failures may occur, but if lessons are learnt, success may be on the horizon. To some extent, it also requires luck and the right timing. It necessitates the use of analysis, data, statistics, and information. It must be founded on dialogue and mutual understanding, with no one left behind. As a result, justice is required. This lays the groundwork for regulatory models and legislative solutions to help achieve the energy transition. This framework also applies to the electricity sector, which is a major aspect of the energy industry and is often used as a synonym for energy in general. With the electrification of transportation, not only vehicles, but also shipping and aviation, and the increased use of renewable energy sources (RES), this connection between electricity and energy is considerably closer to being a reality in the 2020s than it was in the past. This offers the scope of the analysis conducted in this study, which aims to examine the laws and policies governing European and Japanese electricity sectors. The book’s key aim is to compare the European Union’s (EU) regulatory approach with the existing model in Japan. Based on this,

© The Author(s), under exclusive license to Springer Nature Switzerland AG 2022 M. M. Sokołowski, Energy Transition of the Electricity Sectors in the European Union and Japan, https://doi.org/10.1007/978-3-030-98896-8_1

1

2

M. M. SOKOŁOWSKI

the offered study delves into the four elements of energy transition: electricity market, with proposed action to liberalise it, action on reducing emission in the electricity sector, policies on renewable energy sources, and the agenda to enhance energy efficiency. Looking back over the history of European–Japanese interactions, we can see various points of contact. The potential of Japanese policies and companies in renewable energy technologies (also taking into account the competition with the European industry) has been noticed by the EU in the 1990s (see Commission, 1996, p. 9)1 ; it has been combined with calls to take it under surveillance due to competition reasons (see European Parliament, 1993). Over the years, however, the competition has changed into cooperation. In 2018, the EU and Japan signed an Economic Partnership Agreement, which, along with a broader Strategic Partnership Agreement, created the cornerstone of a stronger partnership between the two when it came into force in 2019. Under this framework, energy and climate action finds mutual understanding. As stated in the Strategic Partnership Agreement between the EU and Japan (2018), this concerns the promotion of industrial cooperation to improve the competitiveness of European and Japanese enterprises by enhancing the exchange of views and best practices on their respective industrial policies in several areas. These include: innovation, climate change, or energy efficiency,2 and endeavours ‘to enhance cooperation and, where appropriate, close coordination in international organisations and fora, in the area of energy, including energy security, global energy trade and investment, the functioning of global energy markets, energy efficiency and energy-related technologies’.3 Furthermore, this framework sets a shared stance on climate change, recognised by Japan and the EU as a priority, and confirmed in the following legal way: Article 24 Climate change

1. The Parties, recognising the need for an urgent, deep and sustained reduction in global emissions of greenhouse gases so as to hold the increase in global average temperature to well below 2 °C above pre-industrial levels and to pursue efforts to limit the temperature increase to 1.5 °C above pre-industrial levels, will take the

1

INTRODUCTION

3

lead in combating climate change and the adverse effects thereof, including through domestic and international actions to reduce anthropogenic greenhouse gas emissions. The Parties shall cooperate, where appropriate, under the United Nations Framework Convention on Climate Change, done at New York on 9 May 1992 to achieve the objective of that Convention, in implementing the Paris Agreement, done at Paris on 12 December 2015, and to strengthen the multilateral legal frameworks. They shall also seek to enhance cooperation in other relevant international fora. 2. The Parties shall, with a view to promoting sustainable development, also seek cooperation by enhancing the exchange of information and best practices and, where appropriate, promoting coordination of policies, on issues of mutual interest in the area of climate change, including issues such as: (a) mitigation of climate change through various measures such as research and development of low-carbon technology, marketbased mechanisms and reduction of short-lived climate pollutants; (b) adaptation to the adverse effects of climate change; and (c) assistance to third countries. This approach has bolstered collaborative activities, including knowledge transfer under these agreements. As the EU–Japan Centre for Industrial Cooperation (2022) emphasises, entities from Europe and Japan are developing and implementing a growing number of partnerships in the field of renewable energy, clean hydrogen, energy efficiency, sustainable cities, and low-carbon mobility, bringing together the best of European and Japanese technologies, expertise, and know-how. These projects include newly formed start-ups, small and medium-sized businesses expanding their international footprint, and long-established major corporations, with examples ranging from floating solar PV plants, ultracapacitors for high capacity energy storage devices, hydrogen taxis, and offshore wind farms (see EU–Japan Centre for Industrial Cooperation, 2022).

1.1

Significance

In this regard, the study’s research purpose is to evaluate and compare the regulatory frameworks for achieving energy transitions in Japan and

4

M. M. SOKOŁOWSKI

the EU. The primary goal of the research is to identify the regulatory models that the EU and Japan have used to transform the power industry. The study’s secondary purpose is to assess how much the Japanese energy transition model varies from the European regulatory models in order to determine the models’ convergence. Japan and the EU were chosen for the analysis because they both have extensive experience in reforming the energy sector under different circumstances (world energy crisis of the 1970s, market liberalisation of the 1990s–2000s, the Fukushima 2011 disaster). This experience, when combined with their energy plans and climate ambitions, including the 2050 carbon neutrality, could be used to highlight the needs of an energy transition of important world economies. Furthermore, both the EU and Japan intend to use the COVID-19 crisis to boost their energy transitions. In this context, the significance of the research stems from the importance of energy transition. Climate action, along with energy policies, has become a major driver of modern economies and societies worldwide (see Sokołowski & Heffron, 2022), powered by the need to face climate emergency and the COVID-19 pandemic with the help of green investments as part of the recovery action and energy transition to achieve carbon neutrality by 2050. It has been approved in the EU and Japan and has become a key, long-term goal of the transition to reach sustainability. Many findings demonstrate this is the most critical challenge that the world, with Japan as one of its significant players, must face (see Sokołowski & Kurokawa, 2022). Climate strikes led by young people, global legal settlements under the 2015 Paris Agreement framework, a continued discussion led by the UN during subsequent Conferences of the Parties (COP), together with carbon neutrality announced worldwide—all provide clear proof of this move. For instance, under this international regime, the EU’s nationally determined contribution (NDC) was established under the wider 2030 climate and energy framework for emissions, renewables, and energy efficiency, respectively. Moreover, in December 2019, in response to climate protests and calls to declare a state of emergency, the Commission (2019) announced an initial roadmap of key policies and measures required to implement the European Green Deal. The Deal, which serves as a growth strategy, sets out an ambitious EU objective of ‘a fair and prosperous society, with a modern, resource-efficient and competitive economy where there are no net emissions of greenhouse gases in 2050

1

INTRODUCTION

5

and where economic growth is decoupled from resource use’. Furthermore, in March 2020, a proposal of a regulation on the Commission (2020), aimed at creating the basis for achieving EU climate neutrality, was presented. Japan, too, provides evidence of the significance of this move. In June 2019, the country adopted its Long-Term Strategy under the Paris Agreement (2019), bringing a vision of a ‘decarbonised society’ that Japan could achieve in the second half of this century (or earlier) by reducing greenhouse gas emissions by 80%. In October 2020, the then Prime Minister Suga, the head of the new post-Abe cabinet, announced that Japan will aim to reduce greenhouse gas emissions to net zero by 2050 leading to a carbon–neutral and decarbonised society. However, conducting energy transformation and reaching climate neutrality requires adjusting one’s ‘mindset to a paradigm shift that proactive climate change measures bring transformation of industrial structures as well as our economy and society, leading to dynamic economic growth’, as highlighted by former Prime Minister Suga (2020). In this context, the research aims to assist Japan in conducting a proactive energy transition with the help of a climate-energy policy based on best available scenarios. These would provide a variety of regulatory tools to support the changing structures, boost the economy, and persuade society that carbon neutrality is a chance that can lead to vibrant development. The European benchmarks could help in this regard; however, a thorough analysis and assessment is required. This proposal offers the comparison between the Japanese and European approaches to carbon neutrality addressing the instruments of public law regulation of the energy transition brought about by EU and Japanese policy documents and laws, particularly those covering the following areas: reduction of GHG emissions, promotion of renewable energy sources (RES), enhancing energy efficiency. The proposed European benchmark is based on the idea that combating climate change is a critical long-term policy aim for the EU, with the energy sector’s impact on climate recognised as a key element for a long time and energy itself as a ‘key aspect in achieving sustainable development’ (Commission, 1997, p. 3). First, the Community officially recognised the need for climate legislation in the late 1980s; earlier, beginning in the 1970s, it took action against pollution from industrial installations (Sokołowski, 2018, p. 261). Furthermore, various actions in these fields were carried out in the 1990s, establishing the first steps towards the European climate policy (Massai, 2012, p. 50). In 1993, the first legislation on climate change was passed (Council, 1993), and the

6

M. M. SOKOŁOWSKI

monitoring of CO2 and other greenhouse gas emissions began. The international regime in which the EU has been actively engaging—the United Nations Framework Convention on Climate Change (1992), followed by the Kyoto Protocol (1997)—has further boosted this move. Despite its rejection by the USA in 2001 (see Hovi et al., 2012), the Kyoto Protocol motivated the EU to continue on its path of improving European climate policy and moving it forward at the international level. Its entry into force in 2005 boosted the European climate agenda, resulting in the formation of the fundamental assumptions of EU climate action only two years later. This introduced the three key pillars: reduction of GHG emissions, growth of RES, and improvement of energy efficiency, all with the panEuropean percentage goals of ‘3 × 20%’ for the year 2020 (Sokołowski, 2020b, p. 99). This proposal went through the legislative process and was passed between 2008 and 2009, becoming known as the Climate ˙ and Energy Package (see Zmijewski & Sokołowski, 2010). In 2014, the 2020 goals were revised to increase the reduction of emissions to at least 40% and the growth of renewable energy and improvement of energy efficiency to at least 27% (García-Álvarez et al., 2016, p. 1376). In 2018, the last two objectives were increased once more. This was accomplished by enacting new renewable energy and energy efficiency directives that established at least a 32% share of the EU’s gross final consumption for renewable energy sources and a 32.5% reduction in EU energy consumption through energy efficiency improvements by 2030 (Sokołowski, 2020b, p. 100). Nonetheless, this does not mean that Japan has achieved no significant goals which could serve as a model for the EU in terms of climate action, such as reducing GHG emissions, promoting RES, and improving energy efficiency. Japan has established several initiatives in this field since the 1970s. The Sunshine Project was launched in 1974, with the goal of conducting research and development in areas such as solar, geothermal, and hydrogen energy (Takahashi, 1989). During the 1970s energy crisis, solar energy received a lot of attention as the new alternative to traditional fossil fuels (Hamakawa, 1979). Apart from encouraging the growth of solar cell production, the Sunshine Project laid the groundwork for future public and private efforts to develop new energy technologies (Chowdhury et al., 2014). In 1978, another initiative was launched; this was the Moonlight Project, established to steer the development of energy conservation technologies in Japan (Tatsuta, 1996). To facilitate Japan’s

1

INTRODUCTION

7

renewable energy potential, in the 1990s the Sunshine Project evolved into the New Sunshine Program (Watanabe, 1995, p. 238), with the objective of developing innovative technology including the development of low-cost PV technologies (Tatsuta, 1996). As a result of these incentives, many demonstration projects and basic research and development work were financed in Japan during the 1980s and 1990s, increasing the market for solar cells and allowing for ongoing PV advances. This made Japan a world leader in solar energy until the 2000s when solar subsidies were reduced and then discontinued (Chowdhury et al., 2014, pp. 286, 289). To address this, the national goals of increasing PV capacity by 2020 and 2040 were announced in 2009, and were shortly followed by a feed-in tariff for electricity generated by solar installations (Chowdhury et al., 2014, p. 289). In this light, the presented study represents a collaborative approach based on the adoption of best available models within the framework of climate-energy policy. As a result, it can contribute to improving the efficiency of Japan’s energy transition while helping to avoid policy failures that have previously occurred in the EU (see Sokołowski & Heffron, 2022; de Almeida et al., 2022; Sokołowski & Bouzarovski, 2022). Furthermore, the proposed model can promote Japanese regulatory solutions while also facilitating their implementation in the EU. Under such a win–win scenario, the EU–Japan climate-energy convergence can be achieved. Such convergence could also be seen on a regional and even global scale. For many years, the EU and Japan have been key reference points, also in terms of energy and climate, for other countries and regions (see Compston & Bailey, 2016; Keck, 2008; Ueta & Remacle, 2005), including for instance, the USA (see Duffield, 2015), China (see Iglesias, 2015; Sokołowski, 2016), India (see Rattani, 2019; Sokołowski, 2019b), Australia (see Sokołowski, 2019a), as well as Southeast Asia (see Crowley & Nakamura, 2018) and Africa (see Kato, 2017; Scheipers & Sicurelli, 2008). This offers a universal framework, stemming from the global consensus, with the Sustainable Development Goals (SDGs) adopted by the United Nations (2015) playing a pivotal role. One of them is SDG7 which aims to ‘[e]nsure access to affordable, reliable, sustainable and modern energy for all’, impacting energy services and energy mixes to make them more energy-efficient, renewable, and clean by 2030 (see Parra et al., 2020). Furthermore, with the adoption and entry into force of the Paris Agreement (2015), SGDs have now been addressed in a

8

M. M. SOKOŁOWSKI

legally binding, multi-national (191 parties) climate treaty (Blau, 2017, pp. 91–93; see Kinley et al., 2021; Olsen et al., 2019).

1.2

Regulatory Background

‘[T]his year energy shortages caused rolling blackouts that shut down factories and stranded people in elevators. A half-baked foray into deregulation caused the state to pay unbudgeted billions of dollars to energy producers to wheel some juice its way. [One] blamed the shortage on outof-state corporate “pirates”’ (Locke, 2001). ‘No one likes to raise rates … so I think it’s probably easier to find scapegoats than it is to really face that challenge … We are doing the right thing. We are working to create open, competitive, fair markets, and in open, competitive fair markets, prices are lower and customers get better service … We are the good guys. We are on the side of angels’ (Skilling, 2001). The juxtaposition of pirates and angels paints an image of the early 2000s, when California faced a serious energy crisis (Sokołowski, 2020a, p. 167). ‘Pirates’ is only one of numerous epithets used by Grey Davis, the 37th Governor of California (1999–2003), to disparage US energy businesses, particularly the infamous Enron.4 In contrast, the quote on angels is a famous statement by Jeffrey Skilling, the ignoble ex-chief executive of Enron Corporation (Sokołowski, 2020a, p. 167). The events cited above (see Sokołowski, 2020a) outline the context in which considerations on the regulation in the energy sector (electricity sector—when this study refers to energy regulation, this means electricity in particular) in the EU and Japan are presented in this book. These US experiences have also served as a benchmark for actions taken in the field of electricity markets in the EU and Japan, bringing regulatory approaches into action, and offering lessons on how not to conduct energy market reforms. And these were important lessons, conducted under comprehensive actions. For instance, the pro-competition moves in the electricity sector made by some European countries (e.g. the UK, the Netherlands) in their national energy industries would not have led to a common approach to energy market reform without the necessity to implement the European legislation, which appeared as binding legal acts in the 1990s (see Sokołowski, 2016, pp. 99–100; 2020b, pp. 57–59). As a result, all Member States started to alter the regulations in the electricity sector in order to remove monopolies and enable

1

INTRODUCTION

9

various suppliers to compete for customers (Cameron, 2007, pp. 7– 10; Sokołowski, 2016, p. 41). The above-mentioned legislation on the European energy industry was brought about by the subsequent legislative packages: First (1996/1998), Second (2003), and Third (2009) Energy Package (Liberalisation Packages) together with zero-phase which preceded them in the early 1990s (Sokołowski, 2020b, pp. 57–58), supplemented by the Climate Energy Package of 2009, and finally the Clean Energy Package (2018/2019). This way, the EU’s legal practice of shaping the energy sector and regulation, takes the form of legislative packages—the legal measure of achieving the EU’s policy agenda covers a broad range of regulation (Sokołowski, 2016, p. 4). In Japan, wide energy policy actions are also implemented to reform energy sector, divided into phases with acceleration of the reforms after March 2011 (see Sokołowski, 2015). Then, after the disaster at the Fukushima Daiichi Nuclear Power Plant, a new regulatory attitude towards the nuclear industry was adopted. Nevertheless, the understanding of regulation varies among languages, and legal cultures (Anglo-American vs continental European). It also differs in English itself where regulation means both a concrete legal act—like the EU Regulation or a regulation adopted by a relevant authority—and a wide action conducted by a government and/or its entities to steer, adjust, or influence a process or an issue, etc. (see Sokołowski, 2018, p. 592). When analysing regulation, one may find both its narrow and broad sense (Sokołowski, 2020a, p. 173). In the narrow approach, regulation could be seen as a set of rules adopted under a binding legislation, whereas the broad approach could be defined by any mechanism of social control and influence (Barton, 2006, p. 12). Moreover, regulation in the narrow sense could also be defined by a reference to an activity of the regulatory authorities where the ‘regulation is [a] regulator’ (Sokołowski, 2016, p. 87), established to ‘protect the public interest because the market cannot’ (Dugger, 1989, p. 32). Consequently, the definitions of regulation in its narrow sense highlight the state’s action to establish, monitor, and enforce legal rules aimed at influencing socially valuable behaviour which may have adverse side-effects, while the definitions of regulation in the broad sense concern all forms of social control (Morgan & Yeung, 2007, pp. 3–4). Apart from regulation being defined as an effort to alter someone’s behaviour and adjust it to the defined standards or purpose (see Black, 2002) it can also be described as a way to correct market failures (Prosser,

10

M. M. SOKOŁOWSKI

2010, p. 1). Regardless of the point of reference—be it society (social regulation of health and safety, environmental protection, and consumer protection) or economy (economic regulation to provide a substitute for competition), regulation derives from market failures (see Ogus, 1994, pp. 4–5). Still, in all the discussed aspects of regulation, the will or need to calibrate a social or economic issue to satisfy the policy needs has been a driving force (Sokołowski, 2020a, p. 174). The state’s (government’s) powers and abilities are anchored in the adopted socio-economic system and the regulatory regime/s applied (see Sokołowski, 2016, p. 52). These have different spectra, with direct and indirect control (see Sappington & Stiglitz, 1987, pp. 3–4) holding the power to make and set the rules, or being established to ensure fair and effective competition (Sokołowski, 2020a, p. 174; Thatcher, 2002, pp. 869–870).

1.3

Scope of Analysis

In the outlined context, this book presents a discussion on a regulatory model for the transition of the Japanese and European electricity sectors, reviews their former and current state, and assesses policies and laws applicable thereof. With international frameworks such as the Paris Agreement placing the utmost importance on sustainability (2015), this approach covers a wide environmental agenda and climate action. In this light, the proposed study addresses the issue on how energy transition could be supported by the application of regulatory tools and discusses the kind of conditions which would allow it to happen in the first place. The research covers the public approach to these matters along with regulatory aspects. It presents and juxtaposes primary documents and laws relevant to the analysis of the electricity sector in the EU and Japan concerning its environmental elements—including climate action. This way, the research addresses the issue of making the electricity sector of leading economies—the EU and Japan—liberalised, emissionfree, renewable, and energy-efficient through a regulatory model. This model is based on transparency of costs, service quality, and comparative performance of energy companies that care about the environment and climate action. In the model, the energy regulators are granted powers and given responsibilities for monitoring the energy supply–demand balance and operations of system operators, licensing new power plants,

1

INTRODUCTION

11

fixing or approving tariffs, issuing binding decisions and imposing penalties on electricity companies, establishing standards, providing consumer information, etc. (see Joskow, 2008, p. 13). To discuss these matters in relation to the European and Japanese laws and policies on electricity in their energy transition towards 2050, and to evaluate the regulatory approach of the Community, then the EU and Japan towards energy and climate policies, the book delves into the four pillars of the transition: market reform, reduction of emissions, promotion of renewables, and enhancing energy efficiency. Each chapter shows the timing of actions conducted in both Europe and Japan, and analyse the players and stakeholders of the realised agenda, as well as the technologies involved in the energy transition. These correspond to the policy goals and priorities that propelled the energy transition in the EU and Japan. Issues such as electricity sector liberalisation and regulation are discussed over the four main stages of the electricity sector changes in Europe, with the four Energy Packages adopted: the first in the 1990s, the second and third in the 2000s, and the fourth stage brought about by the Clean Energy Package in the 2010s. This approach is contrasted with the changes implemented in Japan as part of the country’s five key steps; the analysis, however, is broken into three components. It is followed by an overview of the policies, regulations, and regulatory measures in use, and the EU and Japan’s positions on electricity sector liberalisation as part of the energy transition, taking into consideration events such as the California crisis in the 2000s and the earthquake and tsunami in Japan in 2011. The important participants of the electricity sector in the EU and Japan are also mentioned, including MITI and its successor METI, ACER, ERGEG, and OCCTO. The book’s scope also includes such aspects as policy developments under the frameworks of the EU Climate-Energy Package and Clean Energy Package, Japanese Long-Term Strategy Under the Paris Agreement, European Green Deal, and Japanese 2050 Carbon Neutrality. The book delves into the history of regulatory action on emission reductions to make the power industry more environmentally friendly, sustainable, and clean, with less emissions under several frameworks: international, regional, and national. Furthermore, the book addresses specific issues such as the frameworks provided to RWC auto-producers (Renewable-Waste-Cogeneration), programmes provided for the development of renewable technologies in Europe and Japan (Joule-Thermie, Altener, Sunshine Project, New Sunshine Program), as well as relevant

12

M. M. SOKOŁOWSKI

legislation adopted over the years at the European level (three renewable directives) and laws established in Japan to promote RES. Moreover, this study discusses energy prosumers, active consumers, and energy communities, offshore wind farm construction, and policy changes under the EU and Japan’s 2050 objectives. By analysing the changes that have occurred in Europe and Japan under previous and current regulatory frameworks on energy efficiency, the book discusses regulatory tools offered under the framework of the three European directives relevant to energy efficiency, provides insight into the Joule, Thermie, and SAVE programmes; it also analyses Japanese actions under the Moonlight Project and the 1979 Act on Rationalisation of Energy Use, as well as recent laws and policies. A separate space is provided for combined heat and power (CHP), a technology recognised as a critical component of energy transition in European and Japanese climate and energy policy. For these purposes, some proposed electricity sector models, addressing the regulatory scenarios of regulation as usual, total deregulation, and total regulation are presented, with the convergence of the European and Japanese regulatory models taking into account the mutual influences of the EU on Japan and vice versa. This relates to the course the measures carried out in Europe and Japan have taken. In this context, the following questions may be posed here. What are the main regulatory tendencies in the electricity sector? In terms of energy and climate policy, what factors have affected them? What impact has the law had on the EU and Japanese electricity sectors? What are the interrelationships between the legislation and the power sector, and the associated policies, plans, and programmes? What kinds of market processes may be seen? How can regulatory mechanisms be used to effectively encourage renewable energy sources, reduce greenhouse gas emissions, and improve energy efficiency? These issues may inspire those interested in the EU and Japan research to think more deeply about the regulatory regimes and solution interpenetration in the changing electricity sector driven by the 2050 vision. In this context, the book aims to answer the concerns regarding the future regulatory tools which Japan and the EU may employ, as well as the issues that may arise during the implementation phase. In this light, the book offers an examination of the EU and Japan’s energy and climate policies as well as laws in terms of the electricity market and climate action, including emissions reduction, renewables, and, last but not least, energy efficiency.

1

1.4

INTRODUCTION

13

Methods Applied

The points of reference for this book are Japanese and European laws and policies correlated with the energy transition of the electricity sector. The EU is treated as a whole, as outlined in the 2018 Economic Partnership Agreement and 2019 Strategic Partnership Agreement, which serve as the cornerstone of a strengthened relationship between the EU and Japan5 ; however, this does not preclude individual Member States from being addressed when necessary. This is complemented by cross-cutting policies, both pan-European and national, that are impacted by the international policy and legal environment (like the Kyoto Protocol, or the Paris Agreement). The regulatory issues under consideration are grouped into four categories: market, emissions, renewables, and energy efficiency. The book attempts to retain the timeline of the development of regulatory instruments throughout its history, preserving the relationship: past– present–future, while addressing them. In this regard, it describes and evaluates the early policy approach, presenting a multitude of post-war laws, policies, programmes, measures, regulatory tools, and so on, with the acceleration of actions in the 1970s and 1980s, and the beginning of the core reform in the 1990s, with subsequent moves in the 2000s and 2010s. A significant point in the chronology is March 2011 and the events that followed the earthquake and tsunami in Japan. The analysed legislation is accompanied by the evaluation of many strategic documents, which indirectly or directly influenced the European law-making process (e.g. COM, SWD documents) as well as those elaborated by MITI/METI. Other policy and working papers were also evaluated: those developed by the EU and the Japanese government, as well as expert institutions based in Europe and Japan. Furthermore, the book’s arguments are grounded in the literature on energy and environmental law, as well as public law regulation, including my own earlier work on these topics. My research on public law regulation in the energy sector, which were was previously discussed in the section Regulatory background, is given specific attention here. Last but not least, when analysing Japanese legislation, translations into English were done in order to provide non-Japanese speakers with access to sources. Where needed, consultations with Japanese energy law experts were conducted. In terms of the research approach, the following methods are employed in the book: dogmatic and comparative, empirical and interdisciplinary,

14

M. M. SOKOŁOWSKI

and historical. The legislation on the electricity sector, along with the tools and measures established in the scope of public law regulation or contractual ties between players in the energy market, are examined using dogmatic and comparative perspectives. Furthermore, this technique allows one to emphasise the substance of legislation (as opposed to its form, for example, when a legal interpretation is required) while analysing the legal situation in the power sector. This broader viewpoint necessitates the use of a comparative technique to investigate and compare the legislation established in the EU and Japan. Moreover, the empirical and interdisciplinary approaches allow for the demonstration and evaluation of the legal framework for the electricity sector in the following manner: the empirical method incorporates important case studies, while the interdisciplinary approach is required to explain the technical aspects of the power industry. Nonetheless, because the book is mostly regulatory in character, this is an auxiliary technique— essential for a deeper understanding of electricity-related laws, policies, and measures. Finally, the historical method would be used alongside these techniques to depict the evolution of the power industry in the EU and Japan as a process driven by a nexus of laws and regulatory measures. It would also be applied to legislation and policies to follow the course of the proposed analysis.

1.5

Structure of the Book

Apart from this chapter, which provides some introductory remarks, the book consists of five other parts. Chapter 2 provides an outline of how the electricity sector in Japan and the EU has evolved through time. The presented discourse focuses on former and present market reform processes in the EU and Japan, including the adoption of market-oriented institutions, such as Third-Party Access (TPA), and unbundling, as well as regulatory authorities and system operators’ roles. Chapter 2 also looks at the status of the European and Japanese electricity sectors, referring to various stages of power market reform in the Community, then the EU, and finally Japan. Chapter 3 examines European and Japanese initiatives to reduce emissions. This chapter looks at early measures to reduce NOx and SO2 emissions from industry, as well as subsequent legislative agenda for CO2 reduction. Chapter 3 also discusses a variety of different regulatory measures that have been implemented in Europe and Japan throughout

1

INTRODUCTION

15

the years. This concerns, inter alia, emission licences, standards, emission trading and allowances, and taxes which are among the measures used in the EU and Japan to restrict the negative environmental and climate consequences of electricity generation. Chapter 4 looks at the history and current situation of renewable energy sources in the European Union and Japan, concentrating on the policies, programmes, and plans which have fuelled their expansion. This chapter also examines the incentives and regulatory mechanisms utilised to boost the contribution of renewables in the energy mixes of EU Member States and Japan. Renewable energy objectives, incentive programmes (quota systems, feed-in tariffs, auctions), grid connection, and regulatory and administrative impediments are all addressed. Chapter 5 focuses on public incentives and legislative actions to increase energy efficiency. The chapter discusses the efforts to improve energy usage by industry and individuals, beginning with energy conservation and rationalisation as a strategy to ease energy shortages in the 1970s and on through the current views towards optimising energy production and consumption. In this context, the chapter evaluates the EU and Japan’s pro-efficiency activities, targeted programmes, certification systems, and energy efficiency objectives, all of which are controlled by special dedicated legislation. Finally, Chapter 6 summarises the content investigated in this research regarding the European and Japanese electricity laws and policies in the energy transitions into the 2050 vision. The chapter compares the initial conditions for the energy transition and presents the correlations of the regulatory measures provided by the EU and Japan over the years of public action in the electricity sector. In this regard, the chapter covers the momentum of the activities carried out, as well as the nature of the executed actions, including the participants and stakeholders of the realised agenda, and the technologies engaged in the energy transition. Following these topics are the policy goals and priorities that guided the EU and Japan’s energy transition, and established models of the electricity sector regulation by addressing the considered regulatory scenarios with regulation as usual, total deregulation, and total regulation, with the convergence of the European and Japanese regulatory models taking into account the mutual bilateral relations (and their influence) between the EU on Japan. The conclusion of the book also suggests areas in which the EU and Japan’s climate and energy partnership should be strengthened.

16

M. M. SOKOŁOWSKI

These are followed by the final observations on future activities based on past experiences in the EU and Japan relating to the transformation of the electricity sector, regulatory models, and legislative solutions.

Notes 1. As the Commission (1996, p. 10) reported: Japan has, in spite of the limited technical potential for renewable energy sources, set an ambitious target of more than doubling the contribution from renewable energy sources from the current level of 1.2% (1994) to 3% of total energy demand by 2010. R&D is supported in the framework of the New Sunshine Programme. In addition a range of financial incentives, including subsidies, tax credits and low interest loans are provided. Japan has in particular concentrated on the development of photovoltaic applications, the main objective being to stimulate market expansion and thereby benefit from large scale production. To that end a 70,000 roof-top programme has been set up. In addition, the Japanese Government has actively stimulated industry to set up manufacturing operations of PV cells in nearby countries with low wage cost, which, together with a significant R&D effort, has made Japan a world leader in this technology. 2. See Article 17 of the Council (2018). 3. Article 26 of the Council (2018). 4. All of these, in Davis’ opinion, were ‘deserved adjectives’, because companies have been ‘threatening the economic well-being of the flagship of America’s economy, and … doing it by selling a very pedestrian product – electrons – without having added one iota to the quality of the product or the quality of service’ (Sokołowski, 2020a, p. 167). 5. Council (2018) was signed ‘between the European Union and its Member States, of the one part, and Japan, of the other part’.

References Barton, B. (2006). The theoretical context of regulation. In B. Barton, A. Lucas, L. Barrera-Hernández, & A. Rønne (Eds.), Regulating energy and natural resources (pp. 11–33). Oxford University Press. Black, J. (2002). Critical reflections on regulation. http://eprints.lse.ac.uk/ 35985/1/Disspaper4-1.pdf. Accessed 21 Nov 2021.

1

INTRODUCTION

17

Blau, J. (2017). The context of Paris: The MDGs and the SDGs. In The Paris agreement (pp. 85–94). Palgrave Macmillan. Cameron, P. D. (2007). Competition in energy markets: Law and regulation in the European Union (2nd ed.). Oxford University Press. Chowdhury, S., et al. (2014). Importance of policy for energy system transformation: Diffusion of PV technology in Japan and Germany. Energy Policy, 68, 285–293. Commission. (1996, November 20). Communication from the commission energy for the future: Renewable sources of energy green paper for a community strategy. COM(96) 576 final. Commission. (1997, April 23). Communication from the Commission: An overall view of energy policy and actions. COM(97) 167 final. Commission. (2019, December 11). Communication from the Commission to the European Parliament, the European Council, the Council, the European Economic and Social Committee and the Committee of the Regions: The European Green Deal. COM(2019) 640 final. https://eur-lex.europa.eu/legal-con tent/EN/TXT/?uri=COM%3A2019%3A640%3AFIN Commission. (2020, March 4). Proposal for a regulation of the European Parliament and of the Council establishing the framework for achieving climate neutrality and amending regulation (EU) 2018/1999 (European Climate Law). COM(2020) 80 final. https://eur-lex.europa.eu/legal-content/EN/ TXT/?uri=CELEX:52020PC0080 Compston, H., & Bailey, I. (2016). Climate policy strength compared: China, the US, the EU, India, Russia, and Japan. Climate Policy, 16(2), 145–164. Council. (2018). Council Decision (EU) 2018/1197 of 26 June 2018 on the signing, on behalf of the European Union, and provisional application of the Strategic Partnership Agreement between the European Union and its Member States, of the one part, and Japan, of the other part. Council. (1993). Council Decision (EEC) 93/389 of 24 June 1993 for a monitoring mechanism of Community CO2 and other greenhouse gas emissions. OJ L167/31. Crowley, K., & Nakamura, A. (2018). Defining regional climate leadership: Learning from comparative analysis in the Asia Pacific. Journal of Comparative Policy Analysis: Research and Practice, 20(4), 387–403. de Almeida, L., Esposito, F., & van Zeben, J. (2022). When indicators fail electricity policies: Pitfalls of the EU’s retail energy market Barrier Index. Energy Policy, 165, 112892. Duffield, J. S. (2015). Fuels paradise: Seeking energy security in Europe, Japan, and the United States. John Hopkins University Press. Dugger, W. M. (1989). Commentary to K. Nowotny, ‘The economics of public utility regulation: An overview’. In K. Nowotny, D. B. Smith, & H. M. Trebing (Eds.), Public utility regulation (pp. 28–34). Kluwer Academic Publisher.

18

M. M. SOKOŁOWSKI

EU-Japan Centre for Industrial Cooperation. (2021). Case studies: EU-Japan industrial cooperation for decarbonization. https://www.eu-japan.eu/climate. Accessed 24 Nov 2021. European Parliament. (1993, January 19). Resolution on the promotion of renewable forms of energy. A3-0405/92. García-Álvarez, M. T., Moreno, B., & Soares, I. (2016). Analyzing the environmental and resource pressures from European energy activity: A comparative study of EU member states. Energy, 115, 1375–1384. Government of Japan. (2019). The Long-term strategy under the Paris agreement. Tokyo, 11(7), 2019. Hamakawa, Y. (1979). Present status of solar photovoltaic R&D projects in Japan. Surface Science, 86, 444–461. Hovi, J., Sprinz, D. F., & Bang, G. (2012). Why the United States did not become a party to the Kyoto Protocol: German, Norwegian, and US perspectives. European Journal of International Relations, 18(1), 129–150. Iglesias, J. C. (2015). The EU as a security player in Asia: Can the EU-China strategic partnership be compatible with the EU-Japan strategic partnership? In H. Su (Ed.), Asian countries’ strategies towards the European Union in an inter-regionalist context (pp. 229–266). National Taiwan University Press. Joskow, P. L. (2008). Lessons learned from electricity market liberalization. The Energy Journal, 29(Special Issue# 2). Kato, H. (2017). Japan and Africa: A historical review of interaction and future prospects. Asia-Pacific Review, 24(1), 95–115. Keck, J. (2008). EU—Japan “Structured cooperation” and energy efficiency for Asia. Asia Europe Journal, 6(2), 205–216. Kinley, R., et al. (2021). Beyond good intentions, to urgent action: Former UNFCCC leaders take stock of thirty years of international climate change negotiations. Climate Policy, 21(5), 593–603. Kyoto Protocol to the United Nations Framework Convention on Climate Change adopted on 1 December 1997, entered into force on 16 February 2005. (1997). Locke, L. A. (2001). Power’s on—But the cost! https://edition.cnn.com/ALL POLITICS/time/2001/12/31/energy.html. Accessed 21 Nov 2021. Massai, L. (2012). European Climate and Clean Energy Law and Policy. Earthscan. Morgan, B., & Yeung, K. (2007). An introduction to law and regulation: Text and materials. Cambridge University Press. Ogus, A. I. (1994). Regulation: Legal form and economic theory. Clarendon. Olsen, K. H., et al. (2019). Sustainability labelling as a tool for reporting the sustainable development impacts of climate actions relevant to Article 6 of the Paris Agreement. International Environmental Agreements: Politics, Law and Economics, 19(2), 225–251.

1

INTRODUCTION

19

Paris Agreement to the United Nations Framework Convention on Climate Change. (2015). Adopted on 12 December 2015, entered into force on 4 November 2016. Parra, C., Kirschke, J., & Ali, S. H. (2020). Ensure access to affordable, reliable, sustainable and modern energy for all. In C. Parra, B. Lewis, & S. H. Ali (Eds.), Mining, Materials, and the Sustainable Development Goals (SDGs) (pp. 61–68). CRC Press. Prosser, T. (2010). The regulatory enterprise: Government, regulation, and legitimacy. Oxford University Press. Rattani, V. (2019). Exploring the EU—India leadership dynamic on climate change. In G. Sachdeva (Ed.), Challenges in Europe (pp. 181–196). Palgrave Macmillan. Resolution adopted by the General Assembly on 25 September 2015. Transforming our world: the 2030 Agenda for Sustainable Development, A/RES/70/1. (2015). Sappington, D. E. M., & Stiglitz, J. E. (1987). Information and regulation. In E. E. Bailey (Ed.), Public regulation: New perspectives on institution and policies (pp. 3–43). MIT Press. Scheipers, S., & Sicurelli, D. (2008). Empowering Africa: Normative power in EU—Africa relations. Journal of European Public Policy, 15(4), 607–623. Skilling, J. (2001). https://www.pbs.org/wgbh/pages/frontline/shows/bla ckout/interviews/skilling.html. Accessed 22 Nov 2021. Sokołowski, M. M. (2015). Priorities of energy policy of Japan under Abenomics. In M. Sitek & M. Ł˛eski (Eds.), Opportunities for cooperation between Europe and Asia (pp. 227–240). WSGE. Sokołowski, M. M. (2016). China, energy, policy, evolution, revolution: Questions and answer. In J. Marszałek-Kawa (Ed.), Economic and energy stability in Asia: Perspectives and scenarios (pp. 219–242). Wydawnictwo Adam Marszałek. Sokołowski, M. M. (2018). Burning out coal power plants with the Industrial Emissions Directive. The Journal of World Energy Law & Business, 11(3), 260–269. Sokołowski, M. M. (2019a). Renewable energy communities in the law of the EU, Australia, and New Zealand. European Energy and Environmental Law Review, 28(2). Sokołowski, M. M. (2019b). When black meets green: A review of the four pillars of India’s energy policy. Energy Policy, 130, 60–68. Sokołowski, M. M. (2020a). Balancing energy regulation: A day-watchman approach. In R. Grzeszczak (Ed.), Economic freedom and market regulation: In search of proper balance (pp. 167–186). Nomos. Sokołowski, M. M. (2020b). European Law on combined heat and power. Routledge.

20

M. M. SOKOŁOWSKI

Sokołowski, J., & Bouzarovski, S. (2022). Decarbonisation of the Polish residential sector between the 1990s and 2021: A case study of policy failures. Energy Policy, 163, 112848. Sokołowski, M. M., & Heffron, R. (2022). Defining and conceptualising energy policy failure: The when, where, why, and how—The search for the just solutions. Energy Policy, 112745. Sokołowski, M. M., & Kurokawa, S. (2022). Energy justice in Japan’s energy transition: Pillars of just 2050 carbon neutrality. The Journal of World Energy Law & Business [Preprint]. Takahashi, K. (1989). Sunshine project in Japan-solar photovoltaic program. Solar Cells, 26(1–2), 87–96. Tatsuta, M. (1996). New sunshine project and new trend of PV R&D program in Japan. Renewable Energy, 8(1–4), 40–43. Thatcher, M. (2002). Analysing regulatory reform in Europe. Journal of European Public Policy, 9(6), 859–872. Ueta, T., & Remacle, E. (Eds). (2005). Japan and enlarged Europe: Partners in global governance. Peter Lang (4). United Nations Framework Convention on Climate Change, adopted 9 May 1992, entered into force 21 March 1994. (1992). Watanabe, C. (1995). Identification of the role of renewable energy: A view from Japan’s challenge: The new sunshine program. Renewable Energy, 6(3), 237–274. ˙ K., & Sokołowski, M. M. (2010). Development of power grids in Zmijewski, Poland in the context of EU climate and energy package. Acta Energetica, 3, 87–94.

CHAPTER 2

Making the Electricity Market Liberalised

This chapter gives an overview of how the electricity sector in Japan and the EU has changed over the years. The proposed discussion addresses past and current market reform processes in the EU and Japan, including the implementation of market-oriented institutions such as Third-Party Access (TPA) and unbundling, and the roles of regulatory authorities and system operators. This chapter also examines the situation in the European and Japanese electricity sectors by referring different phases of the electricity market reform conducted in the Community, then the EU, and Japan. Issues such as liberalisation and regulation in the electricity sector are discussed over the four main stages of the electricity sector changes in Europe with four Energy Packages adopted: First in the 1990s, Second and Third in the 2000s, and the fourth stage brought about by the Clean Energy Package of the 2010s. This approach is juxtaposed with the reforms delivered in Japan under the country’s five main moves, although, for the course of the analysis, it has been divided into three parts. This chapter offers an insight into the policies, laws, and regulatory tools used, presenting the position of the EU and Japan on the liberalisation of the electricity sector as an element of energy transition, and taking

© The Author(s), under exclusive license to Springer Nature Switzerland AG 2022 M. M. Sokołowski, Energy Transition of the Electricity Sectors in the European Union and Japan, https://doi.org/10.1007/978-3-030-98896-8_2

21

22

M. M. SOKOŁOWSKI

into account such experiences as the 2000s California crisis and the 2011 earthquake and tsunami in Japan. Moreover, this chapter discusses the main actors of the electricity sector in the EU and Japan including such stakeholders as MITI and METI, ACER, ERGEG, or OCCTO.

2.1 Liberalisation of the Electricity Sector for the Energy Transition of Europe Traditionally, the electricity sector in Europe was regarded a public monopoly. It was dominated by national ownership with either de jure or de facto exclusive power over energy production and supply, import and export, and infrastructure ownership (Jones, 2010, p. 1). As a consequence of this stiff and centralised structure, energy faced virtually no competition. This, however, was founded on the premise of central control over a synchronised system, which assumed critical assets for a national economy, necessitating the provision of exclusive rights in the fields of electricity generation, transmission, and distribution (see Cameron, 2007, p. 10). This was a depiction of a post-war Europe dominated by the conviction that the state should control the major sectors of the economy, with the energy sector at the forefront (Sokołowski, 2016, p. 39; see Turner, 2018, pp. 438–439). This arose from the public’s participation in post-war recovery, which included a number of government projects aimed at restoring European industry following years of conflict (see Fitzmaurice, 1990, p. 124; Fraile Balbin, 1999, pp. 255–256; Grabas, 2014, pp. 155–156). In comparison to the pre-war period, the state had a significantly higher part in the economy after 1945, not for military mobilisation, but for achieving national security, equality, and stability goals, as well as promoting industrial and economic growth in general (Grabas & Nützenadel, 2013, p. 23). Under this attitude, a concentration of capital occurred and many core European industries were nationalised, with their assets taken over by state agencies or enterprises subjected to governmental control. Such was the case with banks, aviation, coal, rail industries, as well as public utilities (see Cumbers, 2019). This is also true in the electricity sector (see Chick, 2007), where, in addition to the strategic significance for the overall economy and society with government-controlled electricity prices, a degree of technical complexity—which creates entry barriers, and necessitates coordination and a measure of integration between various energy subsectors like coal,

2

MAKING THE ELECTRICITY MARKET LIBERALISED

23

oil, or gas industries—encourages the state to enter the power sector (see Cameron, 2007, pp. 6–7). In many instances, this meant taking over private assets. In Western Europe, examples of nationalisation resulted in the establishment of Électricité de France (EDF) in 1946 in France (see Frost, 1985), the British Electricity Authority and Area Boards in 1948 in the UK (see Coase, 1950), or Ente Nazionale per l’Energia Elettrica (ENEL) in 1962 in Italy (see Polo & Scarpa, 1997). Statecentred influence on the sector, as well as the changes in ownership structure, occurred in Central and Eastern Europe as well, although as a result of loss of independence and absorption into the Soviet sphere of influence (see Bouzarovski, 2010; Gray, 1995). Despite having distinct origins and occurring in various policy contexts (democracy and the lack thereof), these systems’ features were the operation of vertically integrated entities, remuneration based on historical costs, a high degree of planning, consumer objectification, and, as a result, lack of competition (see Cameron, 2007, p. 8). The quick post-war development of energy-related branches might well have resulted in overproduction, yet international collaboration with coordinated investment plans could have prevented it (Jovanovi´c, 2005, p. 8; Sokołowski, 2016, pp. 13–14). Under these assumptions, an idea for controlling coal and steel industries in Europe was proposed with the concept of transferring national sovereignty to a supranational authority (see Willis, 1965, p. 80). Finding its architects in Jean Monet, Robert Schuman, and Konrad Adenauer this early vision of Franco-German cooperation soon become reality, with partners from Belgium, the Netherlands, Luxembourg, and Italy joining France and West Germany which established the European Coal and Steel Community (ECSC) in 1951 (see Gillingham, 1991). Regardless of some drawbacks, the establishment of the ECSC was an important political and institutional step towards European integration, which enabled the realisation of the European policy in terms of strategic resources and industries of key value for the electricity sector. The approach to the energy sector has evolved through time, first with the ECSC, then with the European Economic Community, and ultimately with the European Union (EU). Correspondingly to how competition regulation was a fundamental subject of the ECSC in the 1950s (see Buch-Hansen & Wigger, 2011, p. 3), the need for competition has moved the European integration agenda forward (see Panke & Haubrich-Seco, 2016, pp. 503–504). In the 1980s, under the framework

24

M. M. SOKOŁOWSKI

of the Single European Act (1986) a market reform programme was launched (see Campbell, 1986; Lombay, 1988), followed by the introduction of the notion of an internal market in electricity (see Sokołowski, 2016, p. 99). The following sections examine how this agenda has developed over the years, with the focus on energy packages motivated by the goal of liberalising the European electricity sector. 2.1.1

First Energy Package (1996)

When considering the era prior to energy packages, one should note the trials to facilitate the position of European auto-producers of renewable, waste, or cogeneration (combined heat and power, CHP) installations (RWC auto-producers), by providing them extra reimbursement for the electricity sold to the grid (Sokołowski, 2020b, pp. 38–39). Then, in the early 1990s a zero-phase or a pre-package period can be distinguished (Sokołowski, 2020b, p. 57). It began rather benignly, focusing on transparency and cross-border transit at first, before moving on to utilities’ procurement and upstream licensing, which were associated with behaviours more damaging to the energy market (see Talus, 2013, p. 40).1 The reform accelerated in the mid-1990s, when, after extensive negotiations (see Schmidt, 1999, pp. 63–73), an agreement on the First Electricity Directive—Directive 96/92/EC (ED I) was reached and the first significant phase of liberalisation in the electricity sector (later known as the First Energy Package) started. To effect the changes in the electricity sector, uniform rules for electricity generation, transmission, and distribution were required, alongside regulatory instruments enabling those falling behind to catch up with the leaders.2 This demonstrates that, from the start, the energy industry has been liberalised through the employment of regulatory mechanisms—this applies, for example, to the generation of electricity, where two mechanisms were used to open up the production market: an authorisation or a tendering procedure (Sokołowski, 2016, p. 100). The ED I (1996) also provided a framework for energy transmission, with a requirement to establish a transmission system operator (TSO) that would be responsible for the operation (managing energy flows, providing and exchanging information with other interconnected systems), maintenance (ensuring a secure, reliable, and efficient system), and development of the electricity system (Sokołowski, 2016, p. 101).3 Some effort was put into improving the objectiveness, transparency, market access, and non-discriminatory

2

MAKING THE ELECTRICITY MARKET LIBERALISED

25

behaviour (see de Almeida, 2020, p. 167; Meeus et al., 2005, p. 27).4 For instance, vertically integrated undertakings5 which were responsible for electricity transmission had to operate independently from other activities, at least in terms of management of different non-transmissionrelated activities6 ; additionally, under the introduced unbundling, driven by the maximum transparency principle, the separation of accounting was established (see Crisan & Kuhn, 2017, p. 166; Sokołowski, 2016, p. 101).7 Further elements of public law regulation, accompanying the regime brought by the ED I (1996) concern public obligations such as environmental protection, quality and price of supplies,8 equal tariff treatment,9 as well as access to the electricity system.10 Regarding the latter, the Member States were obliged to open their electricity markets and conclude contracts by eligible consumers under the negotiated access or single buyer procedure (see Meeus et al., 2005, p. 27). This was determined up to a significant level, annually notified to the Commission, with gradually larger national market shares opened. The thresholds were computed on the basis of the Community share of electricity with the following categories subsequently liberalised (Roggenkamp & Boisseleau, 2005, pp. 7–8): final consumers consuming more than 40 GWh annually (opened by 1999), then 20 GWh (by 2000), and lastly 9 GWh (by 2003).11 Table 2.1 provides an overview of the state of the electricity market at the time of the First Energy Package, with practically all Member States enacting national legislation to fulfil the requirements of the ED I (1996) defining the minimum objectives for market opening: 30% of consumption in 2000, 35% in 2003 (Sokołowski, 2016, p. 108). Nonetheless, the First Energy Package with the ED I was only the beginning of the liberalisation of the EU’s energy sector, and, despite its flaws, it was merely an introduction to a wider agenda. As a follow-up to ED I (1996), the Commission (1998) passed a report on energy market liberalisation, addressing the stage of the process aimed at bringing about the integration of national energy markets to improve supply security, reduce costs, and improve competitiveness, as well as enhance energy efficiency. However, completing this process in the late 1990s encountered structural impediments, particularly in cross-border as well as intra-border trade, as a result of the status of national utilities and the powers accorded to them (see Commission, 1998, p. 3; Sitter, 2000). Difficulties arose as a result of the varying stages of market liberalisation, with countries like Finland, the UK, or Sweden which had liberalised their energy

26

M. M. SOKOŁOWSKI

Table 2.1 Opening of the electricity market in EU-15 by the early 2000s (Commission, 2000, p. 13) Member State Austria Belgium Denmark Finland France Germany Greece Ireland Italy Luxemburg Netherlands Portugal Spain Sweden UK EU

Market opening (%) 30 35 90 100 30 100 30 30 30 40 33 30 45 100 100 6512

Competition in generation

Unbundling transmission

Grid access

Authorisation Authorisation Authorisation Authorisation Authorisation Authorisation Authorisation Authorisation Authorisation – Authorisation Tendering Authorisation Authorisation Authorisation

Legal Legal Legal Ownership Management Management Management Legal Legal – Legal Legal Legal Ownership Ownership

Regulated Regulated Regulated Regulated Regulated Negotiated Regulated Regulated Regulated – Regulated Regulated Regulated Regulated Regulated

markets before the adoption of the ED I (1996), the Member States that were catching up (the Netherlands, Spain, and Germany), and those trailing behind (Commission, 1998, p. 15). The second report on the internal market (Commission, 1999) addressed these issues alongside others, such as the lack of a cross-border strategy and limited state initiatives. To overcome them, the Commission (1999, p. 25) saw its role in facilitating active exchange of information, experience, and expertise between national regulators and competition authorities. This was done in order to create a true common market based on the same regulatory tests and standards, while also promoting active convergence through benchmarking rather than harmonisation of regulatory approaches at the national level (see Sokołowski, 2016, p. 106). However, not every issue, particularly cross-border transmission tariffication and trade-related procedures, could be handled using this approach (Commission, 1999, p. 26).13 To address these issues, the European Electricity Regulation Forum (Florence Forum) could be used to develop consensus between national regulators and the Commission (see Eberlein, 2003). Another solution would be the creation of a new type of regulatory instrument

2

MAKING THE ELECTRICITY MARKET LIBERALISED

27

to be administered by the Commission, or, alternatively by a European energy regulator (see Sokołowski, 2016, p. 107).14 However, even with these assumptions, it was not possible to attain a completely integrated market in 2000. Market players recognised that two concerns needed to be revisited at that time in order to build a real internal market: unbundling and TPA, as access to the market was highly correlated with access to the grid, especially with regard to new entrants (Sokołowski, 2016, p. 109). Strengthening the separation of grid operation, generation, and supply of electricity, as well as regulated TPA based on published pricing, have yielded favourable results, while softer approaches, such as negotiated access, have encountered some practical difficulties (see Commission, 2000, p. 4). Yet, in the early 2000s, national legislation implementing the provisions of ED I (1996) did not offer a sufficient market openness, and the EU’s electricity market was a combination of fifteen somewhat liberalised but over-fragmented markets (see Commission, 2000, p. 4). Still, the ED I (1996), driven by a public law regulatory regime (such as public obligations or duties of energy operators), provided the very first basis for shaping the structure of the internal energy market. However, due to their general, and rather soft, character (and the lack of concrete regulatory institution), the shortcomings of the existence, implementation, and application of the first rules on the electricity market were revealed in the first few years (Sokołowski, 2016, p. 118). Given the strong position of national energy utilities, these are structural hurdles, which require further effort. 2.1.2

Second Energy Package (2003)

In order to complete the internal energy market, a revision of the ED I (1996) was proposed in the early 2000s (see Commission, 2001), including the regulatory tools relating to the degree of market opening (quantitative proposals) and the minimum obligations (qualitative proposals) regarding access to the grid, consumer protection, and the rules on unbundling (Sokołowski, 2016, p. 119; see Kroes, 2007, pp. 1390–1391). The former stemmed from the differences in market opening among Member States, which ranged from a low of 30% to fully open markets, obstructing the development of competition. The latter stemmed from the voices of various stakeholders in the energy

28

M. M. SOKOŁOWSKI

market calling for regulatory reform, including stricter unbundling, clearer TPA access, and stronger regulatory authorities (see Sokołowski, 2016, pp. 110–111). The role of the regulators with the competence to set or approve network tariffs and intervene ex-ante in the market15 was specifically addressed and presented as ‘important in arriving at a truly competitive market’ (see Commission, 2001, p. 6; Humphreys & Padgett, 2006, p. 387). The rationale behind this move also came from the California crisis, where a badly planned liberalisation of the energy market caused a giant growth in final prices and led to a significant decline in the quality of services offered to energy users. The tools to prevent shortages and artificially high prices were therefore placed in the hands of independent regulatory authorities responsible for monitoring the supply/demand balance (see Sokołowski, 2020a). As a result of the legislative process initiated in 2001, the Second Electricity Directive—Directive 2003/54/EC (ED II) was passed. The ED II (2003) delivered some regulatory solutions aimed at improving market functioning. These included ensuring a level playing field, reducing the risks of market dominance and eliminating predatory behaviour, establishing non-discriminatory transmission and distribution tariffs, improving access to the grid, enhancing the rights of small and vulnerable customers, and addressing different degrees of market opening between Member States (see Brunekreeft & Keller, 2004). These were the main barriers and needs driving the European Union towards another stage of legislation that could bring about the fully operational and competitive internal market (Sokołowski, 2016, p. 126). Among the significant provisions of ED II (2003), one should note the deadlines for the market opening, set on 1 July 2004 for all non-households,16 and 1 July 2007 for all customers, enabling them to purchase electricity from the supplier they select (see Leal-Arcas, 2019, p. 295). Similarly to the ED I (1996), the ED II (2003) also made it possible to impose, in the general economic interest, public service obligations on electricity companies. The purpose was to clarify the scope and deepen the said obligations as the ED II (2003) included energy efficiency and climate protection under the protection of the environment (see Sokołowski, 2016, p. 127). Regarding electricity generation, while the ED I (1996) allowed Member States to choose between an authorisation procedure and/or a tendering procedure for the construction of new capacity, the ED II (2003) made the authorisation procedure the primary rule, with tendering employed only if the authorisation procedure

2

MAKING THE ELECTRICITY MARKET LIBERALISED

29

failed to create sufficient capacity to ensure supply security(Mäntysaari, 2015, p. 103).17 Moreover, the provisions of the ED II (2003) strengthened the position of households and small enterprises, obliging Member States to ensure the right to be supplied, within their territory, with electricity of a specified quality at reasonable, easily and clearly comparable and transparent prices, with provisions to protect final customers, especially those most vulnerable (see Brunekreeft & Keller, 2004, p. 186). The said provisions include mechanisms put in place in order to avoid disconnecting the customers from the grid (see Rott, 2007, p. 56). Additionally, to improve the standards of consumers’ protection the ED II (2003) set minimal requirements,18 covering wider contract information on the supplier, tariffs, and charges, as well as further details of electricity contract such as its termination or the right of withdrawal (see Sokołowski, 2016, p. 127).19 Apart from energy consumers, the ED II (2003) put an emphasis on regulating the system operators, TSOs and DSOs. Although the ED II did not compel vertically integrated utilities to split ownership of system operation assets (transmission or distribution), it did, however, provide a baseline of independence in terms of legal structure, organisation, and decision-making. This resulted in a more intensive unbundling than under the ED I (1996).20 Despite slight modifications to the accounting unbundling provisions, the separation of management was expanded to cover both transmission and distribution, with unlinking the responsibilities of individuals in charge and the implementation of compliance programmes to ensure anti-discriminatory treatment and enhanced monitoring of operators’ activities (see Kroes, 2007, pp. 1393–1395). Further advancements in non-discrimination concerned TPA, which provided access to transmission and distribution grid based on published tariffs, applicable to all eligible customers, and applied objectively and without discrimination between system users, with expanded rules for grid access refusal (see Sokołowski, 2016, pp. 128–129).21 Finally, the ED II (2003) built a more complex regulatory framework than the ED I (1996),22 with regulators acting as the central axis of the system (Sokołowski, 2016, p. 129). Regardless of the number of regulators (one or more), these institutions were to be independent from the interests of the electricity sector, with minimum tasks encompassing actions to secure non-discrimination, effective competition, and the efficient operation of the market (see Larsen et al., 2006).23 The regulation itself was to be effective24 and efficient (see Hancher et al., 2003),25

30

M. M. SOKOŁOWSKI

and so, at a national level, each Member State was required to guarantee that regulators’ have competences with the power to fix or approve tariffs (see Humphreys & Padgett, 2006, pp. 386–387), or—as the minimum standard—to determine the methodologies underlying the calculation of transmission and distribution tariffs (see Haverbeke et al., 2010, p. 407; Vasconcelos, 2005, p. 95). The effective regulation was to be accomplished through a number of means. These included: wide-ranging monitoring and reporting on interconnection capacity management and allocation, congested capacity mechanisms, time-length of connections and repairs made by TSOs and DSOs, information on interconnectors, grid usage and capacity allocation, the effectiveness of unbundling, tariff terms and conditions for connecting new producers, the level of transparency and competition, and the fulfilment of other duties imposed by the ED II (2003) on system operators (see Sokołowski, 2016, pp. 130– 131).26 Furthermore, when a complaint related to any of these fields was lodged against a TSO or DSO, the regulators were to resolve the dispute, without prejudice to the exercise of appeal rights under European and national legislation (see Haverbeke et al., 2009, p. 78).27 Last but not least, the ED II (2003) formed a general framework for regulators’ collaboration with the European Regulators’ Group for Electricity and Gas (ERGEG) and other regulatory forums encouraging transparent cooperation and coordination between national regulatory authorities and the Commission, in order to promote the development of the internal market for electricity28 and contribute to level playing field (see Haverbeke et al., 2010, pp. 413–414; Jevnaker, 2015, p. 934).29 As a result, the second phase of the EU energy market reform broadened and clarified the regulatory scope with public service obligations, a catalogue of minimum standards for protecting household customers, a stringent regime for TSOs and DSOs, clearer rules on unbundling and grid access, and a more comprehensive legal dimension of energy regulators (see Mäntysaari, 2015, pp. 103–104; Sokołowski, 2016, pp. 145–146). Regrettably, the reality of implementing the ED II (2003) revealed flaws in the legal framework: aside from delays in transposition, which hampered the European liberalisation agenda, Member States chose the bare minimum of implementation, using possible derogations (e.g. regarding unbundling). Moreover, the market shaped by the ED II (2003) was still influenced by factors hampering the existence of competition such as high degree of market concentration, cross subsidies, primacy of interests of the integrated companies within the same group, low

2

MAKING THE ELECTRICITY MARKET LIBERALISED

31

market liquidity, or constrained authority of energy regulators (see Larsen et al., 2006; Sokołowski, 2016, p. 147). The condition of the formation of the domestic energy market in mid-2005 proved insufficient: the ED II (2003) was supposed to be implemented by 1 July 200430 ; the fact, however, was that, by 2005, the process had not been completed, and many areas of discontent remained (like switching suppliers, competition in the market, or lack of market integration), with the new Member States of the now EU-25 trailing behind (see Commission, 2005, pp. 3–4). To address the stated market obstacles, the Commission proposed a set of remedies, including the initiation of numerous infringement proceedings against Member States for issues such as lack of information on public service obligations, difficulties in identifying the origin of electricity, regulated prices that prevented new market players from entering, discrimination in TPA, unbundling without independence, and the insufficiently established position of the energy regulator (see Sokołowski, 2016, pp. 138–139). The persistent nature of the problems, on the other hand, posed a particular challenge to the completion of the internal energy market, with a regulatory gap at the European level that could not be filled using available tools (see Vasconcelos, 2005), sparking a call to action to strengthen the EU’s electricity sector reform in the next step (see Commission, 2007a, 2007b). 2.1.3

Third Energy Package (2009)

Even after achieving complete retail market openness in July 2007, market integration remained a long way off, and energy markets in the EU tended to remain national in nature, which hampered competition; as the shortcomings could not be addressed through existing legislation, improved legislative measures were required (Commission, 2008, p. 2). The drawbacks included regulated energy prices,31 regional monopolies, persistent cross-border congestion between Member States, the tendency towards consolidation, lack of independence of network operators and ineffectiveness in implementing functional unbundling, unequal levels of regulatory powers, as well as the regulatory gap at the European level (Commission, 2008, pp. 3–6).32 The aforementioned conditions were the causes of a relatively negative Commission’s (2008) overall assessment of development on the internal market, and because the ED II (2003) did not address all the difficulties, the necessity for new legislation with a

32

M. M. SOKOŁOWSKI

greater application of public law regulation arose (see Sokołowski, 2016, pp. 144–145). The next element of the internal energy market’s reform—the architecture of the Third Energy Package was presented in September 2007 (see Bonacina et al., 2011, p. 99). It brought proposals of regulatory changes to the electricity and gas sectors by enhancing the electricity and gas directives with three new regulations on the conditions for access to the network for cross-border exchanges in electricity and to natural gas transmission networks, as well as a new initiative of establishing the Agency for the Cooperation of Energy Regulators (ACER).33 Electricity, being so important for Europe’s well-being, required competition and efficiency (see Sokołowski, 2016, p. 152); however, while this was partly brought about by the liberalisation of the electricity sector that began in the 1990s, the full competitiveness on the energy market had not been achieved by 2007; indeed, the process of developing truly competitive markets is still far from being completed (see Commission, 2007c, p. 9). In this context, a revamp of the regulatory framework was proposed, with six major features relating to a stronger approach to unbundling, national regulator authority and independence, the ACER, TSO collaboration, market functioning, and supply security. With regard to unbundling, the Commission found that legal and functional unbundling have contributed positively to the electricity market. However, the reality of implementing them, where the TSO is a legal entity within an integrated company, has shown problems, and ownership unbundling was advocated as a preferable approach (Nowak, 2010, p. 31), with the independent system operator as a secondary option (see Praduroux & Talus, 2008). To guarantee the independence (transmission grid operation in a separation from the vertically integrated company) Member States were to provide regulation with permanent monitoring (see Commission, 2007c, pp. 5–6). In this light, the Commission (2007c, p. 8) proposed that national regulators be given a broader range of regulatory powers. These included: monitoring of certain activities (TPA, unbundling obligations, balancing mechanisms, congestion and interconnection management, transparency obligations, market opening and competition, as well as network security and reliability), reviewing plans and rules (TSOs’ investment plans and network security and reliability rules), as well as promoting effective competition (in cooperation with competition authorities) and

2

MAKING THE ELECTRICITY MARKET LIBERALISED

33

ensuring effectiveness of consumer protection measures (Sokołowski, 2016, p. 162). Member States were to grant regulators the right to employ specific regulatory instruments, such as the ability to investigate, obtain all required information, and apply dissuasive punishments, in order to carry out their regulatory responsibilities (see Commission, 2007c, p. 9). Recognising the shortcomings of the existing framework on regulators’ independence, which lacked specific rules on how that independence should be ensured, a far-reaching model of regulatory independence was proposed. It included the regulator’s functional independence of any entity, public or private; no influence on the regulator’s staff, e.g. through instructions; granting regulators necessary legal personality, as well as financial and operational position, i.e. autonomy in budget, proper human and financial resources, and independent management (see Commission, 2007c, p. 9). Moreover, to fill the regulatory gap and give the regulators a clear mandate to cooperate at the European level (see Sokołowski, 2016, pp. 167–168) the ACER was proposed. Its aims were to ensure competitive, secure, and environmentally sustainable internal electricity within the EU, an effective market opening for all consumers and suppliers, and the establishment of an independent mechanism for national regulators to cooperate and make decisions (see Commission, 2007c, p. 9; Haverbeke et al., 2010, pp. 414–429). After rounds of negotiation within the legislative process, the Third Energy Package, with the Third Electricity Directive (ED III) at its heart, was adopted in 2009, bringing provisions on effective unbundling of TSOs, strengthening the position of regulatory authorities, and other rules in the fields ranging from consumer protection and energy poverty, to smart metering or clean energy (see Nowak, 2010, p. 29). The ED III (2009) was equipped with a range of rules concerning public law regulation, both in terms of changing existing institutions and providing new legal solutions. It not only confirmed the need for a single national energy regulatory authority,34 but also significantly strengthened the regulators’ position, motivated by the need to ensure competition and the supply of electricity at the lowest possible price (see Haverbeke et al., 2010, pp. 410–411).35 Within the framework of the ED III, regulators were to pursue a wide range of goals, including the promotion of a competitive, secure, environmentally sustainable, and effectively opened for all customers and suppliers internal market in electricity, and the elimination of restrictions on trade in electricity between Member States.36 Separate powers were granted to regulators to enable them the protection of

34

M. M. SOKOŁOWSKI

vulnerable customers (see Dobbins et al., 2019).37 The goal was to give the regulators the authority to make decisions on all the relevant regulatory issues if the internal market in electricity was to function properly, and to be completely independent of any other public or private interests, with no recourse to judicial review or parliamentary oversight.38 As a result, the ED III (2009) extended the guarantees for the regulatory authority’s independence in carrying out their powers, granting them legal personality and functional independence from any public or private entity, personal independence of the regulators’ staff and management for a once-renewable term of five to seven years, as well as budget autonomy (see Boute, 2015, pp. 525–527).39 Furthermore, when it came to the operation of electricity entities, regulators had the authority to issue binding decisions backed up by dissuasive sanctions,40 and to request relevant information from electricity undertakings, conduct appropriate and sufficient investigations, and settle disputes (see Mäntysaari, 2015, pp. 109–110).41 In this manner, national regulators could no longer be powerless institutions spread throughout national administration. Other powers of regulator were linked with facilitating an access to the grid. For this need, the ED III kept the basis for concrete regulatory tool: tariffs (or methodologies for calculating them), with powers to require TSOs and DSOs to modify the terms and conditions, including tariffs or methodologies referred, to ensure that they are proportionate and applied in a non-discriminatory manner (see Delvaux et al., 2014).42 In this context, the ED III extended regulatory framework over system operators.43 The rules on unbundling were revised to guarantee an effective separation of grid from generation and supply (effective unbundling), needed to prevent the discrimination in the operation of the grid (see Lecoque, 2011).44 In reality, the unbundling has kept the shape proposed during the legislation process, with ownership unbundling as a rule and the designation of an independent system operator by the means of exception.45 This, however, necessitated a regulation to assure the implementation of unbundling rules, and therefore securing indiscrimination in the grid, in order to improve competition and reach the most competitive price of electricity (Sokołowski, 2016, pp. 159–160). The regulatory authorities were thus given a number of responsibilities in this field—in addition to certifying companies as complying with the rules on independent transmission operators, these were, inter alia, having access to TSOs’ commercial and financial data,46 approving contracts with the vertically integrated undertaking,47 as well as being notified about TSOs’

2

MAKING THE ELECTRICITY MARKET LIBERALISED

35

personal decisions related to its management (see Haverbeke et al., 2010, pp. 410–411).48 In view of these changes, the Third Energy Package with the ED III greatly expanded the scope of public law regulation at the European level, delivering legislation motivated by the need to achieve full energy market competitiveness while also addressing the shortcomings of the previous regulatory regime. If market rules based on liberalisation failed, regulators were to step in (see Sokołowski, 2020a). A liberalised energy market cannot be left unsupervised, thus the regulators must keep a watch on many domains, examine operators’ activities, foster competition, and safeguard consumers in this way. These conditions demonstrate that the EU has selected a regulatory-based road to the internal energy market. This concept anticipates that the regulatory framework will be established around national independent regulatory authorities. Thus, liberalisation does not exclude regulation, as the European market dilemma, founded on the California crisis in the USA, was designed not to be left alone and unaffected by public reaction. 2.1.4

Fourth Energy Package (2019)

The European electricity market reform gained traction in the mid2010s, with a strong link to the climate agenda (see Chapter 3 of this book). The EU’s energy market has continued to underperform despite the implementation of three prior energy packages into national legislation (see Scholz & Vohwinkel, 2016, p. 57). To improve the situation, the Commission (2015) proposed a new policy framework of a resilient Energy Union,49 centred on ambitious climate policy, security, sustainability, competitiveness, and energy affordability. Based on these leading aims, it has its guiding dimensions (one of which is the fully integrated European energy market), which are to be achieved through 15 action points and other correlated initiatives (see Talus, 2017, pp. 212–213). In this light, the Energy Union has set the course for comprehensive developments in the European electricity sector, with the goal of improving national regulatory frameworks for further market integration, resulting in more competition, greater market efficiency through better use of modern energy generation facilities across the EU, and affordable prices and choices for consumers, including those who are vulnerable (see Commission, 2015; Vinois, 2017, pp. 42–43). ‘A well-functioning internal energy market needs an effective regulatory framework’, and so

36

M. M. SOKOŁOWSKI

further steps related to strengthening the regulatory bodies and system operators, providing a more unified European approach and integration were proposed (Commission, 2015, p. 9; see Gerig & Vasconcelos, 2015, p. 185). This included bolstering the ACER’s mandate and independence50 to perform a regulatory role at the European level, allowing it to adequately oversee the advancement of the internal energy market and related market rules, as well as cope with all the cross-border issues required to build a streamlined internal market (see Commission, 2015, p. 9; Maher & Stefan, 2019). Other elements of this agenda covered ‘an ambitious legislative proposal to redesign the electricity market and linking wholesale and retail’ (Commission, 2015, p. 10; see Carlini et al., 2019). This was driven by market integration of renewables (see Peng & Poudineh, 2019); the improvement of flexibility markets with regard to both the supply and demand within and beyond national borders; evolution of grids to expand the possibilities for distributed generation and demand-side management, including intraday markets, and develop new high-voltage long distance connections—super grids—and new storage technologies (see Buschle & Westphal, 2018, pp. 60–62; Overland, 2019, p. 77), as well as phasing out environmentally harmful subsidies (see Sokołowski, 2018a), with the reformed Emission Trading System designed to ‘play an important role in setting the right investment signals’ (Commission, 2015, p. 10; see Beyer, 2015, p. 41). Finally, the Energy Union’s subsequent measures, as stated in 2015, were to promote greater transparency in the composition of energy costs and prices. It was to be achieved by developing regular and detailed monitoring and reporting, including on the impacts of energy costs and prices on competitiveness, with special attention paid to public interventions such as regulated tariffs, energy taxation policies, and the level of public support, as well as their impact on pricing mechanisms, such as electricity tariffs (Commission, 2015, p. 10; see Proedrou, 2018). In addition to offering an outstanding amount of new proposals and accompanying soft law material, the EU institutions, namely: the Commission, European Parliament, and Council, have taken steps to foster speedy acceptance of these proposed changes. This was accomplished by proceeding with actions under the 2030 climate and energy framework and the Clean Energy for all Europeans Package (Talus, 2017, p. 214)—fourth in a row, though not formally designated as such (see Anchustegui & Formosa, 2020). The Package is a broader legislative initiative led by the Commission (2016) with the goal of modernising

2

MAKING THE ELECTRICITY MARKET LIBERALISED

37

the European economy and increasing investment in clean energy-related fields (see Chapter 3 of this book), with eight new European legal acts implemented in 2018 and 2019 (see Commission, 2017).51 In the context of the previous stages of the electricity market, three of them should be noted. These are the Fourth Electricity Directive (ED IV), the new Electricity Market Regulation (EMR), as well as the revised Regulation on ACER which were passed in June 2019. Moreover, in addition to being the foundations of the Clean Energy Package, the ED IV (2019) and the ER (2019) are the executive components of the Energy Union, aimed to meet its primary aspects: energy security, internal energy market, energy efficiency, decarbonisation, as well as research, innovation, and competitiveness (Sokołowski, 2020b, p. 200).52 Like its predecessor, the ED IV (2019) brings substantial changes to the European electricity market. In a process of energy transition to a sustainable low-carbon system, the ED IV (2019) seeks to provide consumers with affordable, transparent energy prices and costs, as well as a high level of supply security (see Soininen & Huhta, 2021, p. 90), establishing key rules governing the organisation and operation of the EU’s electricity sector, including consumer empowerment and protection, access to the market and infrastructure, unbundling, and the independence of national regulatory authorities.53 This is consistent with the EMR’s (2019) principles for the operation of electricity markets. These include rules on consumer empowerment, decarbonisation of the electricity system and thus the economy, including the integration of renewables and providing incentives for energy efficiency, delivering appropriate investment incentives for generation, fair competition security of supply, barriers to cross-border electricity flows, and objective, transparent, and non-discriminatory grid access (see Huhta, 2020, p. 6).54 In this light, the ED IV (2019) secures previously established legal institutions, such as the right of all consumers to free electricity purchase from the supplier of their choosing,55 TPA,56 or unbundling,57 and adjusting them to changing electricity market conditions. This concerns, for instance, the application of rules of TPA to citizen energy communities that manage distribution grid,58 as well as a clarified and extended catalogue of consumers rights.59 Regarding the extended rights, their list, as established by the ED IV (2019), includes, among others, the right to a dynamic price contract which depends on spot or day-ahead market prices offered from at least one supplier and any supplier with more than 200,000 customers. Others

38

M. M. SOKOŁOWSKI

include the right to be informed about the advantages and risks associated with this type of contract,60 the right to switch supplier within the shortest possible time period,61 without switching-related fees,62 the right to an aggregation contract independent of electricity supply,63 or the right to free of charge access to at least one price tool comparing the offers of suppliers, including offers for dynamic electricity price contracts.64 With respect to consumers, the rules on bills and billing information should also be noted. This concerns the clarified and extended billing requirements, with a standard of ‘accurate, easy to understand, clear, concise, user-friendly and presented in a manner that facilitates comparison by final customers’ electricity bill65 (see Barta, 2020), as well as extended framework on vulnerable consumers and energy poverty (see Bouzarovski et al., 2012; Haber, 2018; Goldberg & Eckenroth, 2021, p. 172).66 In this regard, Member States must take appropriate measures to tackle energy poverty and protect vulnerable customers, such as securing clear contractual terms and conditions, providing general information, introducing dispute resolution methods (see Hesselman, 2021, pp. 699–701), and establishing a definition of vulnerable customers (see Noka & Cludius, 2021). The latter may include energy poverty, and, among other things, the prohibition of the disconnection of electricity to these customers (see Bouzarovski, 2018, pp. 59–60).67 The pro-consumer approach should be combined with general improvements of the position of energy prosumers, both individual, and joint. Here, the ED IV (2019) introduces the definition of ‘active consumers’.68 It also obliges Member States to ensure that final customers have the right to become active consumers without being exposed to unduly burdens like disproportionate or discriminatory technical or administrative requirements, procedures,69 and charges, having rights to operate directly or through aggregation, sell self-generated electricity, or participate in flexibility and energy efficiency schemes (see Anchustegui & Formosa, 2020).70 Other provisions stipulated by the ED IV (2019) and relating to energy consumer empowerment concern energy communities (see Sokołowski, 2018b). In this regard, Member States must provide citizen energy communities with ‘an enabling regulatory framework’ based on non-discriminatory, fair, proportionate, and transparent procedures and charges, including those relating to registration and licensing, and guarantee them access to all electricity markets, either directly or indirectly through aggregation (see Paiho et al., 2021; Sokołowski, 2020c).71

2

MAKING THE ELECTRICITY MARKET LIBERALISED

39

The aforementioned aggregation is also regarded in the ED IV (2019) as a means of improving demand response, which the Member States should allow for and encourage, ensuring that TSOs and DSOs treat those market participants who demand response aggregators in a nondiscriminatory way when the operators are acquiring ancillary services (see Alba et al., 2021; Kerscher & Arboleya, 2022).72 To facilitate aggregators’ positions, national regulatory frameworks must include their right to enter electricity markets (without the consent of other market participants), non-discriminatory treatment, and transparent rules that clearly assign roles and responsibilities to all electricity undertakings and customers, as well as enable secure data exchange between aggregators and other electricity undertakings (see Anchustegui & Formosa, 2020; Palade, 2021, p. 22).73 Furthermore, the regulatory environment for aggregators must ensure that final customers who have contracts with independent aggregators are not subjected to undue payments, penalties, or other unjustified contractual restrictions, and also provide a conflict resolution procedure between market participants involved in aggregation and other market players.74 The new market rules, whether for active consumers, citizen energy communities, or aggregators, do not simply provide preferential conditions. They are also useful for highlighting duties. This is true, for example, in the case of balancing in the electricity system.75 As laid forth in the EMR (2019) under the balance responsibility rule,76 Member States must guarantee that these market players (active consumers, citizen energy communities, and aggregators) are made financially responsible for the imbalances they cause in the electricity system (see Sokołowski, 2020c, p. 302).77 Other obligations include, for example, non-discriminatory treatment of consumers who continue to be connected to the distribution system operated by citizen energy community.78 Other noteworthy provisions related to distribution, which were introduced by the ED IV, concern the regulatory framework required to allow and provide incentives to DSOs to procure flexibility services, including congestion management in their areas. This would allow DSOs to procure such services from providers of distributed generation, demand response, or energy storage, driven by the promotion of the adoption of energy efficiency measures.79 Furthermore, the development of a distribution system must be based on a transparent network development plan that DSOs must publish, consult with all relevant system users and the relevant TSOs, and submit to the regulatory body at least every two years

40

M. M. SOKOŁOWSKI

(Ramos et al., 2021, p. 6).80 This enables the regulator, if necessary, to block certain energy investments (Ramos et al., 2021, p. 6). When evaluating the current regulatory framework of the European energy market and the electricity sector as its component, the balance of the internal market process has been turned to the climate component, with the regulatory aspects of market action guaranteed. In this regard, the fourth phase of market reform carried out within the scope of the Clean Energy Package takes a step beyond. Unlike its predecessors, the Clean Energy Package combines the EU’s climate aims within the liberalisation package, including legislation on energy efficiency and renewable energy, which were previously under distinct climate and energy legislative action (Anchustegui & Formosa, 2020). However, before delving into policies and laws related to climate protection with reduction of emission, renewable energy sources, and energy efficiency, let us first look at the Japanese electricity sector. Here, just like the EU, Japan, has taken a step-by-step approach, and while specific legislative packages cannot be distinguished as clearly as in the EU, the upcoming phases of energy market reform can be stated.

2.2 Liberalisation of the Electricity Sector for the Energy Transition of Japan The structure of the Japanese electricity industry was, for a long time, built on regional monopolies under an ineffective, relatively simple regulatory framework (see Nakano & Managi, 2008; Wada, 2006, p. 18). However, the preponderance of private ownership was the key characteristic of Japan’s post-war development of its electricity sector, in contrast to the moves aimed at nationalising European power companies after 1945 (Kikkawa, 2012, p. 1). It began with the 1950 reform (see Asano, 2016, p. 186), which effectively ended the government’s wartime ownership of the electricity industry in 1951 and created the core structure of the Japanese power sector which, since then, has been run by a system of nine regional utilities, and, after regaining control over Okinawa in 1972, by 10 regional utilities (see Asano, 2016, p. 186; cf. Kikkawa, 2012, p. 1).81 Until the 1990s, each of these utilities was principally responsible for the generation and exclusive distribution as well as transmission of electricity within a specific geographical area (Taniguchi, 2013, p. 714). 10 regional

2

MAKING THE ELECTRICITY MARKET LIBERALISED

41

utilities were accompanied by wholesale utilities (see Asano, 2016, p. 186): Electric Power Development Company (founded in 1952), Japan Atomic Power Company (established in 1957), and, since the 1980s, various companies operating cogeneration units which appeared in the system (see Chapter 5 of this book). However, the liberalisation of the Japanese electricity market did not begin until the 1990s, when the exchange rate climbed to 100 JPY in relation to USD in August 1993 (Shimazaki, 1994, p. 79), following the collapse of Japan’s overheated stock and real estate markets in the early years of the decade (see Taniguchi, 2013, p. 714). This drew harsh criticism from energy customers, particularly the industry, who argued that power rates were excessively expensive in contrast to other countries, and that the high costs hampered the international competitiveness of Japan (see Shimazaki, 1994, p. 79). At the time, the Ministry of International Trade and Industry (MITI) took the first steps towards market reform in the electricity sector. For a long time the sector had been operating as a vertically integrated monopoly under the legislative framework of the Electricity Business Act (1964)82 which had not undergone any substantial modifications since its enactment until the 1990s (see Shimazaki, 1994, p. 79). With the energy industry experiencing structural changes, the 1990s developments sparked more amendments, culminating in later revisions of the 1964 legislation, which resulted in progressive liberalisation of electricity sector in Japan (see Nakano & Managi, 2008; Taniguchi, 2013). However, with the March 2011 earthquake and tsunami devastating Japan’s key infrastructure and having a significant influence on the country’s energy facilities and energy policy, the pace of liberalisation has accelerated. Here, three major stages of electricity liberalisation in Japan may be distinguished (cf. Goto et al., 2013; Kibune, 2019). In the 1990s the first actions to reform the power sector occurred, followed by the gradual continuation of the reforms with some in-between steps and moments of deliberation and hesitation (the second, third, and fourth reforms). The post-Fukushima momentum (the fifth reform with three phases) accelerated changes in the electricity sector, including the market and its regulatory institutions. These stages are covered in the subsequent sections.

42

M. M. SOKOŁOWSKI

2.2.1

First Electricity Sector Reform (1995)

For the first time in 31 years, the Electricity Business Act (1964) was significantly changed in 1995 to relax the limitations on the entrance into the electricity producing and wholesale sectors, slightly liberalise the retail business, and revisit rate-making rules (Kibune, 2019, p. 29). The legal changes enabling the entry of independent producers into the electricity market and a price system reform from the beginning of 1996, were a critical step in changing the structure of the Japanese electricity market. They marked a significant shift in the traditional policy on the power industry, which had focused on providing a stable supply of electricity while improving the competition by introducing independent electricity producers (Shimazaki, 1994, pp. 80, 88). The MITI acknowledged a growing sense of crisis regarding the future stable supply of electricity, with electricity demand expected to increase continuously, issues with building new large-scale power plants, including nuclear sources (see Nambu, 2000, p. 77), and consequent difficulties in meeting the increasing peak demands of summer. It was not, however, eager to change its traditional energy policy from stable supply to competition, due to the possibility of hampering Japan’s international competitiveness (Shimazaki, 1994, p. 87). Despite this, continuing with the existing electricity sector paradigm, which had been criticised for its high electricity tariffs in comparison to other major economies, made little sense (see Nambu, 2000, p. 75). The mid-term account settlements in 1994, revealing large rise in utilities income,83 fuelled the topic of market reform and confirmed its need (see Shimazaki, 1994, p. 87). As a result of these circumstances, the government of Japan decided to shake up the old regulatory system within a relatively short period of time (Nambu, 2000, p. 75). The conducted reform resulted in changes to electricity pricing. Two models were discussed: the British ‘cap regulation’ and the US ‘incentive regulation’. Originally, it was anticipated that the British-type price cap regulation would be a remedy for rectifying the high-cost structure of Japanese electricity rates, and that it would also be essential to significantly reduce the domestic and international price disparity (Shimazaki, 1994, pp. 88–89). However, because the cap regulation system had practical issues in the UK and did not correspond to the trends in electricity pricing

2

MAKING THE ELECTRICITY MARKET LIBERALISED

43

and demand in Japan, the incentive regulation (yardstick regulation) was eventually implemented (see Kibune, 2019, p. 30; Shimazaki, 1994, pp. 88–89). The yardstick regulation referred to the vertically integrated utility, with electricity price of each power company determined partly by comparing its performance with that of other companies (Nakano & Managi, 2008, p. 202). Companies with costs larger than others suffer losses, while those with smaller cost generate profits, and therefore, this system was expected to promote the cost-cutting competition (Nakano & Managi, 2008, p. 202). The first phase of the liberalisation of the electricity market in Japan produced a mixed effect. On the one hand, the new legislation resulted in the eased entry and access into the wholesale power market, as, prior to the reform, no independent company could freely enter the power-generating market. By introducing a competitive bidding, the 1995 amendment allowed new generators to participate in the wholesale market (Nakano & Managi, 2008, p. 202). On the other hand, while the reform stipulated the development of small-scale electricity companies, ten general utilities retained the responsibility for the exclusive franchise area and the scale of electricity generated by the new competitors was low, accounting for less than 1% of the utilities’ total electricity production (Shimazaki, 1994, pp. 87–88). Shiraishi (2012, p. 75) states unequivocally that the application of competition law to the electricity sector ‘did not become a serious issue in Japan until 1999’. Furthermore, the bidding system that allowed new entrants into the power generation market had certain flaws in terms of promoting competition against utilities, even though it gave them a boost in terms of cost comparisons of power generation as they competed with new entrants bidding. In the wholesale market, these were the utilities that were the sole providers of electricity to final customers as opposed to the bidding companies which did not sell it. (Nambu, 2000, pp. 78–79). The electricity generated by the new entrants was sold to ten utilities that subsequently supplied it to consumers through the grid owned and operated by these utilities (Taniguchi, 2013, p. 714).84 To change this situation, real competition in retail was needed.

44

M. M. SOKOŁOWSKI

2.2.2

Second, Third, and Fourth Electricity Sector Reforms (1999, 2003, and 2008)

Further market reform was introduced in Japan in 2000, when, due to the 1999 revision of the Electricity Business Act (1964), the retail market was partially liberalised and the rules on price regulation were eased (see Kibune, 2019, p. 30). This stage of liberalisation allowed power producers and suppliers to sell directly to customers in the retail market for electricity (Taniguchi, 2013, p. 714). This was, however, limited to customers using electricity grid at 20 kV voltage with a contracted power demand of more than 2 MW (Nakano & Managi, 2008, p. 202). These changes covered large factories, office buildings, department stores, and other similar facilities (TEPCO, no date), accounting for about 30% of total electricity supply (Nakano & Managi, 2008, p. 202). As a result, beginning in March 2000, large consumers and electricity companies were free to negotiate contracts, and these customers were allowed to purchase electricity from any regional utility or independent power producer (Nambu, 2000, p. 83). Thus, changes in legislation allowed power producers and suppliers to access part of the market, with new entrants granted access to the grid (Nakano & Managi, 2008, p. 202; see Ise & Yabuta, 2018, p. 75). This was accompanied by fair, equal, and transparent standards for power producers and suppliers using grid (retail wheeling service rules), with former entrance restrictions eliminated (TEPCO, no date). It was also feasible to cut rates for electricity consumers merely by notifying them, rather than going through the approval procedure that had previously been in place (see Kibune, 2019, p. 30); additionally, the restrictions for determining rate plan options were eased (TEPCO, no date). The remaining portion of the retail market for electricity, namely small contract customers, was kept as a monopoly by the given regional utility (Taniguchi, 2013, p. 714). At the turn of the century, the MITI was unable to extend the liberalisation to the smallest electricity users. First, it was seen as too excessive and potentially harmful to them, given that electricity rates for these consumers had risen in many countries after full market opening (Nambu, 2000, pp. 80, 83). Second, this has been a political process (see Okamoto, 2017, pp. 189–190), with a struggle between the government and the incumbent energy utilities85 with strong support from some politicians of the Liberal Democratic Party (LDP). As a result, it was decided that the process of reforming the electricity sector should be gradual, with the market for small customers and households

2

MAKING THE ELECTRICITY MARKET LIBERALISED

45

not being completely opened to competition until the economic effects of the liberalisation to the larger consumers (who pushed for full liberalisation, as had to compete worldwide) were recognised (Nambu, 2000, p. 80). Nevertheless, since late 2001, the Electricity Industry Committee and the Ministry of Economy, Trade and Industry’s (METI substituted MITI after the reorganisation in 2001) Advisory Committee for Natural Resources and Energy have been debating the next step towards liberalisation, which was to include the opening of the market to medium, industrial, and commercial high-voltage (6 kV) users (Asano, 2006). The choice of liberalisation models was influenced by the public perception of the electricity sector, in which consumers expect reliable, stable supply of electricity as their top priority, having witnessed power crises elsewhere, such as in California, and so a step-by-step approach for developing electricity market in the long run was continued (see Ogasawara, 2005). To further liberalise the market by allowing independent power producers and suppliers to enter additional parts of the retail market (see Taniguchi, 2013, p. 714), the Electricity Business Act (1964) was amended in June 2003, becoming effective in December of the same year (Asano, 2006). The revision opened the markets for power demand of more than 500 kW and more than 50 kW in April 2004 and April 2005, respectively (Nakano & Managi, 2008, p. 202; see Ise & Yabuta, 2018, p. 75). As a consequence, 40% of market participants were allowed to select their electricity supplier freely in 2004, and 63% in 2005 (see Takase & Suzuki, 2011, pp. 6736–6737). On the one hand, ten regional power utilities have maintained a market share of 70–80% since the liberalisation of the electricity market; on the other hand, with the advent of new competitors, electricity prices have plummeted (Taniguchi, 2013, p. 714). After assessing the implications of the 2003 retail market reform against the prospect of greater liberalisation in the residential sector, it was decided to forego such expansion in the next (fourth) stage of liberalisation, scheduled for 2008. Instead, further liberalisation was directed towards regulatory reforms that were to improve the competitive environment within the scope of markets already liberalised (TEPCO, no date). In 2003, as part of the METI’s wholesale liberalisation process, the Japan Electric Power Exchange (JEPX) was created and later launched in April 2005 (see Harayama & Katsuda, 2007; Nakajima, 2013). It offered spot and forward markets, with the goal of providing an index price for electricity (a benchmark for producers’ investment in the energy sources)

46

M. M. SOKOŁOWSKI

and enabled the procurement of electricity in the event of a demand– supply mismatch (see Ikeda, 2019, p. 16; Kibune, 2019, p. 30; Sawa et al., 2008). Also in 2005, the Electric Power System Council of Japan (ESCJ) began its full-scale operation.86 Despite the fact that the ESCJ was established as an independent organisation in charge of interregional transmission arrangements (Goto et al., 2013, p. 187), with one of its tasks being to monitor TPA, the grid infrastructure remained regionalised and part of the assets of the general electricity utilities (Hughes, 2016, p. 169). Moreover, measures such as the adjustment of the wheeling rate structure, improved grid usage conditions, and wholesale market reform for activating power trading were implemented during the 2008 phase (Asano, 2016, p. 187). However, barriers to effective competition remained, including the general electricity utilities’ dominating the installed base in each region, the possibility of their coordinated behaviour across regions, and a transmission regional monopoly held by these utilities (Shiraishi, 2012, p. 75). At the time, no additional measures to foster retail competition on the domestic low-voltage scale were planned; reforms were not sought until the earthquake and tsunami of 2011 exposed major issues in the administration of Japan’s electricity system (D’Alessandro et al., 2021, p. 146). 2.2.3

Fifth Electricity Sector Reform (2013–2020)

At the start of the 2010s, the massive March 2011 earthquake and tsunami posed a significant challenge to Japan. A total of around 30 GW, or 17.3% of Japan’s entire power capacity, was lost at the same time (Hayashi & Hughes, 2013, p. 88; cf. Nakano, 2011). This included many Tohoku Electric Power Company and TEPCO’s facilities, notably the TEPCO owned Fukushima Daiichi Nuclear Power Plant, which were heavily damaged. To address the significant decline in electricity capacity, both the Japanese government and the electricity utilities initiated a variety of supply- and demand-side measures. These included restoring thermal and hydro power plants and transferring electricity from other parts of Japan to support areas served by Tohoku Electric Power Company and TEPCO (Hayashi & Hughes, 2013, p. 89). This transfer was, however, hampered, since Japan’s grid frequency varies between the east, where TEPCO, Tohoku, and Hokkaido energy companies use 50 Hz, and the west, where 60 Hz is used. As a result of the restricted capacity of frequency converter stations and high-voltage direct current

2

MAKING THE ELECTRICITY MARKET LIBERALISED

47

transmission lines, only around 1000 MW could be transferred in each direction (Hayashi & Hughes, 2013, p. 89; see Fukushima et al., 2011, p. 367). Nevertheless, the government and electricity suppliers’ calls for saving electricity did not prevent TEPCO from introducing rolling blackouts in March 2011 (which were the first scheduled blackouts in Japan since the period shortly after World War II), which were eventually discontinued in April 2011 (Hayashi & Hughes, 2013, p. 89). Still, the supply–demand balance was tight in the summer of 2011, particularly in the Tokyo and Tohoku areas, prompting the government to impose mandatory rationing for large customers in these areas. This was followed by electricity conservation related to the use of air-conditioning in households, with the most effective measures being the reduction of air conditioner operation and the adjustment of temperature settings (Kimura & Nishio, 2016, p. 67). In particular, by invoking Article 27 of the Electricity Business Act, the government imposed a power consumption restriction order on larger users (those with contracts equivalent to or more than 500 kW) in TEPCO and Tohoku Electric Power Company service areas. The order was effective from July to early September 2011 and obliged large users to reduce energy use by 15% from the previous summer’s peak (see TEPCO, 2011); smaller users had the same target but no enforcement was introduced (Fujimi & Chang, 2014, p. 449). Following 2012, the fading feeling of crisis lessened these measures (see Kimura & Nishio, 2016, p. 67). The catastrophe had consequences not only for Japan’s energy mix but also its nuclear policy (Nomura, 2019, p. 44; see Sokołowski, 2015; Vivoda & Graetz, 2015), with global ramifications (see Feldhoff, 2014; Huang et al., 2018; Wittneben, 2012; Ylönen et al., 2017). Because of the Fukushima Daiichi nuclear disaster, the use of nuclear power in Japan has stalled, and concerns about the availability of electricity have grown, highlighting the fact that the power system, which has been managed by general electricity utilities on a region-by-region basis, cannot adequately respond to demand (METI, 2014, p. 60). In this situation, a flexible supply of power was more than needed, necessitating cross-regional system operation, adjusting electricity rates through competition, utilising a variety of energy sources, including dispersed capacity, and providing diverse and efficient services suited to consumers, together with supply adapted to changes in demand (see METI, 2014, p. 60). To address these issues, the government of Japan adopted the Policy on Electricity System Reform (2013). The 2013 paper outlined a blueprint for the

48

M. M. SOKOŁOWSKI

subsequent measures relating to the post-Fukushima Japanese electricity market (see Sokołowski & Kurokawa, 2022), based on assuring a secure supply of power, reducing electricity rates to the greatest degree possible, and boosting consumer and business options. In terms of stable supplies, the Policy (2013, pp. 1–2) covered the reliance on conventional energy sources with a greater introduction of renewable capacity (see Chapter 4 of this book) as well as the adoption of demand control mechanisms. With respect to electricity rates, more competition in the market was stipulated (under merit order) with the new energy producers emergence; additionally, with regard to consumer and business opportunities, a system of various options for electricity consumers including choosing suppliers, rate plans, and sources was to be established. In light of this, the Electricity Business Act (1964) was amended, and a three-step electricity reform process was implemented to improve nationwide system operation, provide full retail choice and full liberalisation of electricity generation, and separate production activities in the transmission and distribution sectors (see Government of Japan, 2013, pp. 2–4).87 As a consequence, the following steps were taken: first, the establishment of the Organisation for Cross-regional Coordination of Transmission Operators (OCCTO) in April 2015 as well the Electricity Market Surveillance Commission in September 2015—renamed as the Electricity and Gas Market Surveillance Commission (EGMSC) in April 2016; second, the implementation of full liberalisation of electricity retail sales and the introduction of the license system for power generation, transmission and distribution, and retail sales in April 2016 (METI, 2018, p. 82); and third, legal unbundling of transmission and distribution from electricity generation in April 2020 (Federation of Electric Power Companies of Japan, 2021, p. 2). The first phase strengthened the Japanese electricity sector’s regulatory framework (see Mah, 2020). The OCCTO has been guided by three aims since its creation: ensuring stable electricity supply, reducing electricity rates to the maximum extent possible, and expanding consumer and business options (OCCTO, 2021). Before the formation of OCCTO, the government was responsible for system management in terms of planning, drafting, and enforcing laws and regulations. With the creation of OCCTO, the government retained the latter, while planning and studies were transferred to the OCCTO, along with the formulation of technical rules pertaining to the sector (see Wakiyama & Kuriyama, 2018, p. 305),88 as well as providing studies and expertise in terms of system

2

MAKING THE ELECTRICITY MARKET LIBERALISED

49

operation, and preparing Long-term Policy and Cross-regional Network Development Plan (OCCTO, 2021). Prior to this phase of the electricity market, electricity utilities managed grid interconnections and balanced energy demand and supply to stabilise power supply based on the most cost-effective energy mix; since 2015, OCCTO has overseen regional grid connectivity (Wakiyama & Kuriyama, 2018, p. 304; see Ichimura, 2020). In addition to planning and managing grid operation at the national level among regional utilities (see Izui & Koyama, 2017, p. 456), the OCCTO’s tasks include balancing demand and supply (see Ichimura & Kimura, 2019; Yoshida et al., 2018, pp. 146–147), as well as developing transmission infrastructure, including frequency conversion facilities (Ichinosawa et al., 2016, p. 24).89 Concerning the second phase, the Japanese retail electricity market was completely opened in April 2016, and each consumer has been entitled to choose their own supplier since then (Ise & Yabuta, 2018, p. 75). As a result, customers with contract power of less than 50 kW, who accounted for about 40% of total power usage in Japan, became entitled to select their electricity suppliers (Shin & Managi, 2017, p. 676). Within six months of Japan’s retail market being liberalised, 1.88 million households had switched providers, and 1.76 million households had renegotiated the terms of their contracts with incumbent providers; these account for 3% and 2.8% of eligible household consumers, respectively (Shin & Managi, 2017, p. 677). In terms of geographic distribution, the Tokyo metropolitan region had the greatest switching rate (4.7%), followed by the Kansai region (3.8%) and Hokkaido (3.4%), respectively, with no switching on Okinawa, as no new suppliers were registered (Shin & Managi, 2017, p. 677). However, as the Renewable Energy Institute (REI) reports, the general electricity utilities’ sales practices of reclaiming clients who attempted to switch to other retailers have been criticised (see REI, 2020, p. 16).90 To address these concerns, the EGMSC revised its Guidelines for Electricity Retail Sales in December 2018, adding provisions prohibiting the use of contract switching information for sales purposes; priority monitoring of the retail market began in September 2019, with the new retailers asked to provide information on the examples of prices offered (see REI, 2020, p. 16). It is also worth noting that, under Japanese law, general electricity utilities involved in transmission or distribution are prohibited from utilising information about other power suppliers and users acquired throughout the course of delivering their services for reasons other than those services.91

50

M. M. SOKOŁOWSKI

Nevertheless, according to the METI (2018, p. 82), since the full liberalisation of retail power sales began in April 2016, a number of results have already been obtained, including more intense competition among existing power companies, an increase in the number of new entrants, diversified offers for power rates, and rate reductions. In the one and a half years following the liberalisation, the percentage of new power producers and suppliers of the electricity sales volume climbed from approximately 5% to about 12%, and the number of new entrants went from a little less than 300 to more than 450 (METI, 2018, pp. 82–83; see Ofuji & Tatsumi, 2016, p. 34). In this regard, the post-reform electricity system reform includes three new types of retailers entering the market: agent contractors—who bundle together small supply capacities and are subject to both balancing and profiling requirements; bundled power receivers (for apartment complexes where individuals’ low-voltage contracts are integrated into a high-voltage contract), and service contractors—who do not have supply contracts with end-users but sell electricity through service contracts (Ofuji & Tatsumi, 2016, p. 36). Apart from these three categories, there are hybrid entities that produce electricity internally and sell it to other users, as well as incumbent new power companies that retail electricity to other utilities’ supply areas (Ofuji & Tatsumi, 2016, p. 36). In terms of the third phase (legal unbundling), unlike the EU, Japan decided not to conduct unbundling in the initial stages of its electricity sector reform, which was driven by integrated generation and transmission systems believed to be essential to stable power supply, with the focus on maintaining regional monopolies as a foundation of power utility management (REI, 2020, p. 4). However, following the 2011 Fukushima accident, Japan began debating further electricity system restructuring, and the discussions on unbundling began, involving calls to take institutional measures for non-discrimination in the transmission and distribution (REI, 2020, p. 4; see Sokołowski & Kurokawa, 2022). Even so, it took nearly a decade for Japan to implement unbundling,92 and as a result of the revision of the Electricity Business Act (1964), the prohibition on performing transmission and distribution with electricity retail and wholesale was identified as one of the major shifts in Japan’s electricity system.93 Following the introduction of legal unbundling, the rules on parallel job holding in retail and wholesale by persons working in electricity transmission and distribution sectors were implemented.94 However, this has been supplemented by corporate transitional measures

2

MAKING THE ELECTRICITY MARKET LIBERALISED

51

relating to the procurement of funds and other regulatory steps to ensure a steady supply of electricity.95

2.3

Summary

Over the years, the electricity sectors of the EU and Japan have come a long way since the beginning of market reforms. After 1945 and before the integration era energy industry of the European countries was, as a rule, a highly monopolistic structure, with stiff public monopolies, and dominance of national ownership granted exclusive powers over energy production and supply, import and export, and infrastructure. This approach derived from the premise of central control over a synchronised system, which assumed critical assets for a national economy, necessitating the provision of exclusive rights in the fields of electricity generation, transmission, and distribution, and impacting administrative price fixing, and blockage of new entrants access. The functioning of vertically integrated companies, payment based on past costs, a high degree of planning, customer objectification, and, as a result, lack of competition were characteristics of these systems. In Japan, the structure of the electricity sector, built on the government’s wartime ownership of the electricity industry established by the 1950s reform, was a relatively simple regulatory framework of regional electricity utilities. These were responsible for production and distribution, and engaged in the transmission of electricity within a specific geographical area. Alongside the established wholesale utilities this closed competition structure was responsible for providing a stable supply of electricity in a stable regulatory model governed by the long-lasting Electricity Business Act (1964). The Act itself remained unchanged until 1995 when the limitations on entrance into the electricity producing and wholesale sectors, slightly liberalised the retail business, and revisited rate-making rules. In Europe, the 1990s also brought changes in the electricity sector; however, some steps were already undertaken in the 1980s. What characterises the European action on liberalisation is putting it within a framework on packages. In Japan, although specific legislative packages cannot be distinguished as clearly as in the EU, the phases of electricity market reform, as proposed in this chapter, can be observed. In Europe these were the four phases driven by energy packages of the 1990s, 2000s, and 2010s, with emphasis gradually put on extending the scope and depth of conducted actions. In Japan, the liberalisation began

52

M. M. SOKOŁOWSKI

in the 1990s with the first actions to reform the power sector, followed by the gradual continuation of the reforms with some in-between steps and moments of deliberation and hesitation (the second, third, and fourth reforms), as well as post-Fukushima momentum (the fifth reform with three phases) that accelerated changes in the electricity sector, including the market and its regulatory institutions. Thus, both the EU and Japan have taken a step-by-step approach to the liberalisation of the electricity sector. Regarding their reasons, there was a need for a market that would work well and improve the situation of energy consumers. In Japan this has been mainly driven by the price issues and high costs that hampered their international competitiveness as well as market integration and system coordination to tackle issues related to regional monopolies. In the EU, apart from electricity prices, there was a need to tackle market fragmentation and establish an internal energy market consisting of 15, then 25, and finally 27 Member States. The aim was to bring about the integration of national energy markets to improve supply security, reduce costs, and improve competitiveness, as well as enhance energy efficiency. This has required transparency and fair rules for cross-border trade and coordination, conducted at different levels, by different entities, including those performing regulatory functions, such as the ACER. Both the EU and Japan have used a variety of regulatory tools to reach these goals. To achieve changes in the electricity sector, uniform rules for electricity generation, transmission, and distribution, as well as regulatory instruments to facilitate the process were required. It demonstrates that, from the start, the energy sector has been liberalised through the employment of regulatory mechanisms, although with much different regulatory attention in the EU and Japan (see Table 2.2). In the EU, much attention has been paid to the framework for electricity transmission and distribution with a secured position of TSOs and DSOs; here, unbundling was found a useful regulatory tool. Moreover, to improve competition, certain regulatory tools in the fields of objectiveness, transparency, market access, and non-discriminatory behaviour have been adopted. Here, both the EU and Japan have opened their electricity markets enabling the switching of electricity suppliers, although at different speeds: 2007 in the EU, and 2016 in Japan. In the EU this was matched by activities aimed at strengthening the position of energy consumers, including those vulnerable, on the one hand, and those active as well as citizen energy communities on the other

2

MAKING THE ELECTRICITY MARKET LIBERALISED

53

Table 2.2 The 1990–2000s electricity sector reform in the EU and Japan (see Ogasawara, 2005, p. 4) Fields of electricity market reform

EU

Japan

Generation

Required

Required

Unrequired

Unrequired

Required Required Required Required Required Unrequired Required Required Required Required Required

Unrequired Unrequired Required Unrequired Unrequired Unrequired Unrequired Required Unrequired – Unrequired

Transmission

Retail Regulation

Founding of power exchange (energy market) Obligation of ensuring resources to supply for retail company Establishing of balancing market Establishing of ancillary service market Unbundling of accounting Unbundling of decision-making Legal unbundling Ownership unbundling Establishing an independent operator Reliability regulation Full liberalisation Establishing last resort service supplier Establishing independent regulatory authority

hand. Further advancements in non-discrimination concerned TPA, and provided access to transmission and distribution grid. It was based on published tariffs, applicable to all eligible customers, and applied objectively and without discrimination between system users, with expanded rules for grid access refusal, or relaxing limitations on the entrance into the electricity producing and wholesale sectors with competitive bidding, liberalise the retail business, and revisit rate-making rules. On the way to successive goals, certain mistakes were made. Occasionally it was necessary to take into account external circumstances, sometimes of tragic consequences (the 2011 earthquake and tsunami), to speed up actions or make decisions. Often there was a lack of ambition and consensus between individual countries (EU) or ministries (Japan). The compliance with obligations was also problematic—in the EU, it was, in particular, the incorrect implementation of the proposed provisions. In this process of change certain leaders can be pointed out—both at the level of individual countries in the EU, or in regions, cities, or energy companies in Japan. Sometimes the regulatory instruments were insufficient to deal with too difficult problems—it took time to adapt them to

54

M. M. SOKOŁOWSKI

the scale of the challenge, adjust softer instruments to market issues and offer stronger regulatory approaches. These actions, however, required institutions to perform them. While Japan has kept this power in the hands of its ministries (mainly MITI, then METI), the EU introduced a rule to establish energy regulators, which, over the years, have been granted new powers and duties. These included the powers to fix or approve tariffs, monitor market players’ activities, grid security and reliability, review operators’ plans, promote effective competition, and ensure the effectiveness of consumer protection measures, with the ability to investigate, obtain all the required information, and issue binding decisions backed up by dissuasive sanctions. Recognising the shortcomings of the existing framework on the regulators’ independence, which lacked specific rules on how this independence should be ensured, a far-reaching model of regulatory independence was proposed. It included the regulator’s functional independence of any entity, public or private, no influence on the regulator’s staff, e.g. through instructions, granting regulators the necessary legal personality, as well as financial and operational position, i.e. autonomy in budget, proper human and financial resources, and independent management. Nevertheless, a real common market based on the same regulatory tests and standards needed a framework facilitating active exchange of information, experience, and expertise, and so, different actors, including the Florence Forum, ERGEG, and finally the ACER, have been employed to coordinate actions of national regulatory authorities. System coordination also applies to Japan, especially when it comes to regional electricity utilities. Here, the role of the OCCTO should be noticed, particularly its duties connected with providing studies and expertise in terms of system operation, regional grid connectivity and long-term planning, and developing electricity transmission infrastructure. Both EU and Japan took their lessons from the California crisis, trying to avoid badly planned liberalisation of the energy sector. In the EU, the tools to prevent shortages and artificially high prices were placed in the hands of independent regulatory authorities responsible for monitoring the supply/demand balance. Japan, on the other hand, maintained a step-by-step approach towards developing an electricity market in the long run, with the focus on the consumers expectations with reliable, stable supply of electricity as their top priority. Concurrently, Japan established regulatory authorities in the energy sector (Electricity and Gas Market Surveillance Commission) driven by post-Fukushima experience.

2

MAKING THE ELECTRICITY MARKET LIBERALISED

55

Finally, recent action in the European energy agenda link climate action with electricity market reform, and with the Clean Energy Package. The former elements of a separate move on climate, including renewables and energy efficiency, have been integrated with the legislation on energy market, making the new framework oriented not just towards competitiveness and energy affordability but also towards an ambitious climate policy and clean energy. The assessment of the current regulatory framework of the European energy market, with the electricity sector as its component, shows that the focus of the internal market process has been turned to the climate component, with the regulatory aspects of market action guaranteed. In Japan, this approach has not been so clear: the 2011 earthquake and tsunami posed a significant challenge to Japan with the need to secure affordable energy production (utilising a variety of energy sources, with conventional units), develop renewable capacity, and consider further use of nuclear power plants; nevertheless, one should note the evolution of the Japanese energy policy towards low-emission. To understand the process of energy transition in the EU and Japan an insight into the reduction of emission is needed (see Chapter 3 of this book).

Notes 1. This was accomplished in the early 1990s by the enactment of six directives: Directive 90/377/EEC (1990) on price transparency, Directive 90/547/EEC (1990) and Directive 91/296/EEC (1991) on transit in electricity and gas accordingly, Directive 92/13/EEC (1992) and Directive 93/38/EEC (1993) on public procurement, as well as Directive 94/22/EC on licensing hydrocarbons (1994). 2. At that time countries such as the UK, Sweden, and Norway had already liberalised their markets to an extent wider than required by the ED I (see Wasenden, 2008, pp. 33–34). 3. See Articles 7–9 of the ED I (1996). 4. According to Article 7(5) the ED I (1996) the TSO ‘shall not discriminate between system users or classes of system users, particularly in favour of its subsidiaries or shareholders’. 5. Vertical integration means performing two or more of these activities: generation, transmission, and distribution of electricity. 6. According to Article 7(6) of ED I ‘[u]nless the transmission system is already independent from generation and distribution activities, the system operator shall be independent at least in management terms from other activities not relating to the transmission system’.

56

M. M. SOKOŁOWSKI

7. 8. 9. 10. 11. 12. 13.

14.

15.

16.

17. 18. 19.

20. 21. 22.

See Recital 32 of ED I. See Article 3(2) of ED I. See Articles 10(1) and Article 18(1)(i) of ED I. See Chapter VII of the ED I. See Article 19(1)–(3) of the ED I. Excluding Luxembourg which later reported the level of market opening in electricity at 40%. ‘Such an issue cannot be dealt with properly at national level, because it is not possible for any potential single EU tariffication mechanism, or indeed in due course the actual tariffication levels, to be regulated by 15 different authorities, each with possibly conflicting views. EU competition policy, which in any event does not prevent contemporaneous national regulation, is also limited in terms of both procedure and remedies in relation to such issues’ (Commission, 1999, p. 26). The former did not necessitate the establishment of new institutions, treaties, or rules, but instead relied on the unanimous agreement of all fifteen Member States’ regulatory authorities, which could be difficult and time-consuming to achieve, whereas the latter necessitated the creation of a new common regulatory regime (see Commission, 1999, p. 27). In general, this is in contrast to competition agencies that handle competition issues ex-post and use procedures that are not designed to deal with tariff fixing. As defined in the Article 2(11) of Directive 2003/54/EC ‘non-household customers’ were ‘any natural or legal persons purchasing electricity which is not for their own household use and shall include producers and wholesale customers’. See Articles 6 and 7 of the ED II (2003). See Annex A of ED II (2003). Other criteria which the Member States had to develop concerned the authorisations for the construction of generating capacity in their territory, and ensuring the possibility of providing new capacity or energy efficiency/demand-side management measures, see Article 6(2)(a)–(h) of ED II (2003). See Article 7(6) of the ED I (1996). See Article 20 of the ED II (2003). The ED I required Member States to establish appropriate and efficient mechanisms for regulation, control, and transparency in order to avoid any abuse of dominant position, particularly to the detriment of consumers, and any predatory behaviour, as well as to designate an entity (authority, a public body, or a private body independent of electricity generation, transmission, and distribution activities) to be responsible for the organisation, monitoring, and control of the tendering process for the construction of

2

23. 24. 25. 26. 27. 28. 29. 30. 31.

MAKING THE ELECTRICITY MARKET LIBERALISED

57

new generating capacity, as well as to settle disputes related to the negotiated access to the system, as stated in Articles 6(5), 22, and 20(3) of the ED I (1996). See Article 23(1) of the ED II (2003). See Recital 15 of preamble to the ED II (2003). See Article 23(8) to the ED II (2003). See Article 23(1)(a)–(h) of the ED II (2003). See Articles 23(5)–(6) and 23(11) of the ED II (2003). See Recital 16 of preamble to the ED II (2003). See Article 23(12) of the ED II (2003). See Article 30 of the ED II (2003). With respect to regulated energy prices, the Commission (2008, pp. 7– 8), apart from linking them with immediate distortion of competition and reduction of liquidity in wholesale markets, noted the following negative effects: [i]n the long run, regulated prices give wrong price signals to investors and thus have a negative impact on the development of new infrastructure. By setting a price level that does not allow new entrants to supply at cost-covering prices, price regulation creates a market entry barrier for alternative suppliers and thus directly threatens security of supply. … Measures for consumer protection should not be mixed with competitive instruments, they should be addressed by separate means.

32. Regarding the regulatory gap, ERGEG and the Florence Forum were able, to some extent, to improve this situation; however, the voluntary cooperation could not tackle the whole problem (Commission 2008, p. 6). 33. Following the conclusion of the legislative process in July 2009, the following legal acts were enacted: Directive 2009/72/EC (2009), Directive 2009/73/EC (2009), Regulation (EC) No 714/2009 (2009), Regulation (EC) No 715/2009 (2009), and Regulation (EC) No 713/2009 (2009) (see Martínez, 2014). 34. See Article 35 of the ED III (2009). 35. See Recital 8 of the preamble to the ED III (2009). 36. See Article 36 of the ED III (2009). 37. See Recital 37 of the preamble to the ED III (2009). 38. See Recital 34 of the preamble to the ED III (2009). 39. See Article 35 of the ED III (2009). 40. Recital 37 of the ED III (2009). 41. Recital 38 the ED III (2009). 42. See Article 37(10) of the ED III (2009).

58

M. M. SOKOŁOWSKI

43. This concerns, for instance, the grid development plans, that TSOs were to consult with the regulators with the power to require the TSOs to amend their plans, see Article 21(4)–(5) of the ED III (2009). 44. See Recital 9 of the preamble to the ED III (2009). 45. See Article 9 the ED III (2009). 46. See Article 18(6) the ED III (2009). 47. See Article 18(7) the ED III (2009). 48. See Article 19(2) the ED III (2009). Moreover, to secure properly conducted unbundling and exclude discriminatory conduct by the system operators, the compliance programme and the appointment of compliance officers were subjected to the regulators’ approval, see Articles 21(1)–(2) and Article 26(2)(d) of the ED III (2009). 49. The term ‘Energy Union’ appeared in the European debate in March 2014 as the catchphrase for a series of policy ideas, mainly related to natural gas and energy security, then become the Juncker Commission’s (2014–2019) flagship idea (see Szulecki et al., 2016, p. 552; Talus, 2017, pp. 212–213). 50. Under the Third Energy Package, the ACER was acting primarily through recommendations and opinions, while having limited decision-making rights—it could only make decisions if the national regulators asked it to or if they failed to make a decision within a specific deadline. 51. These are the recast Renewable Energy Directive (EU) 2018/2001, the revised Energy Efficiency Directive (EU) 2018/2002, the Fourth Electricity Directive (EU) 2019/944, Energy Performance of Buildings Directive 2018/844, as well as the new Internal Market for Electricity Regulation (EU) 2019/943, the Governance of the Energy Union and Climate Action Regulation (EU) 2018/1999, Risk-preparedness in the Electricity Regulation (EU) 2019/941, and the recast European Union Agency for the Cooperation of Energy Regulators Regulation (EU) 2019/942. 52. The Regulation on the Energy Union introduced integrated national energy and climate plans, which are national frameworks for developing and making public the aims, targets, and contributions of the Energy Union’s dimension (see Sokołowski, 2020b, pp. 200–201). 53. See Article 1 of the ED IV (2019). 54. See Article 3 of the EMR (2019). 55. See Article 4 of the ED IV (2019). 56. See Article 6(1)–(2) of the ED IV (2019). 57. See Article 35 of the ED IV (2019). 58. See Article 6(3) of the ED IV (2019). 59. See Article 10 of the ED IV (2019). 60. See Article 11 of the ED IV (2019).

2

MAKING THE ELECTRICITY MARKET LIBERALISED

59

61. According to the ED III (2009), this must be completed within three weeks—see Article 3(5)(a) the ED III (2009)—but no later than 2026, and the technical procedure of switching suppliers must take no more than 24 hours and be possible on any working day; see Article 12(1) of the ED IV (2019). 62. At least for households and small enterprises, there are no switching costs; see Article 12(2) of the ED IV (2019). 63. See Article 13 of the ED IV (2019). According to Article 2(18) of the ED IV (2019) aggregators combine ‘multiple customer loads or generated electricity for sale, purchase or auction in any electricity market’. 64. This right must be provided to at least household customers and microenterprises with a yearly consumption of less than 100,000 kWh; see Article 14(1) of the ED IV (2019). 65. Article 18 of the ED IV (2019). 66. See Article 3(7)–(8) of the ED III (2009). 67. See Articles 28 and 29 of the ED IV (2019). 68. Pursuant to Article 2(8) of the ED IV (2019), active customer is: a final customer, or a group of jointly acting final customers, who consumes or stores electricity generated within its premises located within confined boundaries or, where permitted by a Member State, within other premises, or who sells self-generated electricity or participates in flexibility or energy efficiency schemes, provided that those activities do not constitute its primary commercial or professional activity. 69. See Article 15(1) of the ED IV (2019). See Article 15(5) of the ED IV (2019) for active customers who operate an energy storage installation. 70. See Article 15(2) of the ED IV (2019). 71. See Article 16 of the ED IV (2019). 72. See Article 17(1)–(2) of the ED IV (2019). As defined in Article 2(48) ‘ancillary service’ is ‘a service necessary for the operation of a transmission or distribution system, including balancing and non-frequency ancillary services, but not including congestion management’. 73. See Article 17(3)(a)–(c) of the ED IV (2019). 74. See Article 17(3)(e)–(f) of the ED IV (2019). 75. According to Article 2(10) of the EMR (2019), ‘balancing’ consists of TSO’s ‘actions and processes, in all timelines, … [needed to] ensure, in an ongoing manner, maintenance of the system frequency within a predefined stability range and compliance with the amount of reserves needed with respect to the required quality’. 76. As stated in Article 5(1) of the EMR (2019):

60

M. M. SOKOŁOWSKI

[a]ll market participants shall be responsible for the imbalances they cause in the system (‘balance responsibility’). To that end, market participants shall either be balance responsible parties or shall contractually delegate their responsibility to a balance responsible party of their choice. Each balance responsible party shall be financially responsible for its imbalances and shall strive to be balanced or shall help the electricity system to be balanced. 77. 78. 79. 80. 81.

82. 83.

84.

85.

86. 87. 88.

89.

See Articles 15(2)(f), 16(3)(c), and 17(3)(d) of the ED IV (2019). See Article 16(4)(c) the ED IV (2019). See Article 32 the ED IV (2019). See Article 32(3)–(4) the ED IV (2019). These are Hokkaido Electric Power Company, Tohoku Electric Power Company, Tokyo Electric Power Company, Chubu Electric Power Company, Hokuriku Electric Power Company, Kansai Electric Power Company, Chugoku Electric Power Company, Shikoku Electric Power Company, Kyushu Electric Power Company, and Okinawa Electric Power Company. However, the Okinawa-based utility had a different post-war corporate history than the other nine utilities as it was not privatised until 1988 (see Goto & Sueyoshi, 2015, p. 341; Kikkawa, 2012, p. 1). Also known as the Electric Utility Industry Law. For example, the Tokyo Electric Power Company’s (TEPCO) income was 70% more than the corresponding period of the preceding year (Shimazaki, 1994, p. 87). Nambu (2000, p. 78) compares the status of new entrants in the bidding system to subcontractors who manufacture products for their parent company but only sell the final product under the parent company’s brand—the subcontractors do not have their own market and cannot compete with their parent firm. President of TEPCO, Naoya Minami, declared in 2001 that his company could accept full liberalisation of electricity retail market but would never accept unbundling (Okamoto, 2017, p. 190). The process of forming it began in 2003, and the ESCJ was officially established in 2004 (Watanabe, 2005, p. 926). See Article 11(1) of the Electricity Business Act (1964). For example, as part of the unbundling of the transmission and distribution, OCCTO devised control rules to meet power supply for power demand when a shortfall of the downward balancing power would arise (Ichimura & Kimura, 2019, p. 424). Strengthening power transmission infrastructure, such as frequency conversion facilities that allow power transfer between eastern (50 Hz) and western (60 Hz) Japan, along with interconnection lines, are aimed at dealing with a tightening of the power supply–demand balance, such

2

MAKING THE ELECTRICITY MARKET LIBERALISED

61

as a disaster, as well as an expansion of electricity trading across regions and an increase in the introduction of renewables, the output of which fluctuates (METI, 2014, p. 60). 90. These include information that is required for switching acquired by utilities’ retail division from the general transmission/distribution division to avoid the switch by offering the consumer a cheaper price than the new retailer; another issue emerges when the market-dominant regional electricity utility provides a consumer a large rate reduction below cost, which is seen improper discounting (REI, 2020, p. 16). 91. See Article 23(1)(ii) of the Electricity Business Act (1964). 92. The following comment accurately depicts the state of debate in Japan over the adoption of unbundling: [t]he Japanese government should not make any quick decision, as found in its current discussions, regarding the functional separation. It is necessary for us to discuss positive and negative aspects on the functional separation in a long time horizon (i.e., at least five to ten years) because once the structural change is implemented, it is difficult and costly to return to the original benefit of the integrated structure, even if later the direction of the change reveals different from what is currently expected. (Goto et al., 2013, p. 198) 93. See Article 11(2) of the Electricity Business Act (1964). 94. See Article 11(2)(i) of the Electricity Business Act (1964). 95. See Article 11(2)(ii)–(iii) of the Electricity Business Act (1964).

References Alba, J. J., et al. (2021). Market design and regulation to encourage demand aggregation and participation in European energy markets. In F. Sioshansi (Ed.), Variable generation, flexible demand (pp. 393–410). Elsevier. Anchustegui, I. H., & Formosa, A. (2020). Regulation of electricity markets in Europe in light of the Clean Energy Package: Prosumers and demand response. In T. S. Hunter (Ed.), Routledge handbook of energy law (pp. 90– 106). Routledge. Asano, H. (2006). Regulatory reform of the electricity industry in Japan: What is the next step of deregulation? Energy Policy, 34(16), 2491–2497. Asano, H., et al. (2016). Electricity grid infrastructure. In Y. Kato (Ed.), Energy technology roadmaps of Japan (pp. 185–195). Springer. Barta, J. (2020). Consumer protection on the fields of electricity service. Journal of Agricultural and Environmental Law, 15, 37–85. Beyer, S. (2015). Moving towards an Energy Union: Recommendations from the IEA in-depth review of the EU. European Energy Journal, 5(2), 37.

62

M. M. SOKOŁOWSKI

Bonacina, M., Creti, A., & Dorigoni, S. (2011). How energy works: Gas and electricity markets in Europe. In I. Galarraga, M. González-Eguino, & A. Markandya (Eds.), Handbook of sustainable energy (p. 99). Edward Elgar. Boute, A. (2015). Regulatory stability under Russian and EU energy law. Maastricht Journal of European and Comparative Law, 22(4), 506–529. Bouzarovski, S. (2010). Post-socialist energy reforms in critical perspective: Entangled boundaries, scales and trajectories of change. European Urban and Regional Studies, 17 (2), 167–182. Bouzarovski, S. (2018). Energy poverty policies at the EU level. In S. Bouzarovski (Ed.), Energy poverty (pp. 41–73). Springer. Bouzarovski, S., Petrova, S., & Sarlamanov, R. (2012). Energy poverty policies in the EU: A critical perspective. Energy Policy, 49, 76–82. Brunekreeft, G., & Keller, K. (2004). Competition in European electricity supply: Issues and obstacles. In J. Eekhoff (Ed.), Competition policy in Europe (pp. 161–195). Springer. Buch-Hansen, H., & Wigger, A. (2011). The politics of European competition regulation: A critical political economy perspective. Routledge. Buschle, D., & Westphal, K. (2018). A challenge to governance in the EU: Decarbonization and energy security. European Energy Journal, 8(3–4), 53– 64. Cameron, P. D. (2007). Competition in energy markets: Law and regulation in the European Union (2nd ed.). Oxford University Press. Campbell, A. (1986). The Single European Act and the implications. International & Comparative Law Quarterly, 35(4), 932–939. Carlini, E. M., et al. (2019). EU transition in power sector: How RES affects the design and operations of transmission power systems. Electric Power Systems Research, 169, 74–91. Chick, M. (2007). Electricity and energy policy in Britain, France and the United States since 1945. Edward Elgar Publishing. Coase, R. H. (1950). The nationalization of electricity supply in Great Britain. Land Economics, 26(1), 1–16. Commission. (1998, April 7). Report from the Commission to the Council and the European Parliament on state of liberalisation of the energy markets. Brussels, COM (1998) 212 final. Commission. (1999, April 16). Second report to the Council and the European Parliament on harmonisation requirements: Directive 96/92/EC concerning common rules for the internal market in electricity. COM (1999) 164 final. Commission. (2000, May 16). Communication from the Commission to the Council and the European Parliament recent progress with building the internal electricity market. COM (2000) 297 final.

2

MAKING THE ELECTRICITY MARKET LIBERALISED

63

Commission. (2001, March 13). Communication from the Commission to the Council and the European Parliament completing the Internal Energy Market. COM (2001) 125 final. Commission. (2005, January 5). Report from the Commission: Annual report on the implementation of the gas and electricity internal market. COM (2004) 863 final. Commission. (2007a, January 10). Communication from the Commission: Inquiry pursuant to Article 17 of Regulation (EC) No. 1/2003 into the European gas and electricity sectors (final report). COM (2006) 851 final. Commission. (2007b, January 10). Communication from the Commission to the European Council and the European Parliament an energy policy for Europe. COM (2007) 1 final. Commission. (2007c, September 19). Proposal for a Directive of the European Parliament and of the Council Amending Directive 2003/54/EC Concerning Common Rules for the Internal Market in Electricity. COM (2007) 528 final. Commission. (2008, April 15). Report from the Commission to the Council and the European Parliament progress in creating the internal gas and electricity market. COM (2008) 192 final. Commission. (2015, February 25). Communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee, the Committee of the Regions and the European Investment Bank a framework strategy for a resilient Energy Union with a forwardlooking climate change policy. COM (2015) 80 final. Commission. (2016, November 30). Communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee, the Committee of the Regions and the European Investment Bank Clean Energy for All Europeans. COM (2016) 860 final. Commission. (2017). Clean energy for all Europeans package, Energy—European Commission. Available at: https://ec.europa.eu/energy/topics/energystrategy/clean-energy-all-europeans_en. Accessed 27 Nov 2021. Council Directive 90/377/EEC of 29 June 1990 concerning a Community procedure to improve the transparency of gas and electricity prices charged to industrial end-users (1990). Council Directive 90/547/EEC of 29 October 1990 on the transit of electricity through transmission grids (1990). Council Directive 91/296/EEC of 31 May 1991 on the transit of natural gas through grids (1991). Council Directive 92/13/EEC of 25 February 1992 coordinating the laws, regulations and administrative provisions relating to the application of Community rules on the procurement procedures of entities operating in the water, energy, transport and telecommunications sectors (1992).

64

M. M. SOKOŁOWSKI

Council Directive 93/38/EEC of 14 June 1993 coordinating the procurement procedures of entities operating in the water, energy, transport and telecommunications sectors (1993). Crisan, A., & Kuhn, M. (2017). The energy network: Infrastructure as the hardware of the Energy Union. In S. S. Andersen, A. Goldthau, & N. Sitter (Eds.), Energy union: Europe’s new liberal mercantilism? (pp. 165–182). Palgrave Macmillan. Cumbers, A. (2019). A tale of two nationalisations: Experiences of post 1945 public ownership in the UK and France compared. International Journal of Public Policy, 15(1–2), 5–20. D’Alessandro, K., Dargusch, P., & Chapman, A. (2021). Disruption, disaster and transition: Analysis of electricity usage in Japan from 2005 to 2016. International Journal of Sustainable Energy Planning and Management, 31, 143–160. de Almeida, L. (2020). Standardization of standard contracts: Fairness in EU energy exchanges. In M. Cantero Gamito & H.-W. Micklitz (Eds.), The role of the EU in transnational legal ordering (pp. 155–179). Edward Elgar Publishing. Delvaux, B., Van Driessche, L., & Taton, X. (2014). Federal implementation of the EU third energy package survives constitutional test. European Energy and Environmental Law Review, 23(1), 29–34. Directive 94/22/EC of the European Parliament and of the Council of 30 May 1994 on the conditions for granting and using authorizations for the prospection, exploration and production of hydrocarbons (1994). Directive 2009/72/EC of the European Parliament and of the Council of 13 July 2009 concerning common rules for the internal market in electricity and repealing Directive 2003/54/EC (2009) OJ L 211, 14.8.2009. Directive 2009/73/EC of the European Parliament and of the Council of 13 July 2009 concerning common rules for the internal market in natural gas and repealing Directive 2003/55/EC (2009). Dobbins, A., et al. (2019). Strengthening the EU response to energy poverty. Nature Energy, 4(1), 2–5. Eberlein, B. (2003). Regulating cross-border trade by soft law? The “Florence Process” in the supranational governance of electricity markets. Journal of Network Industries, 4(2), 137–155. o-h¯ o]. (1964). Act No. 170, Electricity Business Act [電気事業法, denki jigy¯ 11.7.1964. Federation of Electric Power Companies of Japan. (2021). Electricity review Japan. Feldhoff, T. (2014). Post-Fukushima energy paths: Japan and Germany compared. Bulletin of the Atomic Scientists, 70(6), 87–96. Fitzmaurice, J. (1990). Austrian politics and society today. Palgrave Macmillan.

2

MAKING THE ELECTRICITY MARKET LIBERALISED

65

Fraile Balbin, P. (1999). Spain: Authoritarian industrial policy. In J. ForemanPeck & G. Federico (Eds.), European industrial policy: The twentieth-century experience (pp. 233–267). Oxford University Press. Frost, R. L. (1985). Economists as nationalised sector managers: Reforms of the electrical rate structure in France, 1946–1969. Cambridge Journal of Economics, 9(3), 285–300. Fujimi, T., & Chang, S. E. (2014). Adaptation to electricity crisis: Businesses in the 2011 Great East Japan triple disaster. Energy Policy, 68, 447–457. Fukushima, Y., et al. (2011). Tackling power outages in Japan: The earthquake compels a swift transformation of the power supply. Journal of Chemical Engineering of Japan, 44(6), 365–369. Gerig, M., & Vasconcelos, B. (2015). The EU Energy Union strategy: Will it finally complete the EU internal energy market? Renewable Energy Law and Policy Review, 6(3), 183–190. Gillingham, J. (1991). Jean Monnet and the European coal and steel community: A preliminary appraisal. In D. Brinkley & C. Hackett (Eds.), Jean Monnet: The Path to European unity (pp. 129–162). Palgrave Macmillan. https://doi. org/10.1007/978-1-137-12050-2_5. Goldberg, S., & Eckenroth, A. (2021). Governance of the energy market in the European Union. In M. M. Roggenkamp, K. J. de Graaf, & R. C. Fleming (Eds.), Elgar encyclopedia of environmental law (pp. 169–179). Edward Elgar Publishing. Goto, M., Inoue, T., & Sueyoshi, T. (2013). Structural reform of Japanese electric power industry: Separation between generation and transmission & distribution. Energy Policy, 56, 186–200. Goto, M., & Sueyoshi, T. (2015). Electric power market reform in Japan after Fukushima Daiichi nuclear plant disaster: Issues and future direction. International Journal of Energy Sector Management, 9(3), 336–360. Government of Japan. (2013). Policy on electricity system reform. Grabas, C. (2014). Planning the economic miracle? Industrial policy in Italy between boom and crisis, 1950–1975. In C. Grabas & A. Nützenadel (Eds.), Industrial policy in Europe after 1945: Wealth, power and economic development in the Cold War (pp. 134–161). Palgrave Macmillan. Grabas, C., & Nützenadel, A. (2013). Industrial policies in Europe in historical perspective (Working Paper). WWWforEurope. Gray, D. (1995). Reforming the energy sector in transition economies: Selected experience and lessons (World Bank Discussion Papers). World Bank. Haber, H. (2018). Liberalizing markets, liberalizing welfare? Economic reform and social regulation in the EU’s electricity regime. Journal of European Public Policy, 25(3), 307–326. https://doi.org/10.1080/13501763.2016.1249012 Hancher, L., Larouche, P., & Lavrijssen, S. (2003). Principles of good market governance. Journal of Network Industries, 4, 355–389.

66

M. M. SOKOŁOWSKI

Harayama, H., & Katsuda, S. (2007). 改正電気事業法下における電力産業の望 ましい競争政策 [Desirable competition policy of the electric power industry under the revised Electricity Business Act]. 東海大学紀要 教養学部 [Journal of the Faculty of Liberal Arts, Tokai University], 38, 83–95. Haverbeke, D., Henry, F., & Vandorpe, W. (2009). Alternative modes of resolution in the Belgian energy sector. In Association for International Arbitration (Ed.), Alternative dispute resolution in the energy sector (pp. 75–94). Maklu. Haverbeke, D., Naesens, B., & Vandorpe, W. (2010). European energy markets and the new Agency for Cooperation of Energy Regulators. Journal of Energy & Natural Resources Law, 28(3), 403–430. Hayashi, M., & Hughes, L. (2013). The policy responses to the Fukushima nuclear accident and their effect on Japanese energy security. Energy Policy, 59, 86–101. https://doi.org/10.1016/j.enpol.2012.08.059 Hesselman, M. (2021). Energy poverty and household access to energy services in international, regional and national law. In M. M. Roggenkamp, K. J. de Graaf, & R. C. Fleming (Eds.), Energy law, climate change and the environment: Elgar encyclopedia of environmental law. Edward Elgar Publishing. Huang, L., et al. (2018). The changing risk perception towards nuclear power in China after the Fukushima nuclear accident in Japan. Energy Policy, 120, 294–301. Hughes, L. (2016). Renegotiating Japan’s energy compact. In C. Hager & C. H. Stefes (Eds.), Germany’s energy transition: A comparative perspective (pp. 165– 184). Palgrave Macmillan. Huhta, K. (2020). Trust in the invisible hand? The roles of the state and the markets in EU energy law. The Journal of World Energy Law & Business, 13(1), 1–11. Humphreys, P., & Padgett, S. (2006). Globalization, the European Union, and domestic governance in telecoms and electricity. Governance, 19(3), 383–406. Ichimura, S. (2020). Utilization of cross-regional interconnector and pumped hydro energy storage for further introduction of solar PV in Japan. Global Energy Interconnection, 3(1), 68–75. https://doi.org/10.1016/j.gloei.2020. 03.010 Ichimura, S., & Kimura, S. (2019). Present status of pumped hydro storage operations to mitigate renewable energy fluctuations in Japan. Global Energy Interconnection, 2(5), 423–428. https://doi.org/10.1016/j.gloei.2019.11.017 Ichinosawa, M., et al. (2016). Solutions for changes to crossregional grid operation improving from electricity system reform. Hitachi Review, 65(4), 21–29. Ikeda, S. S. (2019). Illiquidity in the Japan electric power exchange. Journal of Commodity Markets, 14, 16–39.

2

MAKING THE ELECTRICITY MARKET LIBERALISED

67

Ise, K., & Yabuta, M., et al. (2018). Structural changes of the electricity market in Japan: Theoretical analysis of consumers’ eco-friendly behavior. In M. Hosoe (Ed.), Applied analysis of growth, trade, and public policy: Ten years of international academic exchanges between JAAE and KEBA (pp. 73–92). Springer. Izui, Y., & Koyama, M. (2017). Future energy and electric power systems and smart technologies. IEEJ Transactions on Electrical and Electronic Engineering, 12(4), 453–464. Jevnaker, T. (2015). Pushing administrative EU integration: The path towards European network codes for electricity. Journal of European Public Policy, 22(7), 927–947. Jones, C. (2010). Introduction. In The internal energy market: The Third Liberalisation package (3rd ed., pp. 1–14). Claeys & Casteels (EU Energy Law). Jovanovi´c, M. N. (2005). The economics of European integration: Limits and prospects. Edward Elgar Publishing. Kerscher, S., & Arboleya, P. (2022). The key role of aggregators in the energy transition under the latest European regulatory framework. International Journal of Electrical Power & Energy Systems, 134, 107361. Kibune, H. (2019). Regulatory reform of energy and economic growth in Japan. International Journal of Economic Policy Studies, 13(1), 27–41. Kikkawa, T. (2012). The history of Japan’s electric power industry before World War II. Hitotsubashi Journal of Commerce and Management, 46(1), 1–16. Kimura, O., & Nishio, K.-I. (2016). Responding to electricity shortfalls: Electricity-saving activities of households and firms in Japan after Fukushima. Economics of Energy & Environmental Policy, 5(1), 51–72. Kroes, N. (2007). Improving competition in European energy markets through effective unbundling. Fordham International Law Journal, 31(5), 1387–1441. Larsen, A., et al. (2006). Independent regulatory authorities in European electricity markets. Energy Policy, 34(17), 2858–2870. Leal-Arcas, R. (2019). Solutions for sustainability how the international trade, energy and climate change regimes can help. Springer. Lecoque, D. (2011). Ownership unbundling of electricity transmission networks. European Energy & Environmental Law Review, 20(5), 207–230. Lombay, J. (1988). The Single European Act. Boston College International and Comparative Law Review, 11, 31. Mah, D. N. (2020). Conceptualising government-market dynamics in sociotechnical energy transitions: A comparative case study of smart grid developments in China and Japan. Geoforum, 108, 148–168. Maher, I., & Stefan, O. (2019). Delegation of powers and the rule of law: Energy justice in EU energy regulation. Energy Policy, 128, 84–93.

68

M. M. SOKOŁOWSKI

Mäntysaari, P. (2015). EU electricity trade law: The legal tools of electricity producers in the internal electricity market. Springer. Martínez, F. C. (2014). The EUenergy market regulation puzzle: Is there still a way out. Renewable Energy Law and Policy Review, 5(2), 121–129. Meeus, L., Purchala, K., & Belmans, R. (2005). Development of the internal electricity market in Europe. The Electricity Journal, 18(6), 25–35. METI. (2014, April). Strategic energy plan. METI. (2018, July). Strategic energy plan. Nakajima, T. (2013). Inefficient and opaque price formation in the Japan Electric Power Exchange. Energy Policy, 55, 329–334. Nakano, J. (2011). Japan’s energy supply and security since the March 11 earthquake. Available at: https://www.csis.org/analysis/japans-energy-supply-andsecurity-march-11-earthquake. Accessed 19 Nov 2021. Nakano, M., & Managi, S. (2008). Regulatory reforms and productivity: An empirical analysis of the Japanese electricity industry. Energy Policy, 36(1), 201–209. Nambu, T. (2000). The liberalization of the Japanese electric power industry. In M. Tsuji, S. V. Berg, & M. G. Pollitt (Eds.), Private initiatives in infrastructure: Priorities, incentives, and performance (pp. 75–85). Institute of Developing Economies. Noka, V., & Cludius, J. (2021). Energy vulnerability and energy poverty: Experience and approaches in the EU (Working Paper 9). Oeko-Institut. Nomura, M. (2019). Security of electricity supply after liberalization: Implications of the experience of UK market reform. International Journal of Economic Policy Studies, 13(1), 43–64. Nowak, B. (2010). Energy market of the European union: Common or segmented? The Electricity Journal, 23(10), 27–37. OCCTO. (2021). Role of OCCTO in the electricity system reform. Available at: https://www.occto.or.jp/en/about_occto/about_occto.html. Accessed 18 Nov 2021. Ofuji, K., & Tatsumi, N. (2016). Wholesale and retail electricity markets in Japan: Results of market revitalization measures and prospects for the current. Economics of Energy & Environmental Policy, 5(1), 31–50. Ogasawara, J. (2005). Current status and Evaluation of Electricity market liberalization in Japan, USA and Europe. Regular Research Briefing Session Report Summary 391. IEEJ. Okamoto, T. (2017). Reorganization, deregulation, and liberalization: Postwar development of the Japanese electric power industry and its change after 11 March 2011. Technology and Culture, 58(1), 182–193. Overland, I. (2019). EU climate and energy policy: New challenges for old energy suppliers. In J. M. Godzimirski (Ed.), New political economy of energy

2

MAKING THE ELECTRICITY MARKET LIBERALISED

69

in Europe: Power to project, power to adapt (pp. 73–102). Springer International Publishing (International Political Economy Series). https://doi.org/ 10.1007/978-3-319-93360-3_4 Paiho, S., et al. (2021). Towards cross-commodity energy-sharing communities— A review of the market, regulatory, and technical situation. Renewable and Sustainable Energy Reviews, 151, 111568. Palade, D. (2021). Small aggregators in the EU internal energy market. FAIMA Business & Management Journal, 9(1), 16–27. Panke, D., & Haubrich-Seco, M. (2016). EU and supranational governance. In C. Ansell & J. Torfing (Eds.), Handbook on theories of governance (pp. 499– 513). Edward Elgar Publishing. Peng, D., & Poudineh, R. (2019). Electricity market design under increasing renewable energy penetration: Misalignments observed in the European Union. Utilities Policy, 61, 100970. Polo, M., & Scarpa, C. (1997). The Italian electricity sector between privatization and the fear of competition. In M. Baldassarri & A. Macchiati (Eds.), The privatization of public utilities: The case of Italy (pp. 143–175). Palgrave Macmillan. Praduroux, S., & Talus, K. (2008). The third legislative package and ownership unbundling in the light of the European fundamental rights discourse. Competition and Regulation in Network Industries, 9(1), 3–28. Proedrou, F. (2018). Designing a steady-state energy policy. In F. Proedrou (Ed.), Energy policy and security under climate change (pp. 57–107). Palgrave Macmillan. Ramos, A., Tuovinen, M., & Ala-Juusela, M. (2021). Battery Energy Storage System (BESS) as a service in Finland: Business model and regulatory challenges. Journal of Energy Storage, 40, 102720. Regulation (EC) No 713/2009 of the European Parliament and of the Council of 13 July 2009 establishing an Agency for the Cooperation of Energy Regulators (2009). Regulation (EC) No 714/2009 of the European Parliament and of the Council of 13 July 2009 on conditions for access to the network for cross-border exchanges in electricity and repealing Regulation (EC) No 1228/2003 (2009). Regulation (EC) No 715/2009 of the European Parliament and of the Council of 13 July 2009 on conditions for access to the natural gas transmission networks and repealing Regulation (EC) No 1775/2005 (2009). REI. (2020). Recommendations for power system restructuring: Toward further deployment of renewables. Roggenkamp, M. M., & Boisseleau, F. (2005). The liberalisation of the EU electricity market and the role of power exchanges. In M. M. Roggenkamp (Ed.), The regulation of power exchanges in Europe (pp. 1–28). Intersentia.

70

M. M. SOKOŁOWSKI

Rott, P. (2007). Consumers and services of general interest: Is EC consumer law the future? Journal of Consumer Policy, 30(1), 49–60. Sawa, T., et al. (2008). A fast market splitting matching method for the spot electric power market. Electrical Engineering in Japan, 165(4), 21–29. Schmidt, S. K. (1999). Mastering differences: The Franco-German alliance and the liberalisation of European electricity markets. In D. Webber (Ed.), The Franco-German relationship in the European Union (pp. 60–76). Routledge. Scholz, U., & Vohwinkel, T. (2016). The application of EU competition law in the energy sector. Journal of European Competition Law & Practice, 7 (1), 56–71. Shimazaki, M. (1994). Liberalization of the Japanese electricity market. The Journal of Energy and Development, 20(1), 79–96. Shin, K. J., & Managi, S. (2017). Liberalization of a retail electricity market: Consumer satisfaction and household switching behavior in Japan. Energy Policy, 110, 675–685. Shiraishi, T. (2012). The electric power industry and competition law in Japan. Soft Law Journal, 19, 75–84. Single European Act. (1986). OJ L 169, 29.6.1987. Sitter, N. (2000). The liberalisation of European Union energy markets: Common policy and plural institutions. In Paper for the Political Studies Association. UK 50th Annual Conference (pp. 10–13). Soininen, N., & Huhta, K. (2021). Law for decentralized electricity systems: Lessons from complexity theory. In R. C. Fleming, K. Huhta, & L. Reins (Eds.), Sustainable energy democracy and the law (pp. 77–98). Brill Nijhoff. Sokołowski, M. M. (2015). Priorities of energy policy of Japan under Abenomics. In M. Sitek & M. Ł˛eski (Eds.), Opportunities for cooperation between Europe and Asia (pp. 227–240). WSGE. Sokołowski, M. M. (2016). Regulation in the European electricity sector. Routledge. Sokołowski, M. M. (2018a). Burning out coal power plants with the Industrial Emissions Directive. The Journal of World Energy Law & Business, 11(3), 260–269. Sokołowski, M. M. (2018b). European law on the energy communities: A long way to a direct legal framework. European Energy & Environmental Law Review, 27 (2), 60–70. Sokołowski, M. M. (2020a). Balancing energy regulation: A day-watchman approach. In R. Grzeszczak (Ed.), Economic freedom and market regulation: In search of proper balance (pp. 167–186). Nomos. Sokołowski, M. M. (2020b). European law on combined heat and power. Routledge.

2

MAKING THE ELECTRICITY MARKET LIBERALISED

71

Sokołowski, M. M. (2020c). Renewable and citizen energy communities in the European Union: How (not) to regulate community energy in national laws and policies. Journal of Energy & Natural Resources Law, 38(3), 289–304. Sokołowski, M. M., & Kurokawa, S. (2022). Energy justice in Japan’s energy transition: Pillars of just 2050 carbon neutrality. Journal of World Energy Law & Business [Preprint]. Szulecki, K., et al. (2016). Shaping the ‘Energy Union’: Between national positions and governance innovation in EU energy and climate policy. Climate Policy, 16(5), 548–567. Takase, K., & Suzuki, T. (2011). The Japanese energy sector: Current situation, and future paths. Energy Policy, 39(11), 6731–6744. Talus, K. (2013). EU energy law and policy: A critical account. Oxford University Press. Talus, K. (2017). Old problems and new challenges will the Energy Union provide the answers. European Investment Law and Arbitration Review, 2(1), 211. Taniguchi, M. (2013). The impact of liberalization on the production of electricity in Japan. Procedia Economics and Finance, 5, 712–721. TEPCO. (2011). Press release | Invocation of Article 27 of Electricity Business Act. Available at: https://www.tepco.co.jp/en/press/corp-com/release/110 52507-e.html. Accessed 9 Nov 2021. TEPCO. (no date). Liberalization of the electric power market. Available at: https://www.tepco.co.jp/en/hd/about/ir/know/liberalization-e. html. Accessed 9 Nov 2021. Turner, T. (2018). Political change, ideology and generational influences on attitudes to state ownership of business in European democracies. European Politics and Society, 19(4), 435–450. Vasconcelos, J. (2005). Towards the internal energy market: How to bridge a regulatory gap and build a regulatory framework. European Review of Energy Markets, 1(1), 1–17. Vinois, J.-A. (2017). The road to Energy Union. In S. S. Andersen, A. Goldthau, & N. Sitter (Eds.), Energy union: Europe’s new liberal mercantilism? (pp. 27–50). Palgrave Macmillan. Vivoda, V., & Graetz, G. (2015). Nuclear policy and regulation in Japan after Fukushima: Navigating the crisis. Journal of Contemporary Asia, 45(3), 490– 509. Wada, K. (2006). Electricity liberalization and reliability assurance: The Japanese and US approaches through the transitional periods. IEEJ. Wasenden, O.-H. B. (2008). EU market abuse regulation in energy markets. Cappelen.

72

M. M. SOKOŁOWSKI

Wakiyama, T., & Kuriyama, A. (2018). Assessment of renewable energy expansion potential and its implications on reforming Japan’s electricity system. Energy Policy, 115, 302–316. Watanabe, T. (2005). 電力系統利用協議会の状況 [Status of the Electric Power System Council of Japan (ESCJ)]. 電気学会論文誌B (電力・エネルギー部門 誌) [IEEJ Transactions on Power and Energy], 125(10), 926–929. Willis, F. R. (1965). France, Germany, and the New Europe, 1945–1967 . Stanford University Press. Wittneben, B. B. (2012). The impact of the Fukushima nuclear accident on European energy policy. Environmental Science & Policy, 15(1), 1–3. Ylönen, M., et al. (2017). The (de)politicisation of nuclear power: The Finnish discussion after Fukushima. Public Understanding of Science, 26(3), 260–274. Yoshida, K., et al. (2018). Scheduled operation of wind farm with a batteryenergy-storage system considering ramp events. Journal of International Council on Electrical Engineering, 8(1), 145–155.

CHAPTER 3

Making the Electricity Sector Emission-Free

This chapter analyses European and Japanese efforts to reduce greenhouse gas emissions, and examines the early attempts to counter industrial emissions such as NOx and SO2 , as well as a recent policy agenda for CO2 reduction. This chapter also presents a discussion on a range of different regulatory measures applied over the years in Europe and Japan. Among them are emission licences, standards, emission trade and allowances, and taxation as methods for limiting the negative environmental and climate effects of electricity production in the EU and Japan. Furthermore, this chapter constitutes a platform showcasing the regulatory changes with such elements as policy developments under the frameworks of the EU Climate-Energy Package and Clean Energy Package, Japanese Long-Term Strategy Under the Paris Agreement, European Green Deal, and Japanese 2050 Carbon Neutrality. This chapter delves down into the history of the regulatory action on the reduction of emissions to make the electricity sector more environmentally friendly, sustainable and clean, with less emissions under various frameworks: international, national, and regional.

© The Author(s), under exclusive license to Springer Nature Switzerland AG 2022 M. M. Sokołowski, Energy Transition of the Electricity Sectors in the European Union and Japan, https://doi.org/10.1007/978-3-030-98896-8_3

73

74

M. M. SOKOŁOWSKI

3.1 Reducing Emissions in the EU’s Energy Transition History demonstrates that, for the European Union, an action on the environment and climate change is extremely significant. This attitude may be described as pro-environmental, i.e. creating a regulation, exerted by the EU’s institutions in the energy sector, aimed at initiating an activity in which the environment, with its natural resources, should be preserved, with respect to the sustainability (Sokołowski, 2016, p. 203). Furthermore, in addition to environmental protection, the European agenda distinguishes a separate, very important policy objective: climate change, and addresses it through a range of policy measures (see Sokołowski, 2016, p. 203). This way, the dedicated regulatory model is pro-environmental and pro-climate. This is supported by a number of actions and declarations taken by the EU at various levels. In this light, energy is a key factor in achieving sustainable development (see Commission, 1997, p. 3; 2010b, p. 6), as it is heavily burdened with GHG emissions—one of the main threats to sustainable development (see Commission, 2001, p. 4)—and climate change with other environmental problems are linked to energy production and use (see Commission, 2002, p. 12). This necessitates the combination of energy and environmental goals (see Commission, 1998, p. 7); the same applies to climate and energy policy integration (see Commission, 2008, pp. 3–4), both at the national and subnational levels, to contribute in a consistent manner to the accomplishment of the SDGs at a national and international level (see Commission, 2015, p. 5). Nevertheless, the process of the integration of environmental protection into other elements of the European policy agenda is a consequence of the 1980s and 1990s treaty amendments.1 First, the Single European Act (1986) created a framework for greater integration of environmental policy with other areas (see Zacker, 1991),2 by orientating the Community’s action towards preservation, protection, and improvement of the quality of the environment, with a prudent and rational utilisation of natural resources, and implementing the rectification of environmental damages under the polluter pay rule. Further integration was then introduced by the Treaty of Amsterdam (1997)3 (see Massai, 2012, p. 72). In effect, environmental protection requirements were incorporated into the definition and implementation of Community policies and activities referred to in Article 3 of TEC, such as commercial, agriculture,

3

MAKING THE ELECTRICITY SECTOR EMISSION-FREE

75

and fisheries, transportation, competition, and research and development, in order to promote sustainable development (see Grimeaud, 2000; Wasmeier, 2001). These actions, however, were the result of a preceding series of policy and legislative events. 3.1.1

The 1970s Anti-Pollution Move and the 1980s Regulatory Action

The European agenda on GHG has its origins in the 1970s. The Community (1973), in the first of a series of action programmes on the environment,4 recognised the need to address energy production and atmospheric pollution (from fuel combustion in fixed plants and refineries, domestic heating, and internal combustion engines), water pollution (from the discharge of cooling water and pollutants), and thermal pollution (from water and air from electricity produced in power plants). This action, according to the Council (1973), was to conduct a variety of examinations and research on the many types of pollutants and nuisances in question (covering, inter alia, the harm they cause, the costs associated with them, the means to combat them, or the cost of steps to decrease them) in order to provide the foundation for fuel policy decisions. Further discussions and decisions, based on the Commission’s report (1974) that provided certain policy and regulatory options, were to address specific environmental issues related to the energy sector, such as the siting of new power plants, thermal discharges, reducing sulphur dioxide emissions into the atmosphere, and implementing preventive measures to reduce sources of pollution caused by nitrogen oxides (see Council, 1975). These means were intended to harmonise the policy for the resolution of environmental problems associated with energy, with the steps outlined in the Community action programmes on the environment (Council, 1973, 1977, 1983) taken into account (see Magdonelle, 1983, pp. 193– 194). To improve the protection of human health and the environment, Council Directive 80/779/EEC (1980) later amended (1989),5 established limit values and guide values6 for sulphur dioxide and suspended particulates in the atmosphere, as well as the conditions for their application (see Ermanski, 1991). To combat the discharge of air pollutants, which may have an adverse effect, and contribute to the reduction of air pollution the Community (1981) joined the international long-range transboundary air pollution regime (1979). Following that, Community

76

M. M. SOKOŁOWSKI

legislation determining the allowable volumes of lead (1982) and nitrogen ˇ dioxide in the air (1985) was enacted (see Cavoški, 2017, p. 259). The 1980s also saw the establishment of a dedicated Community regime for industrial emissions (see Sokołowski, 2018). The Council Directive 84/360/EEC (1984) formed the first European legal framework for industrial plant air pollution (Ramus, 1991). Under this regime, thermal power plants (excluding nuclear power plants) and other combustion installations with the nominal heat output of more than 50 MW required authorisation from the competent authorities prior to operation and after any substantial modifications.7 This system was expanded with the passage of the Directive on controlling emissions from large combustion plants (1988) (LCP Directive). It established new obligations for electricity, including SO2 and NOX emission standards, as well as SO2 and NOX emission ceilings—reduction targets, with programmes for the progressive reduction of total annual emissions from existing plants by 1990 (see Sokołowski, 2016, p. 204). 3.1.2

The First European CO2 Action and Its Legislative Outcomes

The international activity connected with the developments around climate change and its consequences (see Brönnimann, 2018), global warming, and greenhouse effect, with a negative role played by chlorofluorocarbon (CFC) emissions (see Ko et al., 1993; Morrisette, 1989), prompted the Community to be more cautious in this regard. The Council (1978) urged that all appropriate measures be taken to ensure that the industry located within the Community does not increase its production capacity for certain types of CFC.8 This was later confirmed in Decision 80/372/EEC (1980), which included a requirement for Member States to perform all the necessary actions to achieve a reduction of at least 30% in the use of CFC.9 Moreover, the Community played a major role in several efforts to establish an international regime for the protection of the earth’s ozone layer by providing CFC control (see Jachtenfuchs, 1990). However, according to the Commission (1988, p. 5), in the 1980s, CFC was responsible for 25% of the greenhouse effect, while CO2 was responsible for more than half of it, with the remainder owing to methane (CH4 ) and nitrous oxide (N2 O). Because of the energy sector’s role in CO2 emissions, the Commission (1988, p. 7), apart from summarising

3

MAKING THE ELECTRICITY SECTOR EMISSION-FREE

77

the current state of knowledge provided some response options (see Liberatore, 1995, p. 62), with examples of possible energy-related initiatives that could contribute to the reduction of GHG. These included: increasing energy efficiency, switching to less carbon intensive fuels, promoting renewable energy sources and sustainable use of biomass, as well as safe nuclear energy. ‘The Community and its Member States should by now take into account in their policy decisions (related to energy or other sectors relevant to the issue) the problem of potential climate changes linked to the greenhouse effect’, the Commission (1988, p. 11) urged, while cautioning that early consideration of these issues could avoid future higher costs. As a consequence, action was declared to reinforce and expand efforts in the fields of energy savings, energy efficiency improvement, development of new energy sources, and the use of safe nuclear technology (see Commission, 1988, p. 11). The activity of the Commission corresponds to the political actions of the European Parliament and the European Council. In 1986, Members of Parliament prepared two reports on energy sources and the greenhouse effect, which served as the foundation for the European Parliament (1986) resolution on the measures to combat rising CO2 in the atmosphere (see Huber & Liberatore, 2001, p. 300). In June 1990, the European called for the urgent adoption of targets and strategies for limiting GHG with action regarding CO2 measures (see Sbragia & Damro, 1999, p. 66).10 In October 1990, at a joint meeting of the energy and environment ministers (1990) held prior to the Second World Climate Conference (starting that month in Geneva), the Council reached an agreement on the position on climate change policy—stabilising CO2 emissions at 1990 levels by 2000, on the assumption that all other leading countries would follow suit (see Schröder, 2001, p. 28; Haigh, 2016, pp. 102–103; Skjærseth & Wettestad, 2016, p. 3). In line with these settlements, the Commission (1991) outlined A Community Strategy to Limit Carbon Dioxide Emissions and to Improve Energy Efficiency. The proposed Strategy attempted to minimise economic costs while maximising environmental benefits, bringing regulatory and voluntary measures, and, most importantly, a ‘new fiscal initiative’, i.e. a combined tax based on energy and carbon contents (see Commission, 1991, pp. 4–10). To combat global warming, however, global actions on CO2 emissions were required, and while all the industrialised countries (save for the USA) appeared to be ready to stabilise CO2 emissions at 1990 levels by the year 2000, the methods for doing

78

M. M. SOKOŁOWSKI

so varied: Japan, like the USA, did not prefer regulatory instruments (Commission, 1991, pp. 11–12). Soon, the Council (1991) directed that the Commission submit formal proposal for concrete measures, including taxation, and so the Commission (1992) refined the Strategy, and asked the Council for adopting a legislative package. Apart from the proposal of a framework directive on energy efficiency (SAVE) and a decision concerning the promotion of renewable energy sources (ALTENER), the package was to contain two proposals. The first was for a directive on a combined carbon/energy tax and the second for a decision concerning a mechanism for monitoring the Community’s CO2 emissions and other GHG (Commission, 1992, p. 10). Initially, the package was supposed to be adopted before the United Nations Conference on Environment and Development organised in Rio de Janeiro in June 1992 (also known as the Earth Summit), but ultimately it failed to reach an agreement on energy taxation and harmonisation. Consequently, the combined carbon/energy tax was shelved (see Collier, 1996, pp. 6–8; Massai, 2012, p. 50). This did not, however, prevent the first European climate legislation from being passed, i.e. the Council Decision 93/389/EEC (1993) which introduced a Community monitoring framework for the gathering of emissions data at the national level (see Hildén et al., 2014, p. 885; Hyvarinen, 1999; Massai, 2011, p. 64). According to its provisions, Member States were required to publish and implement national programmes aimed at reducing anthropogenic emissions (see Sokołowski, 2016, p. 205). The scope of these programmes was wide, covering such fields as: inventories of CO2 emissions, descriptions of national policies and actions that contribute to CO2 emission reductions, or trajectories for its national CO2 emissions between 1994 and 2000 (see Hyvarinen, 1999, pp. 192–193).11 3.1.3

From the 1996 IPPC Directive to the EU ETS

To achieve integrated prevention and control of pollution arising from industrial activities, including energy combustion installations with a rated thermal input exceeding 50 MW,12 Council Directive 96/61/EC (1996) (IPPC Directive) was passed. For these purposes, the IPPC Directive established a general legal framework and the measures required to implement it, including the best available techniques (on which emission limit values, parameters, or equivalent technical measures had to be based),13

3

MAKING THE ELECTRICITY SECTOR EMISSION-FREE

79

and a joint system of permits for installations. The system included descriptions of such elements as energy used or generated, the sources of emissions, the nature and level of emissions, the proposed measures to prevent or reduce them, or the measures planned to monitor them.14 Although the IPPC Directive’s regulatory framework lacked an overall reduction target, the negotiation of a permit with a regulator based on a technology-based regulatory principle—best available techniques (BAT)—served as a substitute (see Smith & Sorrell, 2001). Furthermore, unlike the emission trading, the regime under the IPPC Directive was a bottom-up approach in which each operator of a designated industrial facility sought an obligatory permit with emission limits and improvement targets to prevent and minimise environmental pollution (Smith & Sorrell, 2001). The solutions introduced at the European level had substantial international points of reference, which stimulated the EU’s 1990s climate action. These were the United Nations Framework Convention on Climate Change (UNFCCC) (1992) and the Kyoto Protocol (1997). The latter, in particular, contributed to the European agenda on climate change accelerating at the beginning of the twenty-first century (see Sokołowski, 2016, p. 206). Since the US announced its intention to withdraw from the Kyoto Protocol in 2001 (see Hovi et al., 2012; Lisowski, 2002), the EU has attempted to take the lead in international climate policy (Massai, 2012, p. 54). This was reaffirmed both in the EU’s strong position at subsequent meetings of the Conference of the Parties (COP) to the UNFCCC (intended to ensure the environmental integrity of the Kyoto Protocol and the ambitious GHG emission reduction objectives), and in the scope of Community legislation targeted at tackling global warming (Massai, 2012, p. 54). Given this, after the approval of the Kyoto Protocol in Council Decision 2002/358/EC (2002), the EU’s climate agenda has advanced substantially (see Oberthür & Pallemaerts, 2010, p. 42). It procured a new toolset in the form of the EU Emission Trading System (EU ETS), which was introduced by Directive, 2003/87/EC (2003). The ETS was launched on 1 January 2005, as a cost-effective and economically efficient measure for promoting GHG emission reductions (see Segura et al., 2018). The system has been divided into several phases. The first one (also known as the pilot phase) went from 2005 to 2008, with at least 95% of the allowances provided free of charge, and the second ran from 2008

80

M. M. SOKOŁOWSKI

to 2012, with at least 90% of the allowances offered free of charge (see Betz & Sato, 2006; Creti et al., 2012; Hintermann, 2010). Soon, with the adoption of Directive 2004/101/EC (2004), the EU ETS was linked with joint implementation (JI) and the clean development mechanism (CDM)—the Kyoto project-based mechanisms (see Trotignon, 2012). Moreover, under the established regulatory framework, as of the beginning of 2005, Member States were required to ensure that no installation engages in any activity listed in Annex I of the EU ETS Directive (which includes electricity-related processes—burning of fuels in plants with a total rated thermal input exceeding 20 MW) unless its operator was given an emission permit issued by a competent authority (see Sokołowski, 2016, p. 206).15 Still, besides the European intention to lead the international action on GHG emissions, a global action was needed to tackle climate change. A small group of countries, including the EU and Japan, contributed to over 75% of global GHG emissions. Therefore, the EU was trying to speed global progress by debating reductions among this smaller group of large emitters in a forum akin to the G8, in tandem with robust efforts to obtain agreement in the UN setting (see Commission, 2005, p. 5). 3.1.4

The 2020 3 × 20% Goals and the Packages for Climate and Energy

A further key period in the European climate action, a substantial impact on the electrical sector, is 2007–2009, when the basic assumptions of the EU climate agenda for 2020 were provided (Sokołowski, 2020, p. 99). It was driven by ‘an absolute necessity’ to establish domestic measures and take international leadership to ensure that global average temperature rises do not exceed 2 °C over pre-industrial levels (Commission, 2007a, p. 2). In 2007, the EU 2020 climate targets—3 × 20% goals— were presented (Commission, 2007a), and then approved (European Council, 2007; see Mehling & Massai, 2007, p. 47). The 2020 goals had a lot of significance for the electricity sector (see Eskeland et al., 2012); they included a reduction of GHG by at least 20% compared to 1990, a 20% increase in renewable capacity, and a 20% improvement in energy efficiency. The only exception was the reduction of emissions, which could be reduced by 30% if an international agreement was reached (Sokołowski, 2020, p. 99). The EU’s determination to transit to a lowemission economy was strong (see Oberthür, 2007). Even in the absence

3

MAKING THE ELECTRICITY SECTOR EMISSION-FREE

81

of a global post-2012 climate agreement—which materialised at the 2009 COP15 in Copenhagen (see Michaelowa & Michaelowa, 2012)—the EU declared its own firm, independent commitment to achieve at least a 20% reduction in GHG emissions by 2020 compared to 1990 (European Council, 2007, p. 12). The EU was backed in this approach by Japan, which promised a 25% decrease compared to 1990 under the scope of a non-binding Copenhagen Accord. This pledge, however, was ‘premised on the establishment of a fair and effective international framework in which all major economies participate and on agreement by those economies on ambitious targets’ (Commission, 2010a, pp. 10–11). In the light of the EU’s climate determination, a collection of laws known as the Climate and Energy Package was presented (mostly in January 2008)16 and passed in April 2009, providing the rules on renewable energy sources, fuel quality, carbon capture and storage, and GHG emissions (see Delbeke & Vis, 2015, p. 19; Sokołowski, 2016, pp. 38– 39).17 Regarding the latter, the amendments to EU ETS Directive (2003), adopted in Directive 2009/29/EC (2009), included the provisions for assessing and executing a stronger European GHG reduction target of more than 20%, which would be implemented if an international climate change agreement was approved.18 Starting from 2013 (Third Phase of EU ETS, 2013–2020), an auctioning mechanism for allowances was established as a rule (see Skjærseth & Wettestad, 2010, p. 106; Solilová & Nerudová, 2014), with no free allocation provided in relation to any electricity generation,19 although certain exceptions were possible (see Stoczkiewicz, 2012).20 Moreover, the Community-wide quantity of allowances was determined to decline annually in a linear way equal to 1.74%, referred to the average annual total quantity of allowances issued in accordance with the approved national allocation plans for the period 2008–2012 (see Lecourt, 2013).21 The 2009 Climate and Energy Package had a considerable impact on the scope of public law regulation of the electricity sector (see Sokołowski, 2016, p. 208). It influenced the energy market reform guided by the Energy Packages (also known as the Liberalisation Packages), particularly the Third Energy Package with its Third Electricity Directive, i.e. Directive 2009/72/EC (2009). This included, for example, the public service obligations for climate protection which might be imposed on entities in the electrical industry22 ; an introduction of proper economic incentives for combating climate change23 ; presenting climate-related information

82

M. M. SOKOŁOWSKI

to electricity consumers (such as CO2 emissions resulting from the electricity produced by the overall fuel mix of the electricity supplier)24 ; or the authorisation procedure for new capacity, which was to include generating capacity’s contribution to reduction of emissions.25 3.1.5

The 2030 Climate-Energy Framework and the Paris Agreement

While the climate and energy policy agenda for 2020 was established— with some adjustments provided by new legislation, such as the one on energy efficiency, which was enhanced by Directive 2012/27/EU (2012) (Energy Efficiency Directive) to enable the achievement of the 20% target for 2020—the new European 2030 framework for climate and energy policies required consideration, although the foundations for a long-term vision have already been laid, as presented in the 2050 Low Carbon Economy Roadmap (Commission, 2011a) and the Energy Roadmap 2050 (Commission, 2011b). Targets, other policy instruments, competitiveness, and the varying capacities of Member States to act were among the key issues to be addressed when developing the 2030 framework (see Commission, 2013). Furthermore, the new 2030 framework was to take into consideration the global situation and predicted developments, with the increasing role of Asia, and, in particular, China as the largest CO2 emitter (as of 2012, responsible for 29% of global emissions, 290% growth since 1990), followed by India (6% globally, growth 200% since 1990), and Japan (accounting for 3.8% globally, despite unchanged emissions over the period 2005 to 2012), the latter one being on an upward trend since 1990 and making no new emission commitments (Commission, 2014, p. 17). In this context, the new framework was to provide certain improvements within the three basic components of European climate-energy action: emissions reduction, renewables, and energy efficiency. The Commission’s 2030 proposal (2014) included a 40% reduction in GHG emissions (compared to the 1990 levels), a growth in the share of renewables in the EU to at least 27%, and accordingly, an improvement of energy efficiency to an indicative European target of at least 27% (see Knopf et al., 2015; Knoop & Lechtenböhmer, 2017; Ristori, 2014, pp. 5–6). The proposed goals were then approved by the European Council (2014), with the emission target set to be delivered collectively

3

MAKING THE ELECTRICITY SECTOR EMISSION-FREE

83

by the EU—with all Member States participating in this effort: the reductions in the ETS and non-ETS sectors totalling to 43% and 30% by 2030 compared to 2005 (see Penttinen et al., 2014, pp. 10–13). Moreover, the European Council (2014, p. 2) endorsed an instrument to stabilise the European carbon market and approved a change in the annual reduction factor (from 1.74 to 2.2% beginning in 2021) to lower the cap on the maximum permitted emissions (see Burns, 2017, pp. 63–64). Decision (EU) 2015/1814 and Directive (EU) 2018/410 revising the EU ETS Directive are the tangible representation of these directions of the European climate and energy policy (Massai et al., 2018). The first established a market stability reserve in 2018, with the allowances placed in the reserve becoming operative at the beginning of 2019 to make the EU ETS more resilient in the face of supply–demand mismatches, allowing the EU ETS to function in an orderly market (see Sobieraj, 2017, p. 101; Draganova, 2017). The second offers further revisions to the EU ETS Directive for the period 2021–2030 in accordance with the European Council’s Conclusions (2014), introduces new rules for addressing carbon leakage, and establishes the Modernisation Fund to support investments, including the financing of small-scale investment projects, to modernise energy systems and improve energy efficiency (see Dorsch et al., 2020; Prentice, 2018).26 Apart from the internal (European) circumstances affecting climate and energy policy in the field of GHG emission reduction, international issues pertaining to the global post-Kyoto agreement are an important factor shaping its structure. Here, the establishment and entry into force of the Paris Agreement (2015) adopted at COP21 marks a watershed moment (Clémençon, 2016; Kinley, 2017; see Jacquet & Jamieson, 2016). Its signatories agreed to keep the global average temperature increase well below 2 °C above pre-industrial levels and will endeavour to limit the temperature increase to 1.5 °C above pre-industrial levels (see Rhodes, 2016). These aspirations have been transferred from the international to the European level by the EU, and the EU ETS reform is a reflection of this move. To provide further dynamics, the EU ETS Directive will be continually reviewed, taking into account worldwide climate developments and efforts made in order to meet the long-term goals of the Paris Agreement (see Torney & O’Gorman, 2020, p. 171).27

84

M. M. SOKOŁOWSKI

3.1.6

European Green Deal and The 2050 Climate Neutrality

In June 2017, the European Council reaffirmed the EU and its Member States’ commitment to implement the Paris Agreement calling it ‘a cornerstone of global efforts to effectively tackle climate change’ and ‘a key element for the modernisation of the European industry and economy’ (European Council, 2017, p. 6). Following that, in March 2018, the European Council (2018, p. 3) requested that the Commission, taking into consideration national plans, offer a proposal for a longterm EU greenhouse gas emission reduction strategy in conformity with the Paris Agreement. In response to these calls, in November 2018, the Commission presented its Strategic Long-Term Vision (2018) delivering scenarios for achieving climate neutrality by 2050 (Wachsmuth et al., 2018). Moreover, Regulation 2018/1999 (2018) (Governance Regulation) was adopted in December 2018, as part of the Clean Energy Package. The Governance Regulation (2018) established a legislative basis for the Energy Union and Climate Action (see Schlacke & Knodt, 2019), which was the Juncker Commission’s (2014–2019) priority (see Szulecki et al., 2016). With decarbonisation as one of its five dimensions (see Buschle & Westphal, 2018), the Governance Regulation (2018) also delivered a framework for developing integrated national energy and climate plans as necessary tools for a more strategic energy and climate policy (Genard & Gaventa, 2018). The new Commission accelerated the climate agenda even further. ‘I want Europe to strive for more by being the first climate-neutral continent’, announced the then candidate for the President of the European Commission Ursula von der Leyen in July 2019 (2019, p. 5), promising to propose a European Green Deal in her first 100 days in office. In December 2019, the von der Leyen Commission (2019–2024) outlined an initial roadmap of key policies and initiatives required to implement the European Green Deal (2019). This covered the subsequent preparation of an impact-assessed plan connected with increasing the EU’s GHG emission reduction target for 2030 to at least 50% and up to 55% compared to 1990 levels, as well as the review of all relevant climate-related policy tools, including the EU ETS (see Pietzcker et al., 2021), with the idea of expanding European emission trading to new areas (Commission, 2019, pp. 4–5).

3

MAKING THE ELECTRICITY SECTOR EMISSION-FREE

85

The European Green Deal directs the present and future EU climate and energy agenda in order to achieve climate neutrality by 2050 (see Sikora, 2021). It is accompanied by a set of policy and legislative actions presented in a series in 2020 and 2021. Among them one may find the European Climate Law, i.e. Regulation (EU) 2021/1119 establishing the framework for achieving climate neutrality with its—now of legal character—climate neutrality objective as stipulated by Article 2(1) under which ‘Union-wide greenhouse gas emissions and removals regulated in Union law shall be balanced within the Union at the latest by 2050, thus reducing emissions to net zero by that date, and the Union shall aim to achieve negative emissions thereafter’. The European Climate Pact, (Commission, 2020a), the 2030 Climate Target Plan (Commission, 2020b), and the New EU Strategy on Climate Adaptation (Commission, 2021b) are other important elements of this agenda. Finally, the Commission’s (2021a) package of proposals from July 2021, also known as ‘Fit for 55’, is another critical milestone in the European Green Deal timeframe. Fit for 55 is a broad legislative initiative backed by extraordinary resources, including the EU’s recovery plan and the NextGenerationEU fund, as well as the next long-term EU budget for 2021–2027. The goal of the initiative is to prepare the EU for the reduction of net emissions by at least 55% by 2030 compared to 1990 and become the first climate-neutral continent by 2050 by implementing the necessary transformational changes across different areas (Commission, 2021a, p. 1). The package’s centrepiece is the strengthening of the EU ETS and its application to new fields such as road transport and buildings, starting from 2026 (see Commission, 2021a, pp. 6–7). Nonetheless, the proposed changes have an impact on the energy sector because of its role in the green transition (75% of the EU’s emissions come from energy use), providing financial resources for energy modernisation for Member States with a higher share of fossil fuels in their energy mix, higher greenhouse gas emissions, higher energy intensity, and lower GDP per capita (Commission, 2021a, pp. 6, 9). Lastly, the envisaged green transition of the EU has a very important external element, in addition to the internal, European dimension. ‘We expect partners to fulfil their Paris commitments too and are ready to work together by strengthening EU climate diplomacy … to enhance cooperation with our international partners and facilitate the global transition to a net zero economy’ declares the Commission (2021a). What is

86

M. M. SOKOŁOWSKI

Japan’s position and role in this global climate and energy dialogue? What kind of partners have Europe and Japan been in making their electricity sector emission-free?

3.2 Reducing Emissions in Japan’s Energy Transition Japan has long been committed to the international climate change action, and the famous Kyoto Protocol is its symbol. Throughout those years, this issue has had an impact not only on Japan’s CO2 -related policies, but also its decision-making process (Kawashima, 2001, p. 132). However, the path to this status was paved with countless difficulties, including painful periods related to the detrimental consequences of environmental pollution, which resulted in victims but also prompted political and legal improvements. Although the Japanese climate policy was adopted in the early 1990s, the first state pollution control measures related to gas emissions came in the 1960s, and were significantly improved by the mid-1970s, when Japan established a comprehensive environmental legislative system (Fermann, 1993, pp. 288–289). Some early pollution control steps in Japan were implemented before and shortly after World War II. To combat air pollution in Osaka, caused by coal used in factories and power plants, Osaka Prefecture enacted the Smoke and Soot Control Ordinance in 1932. It was the first such legislation in Japan (Kuroda & Shimadera, 2020, p. 131). The same measures were put in place in Kyoto in 1933 and Hyogo Prefecture in 1935,28 and other anti-smoking and soot laws were passed in Tokyo in 1935 and Kanagawe Prefecture in 1937 (Overseas Environmental Cooperation Center, 1998, p. 39). After World War II the factory ordinances were passed in Tokyo (1949),29 which were then followed locally by some prefectures. Consequently, when the Act Concerning Regulation of Soot and Smoke Emissions30 (1962) was adopted to address air pollution at the national level, six prefectures already had their own ordinances against environmental pollution (Ushiyama, 1981, p. 13). This does not imply that the situation was satisfactory; on the contrary, it was far from it. Despite these moves, pollution—being a side effect of a huge economic growth—was an issue that impacted people’s quality of life (see Terao, 2007). Extremely high levels of dust from coal (Japan’s main post-war energy source), reaching 100 tonnes/km2 per month, were recorded

3

MAKING THE ELECTRICITY SECTOR EMISSION-FREE

87

in industrial cities in the 1950s, and when coal was gradually replaced by oil in the 1960s, SOx emissions became a problem (Imura, 2005, pp. 21–22). Although pollution was a concern in Japan before War World II, most Japanese people did not take it seriously until the 1950s and 1960s, when particularly hazardous cases of pollution’s detrimental impacts were recorded (see von Feigenblatt, 2007, p. 42; Mori, 2008, p. 1468). These were the ‘four big pollution diseases’31 : Itai-itai, Minamata, Niigata Minamata, and Yokkaichi asthma, which were the most prominent pollution problems (Kuroda & Shimadera, 2020). The health issues stemmed from various sources: water pollution and food contamination, as in the outbreak of Minamata disease and Niigata Minamata disease due to methylmercury poisoning32 ; cadmium poisoning which resulted in Itai-itai disease33 ; as well as air pollution as in the case of Yokkaichi asthma.34 Regardless of the fact that the victims not only began to protest in the polluted areas but also took their fights to Japan’s judicial system and finally triumphed (Avenell, 2006, p. 92),35 environmental contamination became a national concern, not just because of the widely publicised cases of disease, but also because people found themselves imminently threatened by air and water pollution (Takahashi et al., 1998, p. 291). 3.2.1

The 1967 Basic Law and The 1970s/1980s Environmental Agenda

In response to the rise of the environmental concerns including the four big pollution diseases the Basic Law for Environmental Pollution Control (1967) was passed (Nakanishi, 2016, p. 2).36 It was one of Japan’s first basic laws, specifying the role of various parties in the implementation of key policy frameworks such as environmental protection (Tani, 2015). The establishment of the Basic Law was followed by the Air Pollution Control Act (1968), revised and strengthened in 1970, and accompanied by the implementation of regulations governing total emissions of sulphur oxides and nitrogen oxides, which were greatly influenced by social circumstances and severe pollution health damage and environmental pollution trials connected with Yokkaichi asthma (Overseas Environmental Cooperation Center, 1998, p. 37).37 Furthermore, MITI used its administrative authority to compel the petroleum refining business to import low-sulphur petroleum and install heavy oil desulphurisation equipment, and subsequently, as technology advanced, MITI

88

M. M. SOKOŁOWSKI

pushed the power industry to use flue gas desulphurisation equipment (Fukasaku, 1995, p. 1065). These instructions were accompanied by fiscal measures to aid the spread of desulphurisation, such as lower tariffs on desulphurised oil imports, lower tax rates on fixed capital, and a special depreciation scheme and dedicated loans from the Japan Development Bank (Fukasaku, 1995, p. 1065). As a result of these legal improvements, a basic framework for pollution control in Japan was formed, with environmental quality standards, permitted emission limits, and other measures for hazardous pollutants leading to lower pollution levels, as seen in Yokkaichi, where air quality improved after the introduction of emission control measures for SO2 (Takebayashi, 2016, p. 66). On the one hand, the legislation enabled national environmental coordination, as only 19 of the 47 prefectures had their own pollution control legislation when the Basic Law was passed (Ushiyama, 1981, p. 13). On the other hand, the Basic Law included the so-called ‘economic harmony clause’, which required efforts to strike a balance between pollution control with its negative effects and the need for economic development with the positive effects of business prosperity (Sato, 2002, p. 113; Tsuji, 2010, p. 345).38 The aforementioned clause met with criticism and resurfaced soon after, becoming the subject of a landmark 1970 session of the Japanese parliament named the Pollution Diet39 as it was focused on finding legal solutions to environmental problems (see Kawamura, 2018, pp. 6–7; Matsushita, 2006, p. 34). 14 pollution-related laws were established or altered during this special session, and the economic harmony clause was dropped (Nakanishi, 2016, p. 2). In the years that followed, more measures were taken in the area of pollution protection (see Sokołowski & Kurokawa, 2022). In 1971, the Environmental Agency was established to provide administration-wide coordination to improve environmental policy processes that were previously carried out separately by different entities (see Mitsuda, 1997, pp. 123–124; Shibamiya, 1999, p. 148). For instance, the Act Concerning Regulation of Soot and Smoke Emissions from 1962 was implemented by both the Ministry of Trade and Industry and the Ministry of Health and Welfare, and the situation in which many different entities collaborated on environmental legislation was not an exception, but rather the norm (see Sumikura, 1998, p. 242). In this way, the Environmental Agency has bridged the gap in the structure of the Japanese administration and provided much-needed unification. Additionally, a network of environmental pollution institutes in each prefecture

3

MAKING THE ELECTRICITY SECTOR EMISSION-FREE

89

and bodies responsible for pollution control in each municipality was developed across Japan to improve expert knowledge on pollution and enhance anti-pollution measures (Kuroda & Shimadera, 2020, p. 134). Moreover, by 1972, all of Japan’s prefectures had pollution prevention ordinances which—apart from factory effluent or noise—included air emissions such as soot and smoke, and many set stricter standards than those in effect nationally (Avenell, 2012, p. 436). Of particular importance was the Tokyo Metropolitan Environmental Pollution Control Ordinance (1969), adopted under the leadership of the Governor of Tokyo Ryokichi Minobe,40 which emphasised people’s right to a clean and safe environment, as well as their responsibility to refrain from behaviours that pollute the environment and infringe on other people’s rights (see Schreurs, 2008, p. 347; Ushiyama, 1981, pp. 14–15). Aside from stricter environmental standards than those in place nationally,41 the environmentally progressive Minobe administration established research and monitoring institutions such as the Pollution Research Institute and a Bureau of Pollution (Fujita & Hill, 2007, pp. 418–419). Another significant regional legislation that addressed the right to a healthy environment (see Ushiyama, 1981, p. 15) was the Kyoto Prefectural Environmental Pollution Control Ordinance (1971). In its Preamble, it declared that all citizens have the right to enjoy a better natural environment (including historical heritage) as well as the right to live in healthy and comfortable surroundings, that entrepreneurs must not infringe on these rights by causing environmental pollution, and that Kyoto Prefecture will try to do everything possible to prevent and eliminate environmental pollution (Nabika, 1972, p. 135). This was a soft, but still quite flexible approach based on local community and business cooperation under the prefectural authorities’ slight supervision—according to Article 12 of the Kyoto Prefectural Ordinance (1971), the Governor was required to inform the public about actual environmental pollution conditions as well as the names of polluters.42 While the Japanese post-war legislation and policies dealing with air pollution (as part of broader environmental activity) made a significant progress, particularly with the early 1970s establishment of an administrative system to handle compensation payments to pollution victims (see Gresser, 1975; Kanazawa, 1973)—there was little advancement in the field of environmental law between the late 1970s and 1990s (see Nakanishi, 2016, p. 2). The same applies to the environmental policy as reported in the 1970s OECD review on Japan (see Sprenger &

90

M. M. SOKOŁOWSKI

Ohmura, 1997, p. 337). Traditional direct regulation approaches, aimed primarily at creating standards and control pollution sources, were ineffective, since many problems emerged from everyday social and economic activity, making it impossible to pinpoint pollution sources (Sprenger & Ohmura, 1997, p. 337). Although the Japanese government adopted new approaches, such as multi-faceted initiatives for the systematic development of infrastructure, they had little practical impact, partly due to the pollution control investment, which had soared in the late 1960s and early 1970s but then plummeted in the late 1970s as a result of the oil crises (Sprenger & Ohmura, 1997, p. 337). Further pollution problems worsened in the 1980s, stemming from urbanisation (see Hirohara et al., 1988, p. 374) and the emergence of new chemical substances not covered by the existing laws (see Sprenger & Ohmura, 1997, p. 338). This changed in the 1990s, when Japanese environmental law underwent a significant change, owing in part to the influence of international and European legal solutions (see Nakanishi, 2016, p. 2). Climate change was also a factor in this move. 3.2.2

The Noordwijk Conference, The 1990 Action Programme, and The Earth Summit

Aside from internal activities related to air quality and other types of environmental pollution, one should also take note of Japan’s global actions related to GHG emissions. At the end of the 1980s, the scientific debate on quantitative maximum targets for global warming entered the political arena propelled by Western democracies, with the Netherlands playing a key role by hosting the Noordwijk Ministerial Conference in 1989, which brought together 67 national delegations from both the developed and developing countries (Morseletto et al., 2017, p. 659). The Noordwijk Conference also resulted in a shift in Japan’s attitude towards international climate challenges, as well as its commitment to emissions reduction targets (Fermann, 1993, p. 291). The Japanese delegation—taken aback by the call for a timetable for reducing CO2 emissions—opposed (together with the USA, the UK, and the Soviet Union) (Zaelke & Cameron, 1990, p. 276) to await the results of a thorough examination of each sector of energy use to determine whether an emissions target could be met (Fermann, 1993, p. 291). The key Japanese argument was that setting emission targets was the same as limiting

3

MAKING THE ELECTRICITY SECTOR EMISSION-FREE

91

nations’ sovereignty over energy policy (Kawashima, 2001, p. 169)— this was accepted in the final version of the Noordwijk Declaration (1989) which recognised ‘the principle of the sovereign right of States to manage their natural resources independently’. Additionally, establishing a common reduction rate from a specific base year for all industrialised countries was an issue (Kawashima, 2001, p. 169)—countries were urged to commit to stabilising CO2 emissions by the year 2000 at 1988 levels, according to the draft version of the Declaration (Zaelke & Cameron, 1990, p. 276; Cass, 2012, p. 27). Instead, a soft approach was taken in the final wording of the Declaration (1989), which called for action and the development of ‘effective and operational strategies to control, limit or reduce emissions of greenhouse gases’. And such a move was to take place in Japan soon. Japanese citizens had mixed feelings about Japan’s opposition to emission targets, which was part of a larger ecological context and the growing awareness of the Japanese society (see Kawashima, 2001, p. 169).43 Both internal and international criticism have been concerning to Japanese politicians, who began to urge the government to complete the domestic process of developing climate policies; however, with fifteen ministries and agencies involved in the talks, and a conflict line running between the MITI and the Environment Agency, this process was not easy (Fermann, 1993, p. 291; cf. Tomitate, 1993). The main point of contention was the establishment of any CO2 target, and once that was decided, its nature became a source of tension as two different proposals were made.44 Finally, under pressure from the Ministry of Foreign Affairs, just a few weeks before the November 1991 Geneva Climate Change Conference, a compromise was reached and both proposals (the per capita and the flat stabilisation targets—at the 1990 level by the year 2000) were included, with commitment slightly weaker towards the flat stabilisation target than the per capita-based one (Fermann, 1993, p. 292). Both targets included in the Action Programme to Arrest Global Warming (1990)45 adopted as the baseline Japanese position in terms of participating in the creation of an international framework to address global warming (Shindo et al., 1992). The Action Programme advocated for the immediate implementation of global warming mitigation measures that were compatible with the long-term economic development (energy conservation was to play a significant role here),46 international cooperation, and structural changes ranging from urban and transportation systems to lifestyles. The latter was associated with careful consideration

92

M. M. SOKOŁOWSKI

of environmental ethics and the development of a society that would place less stress on the environment (Fukasaku, 1995, p. 1073). As mentioned earlier, the domestic stance outlined in the Action Programme influenced the Japanese position on air pollution controls presented at the Earth Summit organised in Rio de Janeiro in June 1992 (see Lauber, 1993, p. 41). Japan hoped that by setting its own national emission target, all industrialised countries would follow suit (Kawashima, 2001, p. 170), and finally, at the Rio summit, developed countries declared a target of reducing CO2 emissions to 1990 levels by the year 2000, as set forth in the Action Programme (Chang, 2002, p. 259).47 This target was, however, criticised by the developing countries as allowing wealthier states to continue not only to consume excessive amounts of energy but also lock in CO2 ; this was particularly concerning for Japan, whose 1990 benchmarks were relatively high on a global scale (Lauber, 1993, p. 41). It was also Japan’s position not to include greenhouse gases (GHG) other than carbon dioxide (CO2 )—such as methane (CH4 ) and nitrous oxide (N2 O)—or CO2 sequestration by forests, because measuring emission and sequestration of those activities was considered to be technically more difficult than measuring anthropogenic CO2 emissions alone (Kawashima, 2001, p. 170). Interestingly, in a report published by the Commission three months before the Earth Summit (1992b, p. 100), while reviewing global discussions on the Climate Change Convention and presenting European calls for ‘a strong framework’ under ‘the Environmental Imperative’, Japan was labelled as a ‘like-minded’ country.48 3.2.3

The 1990s Climate Framework

The climate issue has also begun to play an increasingly important role in domestic politics and law. From the 1990s onwards, Japanese law on emissions improved further under the influence of international and European environmental legislation (see Nakanishi, 2016, p. 2). The Japanese Basic Environmental Act (1993), which replaced the Basic Law from 1967, held a significant position, as it established environmental conservation and global environmental protection as basic policies (see Takebayashi, 2016, p. 66). Apart from these issues, the Basic Environment Act addressed global warming, and this was followed in the Basic Environmental Plan (1994) (see Kimura, 2013, p. 286).

3

MAKING THE ELECTRICITY SECTOR EMISSION-FREE

93

After the Kyoto Protocol was passed, new developments emerged. The Global Warming Prevention Headquarters (GWPH) were established within the structure of the Government of Japan (1997) with the goal of consistently implementing the Kyoto Protocol and comprehensively advancing concrete and effective global warming prevention measures. This inter-ministerial council, chaired by the Prime Minister and comprised of other top decision-makers, responsible for areas such as the environment and the economy, was established with the mission of coordinating strategies related to organisational setup, policy formulation, guidelines, and action plans on climate change (see Zhou & Mori, 2011, p. 301).49 Few months later, the Guidelines for Measures to Prevent Global Warming (1998), which replaced the Action Programme from 1990 (with energy conservation as its axis), were adopted by the GWPH, and theAct on Promotion of Global Warming Countermeasures (1998) was introduced to serve as an umbrella legislation for tackling climate change (Kimura, 2013, p. 587). The Guidelines were set for the year 2010 and, besides the above-mentioned energy conservation with promoting energy saving and introducing new energy-efficient technologies, covered many other aspects relevant to the Japanese electricity sector. This relates to a framework for ‘promotion of energy supply side measures to reduce CO2 emissions’, where the following three elements were proposed: first, ‘promoting construction of nuclear power plants’, second, ‘accelerating the introduction of new energy’, and third, ‘promoting measures for electrical load balancing’ as underlined in the Guidelines (1998). The first element required a more than 50% rise in the share of electricity supplied by nuclear power plants from fiscal year 1997 to fiscal year 2010, to reach Japan’s CO2 emission reduction targets—this necessitated the restoration of public trust in nuclear power, collaboration with local communities, as well as coordination among the concerned ministries and agencies in order to develop the regions surrounding nuclear power facilities (see GWPH, 1998). The second one focused on promoting renewable energy sources (see Chapter 4 of this book) such as photovoltaics, wind power, and biomass, as well as waste-toenergy for housing, industry, commercial, and authorities—with the goal of nearly tripling the current levels by fiscal year 2010 (see GWPH, 1998). The final element was to decrease electricity peak demand, resulting in energy savings and a reduction in CO2 emissions.50 The Guidelines were then incorporated into the Act on Promotion of Global Warming

94

M. M. SOKOŁOWSKI

Countermeasures (1998), which established broad goals and outlined the responsibilities of the central government for monitoring GHG trends and impacts, central and local governments for implementing mitigation measures, and businesses and citizens for implementing emission reduction measures (Tiberghien & Schreurs, 2010, p. 157). It should also be noted that the above-mentioned Act defined GHG emissions in relation to anthropogenic activities, such as the use of electricity or heat.51 3.2.4

Energy-Oriented Emissions CO2 Under the Kyoto Protocol

The Kyoto Protocol (1997) entered into force in 2005, requiring Japan to reduce GHG emissions by an average of 6% below 1990 levels for the first commitment period of 2008–2012. To meet this national reduction goal, Japan established the Kyoto Protocol Target Achievement Plan (Government of Japan, 2005) and fulfilled the obligation stipulated by the Act on Promotion of Global Warming Countermeasures (1998).52 The Achievement Plan (outlined in 1998 and 2002, then passed and accordingly revised in 2008)53 addressed the measures to be taken to reduce energy-related GHG, with the focus on voluntary activities by businesses, education and information dissemination, and forest management. It also provided some regulatory action of soft nature (see Mi Sun & Yeo-Chang, 2013, p. 73; Schreurs, 2010, p. 91). The Achievement Plan (2005, p. 7) also emphasised the need to reduce Japan’s reliance on fossil fuels, required not only to meet the Kyoto Protocol commitment but also to promote long-term and continuous emissions reductions aimed at creating a low-carbon society. Because of this dependence, energy-related CO2 emissions account for 90% of Japan’s GHG emissions—the Plan (2005, pp. 12, 20) established targets for them. These, however, assumed slight growth (ranging from +1.3% to +2.3% increase) between 1990 (base year) and 2010, resulting in 1076– 1089 million tonnes of energy-derived CO2 in FY 2010, compared to 1059 in FY 1990. Nevertheless, with other GHG, the total reduction was to reach (−1.8%)–(−0.8%), i.e. 1239–1252 million tonnes of CO2 in FY 2010 contrasted with 1261 million tonnes of CO2 in FY 1991 as forecasted in the Achievement Plan (2005, p. 20). The importance of electricity in the structure of CO2 emissions (30% of indirect emissions out of the total 1,292 million tonnes of CO2 in FY 2005) necessitated the inclusion of actions dedicated to ‘the Energy Conversion Sector’ with electricity as a component identified in the

3

MAKING THE ELECTRICITY SECTOR EMISSION-FREE

95

Achievement Plan (2005, pp. 10, 35, 53). Regardless of the timeframe required for the infrastructure development, the government of Japan (2005, p. 53) assumed imminent measures for the use of energy sources with low CO2 emissions intensity, and for improving energy supply efficiency ‘by working toward environmentally conscious use of fossil fuels’ while maintaining a stable supply of energy. This covered promotion of renewables, but also conventional energy sources, including those powered by natural gas, by converting the old coal-fired units to natural gas-fired units, ‘a clean form of energy which has relatively small environmental burdens compared to other fossil fuels’ as emphasised in the Achievement Plan (2005, p. 54).54 As a result, the following measures were to be implemented: enhancing the efficiency of thermal power plants by making their operational procedures more environmentally friendly, and utilising the Kyoto Protocol’s credit-earning processes (see Government of Japan, 2005, p. 53), which the government began to use in 2007, by buying Clean Development Mechanism and Joint Implementation credits from companies that had purchased certified emission reduction certificates (Sugiyama & Takeuchi, 2008, pp. 426–427). The Achievement Plan included the use of a range of instruments of various types in order to achieve the set targets. This included the use of a policy mix approach with voluntary, regulatory, economic, and informational tools, utilising their specific functions and harmoniously integrating them to achieve an effective and efficient reduction of GHG emissions, and to lessen the cost burdens while maintaining fairness to strike a balance between the multiple policy, environmental, and development objectives (see Government of Japan, 2005, p. 66). However, many of these measures, whether planned or implemented, were of a soft character, while those of greater power were only being considered and still under discussion. Soft nature concerns, for instance, companies with considerable GHG emissions that were expected to develop voluntary reduction plans (see Ohta, 2000). These driven by quantitative target plans were to be prepared individually or cooperatively, with the goal of reducing emissions by promoting improvements in energy consumption intensity or CO2 emissions intensity as the focus of specific activities, and analysing those results using worldwide standards for these intensities (see Government of Japan, 2005, p. 79). Even though these plans were voluntary, some mechanisms for strengthening their power were introduced. Companies were to strive to improve their transparency and reliability by having plans objectively evaluated by a relevant governmental unit or a

96

M. M. SOKOŁOWSKI

third-party institution, and working to improve the plan’s likelihood of success based on the results of such an evaluation (see Government of Japan, 2005, p. 79). Other measures, such as domestic emissions trading scheme or the environment tax, were being ‘comprehensively studied’, as was the shift towards night-time working and the introduction of summer time (see Government of Japan, 2005, pp. 66–67). However, starting in 2005, the Ministry of the Environment (which replaced the Environmental Agency in 2001) introduced Japan’s Voluntary Emissions Trading Plan, a voluntary experimental system designed to gather experience and information in the development of a nationwide cap-and-trade emission trading (Kuramochi, 2015, p. 1325). This scheme (2005–2014) was based on subsidies (up to a third of total project cost for the installation of emission-saving facilities) obtained by the participants (business facilities, such as factories and offices). These subsidies were, however, limited, both in number (ranged from 21 to 89 per term, with a total of 389 over the seven terms), and status—primarily not part of the voluntary action under Keidanren (Kuramochi, 2015, p. 1325). It is also worth noting that, in 2010, Tokyo launched its own metropolitan emissions trading scheme, which was Japan’s first mandatory cap-and-trade system for CO2 emission (see Arimura & Abe, 2021; Wakabayashi & Kimura, 2018). 3.2.5

Pre- and Post-Fukushima Climate Action

While energy utilities and energy-intensive industries were concerned about how the Kyoto Protocol would undermine their competitiveness, the nuclear sector saw its ratification as a way to justify the construction of more nuclear power plants (Tiberghien & Schreurs, 2010, p. 145). The 2005 Plan assured this ratification as a way to justify the construction of more nuclear power plants as, apart from improving energy efficiency and energy saving, developments in renewable and conventional energy sources, it also advocated strengthening the role of nuclear power plants in the Japanese energy sector. As declared there ‘[n]uclear power does not produce carbon dioxide in the power generation process, so it occupies an extremely important position with respect to the promotion of global warming countermeasures’ (Government of Japan, 2005, p. 53). This approach was, in fact, following previous declarations, including those brought by the Guidelines from 1998. Its justification was based

3

MAKING THE ELECTRICITY SECTOR EMISSION-FREE

97

on nuclear power’s long-term national priority (see Sekine, 1993; Yoshioka, 1984, pp. 28–29), as well as its recognition as ‘a safe, reliable and competitive energy source’ represented by a fleet of 55 nuclear power plants supplying roughly one-third of Japan’s electricity (Kondo, 2006, p. 7). Furthermore, Japan intended to scale this up by adding new units and developing nuclear solutions. In 2005, two new power plants (Tomari Unit 3 and Shimane Unit 3) were under construction and expected to be operational by FY 2012; additionally, work on technologies (developing next-generation light water reactor technology and commercialising the fast breeder reactor cycle technology) were conducted (see Government of Japan, 2005, p. 54). All of that changed in 2011, when the Great East Japan Earthquake struck on 11 March, generating a devastating tsunami along the Japanese coast. It caused massive destruction leading to a nuclear accident at the severely damaged Fukushima Daiichi Nuclear Power Station. In the aftermath of the disaster, Japan began to rethink its energy policy and the role of nuclear power (see Portugal Pereira et al., 2014; Sokołowski, 2015; Vivoda, 2012). However, just nine months before the Fukushima disaster, in June 2010, the Japanese government updated its Strategic Energy Plan, deciding to boost nuclear power’s share of electricity generation to around 53% by 2030 (Hayashi & Hughes, 2013, p. 86). By 2020, plans called for the construction of nine new or additional nuclear power plants (with an overall plant capacity utilisation rate of roughly 85%) and more than fourteen (with the rate of about 90%) by 2030 (METI, 2010; see Sokołowski, 2015, p. 233). 6 months earlier, in December 2009, at the COP15 in Copenhagen, the new Japanese government of the Democratic Party of Japan (DPJ)55 played an active role—not only did it agree to cut GHG emissions by 25% by 2020, compared to 1990 levels, but also pledged a significant financial aid to the developing countries (see Dimitrov, 2010, pp. 804, 806; Ohta & Tiberghien, 2016, p. 179). Nuclear power expansion was expected to contribute significantly to the planned 25% decrease, but the 2011 Fukushima accident rendered this goal effectively unattainable, prompting the DPJ government to announce a revision of the 2020 target followed by the Innovative Strategy for Energy and the Environment (2012) prepared by the Energy and Environmental Council (see Kuramochi, 2015, p. 1321). The Innovative Strategy (2012, p. 2) proposed a significant change in the Japanese electricity sector, not just by reforming it and conducting ‘a green energy revolution’, but, most of all, leading to ‘a society not dependent on

98

M. M. SOKOŁOWSKI

nuclear power in earliest possible future’ (see McLellan et al., 2013). Nevertheless, as the Energy and Environmental Council (2012, p. 2) clearly stated, this transition required ensuring ‘sufficient electric supply from fossil fuels’. In terms of GHG reduction, the Innovative Strategy assumed a 20% reduction in 2030 compared to the 1990 levels, with a much slower pace of the 2020 reduction (ranging from 2 to 9% compared to the 1990 levels, depending on the scenario) due to uncertainty about the operation of nuclear power plants (Energy and Environment Council, 2012, p. 22). However, for two reasons, the vision provided in the Innovative Strategy has not been realised. First, other higher-level governmental bodies, such as the National Strategy Council, did not come to a final decision (see Homma & Akimoto, 2013, pp. 1216–1217). Second, the December 2012 elections saw a shift in the Japanese politics, with the DPJ losing and the LDP regaining power, then forming a cabinet led by Prime Minister Shinzo Abe. The new administration has pledged to overhaul the Japanese energy and climate policies (Kuramochi, 2015, p. 1321). At COP19 in Warsaw in 2013, Japan announced that the country’s 2020 target would be a 3.8% reduction from 2005 levels (Asuka, 2017, p. 373). One year earlier, in 2012, with the Fourth Basic Environmental Plan, the government of Japan, led by DPJ, announced a reduction in GHG emissions of 80% by 2050, although without base year specified explicitly (see Oshiro et al., 2016, p. S68; 2017, p. 582). Nevertheless, both 2020 and 2050 mitigation targets were not enshrined in domestic legislation, and so were found to be weak in nature (Kuramochi, 2015, p. 1330). 3.2.6

From Abenomics to the 2050 Carbon Neutrality

The second government of the old-new Prime Minister Shinzo Abe56 came back to power by taking the aspirations of ordinary Japanese citizens into account, and focusing on strengthening the economy (Lechevalier & Monfort, 2018). The Japanese economy, which had been experiencing sluggish growth since the early 1990s, had first been threatened by the collapse of the Lehman Brothers in September 2008 and the global financial crisis, and then hit by a devastating earthquake and tsunami in March 2011. Understandably, it needed a stimulus to break out of this longterm negative tendency (Yoshino & Taghizadeh-Hesary, 2017, p. 136). To address these issues, an economic agenda named Abenomics was given top priority, with ‘three arrows’ as its key components: a ten trillion

3

MAKING THE ELECTRICITY SECTOR EMISSION-FREE

99

yen stimulus package, inflation targeting, and structural, growth-driven reforms (Abe & Tepperman, 2013, pp. 2–4). The Abe administration has used these three arrows to revitalise economy by enacting ambitious economic policies that would lift Japan out of lengthy deflation, weaken the Japanese yen, and induce a 2% annual inflation rate (Fukuda, 2015). The arrows introduced by the Abenomics are all tied to the energy sector, either directly or indirectly. The inflation recorded in Japan was primarily due to other factors, such as the increasing energy prices caused by the depreciation of the Japanese yen following the relaxation of the monetary policy (Yoshino & Taghizadeh-Hesary, 2017, p. 137). Structural reforms aimed at promoting growth and competition have been linked to the reconstruction of aged infrastructure (including energy); this also necessitated the diversification of the energy basket (Yoshino & Taghizadeh-Hesary, 2017, p. 141). Nevertheless, these ambitions had to be adjusted to the post-Fukushima situation. In April 2014, the Third Strategic Energy Plan, with 70% of zero-emission energy sources, mainly nuclear, and supplemented by renewables (Vance et al., 2017), was revised, and the Fourth Strategic Energy Plan adopted (METI, 2014). The new strategic framework anticipated the use of coal-fired energy sources ‘re-evaluated as an important base-load power supply’. These, however, were to be mitigated—with respect to their GHG emissions—by technology (highly efficient coal thermal generation as well as other solutions for decreasing GHG emission in electricity generation), and voluntary measures (plans and goals for the reduction of emissions) proposed by the electricity sector (METI, 2014, pp. 25, 57). These voluntary corporate activities are seen as feasible policy instruments that may be used to encourage industries to carry out socially responsible actions in Japan (see Sugiyama & Imura, 1999; Wakabayashi, 2013, p. 1086). The Fourth Strategic Plan (2014, p. 24) addressed nuclear power’s postFukushima status as ‘an important base-load power source as a low-carbon and quasi-domestic energy source, contributing to stability of energy supply–demand structure’ (see Midford, 2021, p. 107), with the top priority of guaranteeing its operational safety under the new regulatory framework. The Strategic Energy Plan was revised again in July 2018, and its fifth version was adopted. The Fifth Strategic Energy Plan (METI, 2018) envisions policy measures not only for 2030 but also 2050, the latter being tagged as challenges for energy transformations, decarbonisation, and new

100

M. M. SOKOŁOWSKI

energy options. Here, the 2030 forecast is consistent with Japan’s reduction target under the Paris Agreement, i.e. lower GHG emissions by 26% (compared to the FY 2013) by FY 2030, which accounts for 25.4% compared to the FY 2005 (METI, 2018, p. 13). In terms of the 2050 and the 80% GHG reduction in the decarbonisation scenario, it will be evaluated from the standpoint of how Japan should use the existing potential technological assets, such as hydrogen, electricity storage, and nuclear power (METI, 2018, pp. 108, 115). By referring to European examples: Germany—reliance on coal during energy transition, as well as France and Sweden, with their nuclear and nuclear-hydro sources—as stated in the Fifth Strategic Energy Plan ‘only hydro and nuclear power can be considered the main tools for decarbonization that are stable given the state of technology today and that decarbonization cannot be achieved as of now with fluctuating renewable technology alone’ (METI, 2018, p. 116). Nevertheless, the 2050 vision, as presented in the Fifth Strategic Energy Plan, was still a far more general plan, a goal that needed further evaluation, based on ‘sophisticated 3E+S’,57 where under the environmental acceptability (one of the Es) decarbonisation would be conducted (see METI, 2018, pp. 118–121). The Long-Term Strategy Under the Paris Agreement (Government of Japan, 2019) provides a more detailed description of the 2050 vision. The Strategy (2019, p. 15) declares a decarbonised society as Japan’s ultimate goal, to be achieved as soon as possible in the second half of the twentyfirst century, with a long-term goal of reducing GHG emissions by 80% by 2050. It does not, however, indicate the reference year or imply any specific reduction pathway (Sugiyama et al., 2021, p. 359). Nevertheless, the 2019 Strategy discusses the means necessary to reach the target. This will be accomplished by promoting renewable energy sources, which are expected to become the primary carbon-free power sources, reducing nuclear dependency while prioritising nuclear safety, reducing CO2 emissions from conventional energy sources, improving energy efficiency, and establishing a hydrogen society, in which hydrogen is used in daily life and industrial activities (Government of Japan, 2019, p. 23). By boosting the deployment of renewable energy and restarting nuclear power facilities, the non-fossil power ratio is predicted to reach around 44% of the energy mix in FY 2030, while in terms of coal-fired capacity Japan seeks commercial utilisation of captured and stored CO2 by 2030, together with introducing certain measures of carbon recycling (Government of Japan, 2019, pp. 21, 26).58 Still, in the Strategy (2019) a lot of space

3

MAKING THE ELECTRICITY SECTOR EMISSION-FREE

101

is left for general declarations, not concrete actions. This concerns, for instance, ‘work to reduce reliance on coal-fired power generation as much as possible by fadeout inefficient coal-fired thermal power generation’, or protracted discussions on carbon pricing (Government of Japan, 2019, pp. 27–28, 110–111). In this regard, Japan has been unenthusiastic about price instruments, and overall, carbon pricing (both explicit and implicit) has been relatively weak in Japan,59 with the global warming countermeasure tax60 (fossil fuel tax) standing at only 289 JPY/t of CO2 , owing to industry concerns about competitiveness (Sugiyama et al., 2021, p. 357). Nevertheless, as declared in the Long-Term Strategy Under the Paris Agreement (2019, p. 14) ‘[d]etermined to lead global decarbonization, Japan will demonstrate its high aspiration and its stance to actively promote efforts for decarbonization both in and out of Japan’. This approach tends to be bringing Japan and the EU closer together in their efforts to protect climate and cut GHG emissions. Furthermore, the first ever such proclamation by Japan’s head of government, the new Prime Minister, Yoshihide Suga, who said in October 2020 that Japan will reduce GHG emissions to zero, achieving a carbon–neutral, decarbonised society by 2050, affirms these ties between the EU and Japan (see Sokołowski & Kurokawa, 2022). To reach these assumptions, in May 2021 the Act on Promotion of Global Warming Countermeasures (1998) was revised, bringing a regulatory framework aimed at reaching carbon neutrality in Japan by 2050 (see Sokołowski, 2021, p. 159). The revised Act (2021) established a new basic principle linked to the need to halt the rise in global average temperature as expressed in the Paris Agreement (2015), thereby integrating environmental conservation with economic and social development, carried out in close cooperation between people, government, businesses, and private organisations, with the goal of achieving a decarbonised society by 2050 (see Cassotta & Sokołowski, 2022, pp. 194–196).61 To reach this aim, the 2021 revision introduces a certification system for regional decarbonisation promotion project plans. It applies to municipalities that developed action plans in collaboration with local governments and allowed for the acquisition of all essential licences and approvals in a one-step approach for the implementation of decarbonisation projects62 (see Akahane et al., 2021, pp. 2–8). These projects utilise solar, wind, or other renewable energies and include efforts aimed at conserving the local environment and the sustainable development of the local economy and society, in order to contribute to the realisation

102

M. M. SOKOŁOWSKI

of a decarbonised society (see Saraff, 2021). Owing to these features, the decarbonisation projects were to be streamlined under the new regulatory framework. Although the progress towards long-term climate goals has been slow in the past, there has been a surge in interest in customised subnational mitigation plans since 2019. Additionally, according to the Ministry of Environment, as of April 2021, approximately 370 cities have committed to reaching zero-emission targets by 2050, accounting for more than 86.8 per cent (about 110 million people) of the total population of Japan (Long et al., 2021, p. 9). National carbon reduction initiatives and targets, however, continue to lack clarity in terms of concrete reduction paths for individual areas and industries (Long et al., 2021, p. 9). A more thorough approach to the objective of achieving carbon neutrality by 2050 may change this. In this light, the new Sixth Strategic Energy Plan (METI, 2021), which was adopted in October 2021, provides a blueprint for the Japanese energy policy to achieve carbon neutrality by 2050 and reduce greenhouse gas emissions by 46% by 2030 from FY 2013 levels, while pursuing intensive efforts to meet the aim of cutting emissions by 50% (Agency for Natural Resources & Energy, 2021, p. 3). The 2021 Strategy proposes decarbonisation of the electricity sector through thermal powergenerating technologies employing hydrogen/ammonia-fired power production, and carbon storage/utilisation based on CCUS/carbon recycling, while maintaining the S+3E approach (see Agency for Natural Resources & Energy, 2021, p. 5). Moreover, while promoting nextgeneration/highly efficient thermal power plants, a phase-out of inefficient thermal units will be steadily realised (METI, 2021, p. 77). This is consistent with Japan’s pledge to terminate new direct government support for unabated overseas thermal coal power plants by the end of 2021, including the Official Development Assistance, export finance, investment, and financial and trade promotion assistance (METI, 2021, p. 77; cf. Trencher et al., 2020, p. 8), as announced by other G7 nations during the Cornwall Summit in July 2021. Furthermore, Japan is heavily focused on the utilisation of hydrogen in its economy and energy system. In the future, hydrogen will be positioned as a new resource, and its implementation will be accelerated: in order to supply cost-effective hydrogen/fuel ammonia consistently and in large quantities in the long term, inexpensive hydrogen from overseas will be used, and a hydrogen production base will be established

3

MAKING THE ELECTRICITY SECTOR EMISSION-FREE

103

by utilising domestic resources (see METI, 2021, pp. 79–81). The latter includes the commercialisation of hydrogen production utilising international hydrogen supply chain and water electrolysis equipment using excess renewable energy, and the development of innovative hydrogen production technology utilising high-temperature heat sources such as photocatalyst/high-temperature gas-cooled reactor (Agency for Natural Resources & Energy, 2021, p. 10). Nonetheless, attaining the ambitious targets will likely necessitate Japan restarting more nuclear facilities, and a huge surge in renewables—this, however, requires policies to steer this green growth (see Chapter 4 of this book).

3.3

Summary

Over the decades, environmental issues have risen to the top of the political agenda in both Europe and Japan. However, in the 1970s, this trend escalated, resulting in significant policy and legal reforms. Energy has steadily gained importance in these movements, necessitating a response to the growing concerns about sustainable development, global warming, and climate change, with the electricity sector serving as a critical component in any transition to a zero-emission economy with a commitment to limit GHG emissions. Although, in terms of broad direction, Europe and Japan are on the same page when it comes to climate action, the extent and scope of the actions taken varies. The 1970s was also the time when establishing a format for the Community—Japan regular talks on energy issues (similar to the one created with the USA) appeared to be necessary and beneficial (see Commission, 1972, p. 13; 1973, p. 6). Hence, in terms of timing, many of Europe’s and Japan’s efforts took place at around the same period. This includes, for example, pollution control measures relating to gas emissions, which were implemented in Japan in the 1960s and greatly enhanced by the mid-1970s, when the country developed a comprehensive environmental regulatory system. The same is true for a slew of other pro-environmental improvements in Japanese law, including a framework for air pollution, SOx and NOx emissions, environmental quality standards, allowed emission limits, and other hazardous-pollutant-control measures. The authorisation of energy installations to operate, including SO2 and NOX emission standards, as well as SO2 and NOX emission limits—reduction objectives, with programmes for the gradual reduction of total yearly emissions from existing plants—were among the regulatory instruments available in

104

M. M. SOKOŁOWSKI

Europe. An integrated model has been implemented, as evidenced by the IPPC Directive. Aside from the EU-wide permit system for installations, the legislative framework established the benchmarks on which emission limit values, parameters, or comparable technical measures must be based (BAT). In Japan, there are also technological benchmarks. Although their power varies (these are soft measures), the 2019 Fifth Strategic Energy Plan provides a scientific review mechanism to regularly grasp the latest technological changes and state of affairs in energy technologies in order to flexibly modify and determine development goals and the relative value of each alternative through transparent mechanisms and procedures. Many of the available regulatory tools are the product of global initiatives concerning climate change and its implications, global warming, and the greenhouse effect. This is an example of a CFC emission system followed by a CO2 emission regime. In the early 1990s, with subsequent international developments, such as the establishment of the UNFCCC and the Kyoto Protocol, as well as the Paris Agreement, the efforts on controlling GHG emissions increased enhanced by specific regulatory tools. In this regard, the Community, and then the EU, preferred a stronger approach, even when the world failed to establish an international framework, as transpired in Copenhagen. whereas Japan, on the other hand, favoured a weaker approach to setting emission targets, particularly during the early stages of the global climate dialogue, when the country defended the principle of the states’ sovereign right to manage their natural resources independently. In contrast, the Community and the EU have always acknowledged their leadership role in the international climate discussions, even when significant partners expressed contrary views (as happened with the US opposition to Kyoto Protocol and its withdrawal from the Paris Agreement). Additionally, both Japan and the EU used more moderate ways to address the issue of energyorigin emissions. This comprises methods and programmes implemented over time. Many of them have been accepted in relation to global climate dialogue, with the European and Japanese delegates participating in international negotiations. Some were the consequence of international agreements, such as the 1990 Action Programme developed by Japan in response to the Noordwijk Conference’s Declaration (1989). Apart from being informational (collection of data and statistics), this type of measure conveyed certain signals to the industry and other stakeholders, demonstrating the introduced policy ideas and key concepts to be applied in the power sector. Although some of these ideas were never

3

MAKING THE ELECTRICITY SECTOR EMISSION-FREE

105

realised in their original form, they have evolved and resurfaced in a modified form. This is an example of a European fiscal instrument, such as the 1990s combination tax based on energy and carbon content, which was never implemented in the Community and was eventually replaced by a market mechanism (auctioning) within the scope of the EU ETS. Climate goals are linked to carbon trading since this mechanism is a key component in accomplishing them. This refers to the EU’s long-standing climate-binding targets: a 20% reduction in GHG emissions by 2020 compared to 1990 levels, and a 40% reduction (compared to 1990 levels) by 2030. In contrast, the Japanese reduction targets were non-binding declarations, such as the targeted 25% reduction from 1990 under the scope of a non-binding Copenhagen Accord. Furthermore, the law is comprehensive and takes the form of packages, as seen by the Climate and Energy Package, Third Energy Package, or Clean Energy Package. The packages, through the legal acts adopted under their framework, bring several regulatory instruments. These include public service obligations for climate protection that may be imposed on entities in the electricity sector; the introduction of economic incentives for combating climate change; the presentation of climate-related information to electricity consumers (such as CO2 emissions resulting from the electricity produced by the overall fuel mix of the electricity supplier); or the authorising procedures for new capacities contributing to the reduction of emissions. Finally, much has changed in recent years in the fields of climate and energy policy, as well as regulatory frameworks for the power industry. Independent forces, such as the climate emergency and specific international commitments—the Paris Agreement, for example—have accelerated the climate agenda in both the EU and Japan. Climate neutrality through decarbonisation is now a unified European and Japanese aim for 2050. Nonetheless, as with climate and energy policy, the paths leading to it are different. While the EU favours a strong regulatory approach and goal-oriented action with legally enforceable measures, Japan advocates a more cooperative, voluntary, and technology-driven approach. Both Japan and the EU are heading in the same direction, pushed by the European Green Deal and the Japanese vision of a decarbonised society, but their approaches to meeting the 2050 goals diverge. In many respects this is a result of the attitude adopted years ago: a clear climate leader (EU) and a keen

106

M. M. SOKOŁOWSKI

observer (Japan). These positions are the result of internal conditions, such as the European societies (particularly in the West) aiming for the quickest possible decarbonisation while already developing non- or lowemission sources, in contrast to Japan’s lack of energy resources and the unplanned shutdown of non-emission nuclear sources as a result of the 2011 earthquake and tsunami. This opens the door to a consideration of yet another sort of zero-emission source, renewables, which is covered in Chapter 4 of this book.

Notes 1. This concerns the Treaty Establishing the European Economic Community (1957), then renamed and amended by the Treaty of the European Union (1992)—also known as the Treaty of Maastricht—to the Treaty Establishing the European Community (1992) (TEC) (see Sokołowski, 2016, pp. 23–25; Territt, 2008, p. 15). 2. According to the Treaty the changes provided in Article 25 of the Single European Act (1986) ‘[e]nvironmental protection requirements shall be a component of the Community’s other policies’. 3. Inserted by Article 2(4) of the Amsterdam Treaty (1997). 4. Subsequent programmes were established in 1977 and 1983 (see Council, 1977, 1983). 5. To harmonise the measurement methods, see Council Directive 89/427/EEC (1989). 6. See Annex I and Annex II of Council Directive 80/779/EEC (1980). 7. See Article 3 and Annex I (1.4) of Council Directive 84/360/EEC (1984). 8. This concerned CFC F-11 and F-12. 9. This referred to the reductions in aerosol can filling by the end of 1981 when compared to 1976 levels., see Article 1(2) of Decision 80/372/EEC (1980). 10. This was an element of the Environmental Imperative, highlighted in the Annex II of Presidency Conclusions (see European Council, 1990, p. 27). 11. See Article 2(2) of Council Decision 93/389/EEC (1993). 12. See Annex I (1.1) of the IPPC Directive (1996). 13. See Articles 9(4), 10, and 11 of the IPPC Directive (1996). 14. See Article 6 of the IPPC Directive (1996). 15. See Article 4 of the EU ETS Directive (2003). 16. Proposals for Directive on fuel quality (Commission, 2007b) and Regulation on emission performance standards for new passenger car (Commission, 2007c) come from 2007. 17. See OJ L 140, 5.6.2009.

3

MAKING THE ELECTRICITY SECTOR EMISSION-FREE

107

18. See Article 1(1) of Directive 2019/29/EC (2009). 19. See revised Article 10 of the EU ETS Directive (2003) as amended by Article 1(11) of Directive 2009/29/EC (2009). 20. Member States could grant a transitional free allocation to installations for electricity production that were operational by 31 December 2008 or for which the investment process was physically started by the same date, only if the national electricity system was experiencing network (as for 2007, the Member State was not directly or indirectly connected to the network interconnected system operated by the Union for the Coordination of Transmission of Electricity or connected by a single line with a capacity of less than 400 MW) or fuel structure issues (in 2006, the Member State generated more than 30% of electricity from a single fossil fuel, and its GDP per capita at market pricing did not exceed 50% of the Community’s average). 21. See revised Article 9 of the EU ETS Directive (2003) as amended by Article 1(9) of Directive 2009/29/EC (2009). 22. See Article 3(2) of the Third Electricity Directive (2019). 23. See Article 3(10) of the Third Electricity Directive (2019). 24. See Article 3(9)(b) of the Third Electricity Directive (2019). 25. See Article 7(2)(k) of the Third Electricity Directive (2019). 26. See Article 10d added to the EU ETS Directive (2003) by Article 1(16) of Directive (EU) 2018/410 (2018). 27. See revised Article 30 of the EU ETS Directive (2003) as amended by Article 1(37) of Directive (EU) 2018/410 (2018). 28. Emissions of black smoke qualified 3 or above out of 5 on the Ringelmann smoke scale were prohibited for six minutes or more per hour (Overseas Environmental Cooperation Center, 1998, p. 39). The Ringelmann scale was developed in France in the late 1800s and in the first half of the twentieth century was widely used in the Western countries as a measure of air pollution: it was based on a chart consisting of different shades of grey that could be compared to a plume of smoke; usually, smoke ordinances prohibited the emission of smoke that was darker than a chart with 60% blackness (3rd level) (Blackman & Harrington, 2000, p. 27; Uekoetter, 2005, pp. 14–15). 29. These measures, which were enacted as part of the Tokyo Metropolitan Factory Pollution Prevention Ordinance, did not include quantitative standards and instead focused on noise (Overseas Environmental Cooperation Center, 1998, p. 39). 30. Also known in English as the Smoke and Soot Regulation Law. ogaiby¯ o ]. 31. In Japanese: 四大公害病 [yondaik¯ 32. Minamata disease (typical symptoms include: sensory problems, ataxia, dysarthria, visual field constriction, auditory disturbances, and tremors)

108

33.

34.

35.

36. 37.

38. 39. 40.

41.

M. M. SOKOŁOWSKI

was initially detected in Minamata City, Japan’s Kyushu Island’s southwest area in May 1956—people were poisoned by methylmercury (MeHg) discharged in waste water from a chemical plant after consuming fish and shellfish from Minamata Bay, which had high levels of mercury contamination—5.61 to 35.7 ppm (Harada, 1995). Similar methylmercury food poisoning occurred in Niigata Prefecture in; the factory responsible for the contamination operated in the same way as the factory in Minamata, except that the contaminated water in Niigata was in a river (the Agano River) rather than the sea (Eto et al., 2010; Yorifuji, 2020). Itai-itai disease (meaning ‘ouch-ouch’ or ‘it hurts, it hurts’ disease) is the most severe form of chronic cadmium (Cd) poisoning that occurred in the residents of the downstream Jinzu River basin in Toyama Prefecture as a result of persistent irrigation, from around 1900 to the 1960s, through the consumption of rice grown in paddies contaminated with Cd from effluent originating in a zinc mine located in the upper reaches of the river; it causes injuries manifested by tubular and glomerular dysfunction, as well as bone injury consisting of a combination of osteomalacia and osteoporosis (Aoshima, 2016, 2019; Inaba et al., 2005). Yokkaichi asthma is a type of chronic obstructive pulmonary disease (COPD) and bronchial asthma that appeared in Yokkaichi-city (Mie Prefecture, Japan) in the early 1960s; it is caused by concentrated sulfuric acid mists emitted from calciner stacks at a titanium oxide installation situated windward of the residential area (Guo et al., 2008; Kitagawa, 1984). From 1971 to 1973, judges ruled in favour of plaintiffs in the four big cases of pollution-related illnesses: Itai-itai and Niigata Minamata diseases in 1971, Yokkaichi asthma in 1972, and Minamata disease in 1973 (Avenell, 2012, p. 429). In Japanese: 公害対策基本法 [k¯ ogai taisaku kihon-h¯ o ]. For example, the air quality standard for sulphur dioxide (SO2 ) was first established in 1969 as not exceeding the annual average for hourly values of 0.05 ppm, and was later revised to the daily average for hourly values of 0.04 ppm, and hourly value of 0.1 ppm (Takebayashi, 2016, p. 66). For more views on economic growth and environmental quality in Japan see Nakano (1987, pp. 286–277). In Japanese: 公害国会 [k¯ ogai kokkai]. Ryokichi Minobe was a progressive Governor of Tokyo from 1967 to 1979 (three terms), supported by both the Japan Socialist Party (JSP) and the Japan Communist Party (JCP); his success stemmed from, inter alia, public dialogue and people’s engagement (see Lee, 1974, p. 478; Sasaki, 1998). The Ordinance enumerated the Governor’s, entrepreneurs’, and citizens’ responsibilities with regard to the environment and identified pollution

3

42.

43.

44.

45. 46.

47. 48. 49.

50.

51. 52.

53.

MAKING THE ELECTRICITY SECTOR EMISSION-FREE

109

sources subjected to control standards (such as factories, designated workshops, construction sites, etc.) covering, inter alia, soot, smoke, dust, and poisonous gases (Tokyo Metropolitan Environmental Protection Research Institute, 1972, p. 159). The right to a healthy and comfortable environment was to be upheld by citizens’ (Article 8) and entrepreneurs’ efforts, with extra obligations imposed on entrepreneurs: they had to be responsible for taking necessary measures on their own in order to prevent pollution (Article 2) as well as work together to protect the environment (Article 7), and in the absence of regulation standards in the Ordinance, entrepreneurs were required to make every effort to prevent environmental pollution (Article 19) (Nabika, 1972, p. 135). Japanese private companies were reported to be exploiting tropical forests and marine resources in the 1980s, for which Japan was widely chastised (Kawashima, 2001, p. 161). MITI recommended a per capita-based stabilisation target, whereas the Environment Agency insisted on a flat stabilisation target (see Fermann, 1993, pp. 291–292). In Japanese: 地球温暖化防止行動計画 [chiky¯ uondankab¯ oshi k¯ od¯ o keikaku]. Energy conservation was listed in the Action Programme as a major tool for reducing CO2 emissions, and energy conservation technologies were expected to be a key component of the developments aimed at combating global warming (Fukasaku, 1995, p. 1073). See of Article 4.2. (a)–(b) of the United Nations Framework Convention on Climate Change (1992). In the Commission’s assessment, in addition to Japan, this group included the European Free Trade Association, Australia, and New Zealand. Earlier, the Council of Ministers for Global Environmental Conservation, established in 1989, coordinated policies on global environmental issues, including climate, during its ad hoc meetings (Zhou & Mori, 2011, p. 301). This included, among other things, amending energy safety standards to improve heat-storing air conditioner systems that use off-peak electricity to run air cooling during peak hours to reduce CO2 emissions, and pressing public authorities to install these systems in their buildings (see GWPH, 1998). See Article 2(4) of the Act on Promotion of Global Warming Countermeasures (1998). According to the revised Article 8(1) ‘[t]he national government shall establish a plan for attaining the targets prescribed in Article 3 of the Kyoto Protocol’. To meet the Kyoto 6% target, the Japanese government proposed the Outline for Promotion of Efforts to Prevent Global Warming in 1998,

110

54.

55.

56. 57.

58. 59. 60. 61. 62.

M. M. SOKOŁOWSKI

which was revised in 2002 following the promulgation of the Marrakesh Accords in November 2001 (see Huang & Nagasaka, 2011, p. 378; Isozaki, 2010, p. 389). ‘Government will promote the introduction and utilization expansion of natural gas including the shift to natural gas, while taking into account energy security and the balance with other energy sources such as nuclear power’ (Government of Japan, 2005, p. 54). Except for an 11-month period in 1993/94, Japan had been governed by a single political party—the Liberal Democratic Party (LDP) since 1955— in the national elections of August 2009, the DPJ led by Yukio Hatoyama deposed the LDP as the ruling party, promising a change in Japan’s energy policy—the DPJ campaigned on the platform that included a pledge to reduce the use of fossil fuels and a promise to pursue ambitious GHG emission reduction (Valentine et al., 2011, pp. 1865–1866). 2006–2007 was Shinzo Abe’s first term as Prime Minister (see Envall, 2011). Sophisticated 3E+S is an extended version of the previous four priorities of the Japanese energy policy (3E+S): energy security, environment, economic efficiency, and safety (see METI, 2018, pp. 15, 118). These are CCS (carbon capture and storage) and CCUS (carbon capture, usage, and storage). Emission trading schemes in Tokyo (mandatory) and Saitama Prefecture (voluntary) are exception (see Arimura & Abe, 2021, p. 520). In Japanese: 地球温暖化対策税 [chiky¯ uondankataisaku zei]. See Article 2–2 of the revised Act on Promotion of Global Warming Countermeasures (2021). See Article 2(6) of the revised Act on Promotion of Global Warming Countermeasures (2021).

References 80/372/EEC: Council Decision of 26 March 1980 Concerning Chlorofluorocarbons in the Environment (1980). 81/462/EEC: Council Decision of 11 June 1981 on the Conclusion of the Convention on Long-Range Transboundary Air Pollution. (1981). OJ L 171, 27.6.1981. 93/389/EEC: Council Decision of 24 June 1993 for a Monitoring Mechanism of Community CO2 and Other Greenhouse Gas Emissions (1993). 2002/358/EC: Council Decision of 25 April 2002 Concerning the Approval, on Behalf of the European Community, of the Kyoto Protocol to the United Nations Framework Convention on Climate Change and the Joint Fulfilment of Commitments Thereunder. (2002). OJ L 130, 15.5.2002.

3

MAKING THE ELECTRICITY SECTOR EMISSION-FREE

111

Abe, S., & Tepperman, J. (2013). Japan is back: A conversation with Shinzo Abe. Foreign Affairs, 92(4), 2–8. Act Concerning Regulation of Soot and Smoke Emissions [ばい煙の排出の規制 oritsu]. (1962). 等に関する法律, baien no haishutsu no kisei-t¯o ni kansuru h¯ Act No. 146, 2.6.1962. Act on Promotion of Global Warming Countermeasures [地球温暖化対策の推進 に関する法律, chiky¯u ondanka taisaku no suishin ni kansuru h¯oritsu]. (1998). Act No. 117, 9.10.1998. Act to Partially Revise the Act on Promotion of Global Warming Countermeau sures [地球温暖化対策の推進に関する法律の一部を改正する法律, chiky¯ ondanka taisaku no suishin ni kansuru h¯ oritsu no ichibu o kaisei suru h¯ oritsu]. (2021). Act No. 54, 3.6.2021. Agency for Natural Resources and Energy. (2021). Outline of strategic energy plan. Available at: https://www.enecho.meti.go.jp/en/category/oth ers/basic_plan/pdf/6th_outline.pdf (Accessed: 27 November 2021). oshi-h¯ o]. (1968). Act Air Pollution Control Act [大気汚染防止法, taiki osen b¯ No. 97, 10.6.1968. Akahane, T., Yokoi, K., & Fujiki, T. (2021). Overview of the revised act on the promotion of global warming countermeasures and its practical impact. Anderson Mori & Tomotsune. Available at: https://www.amt-law.com/ asset/pdf/bulletins12_pdf/210623.pdf (Accessed: 10 November 2021). Aoshima, K. (2016). Itai-itai disease: Renal tubular osteomalacia induced by environmental exposure to cadmium—Historical review and perspectives. Soil Science and Plant Nutrition, 62(4), 319–326. Aoshima, K. (2019). Recent clinical and epidemiological studies of itai-itai disease (cadmium-induced renal tubular osteomalacia) and cadmium nephropathy in the Jinzu River basin in Toyama Prefecture, Japan. In S. Himeno & K. Aoshima (Eds.), Cadmium toxicity: New aspects in human disease, rice contamination, and cytotoxicity (pp. 23–37). Springer. Arimura, T. H., & Abe, T. (2021). The impact of the Tokyo emissions trading scheme on office buildings: What factor contributed to the emission reduction? Environmental Economics and Policy Studies, 23(3), 517–533. Asuka, J. (2017). INDC costs and experiences in removing low-carbon technology barriers: Japan. In V. Anbumozhi & K. Kalirajan (Eds.), Globalization of low-carbon technologies: The impact of the Paris agreement (pp. 367–402). Springer. Avenell, S. (2006). Regional egoism as the public good: Residents’ movements in Japan during the 1960s and 1970s. Japan Forum, 18(1), 89–113. Avenell, S. (2012). Japan’s long environmental sixties and the birth of a green leviathan. Japanese Studies, 32(3), 423–444. o kihon-h¯ o]. (1993). Act No. 91, Basic Environmental Act [環境基本法, kanky¯ 19.11.1993.

112

M. M. SOKOŁOWSKI

Basic Law for Environmental Pollution Control [公害対策基本法, k¯ ogai taisaku kihon-h¯ o]. (1967). Law No. 132, 3.8.1967. Betz, R., & Sato, M. (2006). Emissions trading: Lessons learnt from the 1st phase of the EU ETS and prospects for the 2nd phase. Climate Policy, 6(4), 351–359. Blackman, A., & Harrington, W. (2000). The use of economic incentives in developing countries: Lessons from international experience with industrial air pollution. The Journal of Environment & Development, 9(1), 5–44. Brönnimann, S. (2018). Global warming (1970–present). In S. White, C. Pfister, & F. Mauelshagen (Eds.), The Palgrave handbook of climate history (2018th ed., pp. 321–328). Palgrave Macmillan. Burns, W. (2017). The European Union’s emissions trading system: Climate policymaking model, or muddle? (part II). Tulane Environmental Law Journal, 31(1), 51–77. Buschle, D., & Westphal, K. (2018). A challenge to governance in the EU: Decarbonization and energy security. European Energy Journal, 8(3–4), 53– 64. Cass, L. R. (2012). The failures of American and European climate policy: International norms, domestic politics, and unachievable commitments. State University of New York Press. Cassotta, S., & Sokołowski, M. M. (2022). Regulatory models of community energy (CE) in a multi-regulatory approach: Juxtaposing the global, the EU, the Japanese and Swedish cases. European Energy and Environmental Law Review, 31(3), 189–199. ˇ A. (2017). The unintended consequences of EU law and policy on air Cavoški, pollution. Review of European, Comparative & International Environmental Law, 26(3), 255–265. Chang, H. (2002). The political economy of carbon dioxide emissions in three Asian countries. Asian Perspective, 237–267. Clémençon, R. (2016). The two sides of the Paris climate agreement: Dismal failure or historic breakthrough? Journal of Environment & Development, 25(1), 3–24. Collier, U. (1996). Implementing a climate change strategy in the European Union: Obstacles and opportunities. EUI Working Paper RSC [Preprint], (96/1). Commission. (1972). Communication from the Commission to the Council necessary progress in community energy policy. Brussels, 4.10.1972, COM(72) 1200. Commission. (1973). Communication from the Commission to the Council guidelines and priority actions under the community energy policy. Brussels, SEC(73) 1481, 19.4.1973.

3

MAKING THE ELECTRICITY SECTOR EMISSION-FREE

113

Commission. (1974). Preliminary report on the problems of pollution and nuisances originating from energy production (with a special emphasis on SO2, particulate matter, NOx and thermal discharges). Luxembourg, 3.4.1974, SEC(74) 1150 final. Commission. (1988). Communication to the council the greenhouse effect and the community: Commission work programme concerning the evaluation of policy options to deal with the “Greenhouse Effect”’. Brussels, 16.11.1988, COM(88) 656 final. Commission. (1991). Communication from the commission to the council community strategy to limit carbon dioxide emissions and to improve energy efficiency. Brussels, 14.10.1991, SEC(91) 1744 final. Commission. (1992). A community strategy to limit carbon dioxide emissions and to improve energy efficiency. Brussels, 1.6.1992, COM(92) 246 final. Commission. (1997). Communication from the commission an overall view of energy policy and actions. Brussels, 23.4.1997, COM(97) 167 final. Commission. (1998). Communication from the commission strengthening environmental integration within community energy policy. Brussels, 14.10.1998, COM(1998) 571 final. Commission. (2001). Communication from the commission a sustainable Europe for a better world: A European Union strategy for sustainable development. Brussels, 15.5.2001, COM(2001) 264 final. Commission. (2002). Communication from the commission to the European Parliament, the Council, the Economic and Social Committee and the Committee of the Regions Towards a Global Partnership for Sustainable Development. Brussels, 13.2.2002, COM(2002) 82 final. Commission. (2005). Communication from the Commission to the Council, the European Parliament, the European Economic and Social Committee and the Committee of the Regions: Winning the Battle Against Global Climate Change. Brussels, 9.2.2005, COM(2005) 35 final. Commission. (2007a). Communication from the Commission to the Council, the European Parliament, the European Economic and Social Committee and the Committee of the Regions—Limiting Global Climate Change to 2 Degrees Celsius—the Way Ahead for 2020 and Beyond. Brussels, 10.1.2007, COM(2007) 2 final. Commission. (2007b). Proposal for a Directive of the European Parliament and of the Council Amending Directive 98/70/EC as Regards the Specification of Petrol, Diesel and Gas-Oil and Introducing a Mechanism to Monitor and the Introduction of a Mechanism to Monitor and Reduce Greenhouse Gas Emissions from the Use of Road Transport Fuels and Amending Council Directive 1999/32/EC, as Regards the Specification of Fuel Used by Inland Waterway Vessels and Repealing Directive 93/12/EEC. Brussels, 31.1.2007, COM(2007) 18 final.

114

M. M. SOKOŁOWSKI

Commission. (2007c). Proposal for a Regulation of the European Parliament and of the Council Setting Emission Performance Standards for New Passenger Cars as Part of the Community’s Integrated Approach to Reduce CO2 Emissions from Light-Duty Vehicles. Brussels, 19.12.2007, COM(2007) 856 final. Commission. (2008). Communication from the Commission to the Council and the European Parliament on a First Assessment of National Energy Efficiency Action Plans as Required by Directive 2006/32/EC on Energy End-Use Efficiency and Energy Services—Moving Forward Together on Energy Efficiency. Brussels, 23.1.2008, COM(2008) 11 final. Commission. (2010a). Commission Staff Working Document Accompanying the Communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions Analysis of Options to Move Beyond 20% Greenhouse Gas Emission Reductions and Assessing the Risk of Carbon Leakage: Background Information and Analysis. Part II’. Brussels, 26.5.2010, SEC(2010) 650. Commission. (2010b). Communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions Energy 2020: A Strategy for Competitive, Sustainable and Secure Energy. Brussels, 10.11.2010, COM(2010) 639 final. Commission. (2011a). Communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions A Roadmap for Moving to a Competitive Low Carbon Economy in 2050. Brussels, 8.3.2011, COM(2011) 112 final. Commission. (2011b). Communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions Energy Roadmap 2050. Brussels, 15.12.2011, COM(2011) 885 final. Commission. (2013). Green paper: A 2030 framework for climate and energy policies. Brussels, 27.3.2013, COM(2013) 169 final. Commission. (2014). Communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions a Policy Framework for Climate and Energy in the Period from 2020 to 2030. Brussels, 22.1.2014, COM(2014) 15 final. Commission. (2015). Communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions: A Global Partnership for Poverty Eradication and Sustainable Development After 2015. Commission. (2018). Communication from the Commission to the European Parliament, the European Council, the Council, the European Economic and Social Committee, the Committee of the Regions and the European Investment Bank a Clean Planet for All a European Strategic Long-Term Vision for

3

MAKING THE ELECTRICITY SECTOR EMISSION-FREE

115

a Prosperous, Modern, Competitive and Climate Neutral Economy. Brussels, 28.11.2018, COM(2018) 773 final. Commission. (2019). Communication from the Commission to the European Parliament, the European Council, the Council, the European Economic and Social Committee and the Committee of the Regions the European Green Deal. Brussels, 11.12.2019, COM(2019) 640 final. Commission. (2020a). Communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions European Climate Pact’. Brussels, 9.12.2020, COM(2020) 788 final. Commission. (2020b). Communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions Stepping up Europe’s 2030 Climate Ambition: Investing in a Climate-Neutral Future for the Benefit of Our People. Brussels, 17.9.2020, COM(2020) 562 final. Commission. (2021a). Communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions Empty “Fit for 55”: Delivering the EU’s 2030 Climate Target on the Way to Climate Neutrality. Brussels, 14.7.2021, COM(2021) 550 final. Commission. (2021b). Communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions Empty Forging a Climate-Resilient Europe—The New EU Strategy on Adaptation to Climate Change’. Brussels, 24.2.2021, COM(2021) 82 final. Convention on Long-Range Transboundary Air Pollution (1979) adopted on 13.11.1979, entered into force on 16.3.1983. Council. (1973). Declaration of the Council of the European Communities and of the Representatives of the Governments of the Member States Meeting in the Council of 22 November 1973 on the Programme of Action of the European Communities on the Environment. Council. (1975). Council Resolution of 3 March 1975 on Energy and the Environment, OJ C 168, 25.7.1975. Council. (1977). Resolution of the Council of the European Communities and of the Representatives of the Governments of the Member States Meeting Within the Council of 17 May 1977 on the Continuation and Implementation of a European Community Policy and Action Programme on the Environment, OJ C 139, 13.6.1977. Council. (1978). Council Resolution of 30 May 1978 on Fluorocarbons in the Environment, OJ C 133, 7.6.1978. Council. (1983). Resolution of the Council of the European Communities and of the Representatives of the Governments of the Member States, Meeting

116

M. M. SOKOŁOWSKI

Within the Council, of 7 February 1983 on the Continuation and Implementation of a European Community Policy and Action Programme on the Environment (1982 to 1986), OJ C 46, 17.2.1983. Council. (1990a). Press Release 1436th Joint Council Meeting: Energy/Environment. Luxembourg, 29.10.1990, 9482/90 (Presse 167). Council. (1991b). Press Release 1544th Meeting of the Council: Environment/Energy. Brussels, 13.12.1991, 9916/91 (Presse 231). Council Directive 80/779/EEC of 15 July 1980 on Air Quality Limit Values and Guide Values for Sulphur Dioxide and Suspended Particulates. (1980). OJ L 229, 30.8.1980. Council Directive 82/884/Eec of 3 December 1982 on a Limit Value for Lead in the Air. (1982). OJ L 378, 31.12.1982. Council Directive 84/360/EEC of 28 June 1984 on the Combating of Air Pollution from Industrial Plants. (1984). OJ L 188, 16.7.1984. Council Directive 85/203/EEC of 7 March 1985 on Air Quality Standards for Nitrogen Dioxide. (1985). OJ L 87, 27.3.1985. Council Directive 88/609/EEC of 24 November 1988 on the Limitation of Emissions of Certain Pollutants into the Air from Large Combustion Plants. (1988). OJ L 336, 7.12.1988. Council Directive 89/427/EEC of 21 June 1989 Amending Directive 80/779/EEC on Air Quality Limit Values and Guide Values for Sulphur Dioxide and Suspended Particulates (1989). Council Directive 96/61/EC of 24 September 1996 concerning integrated pollution prevention and control (1996) OJ L 257, 10.10.1996. Creti, A., Jouvet, P.-A., & Mignon, V. (2012). Carbon price drivers: Phase I versus Phase II equilibrium? Energy Economics, 34(1), 327–334. https://doi. org/10.1016/j.eneco.2011.11.001 Delbeke, J., & Vis, P. (2015). EU climate leadership in a rapidly changing world. In J. Delbeke, & P. Vis (Eds.) EU climate policy explained (pp. 5–28). Routledge. Dimitrov, R. S. (2010). Inside UN climate change negotiations: The Copenhagen conference. Review of Policy Research, 27 (6), 795–821. Directive 2003/87/EC of the European Parliament and of the Council of 13 October 2003 establishing a scheme for greenhouse gas emission allowance trading within the Community and amending Council Directive 96/61/EC (2003) OJ L 275, 25.10.2003. Directive 2004/101/EC of the European Parliament and of the Council of 27 October 2004 Amending Directive 2003/87/EC Establishing a Scheme for Greenhouse Gas Emission Allowance Trading Within the Community, in Respect of the Kyoto Protocol’s Project Mechanisms (2004) OJ L 338, 13.11.2004.

3

MAKING THE ELECTRICITY SECTOR EMISSION-FREE

117

Directive 2009/29/EC of the European Parliament and of the Council of 23 April 2009 Amending Directive 2003/87/EC so as to Improve and Extend the Greenhouse Gas Emission Allowance Trading Scheme of the Community (2009) OJ L 140, 5.6.2009. Directive 2009/72/EC of the European Parliament and of the Council of 13 July 2009 concerning common rules for the internal market in electricity and repealing Directive 2003/54/EC (2009) OJ L 211, 14.8.2009. Directive 2012/27/EU of the European Parliament and of the Council of 25 October 2012 on Energy Efficiency, Amending Directives 2009/125/EC and 2010/30/EU and Repealing Directives 2004/8/EC and 2006/32/EC (2012) OJ L 315, 14.11.2012. Dorsch, M. J., Flachsland, C., & Kornek, U. (2020). Building and enhancing climate policy ambition with transfers: Allowance allocation and revenue spending in the EU ETS. Environmental Politics, 29(5), 781–803. Draganova, D. (2017). The market stability reserve strikes back: A new hope for the EU’s greenhouse gas emissions trading system. Aberdeen Student Law Review, 7 , 80–108. Energy and Environment Council. (2012). Innovative strategy for energy and the environment. Envall, H. D. P. (2011). Abe’s fall: Leadership and expectations in Japanese politics. Asian Journal of Political Science, 19(2), 149–169. Ermanski, R. A. (1991). EC regulation of sulphur dioxide levels: Directive 89/427. Boston College International and Comparative Law Review, 14(2), 369–378. Eskeland, G. S., Rive, N. A., & Mideksa, T. K. (2012). Europe’s climate goals and the electricity sector. Energy Policy, 41, 200–211. Eto, K., Marumoto, M., & Takeya, M. (2010). The pathology of methylmercury poisoning (Minamata disease): The 50th anniversary of Japanese Society of Neuropathology. Neuropathology, 30(5), 471–479. European Council. (1990). Presidency conclusions. Dublin, 25–26.6.1990, SN 60/1/90. European Council. (2007). Presidency Conclusions of the Brussels European Council (8/9 March 2007). Brussels, 2.5.2007, 7224/1/07 REV 1. European Council. (2014). European Council (23 and 24 October 2014)— Conclusions. Brussels, 24.10.2014, EUCO 169/14. European Council. (2017). European Council Meeting (22 and 23 June 2017)— Conclusions. Brussels, 23.6.2017, EUCO 8/17. European Council. (2018). European Council Meeting (22 March 2018)— Conclusions. Brussels, 23.3.2018, EUCO 1/18. European Parliament. (1986). Resolution on measures to counteract the rising concentration of carbon dioxide in the atmosphere (the ‘Greenhouse’ effect), Strasbourg, 12.9.1986, A2-68/86.

118

M. M. SOKOŁOWSKI

von Feigenblatt, O. (2007). Japan and human security: 21st century ODA policy apologetics and discursive co-optation. Academic Research International. Fermann, G. (1993). Japan’s 1990 climate policy under pressure. Security Dialogue, 24(3), 287–300. Fujita, K., & Hill, R. C. (2007). The zero waste city: Tokyo’s quest for a sustainable environment. Journal of Comparative Policy Analysis, 9(4), 405–425. Fukasaku, Y. (1995). Energy and environment policy integration: The case of energy conservation policies and technologies in Japan. Energy Policy, 23(12), 1063–1076. Fukuda, S. (2015). Abenomics: Why was it so successful in changing market expectations? Journal of the Japanese and International Economies, 37 , 1–20. Genard, Q., & Gaventa, J. (2018). Energy Union governance and the European strategic vision for a climate neutral economy: How will they work together. European Energy Journal, 8(2), 10–14. Government of Japan. (1990). Action Programme to Arrest Global Warming. Tokyo, 23.10.1990. Government of Japan. (1994). Basic environmental plan. Tokyo, 16.12.1994. Government of Japan. (1997). Establishment of the global warming prevention headquarters. Tokyo, 19.12.1997, partially revised 19.6.1998, 12.12.2000, 5.2.2002. Government of Japan. (2005). Kyoto protocol target achievement plan. Tokyo, 28.5.2005, partially revised 11.7.2006, totally revised 28.3. 2008. Government of Japan. (2019). The long-term strategy under the Paris Agreement. Tokyo, 11.7.2019. Gresser, J. (1975). The 1973 Japanese law for the compensation of pollutionrelated health damage: An introductory assessment. Law Japan, 8, 91–135. Grimeaud, D. (2000). The integration of environmental concerns into EC policies: A genuine policy development? European Energy and Environmental Law Review, 9(7), 207–218. Guo, P., et al. (2008). Mortality and life expectancy of Yokkaichi asthma patients, Japan: Late effects of air pollution in 1960–70s. Environmental Health, 7 (1), 1–10. GWPH. (1998). Guidelines for measures to prevent global warming. Tokyo, 19.6.1998. Available at: https://www.env.go.jp/en/earth/cc/gw/index. html (Accessed: 17 August 2021). Haigh, N. (2016). EU environmental policy: Its journey to centre stage. Routledge. Harada, M. (1995). Minamata disease: Methylmercury poisoning in Japan caused by environmental pollution. Critical Reviews in Toxicology, 25(1), 1–24.

3

MAKING THE ELECTRICITY SECTOR EMISSION-FREE

119

Hayashi, M., & Hughes, L. (2013). The policy responses to the Fukushima nuclear accident and their effect on Japanese energy security. Energy Policy, 59, 86–101. https://doi.org/10.1016/j.enpol.2012.08.059 Hildén, M., Jordan, A., & Rayner, T. (2014). Climate policy innovation: Developing an evaluation perspective. Environmental Politics, 23(5), 884–905. Hintermann, B. (2010). Allowance price drivers in the first phase of the EU ETS. Journal of Environmental Economics and Management, 59(1), 43–56. Hirohara, M., Alden, J. D., & Cassim, M. (1988). The impact of recent urbanisation on inner city development in Japan. The Town Planning Review, 365–381. Homma, T., & Akimoto, K. (2013). Analysis of Japan’s energy and environment strategy after the Fukushima nuclear plant accident. Energy Policy, 62, 1216– 1225. Hovi, J., Sprinz, D. F., & Bang, G. (2012). Why the United States did not become a party to the Kyoto protocol: German, Norwegian, and US perspectives. European Journal of International Relations, 18(1), 129–150. Huang, J., & Nagasaka, K. (2011). Allocation of greenhouse gas emission for Japan large emitting industries under Kyoto protocol by grandfathering rule approach. International Journal of Environmental Science and Development, 2(5), 377. Huber, M., & Liberatore, A. (2001). A regional approach to the management of global environmental risks: The case of the European Community. Learning to Manage Global Environmental Risks, 1, 295–322. Hyvarinen, J. (1999). The European Community’s monitoring mechanism for CO2 and other greenhouse gases: The Kyoto protocol and other recent developments. Review of European, Comparative & International Environmental Law, 8(2), 191–197. Imura, H. (2005). Japan’s environmental policy: Past and future. In H. Imura & M. Schreurs (Eds.), Environmental policy in Japan (pp. 15–48). Edward Elgar Publishing. Inaba, T., et al. (2005). Estimation of cumulative cadmium intake causing Itai– itai disease. Toxicology Letters, 159(2), 192–201. Isozaki, H. (2010). Japan: Achieving its Kyoto target. In K.-L. Koh, L. H. Lye, & J. Lin (Eds.), Crucial issues in climate change and the Kyoto protocol: Asia and the World (pp. 383–405). World Scientific. Jachtenfuchs, M. (1990). The European Community and the protection of the ozone layer. Journal of Common Market Studies, 28(3), 261–278. Jacquet, J., & Jamieson, D. (2016). Soft but significant power in the Paris Agreement. Nature Climate Change, 6(7), 643–646. Kanazawa, Y. (1973). A system of relief for pollution-related injury. Law Japan, 6, 65–72.

120

M. M. SOKOŁOWSKI

Kawamura, H. (2018). The relation between law and technology in Japan: Liability for technology-related mass damage in the cases of Minamata disease, asbestos, and the Fukushima Daiichi nuclear disaster. Contemporary Japan, 30(1), 3–27. Kawashima, Y. (2001). Japan and climate change: Responses and explanations. Energy & Environment, 12(2/3), 167–179. Kimura, H. (2013). Climate law and policy in Japan. In E. J. Hollo, K. Kulovesi, & M. Mehling (Eds.), Climate change and the law (pp. 585–595). Springer. Kinley, R. (2017). Climate change after Paris: From turning point to transformation. Climate Policy, 17 (1), 9–15. Kitagawa, T. (1984). Cause analysis of the Yokkaichi asthma episode in Japan. Journal of the Air Pollution Control Association, 34(7), 743–746. Knoop, K., & Lechtenböhmer, S. (2017). The potential for energy efficiency in the EU Member States—A comparison of studies. Renewable and Sustainable Energy Reviews, 68, 1097–1105. Knopf, B., Nahmmacher, P., & Schmid, E. (2015). The European renewable energy target for 2030—An impact assessment of the electricity sector. Energy Policy, 85, 50–60. Ko, M. K., et al. (1993). Global warming from chlorofluorocarbons and their alternatives: Time scales of chemistry and climate. Atmospheric Environment. Part a. General Topics, 27 (4), 581–587. Kondo, S. (2006). Current status and future prospects of nuclear energy utilization in Japan. Pacific Basin Nuclear Conference 2006 (pp. 7–12). Australian Nuclear Association. Kuramochi, T. (2015). Review of energy and climate policy developments in Japan before and after Fukushima. Renewable and Sustainable Energy Reviews, 43, 1320–1332. Kuroda, M., & Shimadera, H. (2020). Looking to the future based on the history of water and atmospheric environmental issues in Japan. In T. Saijo (Ed.), Future design: Incorporating preferences of future generations for sustainability (pp. 129–150). Springer. Kyoto Prefectural Environmental Pollution Control Ordinance (1971). Kyoto Protocol to the United Nations Framework Convention on Climate Change adopted on 1 December 1997, entered into force on 16 February 2005 (1997). Lauber, S. (1993). Japan and international environment law—Economy over environment? Japanese Studies, 13(3), 37–54. Lechevalier, S., & Monfort, B. (2018). Abenomics: Has it worked? Will it ultimately fail? Japan Forum, 30(2), 277–302. Lecourt, S. (2013). EU ETS phase 3 benchmarks—Implications and potential flaws. Economics of Energy & Environmental Policy, 2(2), 125–136.

3

MAKING THE ELECTRICITY SECTOR EMISSION-FREE

121

Lee, T. (1974). Tokyo metropolitan assembly election–1973. Asian Survey, 14(5), 478–488. von der Leyen, U. (2019). A union that strives for more. My agenda for Europe: Political guidelines for the next European Commission 2019–2024. Available at: https://op.europa.eu/en/publication-detail/-/publication/43a 17056-ebf1-11e9-9c4e-01aa75ed71a1 Liberatore, A. (1995). Arguments, assumptions and the choice of policy instruments. In B. Dente (Ed.), Environmental policy in search of new instruments (pp. 55–71). Springer. Lisowski, M. (2002). Playing the two-level game: US President Bush’s decision to repudiate the Kyoto protocol. Environmental Politics, 11(4), 101–119. Long, Y., et al. (2021). Japanese carbon emissions patterns shifted following the 2008 financial crisis and the 2011 Tohoku earthquake. Communications Earth & Environment, 2(1), 1–12. Magdonelle, F. (1983). Actions of the European Communities in the domain of air pollution caused by hydrocarbons. In D. Rondia, M. Cooke, & R. K. Haroz (Eds.), Mobile source emissions including policyclic organic species (pp. 193–196). D. Reidel Publishing Company. Massai, L. (2011). The Kyoto protocol in the EU . T.M.C. Asser Press. Massai, L. (2012). European climate and clean energy law and policy. Earthscan. Massai, L., Beyet, C.-M., & Zevin, A. (2018). Current developments in carbon & climate law. Carbon & Climate Law Review, 12(3), 272–277. Matsushita, K. (2006). Thirty-five years of environmental policy in Japan: A call for environmental structural change. SANSAI: An Environmental Journal for the Global Community, 1, 21–40. McLellan, B. C., et al. (2013). Analysis of Japan’s post-Fukushima energy strategy. Energy Strategy Reviews, 2(2), 190–198. Mehling, M., & Massai, L. (2007). The European Union and climate change: Leading the way towards a post-2012 regime?. Carbon & Climate Law Review, 45–52. METI. (2010). The Strategic energy plan of Japan: Meeting global challenges and securing energy futures (revised in June 2010). METI. (2014). Strategic energy plan. April 2014. METI. (2018). Strategic energy plan. July 2018. METI. (2021). 6th Strategic energy plan [第6次エネルギー基本計画, dai 6-ji enerug¯ı kihon keikaku]. Mi Sun, P., & Yeo-Chang, Y. (2013). Legal institutions for enhancing and protecting forests as a carbon sink in Japan and the Republic of Korea. Forest Science and Technology, 9(2), 72–80. Michaelowa, K., & Michaelowa, A. (2012). Negotiating climate change. Climate Policy, 12(5), 527–533. https://doi.org/10.1080/14693062.2012.693393

122

M. M. SOKOŁOWSKI

Midford, P. (2021). The politics of nuclear power plant restarts versus renewable energy promotion. In P. Midford & E. Moe (Eds.), New challenges and solutions for renewable energy: Japan, East Asia and Northern Europe (pp. 101–134). Palgrave Macmillan. Mitsuda, H. (1997). Surging environmentalism in Japan: Back to the root. Journal of the Faculty of Sociology, 30, 119–135. Mori, M. (2008). Environmental pollution and bio-politics: The epistemological constitution in Japan’s 1960s. Geoforum, 39(3), 1466–1479. Morrisette, P. M. (1989). The evolution of policy responses to stratospheric ozone depletion. Natural Resources Journal, 29(3), 793–820. Morseletto, P., Biermann, F., & Pattberg, P. (2017). Governing by targets: Reductio ad unum and evolution of the two-degree climate target. International Environmental Agreements: Politics, Law and Economics, 17 (5), 655–676. Nabika, H. (1972). Kyoto prefectural environmental pollution control ordinance. Air Pollution Abstracts, 3(3), 135. Nakanishi, Y. (2016). Introduction: The impact of the international and European Union environmental law on Japanese basic environmental law. Contemporary Issues in Environmental Law: The EU and Japan (pp. 1–15). Springer. Nakano, T. (1987). Environmental policies in Japan. In C. C. Park (Ed.), Environmental policies: An international review (2013th ed. , pp. 259–288). Routledge. Noordwijk Declaration on climate change. (1989). Noordwijk, 6–7.11.1989. Oberthür, S. (2007). The European Union in international climate policy: The prospect for leadership. Intereconomics, 42(2), 77–83. Oberthür, S., & Pallemaerts, M. (2010). The EU’s internal and external climate policies: An historical overview. In S. Oberthür & M. Pallemaerts (Eds.), The new climate policies of the European Union: Internal legislation and climate diplomacy (pp. 27–63). VUB Press. Ohta, H. (2000). Effectiveness of voluntary agreements: Results of the second follow-up to the Keidanren voluntary action plan on the environment. Innovation and the environment (pp. 95–99). OECD. Ohta, H., & Tiberghien, Y. (2016). Saving the Kyoto protocol: What can we learn from the experience of Japan—EU cooperation? In P. Bacon, H. Mayer, & H. Nakamura (Eds.), The European Union and Japan: A new chapter in civilian power cooperation? (pp. 169–184). Routledge. Oshiro, K., Kainuma, M., & Masui, T. (2016). Assessing decarbonization pathways and their implications for energy security policies in Japan. Climate Policy, 16(sup1), S63–S77. Oshiro, K., Kainuma, M., & Masui, T. (2017). Implications of Japan’s 2030 target for long-term low emission pathways. Energy Policy, 110, 581–587.

3

MAKING THE ELECTRICITY SECTOR EMISSION-FREE

123

Overseas Environmental Cooperation Center. (1998). Air pollution control technology manual. Overseas Environmental Cooperation Center. Paris Agreement to the United Nations Framework Convention on Climate Change (2015) adopted on 12 December 2015, entered into force on 4 November 2016. Penttinen, S.-L., Sartori, N., & Talus, K. (2014). Governance challenges of the EU’s 2030 energy and climate framework. Istituto Affari Internazionali Working Papers, (14), 1–18. Pietzcker, R. C., Osorio, S., & Rodrigues, R. (2021). Tightening EU ETS targets in line with the European Green Deal: Impacts on the decarbonization of the EU power sector. Applied Energy, 293, 116914. Portugal Pereira, J., Troncoso Parady, G., & Castro Dominguez, B. (2014). Japan’s energy conundrum: Post-Fukushima scenarios from a life cycle perspective. Energy Policy, 67 , 104–115. Prentice, J. (2018). The revision of the European Union’s Emissions Trading System ahead of the fourth trading period, 2021–2030. Climate Law, 8(3–4), 338–348. Ramus, C. A. (1991). The large combustion plant directive: An analysis of European Environmental Policy. Oxford Institute for Energy Studies. Regulation (EU) 2018/1999 of the European Parliament and of the Council of 11 December 2018 on the Governance of the Energy Union and Climate Action, Amending Regulations (EC) No 663/2009 and (EC) No 715/2009 of the European Parliament and of the Council, Directives 94/22/EC, 98/70/EC, 2009/31/EC, 2009/73/EC, 2010/31/EU, 2012/27/EU and 2013/30/EU of the European Parliament and of the Council, Council Directives 2009/119/EC and (EU) 2015/652 and Repealing Regulation (EU) No 525/2013 of the European Parliament and of the Council (2018) OJ L 328, 21.12.2018. Rhodes, C. J. (2016). The 2015 Paris climate change conference: COP21. Science Progress, 99(1), 97–104. Ristori, D. (2014). Rethinking European energy policy. European Energy Journal, 4(3), 3–7. Saraff, E. (2021). Local decarbonisation in Japan. EU-Japan Centre for Industrial Cooperation. Sasaki, N. (1998). A study of the political leadership of Tokyo metropolitan governors: In search of the ideal of decentralization in Japan. International Review of Administrative Sciences, 64(2), 247–260. Sato, A. (2002). Beyond boundaries: Japan, knowledge, and transnational networks in global atmospheric politics. PhD Dissertation. University of Hawai‘i at M¯anoa. Sbragia, A. M., & Damro, C. (1999). The changing role of the European Union in international environmental politics: Institution building and the politics of

124

M. M. SOKOŁOWSKI

climate change. Environment and Planning C: Government and Policy, 17 (1), 53–68. Schlacke, S., & Knodt, M. (2019). The governance system of the European Energy Union and climate action. Journal for European Environmental & Planning Law, 16(4), 323–339. Schreurs, M. A. (2008). From the bottom up: Local and subnational climate change politics. The Journal of Environment & Development, 17 (4), 343–355. Schreurs, M. A. (2010). Multi-level governance and global climate change in East Asia. Asian Economic Policy Review, 5(1), 88–105. Schröder, H. (2001). Negotiating the Kyoto protocol: An analysis of negotiation dynamics in international negotiations. Lit. Segura, S., et al. (2018). Environmental versus economic performance in the EU ETS from the point of view of policy makers: A statistical analysis based on copulas. Journal of Cleaner Production, 176, 1111–1132. Sekine, Y. (1993). Nuclear power generation in Japan—Present status and future prospects. Proceedings of the Institution of Mechanical Engineers, Part A: Journal of Power and Energy, 207 (4), 233–246. Shibamiya, T. (1999). Japanese approaches to environmental management. In International environmental management benchmarks (pp. 147–154). Springer. Shindo, Y., Hakuta, T., & Miyama, H. (1992). The present status of carbon dioxide removal in Japan. Energy Conversion and Management, 33(5), 773– 779. Sikora, A. (2021). European green deal—Legal and financial challenges of the climate change. ERA Forum, 21(4), 681–697. Single European Act. (1986). OJ L 169, 29.6.1987. Skjærseth, J. B., & Wettestad, J. (2010). Fixing the EU emissions trading system? Understanding the post-2012 changes. Global Environmental Politics, 10(4), 101–123. Skjærseth, J. B., & Wettestad, J. (2016) EU emissions trading: Initiation, decisionmaking and implementation. Routledge. Smith, A., & Sorrell, S. (2001). Interaction between environmental policy instruments: Carbon emissions trading and integrated pollution prevention and control. International Journal of Environment and Pollution, 15(1), 22–41. Sobieraj, K. (2017). Revision of the functioning of the EU Emissions Trading System. Roczniki Nauk Prawnych [Annals of Juridical Sciences], 27(1EV), 93–108. Sokołowski, M. M. (2015). Priorities of energy policy of Japan under Abenomics. In M. Sitek, & M. Ł˛eski, (Eds.), Opportunities for cooperation between Europe and Asia (pp. 227–240). WSGE. Sokołowski, M. M. (2016). Regulation in the European electricity sector. Routledge.

3

MAKING THE ELECTRICITY SECTOR EMISSION-FREE

125

Sokołowski, M. M. (2018). Burning out coal power plants with the Industrial Emissions Directive. The Journal of World Energy Law & Business, 11(3), 260–269. Sokołowski, M. M. (2020). European law on combined heat and power. Routledge. Sokołowski, M. M. (2021). Models of energy communities in Japan (enekomi): Regulatory solutions from the European Union (rescoms and citencoms). European Energy and Environmental Law Review, 30(4), 149–159. Sokołowski, M. M., & Kurokawa, S. (2022). Energy justice in Japan’s energy transition: Pillars of just 2050 carbon neutrality. Journal of World Energy Law & Business [Preprint]. Solilová, V., & Nerudová, D. (2014). Overall approach of the EU in the question of emissions: EU emissions trading system and CO2 taxation. Procedia Economics and Finance, 12, 616–625. Sprenger, R. -U., & Ohmura, T. (1997). Environmental problems. In R. Osterkamp, & K. Takahashi (Eds.), A comparative analysis of Japanese and German economic success. Springer. Stoczkiewicz, M. (2012). Free allocation of EU ETS emission allowances to installations for electricity production from a state aid law perspective. Environmental Economics, 3(3), 99–107. Sugiyama, M., et al. (2021). EMF 35 JMIP study for Japan’s long-term climate and energy policy: Scenario designs and key findings. Sustainability Science, 16(2), 355–374. Sugiyama, N., & Takeuchi, T. (2008). Local policies for climate change in Japan. The Journal of Environment & Development, 17 (4), 424–441. Sugiyama, R., & Imura, H. (1999). Voluntary approaches in Japan: Proven record of pollution control agreements and new industrial initiatives for the protection of the global environment. Eco-Management and Auditing: THe Journal of Corporate Environmental Management, 6(3), 128–134. Sumikura, I. (1998). A brief history of Japanese environmental administration: A qualified success story? Journal of Environmental Law, 10(2), 241–256. Szulecki, K., et al. (2016). Shaping the ‘Energy Union’: Between national positions and governance innovation in EU energy and climate policy. Climate Policy, 16(5), 548–567. Takahashi, K., Kato, S., & Akamine, R. (1998). The conservation movement and its literature in Japan. In P. Murphy (Ed.), Literature of Nature: An international sourcebook (pp. 290–293). Fitzroy Dearborn Publishers. Takebayashi, T. (2016). Air pollution and health in Japan. In D.-C. Shin (Ed.), Hazardous air pollutants: Case studies from Asia (pp. 65–75). CRC Press. Tani, M. (2015). Japan’s environmental policy: Policy update 059. Available at: https://www.rieti.go.jp/en/special/policy-update/059.html (Accessed: 8 August 2021).

126

M. M. SOKOŁOWSKI

Terao, T. (2007). Industrial policy, industrial development and pollution control in post-war Japan: Implications for developing countries. In T. Terao & K. Otsuka (Eds.), Development of environmental policy in Japan and Asian countries (pp. 9–47). Palgrave Macmillan. Territt, M. (2008). 50 Years of the treaty of Rome. Irish Journal of European Law, 15, 13–18. Tiberghien, Y., & Schreurs, M. A. (2010). Climate leadership, Japanese style: Embedded symbolism and post-2001 Kyoto protocol politics. In K. Harrison & L. McIntosh Sundstrom (Eds.), Global commons, domestic decisions: The comparative politics of climate change (pp. 139–168). MIT Press. Tokyo Metropolitan Environmental Pollution Control Ordinance (1969). Tokyo Metropolitan Environmental Protection Research Institute. (1972). The Tokyo Metropolitan Environmental Pollution Control Ordinance and its enforcement regulation. Air Pollution Abstracts, 3(5), 159. Tomitate, T. (1993). Japan’s climate policy: A rejoinder. Security Dialogue, 24(3), 301–304. Torney, D., & O’Gorman, R. (2020). Adaptability versus certainty in a carbon emissions reduction regime: An assessment of the EU’s 2030 climate and energy policy framework. Review of European, Comparative & International Environmental Law, 29(2), 167–176. Treaty establishing the European Community (1992) codified version OJ C 224, 31.8.1992. Treaty Establishing the European Economic Community (1957). Treaty of Amsterdam Amending the Treaty on European Union, the Treaties Establishing the European Communities and Certain Related Acts (1997) OJ C 340, 10.11.1997. Treaty on European Union (1992) OJ C 191, 29.7.1992. Trencher, G., et al. (2020). Revisiting carbon lock-in in energy systems: Explaining the perpetuation of coal power in Japan. Energy Research & Social Science, 69, 101770. Trotignon, R. (2012). Combining cap-and-trade with offsets: Lessons from the EU-ETS. Climate Policy, 12(3), 273–287. Tsuji, Y. (2010). The legal issues on environmental administrative lawsuits under the amendment of ACLA in Japan. Yonsei Law Journal, 1(2), 339–362. Uekoetter, F. (2005). The strange career of the Ringelmann smoke chart. Environmental Monitoring and Assessment, 106(1), 11–26. United Nations Framework Convention on Climate Change, adopted 9 May 1992, entered into force 21 March 1994 (1992). Ushiyama, T. (1981). Environmental pollution control in Japan—Development and characteristics. Waseda Bulletin of Comparative Law, 1, 12–21.

3

MAKING THE ELECTRICITY SECTOR EMISSION-FREE

127

Valentine, S., Sovacool, B. K., & Matsuura, M. (2011). Empowered? Evaluating Japan’s national energy strategy under the DPJ administration. Energy Policy, 39(3), 1865–1876. Vance, R., Henderson, D., & Moore, L. (2017). Impacts of the Fukushima Daiichi accident on nuclear development policies. OECD. Vivoda, V. (2012). Japan’s energy security predicament post-Fukushima. Energy Policy, 46, 135–143. Wachsmuth, J., Schaeffer, M., & Hare, B. (2018). The EU long-term strategy to reduce Ghg emissions in light of the Paris Agreement and the IPCC special report on 1,5°C. S22/2018. Fraunhofer-Institut für System- und Innovationsforschung ISI. Wakabayashi, M. (2013). Voluntary business activities to mitigate climate change: Case studies in Japan. Energy Policy, 63, 1086–1090. Wakabayashi, M., & Kimura, O. (2018). The impact of the Tokyo Metropolitan Emissions Trading Scheme on reducing greenhouse gas emissions: Findings from a facility-based study. Climate Policy, 18(8), 1028–1043. Wasmeier, M. (2001). The integration of environmental protection as a general rule for interpreting community law. Common Market Law Review, 38(1), 159–177. Yorifuji, T. (2020). Lessons from an early-stage epidemiological study of Minamata disease. Journal of Epidemiology, 30(1), 12–14. Yoshino, N., & Taghizadeh-Hesary, F. (2017). Three arrows of “Abenomics” and the further remedy for the Japanese economy. In N. Yoshino & F. Taghizadeh-Hesary (Eds.), Japan’s lost decade: Lessons for Asian economies (pp. 135–145). Springer. Yoshioka, H. (1984). Japan in the US dominion: State, politics, and labor in the 1980s. Canadian Journal of Political and Social Theory, 8(3), 21–39. Zacker, C. (1991). Environmental law of the European Economic Community: New powers under the Single European Act. Boston College International and Comparative Law Review, 14(2), 249–278. Zaelke, D., & Cameron, J. (1990). Global warming and climate change—An overview of the international legal process. American University Journal of International Law and Policy, 5(2), 249–290. Zhou, X., & Mori, H. (2011). National institutional response to climate change and stakeholder participation: A comparative study for Asia. International Environmental Agreements: Politics, Law and Economics, 11(4), 297–319.

CHAPTER 4

Making the Electricity Sector Renewable

This chapter also addresses the following specific issues: frameworks offered to the RWC auto-producers (Renewable-Waste-Cogeneration); programmes offered for the development of renewable technologies in Europe and Japan (Joule-Thermie, Altener, Sunshine Project, New Sunshine Program); relevant legislation adopted over the years at the European level (three renewable directives) and laws established in Japan to promote RES. Moreover, the chapter covers such matters as energy prosumers, with active consumers and energy communities, development of offshore wind farms, and policy developments under 2050 agendas in the EU and Japan.

4.1

Renewable Transition in the EU

Promotion of renewable energy has long been a priority of the European energy policy. As early as in the mid-1980s the Council (1986) listed the development of renewable energy sources among its energy objectives. In November 1988, the Council adopted Recommendation 88/611/EEC (1988) on the promotion of cooperation between public utilities and electricity auto-producers where renewable energy sources were combined with waste energy and cogeneration. This resulted in a specific category of RWC auto-producers (Renewable-Waste-Cogeneration) for which the © The Author(s), under exclusive license to Springer Nature Switzerland AG 2022 M. M. Sokołowski, Energy Transition of the Electricity Sectors in the European Union and Japan, https://doi.org/10.1007/978-3-030-98896-8_4

129

130

M. M. SOKOŁOWSKI

Council intended to create a regulatory environment (see Gochenour, 2001). To strengthen the RWC auto-producers’ position, the Council (1988) advised Member States to develop criteria for cooperation between RWC auto-producers and public utilities (including the quantity and price of electricity exchange) and propose a standard contract for them (see Sokołowski, 2020a, p. 38). However, the approach still preferred at the Community level limited the direction suitable for introducing new technologies in the energy sector. Public utilities were recommended to offer the purchase of electricity generated by RWC auto-producers, but only if this did not hinder the smooth economic operation of the public power plants, and if RWC auto-production did not infringe the public interest (see Sokołowski, 2020a, pp. 38–39). Regardless of this public priority, Recommendation 88/611/EEC established a community-level field for getting reimbursement for electricity sold to the public grid by RWC auto-producers, with the goal of being as transparent as possible (see Sokołowski, 2020a, p. 39). Additionally, programmes like Joule-Thermie (see Yordi et al., 1997), with a significant part of its budget, i.e. 45% out of 1030 million ECU to support the activities aimed at developing and promoting renewables between 1995 and 1998 (see Commission, 1996, pp. 39–40), or INCO,1 have been steering the development of renewable technologies. With the Altener programme (1993), funding dedicated to supporting such activities as studies and technical evaluations, adoption of local plans for the development of RES, pilot actions including the installation of PV in new or existing buildings, wind project planning, or training, information exchange, and international networking activities related to renewables, was introduced.2 As highlighted, the Altener programme (1993), by increasing the share of RES to the coverage of total energy demand from approximately 4% in 1991 to 8% in 2005 would result in a 180-million-tonne CO2 decrease.3 Furthermore, the European Parliament has long been a supporter of renewables, consistently—since the 1990s—highlighting their importance and the role they could play in halting the greenhouse effect or creating new jobs (see European Parliament, 1993). This was also expressed in calls for the establishment of a Community action plan for RES and a set objective of increasing the proportion of renewables in the EU’s primary energy mix (see European Parliament, 1996). As observed, because of international actions on the climate agenda, with the Kyoto Protocol at the forefront, the 1990s work on the European renewable energy policy

4

MAKING THE ELECTRICITY SECTOR RENEWABLE

131

has been accelerated. To offer a strategic approach to renewable energy, in November 1996, the Commission adopted the Green Paper, and, a year later, the White Paper (1997) was presented. 4.1.1

Energy for the Future: Renewables in the European Energy Policy of the 1990s

Both the Green (1996) and White Paper (1997), issued under the title of ‘Energy for the Future’, introduced a strategic approach of the EU to renewables in the 1990s (see Bilgen et al., 2004). These moves were driven by the need to create the requisite environment for RES and to add value to national initiatives aimed at increasing their overall impact (see Rowlands, 2005). Another driving factor was the need to ensure the necessary coordination and consistency in implementing these policies at the Community, national, and local levels to avoid Member State imbalances or market distortions (see Commission, 1997, pp. 6–7). Thus, a long-term solid framework for the expansion of renewable energy sources, covering political, legislative, administrative, economic, and marketing aspects, was identified as the top priority for their development (see Commission, 1997, p. 7). Also at that time, several Member States have taken steps to support renewables, with the established strategies and targets for the medium and long-term development of RES (Commission, 1997, p. 6). In the latter case, the Member States (EU-15) either already had or had set in the past the quantitative targets for the total contribution of RES to their energy balances or for the contributions to be made by one or more specific renewable technologies (Commission, 1996, p. 8). Table 4.1 juxtaposes some of them. The renewable targets were supported by various national measures ranging from capital subsidies, fixed buy-back rates (like the German stromeinspeisungsgesetz), fiscal incentives, support for third party financing, surcharge arrangements (for instance, the UK non-fossil fuels obligation and public support for research and development), voluntary agreements with utilities through the obligation to buy electricity from RES, to schemes for export supports (Commission, 1996, p. 9). Nevertheless, some drawbacks were reported. Not every Member State has fully integrated renewable-friendly policies into their overall energy planning. Moreover, with a plethora of different national schemes that have been constantly changing as a result of new policy priorities, the level of

132

M. M. SOKOŁOWSKI

Table 4.1 The 1990s renewable energy targets in the selected EU-15 Member States (Commission, 1996, pp. 8–9) Member State

Renewable target

Netherlands

Increase in the contributions to primary energy consumption to 10% by 2010 The quantitative target of 12% of energy consumption is aimed by 2005 and 35% contribution by 2030 Contribution of 1100 ktoe by 2020 Contribution 1800 ktoe by 2005 Specific sectoral objectives, including the construction of 1500 stand-alone photovoltaic systems by 2005 and 5% contribution from renewable sources to transport fuels, also by 2005 675 MW renewable capacity by 2000 241 MW in RES by 1999 1500 MW renewable capacity by 2000 target of 100 MW additional wind energy capacity over a 5-year period

Denmark Spain Greece France

Italy Ireland United Kingdom Germany

transparency and predictability was insufficient for the renewable energy industry to fully benefit from public policy incentives and to develop longterm stable commercial prospects within the EU (Commission, 1996, p. 9). Other challenges faced by renewables included: the high cost of deploying these sources (hence the proposal to internalise the costs of externalities); overestimated technical and market risks; uneven distribution of information, awareness, and experience related to renewables; national energy companies’ negative attitudes towards renewables; the connection to centralised electricity grids with high charges and imposed standard contracts; and rigorous technical requirements for RES (see Commission, 1996, pp. 24–27) (Table 4.2). In this light, to steer further development of renewables in the EU, the Commission proposed ‘an ambitious but realistic objective’ of 12% renewables to be achieved by 2010 (see Menegaki, 2011, p. 258). This would double the RES contribution compared to the mid-1990s share of renewables in the energy mix of about 6% including large-scale hydro (see Commission, 1996, p. 4; 1997, pp. 10–11). Given the general importance of expanding the share of renewable energy in the EU, this indicative political and non-binding target was regarded a crucial minimum objective to be introduced, monitored, and revised if necessary (Commission, 1997, p. 10).

4

MAKING THE ELECTRICITY SECTOR RENEWABLE

133

Table 4.2 Shares of RES in the EU-15 in the 1990s4 (Commission, 1996, p. 12) Member State Austria Belgium Denmark Finland France Germany Greece Ireland Italy Luxembourg Netherlands Portugal Spain Sweden United Kingdom EU-15

4.1.2

1991 (%) 22.1 1.0 6.3 18.9 6.4 1.7 7.1 1.6 5.3 1.3 1.3 17.6 6.7 24.7 0.5 5.0

Tendency          ⇔      

1994 (%) 24.1 0.8 7.0 19.3 7.2 1.9 7.2 2.2 6.4 1.3 1.4 17.5 6.2 24.0 0.6 5.4

The 2001 Renewable Energy Sources Directive and the First Regulatory Framework

In September 2001, the first ever European legislation on renewable energy was passed. This occurred with the adoption of Directive 2001/77/EC (2001) (RES Directive), which aimed to boost the contribution of RES to electricity generation in the internal market. In addition to the definitions of ‘renewable energy sources’,5 ‘biomass’,6 or ‘electricity produced from renewable energy sources’,7 the RES Directive (2001) introduced national indicative, non-obligatory targets for future consumption of electricity produced from RES (see Lauber & Schenner, 2011, p. 516), i.e. the percentage of electricity consumption for the next 10 years. These were soft measures (enhanced only by reporting obligation),8 based on appropriate steps to encourage greater usage of RESgenerated power. Support schemes—mechanisms used in Member States to provide direct or indirect financial aid to RES electricity producers (see Iliopoulos, 2018, p. 211)9 —and guarantees of origin (see Sokołowski, 2019, p. 35)—documents that let electricity producers demonstrate that the electricity they generate came from RES10 —were among these steps.

134

M. M. SOKOŁOWSKI

Under the RES Directive (2001) Member States were also required to evaluate their existing legislative and regulatory framework with regard to authorisation or other procedures applicable to RES (see Jankowski, 2010, p. 275). The goal was to decrease regulatory and non-regulatory barriers to electricity production from RES, streamline these procedures, and ensure that the rules on RES are objective, transparent, and non-discriminatory (see Sokołowski, 2018, pp. 62–63).11 Moreover, the RES Directive established the Community rules on gird issues. This was a more comprehensive framework that governed the relationship between transmission (TSO) and distribution (DSO) system operators,12 motivated by making RES access to the grid easier.13 The priority access of electricity produced from RES to the grid was made possible in line with European law, while the priority dispatch for RES was set as a rule, until it did not hinder the operation of the electricity system. In this context, the RES Directive (2001) required Member States to take the necessary steps to ensure that TSO and DSO in their areas of operation guaranteed the transmission and distribution of electricity generated from RES—until the grid’s reliability and safety were not jeopardised. Furthermore, Member States were obliged to improve the transparency of system operators’ rules for bearing the costs of grid technical adaptations such as connections and reinforcements.14 Another obligation was to base these rules on objective, transparent, and non-discriminatory criteria that took into account all costs and benefits associated with these producers’ connection to the grid, with the possibility to make TSO and DSO pay for the connection costs fully or partly.15 Finally, Member States were required to ensure that transmission and distribution fees do not discriminate against renewable energy sources.16 4.1.3

The 2009 Renewable Directive I and 2020 Climate Goals

In 2009, as part of the Climate and Energy Package, the new European regulatory regime on renewables was established. This was done by adopting Directive 2009/28/EC (2009) (RED I). It brought a common framework for the promotion of energy produced in RES with mandatory national targets set for the EU Member States. The new renewable targets were originally proposed by the European Council, and then backed by the European Parliament. The European Council (2006, p. 15) in March 2006 called for strengthening the EU leadership on renewables and requested the Commission to examine how to further promote RES

4

Table 4.3 The 2005 shares and 2020 national overall targets of RES in the EU-2718 (RED I, 2009)

MAKING THE ELECTRICITY SECTOR RENEWABLE

Member State Belgium Bulgaria Czech Republic Denmark Germany Estonia Ireland Greece Spain France Italy Cyprus Latvia Lithuania Luxembourg Hungary Malta Netherlands Austria Poland Portugal Romania Slovenia Slovak Republic Finland Sweden United Kingdom

135

Share in 2005 (%)

Target for 2020 (%)

2.2 9.4 6.1 17.0 5.8 18.0 3.1 6.9 8.7 10.3 5.2 2.9 32.6 15.0 0.9 4.3 0.0 2.4 23.3 7.2 20.5 17.8 16.0 6.7 28.5 39.8 1.3

13 16 13 30 18 25 16 18 20 23 17 13 40 23 11 13 10 14 34 15 31 24 25 14 38 49 15

in the long term, proposing the idea of increasing their share of gross consumption to 15% by 2015. This concept was endorsed by the European Parliament (2006), which changed the assumption by raising the European aim to 25%, but only in the long term—by 2020. In response to these calls, the Commission (2007) proposed that the EU set a mandatory goal of 20% renewable energy share of EU energy consumption by 2020. In March 2007, the European Council (2007) endorsed a binding target of a 20% share of renewables in the overall Community’s energy consumption by 2020. The 20% aim, however, did not become enforceable until RED I introduced and separated it into national requirements (Table 4.3).17

136

M. M. SOKOŁOWSKI

As shown in Table 4.3, the joint 20% target was converted into national targets. This was accomplished by allocating the required total increase in renewable energy use among Member States on the basis of an equal increase in each national share weighted by GDP, modulated to reflect their starting points and accounting in terms of gross final energy consumption, taking into account the countries’ previous efforts in this area.19 The variations in starting points, renewable energy potential, and energy mixes of each Member State were the catalysts for this split. The national goals were created with the intention of influencing additional RED I (2009) initiatives. Member States were required to implement tools which effectively ensured that the share of energy from RES matched or exceeded that shown in the 2020 indicative renewable trajectory (see Jäger-Waldau et al., 2011, p. 3705), such as support schemes or measures of renewable cooperation between Member States and with third countries.20 The support scheme in this case referred to measures—investment aid, tax exemptions or reductions, tax refunds, renewable energy obligation support schemes like green certificates, and direct price support schemes with feed-in tariffs and premium payments (see Del Rio, 2014; Fagiani et al., 2013)—taken by each Member State or their groups to encourage the use of renewable energy. This was to be done by lowering the cost of that energy, increasing the price at which it can be sold, or increasing the volume of renewable energy purchased, whether through a renewable energy obligation or otherwise.21 These actions were to be gathered in the framework of national renewable energy action plans (see Beurskens et al., 2011),22 presented to the Commission by the mid-2010, and then evaluated, with the possibility to offer the Commission’s recommendation on a given plan. The 2020 targets with the above-mentioned support schemes, were, however, not the only measures aimed at increasing the capacity of RES in the EU. Here, one should also list guarantees of origin, issued in response to a request from a producer of electricity from RES,23 and improvements to administrative procedures on RES. The latter concerned streamlining authorisation, certification, and licencing related to renewables by making them proportionate, objective, not discriminative, adjusted to specifics of given renewable technology, clearly defined, and wellcoordinated with transparent timetables and comprehensive information on processing offered (see Wyns & Khatchadourian, 2016, pp. 572– 573).24 Moreover, according to RED I (2009) administrative charges paid by consumers, planners, architects, builders, equipment and system

4

MAKING THE ELECTRICITY SECTOR RENEWABLE

137

installers and suppliers were to be transparent and cost-related. In this light, a general approach, proposed rather than imposed by the RED I (2009)—as it was a possibility, not an obligation—was to make the authorisation procedures ‘simplified and less burdensome’ (see Peeters, 2014, p. 58), including through simple notification established for smaller projects and decentralised renewable installations (see Sokołowski, 2016, pp. 208–209). The rules on building standards and codes, which were to include steps enhancing the share of all types of energy from renewables in the building industry, were yet another move aimed at increasing the percentage of renewables in the mix. This relates to the implementation (but only ‘where appropriate’) of minimum volumes of renewable energy in new and existing buildings undergoing substantial renovations by the end of 2014 (see Szalay & Zöld, 2014, p. 511).25 Public buildings at national, regional, and local levels were designed to fulfil an exemplary role by, for instance, complying with standards for zero energy housing (see Pan & Ning, 2015, p. 102), or ensuring that the roofs of public or mixed private–public buildings are used by third parties for renewable installations. Finally, the RED I (2009) set the rules for RES access to the grid as part of its pro-renewable efforts. These entailed Member States taking the necessary steps to develop certain elements of the electricity system, such as interconnectors and the transmission and distribution grid, in order to ensure the system’s secure operation to accommodate the continued development of renewables. Another such step was to expedite grid infrastructure authorisation and coordinate administrative and planning procedures.26 The RED I (2009) also required the Member States to offer priority or guaranteed grid access for renewable electricity transmission and distribution (see Fouquet, 2013, p. 15), alongside priority dispatching (see Mäntysaari, 2015, p. 150) and reduced renewable electricity curtailment (see Steurer et al., 2017).27 Moreover, under the introduced regulatory framework, transmission system operators (TSO) and distribution system operators (DSO) were required to develop and publish standard rules for the bearing (including entirely)28 and sharing of costs of grid connections and grid reinforcements (see Batlle, 2011, p. 2586), which were to be objective, transparent, and nondiscriminatory. All the costs and benefits associated with the connection of renewable energy sources to the grid had to be taken into account.29 This was paired with the rules requiring any new renewable electricity

138

M. M. SOKOŁOWSKI

producer, wanting to connect to the grid, to be given complete information with a detailed estimate of connection costs, a precise schedule for receiving and processing the request for grid connection, and an oriented timetable for the proposed grid connection (Nysten, 2016, p. 175).30 4.1.4

The 2018 Renewable Directive II and the European Green Deal Ahead

Since RED I (2009) has been substantially amended several times, instead of its revision, a new directive was proposed and later adopted as Directive (EU) 2018/2001 (2018) (RED II). The EU has regarded the future expansion of renewables as the key element of the package of actions needed to decrease GHG emissions, driven by the 2015 Paris Agreement’s reduction pledge and the 2030 EU climate plan with emission cuts—at least 40% below 1990 levels by 2030. Thus, it was appropriate to establish a binding EU target of a share of at least 32% of renewable energy achieved by 2030 (see Veum & Bauknecht, 2019),31 with the national 2020 targets being the Member States’ minimum contributions to the new framework (see Presno & Landajo, 2021).32 Contrary to the previous 2020 goal, the 2030 target is of a collective nature (see Monti & Martinez Romera, 2020, pp. 224–225) and national contributions are not set at a level of EU legislation, but determined by the Member States in their integrated national energy and climate plans, as elaborated under Regulation (EU) 2018/1999 (2018) (Governance Regulation).33 To support the high aspirations of Member States, the RED II designed an enabling framework permitting the enhanced use of EU funds, including additional ones to facilitate a just transition of carbon intensive regions towards an increased share of renewables. In particular, the provided financial instruments covered various purposes, such as reducing the cost of capital for renewable energy projects, and developing projects and programmes for: integrating renewables into the energy system, increasing the flexibility of the energy system, maintaining grid stability, and managing grid congestions (see Iliopoulos et al., 2020, p. 247). Other related purposes included developing transmission and distribution grid infrastructure, intelligent networks, storage facilities, and interconnections, enhancing regional and international cooperation through joint projects and support schemes and the opening of support schemes for renewable electricity to producers located in other countries.34

4

MAKING THE ELECTRICITY SECTOR RENEWABLE

139

Moreover, in order to reach or exceed the EU 2020 renewable target, as delivered by the RES Directive (2001) and the RED I (2009) under previous regimes, the European law has a certain leeway for establishing support schemes. These, however, shall be market-based mechanisms responding to price signals35 which avoid unnecessary distortions of electricity markets and take into account possible system integration costs and grid stability. Furthermore, the support granted to renewable energy projects cannot be revised (‘stability clause’) in a way that negatively affects the rights conferred thereunder and undermines the economic viability of projects that already benefit from support (see Huhta, 2020, p. 438). Nonetheless, Member States may adjust the level of support in accordance with objective criteria, provided that such criteria are established in the original design of the support scheme,36 e.g. to follow the price signals (see Ludwig, 2019, p. 88). As the electricity from RES should be deployed at the lowest possible cost to consumers and taxpayers, when designing support schemes and allocating support (see Boscán, 2020), Member States should seek to minimise the overall system cost of deployment along the decarbonisation pathway towards the objective of a low-carbon economy by the year 2050. Here, mechanisms such as tendering procedures (auctions), have been demonstrated to reduce support cost effectively in competitive markets in many circumstances (Sokołowski, 2020b, pp. 295–296). This is due to the fact that, if designed correctly, the tendering meets the guidelines set for providing the support for renewables, by granting it ‘in an open, transparent, competitive, non-discriminatory and costeffective manner’.37 However, other than auction schemes are permitted provided the above-mentioned requirements are followed (Iliopoulos, 2020, p. 10). Moreover, some exceptions from competitive bidding could be offered to small-scale installations and demonstration projects (see Segura et al., 2021, p. 678),38 to accommodate their more limited capabilities.39 The RED II also offers a possibility to adjust the support scheme to regional needs related to the potential of RES, in particular to ensure cost-efficient system integration.40 Finally, the performance for electricity from RES granted by means of tendering procedures in the EU is covered by Commission’s reporting to the Parliament and the Council, with the first report prepared by the end of 2021.41 With respect to administrative procedures, the RED II reaffirmed the bulk of the previous framework’s rules while adapting them to biofuels, bioliquids, and biomass fuels and emphasising the energy efficiency first

140

M. M. SOKOŁOWSKI

principle (see Sokołowski, 2021a, p. 760).42 In this regard, authorities are required to include provisions in their planning for the use of unavoidable waste heat and cold, and they are urged to communicate with network operators to reflect the influence of energy efficiency on infrastructure development plans.43 Moreover, among the added provisions one should notice the obligation of Member States to: assess the regulatory and administrative barriers to long-term renewables power purchase agreements, remove the ‘unjustified barriers’,44 and create rules on streamlining the permit-granting process (see Roberts, 2020, p. 241). In terms of the latter, this includes establishing a contact point to guide the applicant through the administrative permit application process for RES (see Krug-Firstbrook et al., 2019, p. 408), with the possibility to submit a digital application and find all necessary information online. Moreover, the permit-granting process should not exceed two years for power plants (one year for installations with an electrical capacity of less than 150 kW), and simplified procedures should be offered.45 This is accompanied by a simple-notification procedure for grid connections established as a rule (see Lowitzsch, 2019, p. 20). According to the RED II installations or aggregated production units of renewables, self-consumers, and demonstration projects with an electrical capacity of 10.8 kW or less46 can be connected to the grid following a notification to the DSO—if the DSO makes a favourable decision or does not make a decision within one month of receiving the notice.47 Finally, regarding other noteworthy regulatory rules offered for renewables, the RED II updated the provisions on guarantees of origin (e.g. by including hydrogen in their description, or the Commission’s assessment of establishing an EU-wide green label),48 and introduced an EU framework on energy prosumers—both individual and joint (see Horstink et al., 2021; Iliopoulos, 2021). The RED II obliges the Member States to permit these prosumers (defined as ‘renewables self-consumers’) to generate renewable energy, including for their own consumption, and store and sell their excess electricity (see Inês et al., 2020). This is to be done without being subject to discriminatory or disproportionate procedures and fees. The RED II also enables prosumers to network charges that are not cost-reflective, and maintain their rights and obligations as final consumers. It also gives the prosumers the right to receive remuneration, including this under the support schemes for the self-generated renewable electricity that they feed into the grid.49 To address these issues

4

MAKING THE ELECTRICITY SECTOR RENEWABLE

141

and to tackle the unjustified financial and regulatory barriers, the Member States have to establish the enabling framework.50 The said framework is also a mechanism made available to renewable energy communities that fall under the concept of joint prosumerism (see Reis et al., 2021). The framework is designed to remove unjustified regulatory and administrative barriers to renewable energy communities; adjust provisions on energy supply, cooperation with DSO, and access to the market, finance, and information (see Sokołowski, 2020b). It should also ensure non-discriminatory treatment (both externally, i.e. in relation to these communities as market participants and with respect to consumers participating in the communities).51 With respect to the external dimension, renewable energy communities are subject to fair, proportionate and transparent procedures, including the registration and licencing procedures, cost-reflective network charges, and relevant charges, levies and taxes (see Savaresi, 2019, pp. 493, 504–505). The aim is to ensure that they contribute, in an adequate, fair, and balanced way, to the overall cost sharing of the system in line with a transparent cost– benefit analysis of distributed energy sources developed by the national competent authorities.52 Regarding the internal relations, Member States ensure that final customers, particularly households, have the right to join a renewable energy community without being subjected to circumstances or procedures that are unfair or discriminatory and which would prevent them from participation; also, that they maintain their status as final customers.53 Finally, the assessment of Member States addresses the existing obstacles to the development of renewable energy communities as well as the potential for their development (see Sokołowski, 2020b).54 Last but not least, renewables are an important element of the European Green Deal (see Chapter 3 of this book). To transform the EU into a just and harmonious society with an advanced, resource-efficient, and competitive economy with no net greenhouse gas emissions by 2050, several critical conditions would have to be met. These would include: expanding offshore wind production based on regional cooperation between Member States, smart integration of renewables, energy efficiency (see Chapter 5 of this book), and other policy measures across the sectors established to achieve decarbonisation at a faster pace, at the lowest possible cost (Commission, 2019). The Commission (2021, p. 9) proposed an update of the Renewable Energy Directive as part of the Fit for 55% package (see Chapter 3 of this book) to speed up the process of integrating renewables in order to meet the 2030 objective.

142

M. M. SOKOŁOWSKI

The 2021 proposal raises the overall binding objective for the renewables in the EU energy mix from the current 32 to 40% which is accompanied by indicative national contributions. The proposal, which aims to assist the Member States in maximising their cost-effective renewable energy potential across sectors through a combined effect of sectoral targets and measures, aims to make the energy system cleaner and more efficient. This is to be done by promoting renewables-based electrification and, in sectors where this is more challenging, the utilisation of renewable fuels, such as clean hydrogen (Commission, 2021, p. 9).

4.2

Renewable Transition in Japan

The first of a series of governmental actions on renewable energy in Japan (see Sokołowski, 2021c, pp. 145–146)—the Sunshine Project—was initiated in 1974 by the Agency of Industrial Science and Technology, a part of the Ministry of International Trade and Industry (MITI). This was a long-term initiative that aimed to create new technologies to provide clean energy by the year 2000 to meet a significant portion of the future energy demand (Matsumoto, 2005, p. 624). This programme, in addition to its long-term goal, included a short-term target of increasing energy supply from new energy resources to around 5% of the nation’s total energy supply by 1990 (Kamimoto & Hayashi, 1982, p. 186). The Sunshine Project offered support for research and development activities in different energy activities, including solar energy (Takahashi, 1989). The Project aided basic research by providing funding for conceptual design, component technology development, and the construction and operation of the pilot, practical, and, eventually, commercial plants (Matsumoto, 2005, p. 625). Although this was the time of the energy crisis (Sokołowski, 2012, pp. 111–115), attention was given to solar installations seen as an alternative to conventional fossil fuels (Hamakawa, 1979). In addition, the Sunshine Project covered other fields—besides solar energy, this programme also focused on gasification and liquefaction of coal, and hydrogen energy, with initial studies on the energy of ocean and wind (Kamimoto & Hayashi, 1982, p. 186). One of its major components was solar energy, but a small fraction (12–20%) of the solar energy budget was expended in the photovoltaic (PV) division (see Kamimoto & Hayashi, 1982, pp. 187–189). Moreover, in May 1980, the Act on the Promotion of Development and Introduction of Alternative Energy to Petroleum (1980) was passed

4

MAKING THE ELECTRICITY SECTOR RENEWABLE

143

(Act on Alternative Energy to Petroleum).55 It introduced a definition of petroleum alternative energy56 covering energy (including electricity and heat) coming from sources other than petroleum. The Act on Alternative Energy to Petroleum established a supply target for petroleum alternative energy that was to be approved by the government. According to Article 4 of the Act on Alternative Energy to Petroleum, energy users were to make efforts to substitute petroleum by alternative means, considering such factors as the supply situation or the technological level. In addition, in 1980, the New Energy Development Organization was formed to meet the need for a single, unified research entity for development and application. Such step had been anticipated since the beginning of the Sunshine Project, while MITI oversaw the NEDO’s work and controlled the expenditure of funds for investment, grants, or subsidies (Matsumoto, 2005, p. 625). During the early stages of the Sunshine Project an estimation was made that the potential of rooftop PV installations would cover 5% of national electricity consumption (see Kurokawa & Ikki, 2001, p. 458).57 With the total annual budget ranging from about 2400 million JPY (1974) to 44,000 million JPY in the fiscal year 1985, the solar cell production in Japan reached 12,500 kW in 1986 (Takahashi, 1989, pp. 87, 96). However, this programme faced difficulties in delivering its results. While the technological basis for a electricity generation system utilising PV was built (see Morishita et al., 1991), the Sunshine Project’s ultimate goals were not met. After the late 1970s, new energy as a percentage of primary energy barely increased. Moreover, the sense of urgency around developing new energy faded as crude oil prices fell in the 1980s, making power plants utilising this type of installations unprofitable. so As a result, no further progress was made after the experimental plants of the early 1980s (Shimamoto, 2020, p. 25). The reduction of costs and the improvement of the efficiency of PV installations was needed for greater progress (see Morishita et al., 1991).58 4.2.1

The 1993 New Sunshine Program and the 1997 Act on New Energy

Beginning in 1987, during Japan’s ‘bubble economy’, investments in PV research and development fell (Watanabe et al., 2000, p. 300). In response to the 1990s stagnation trends and to take advantage of the potential of renewable energy in Japan, the Sunshine Project, along

144

M. M. SOKOŁOWSKI

with the Moonlight Project59 and the Global Environmental Technology Program, evolved into the New Sunshine Program launched in 1993 (Watanabe, 1995, p. 238). As a priority initiative under the worldwide environmental repercussions of CO2 emissions coming from energy use, the New Sunshine Program was aimed at increasing PV research and development activities (Watanabe et al., 2000, p. 300). Supplemented by other actions on PV—such as these managed by the New Energy Foundation (see Avril et al., 2012, p. 251) like the 1994 Residential PV System Monitoring Program, and then the 1997 Residential PV System Dissemination Program60 —the New Sunshine Program resulted in many demonstration projects and establishing basic research and development work which create the necessary demand for solar cells (Chowdhury et al., 2014, pp. 286, 289). Moreover, in the early 1990s some promising results of the earlier Sunshine Project were delivered, e.g. the Japanese manufacturer Sharp developed its residential PV system (Marukawa, 2012, p. 8). Other producers, like Sanyo and Kyocera, have also undertaken PV projects (see Moe, 2012, p. 264). Additionally, in 1992, a voluntary initiative was started by electricity utilities, enabling households and other entities to sell their surplus to electricity suppliers at 24 JPY/kWh for residential solar PV, and 11–15 JPY/kWh for non-residential solar PV (Li et al., 2019, pp. 4–5; Okamura, 2020, p. 104). This has been the net billing offered by the electricity utilities under a voluntary scheme (see Shum & Watanabe, 2009, p. 3537); nonetheless, the electricity generated by PV systems was to be mostly utilised by the household that installed the system (Marukawa, 2012, p. 8). Furthermore, in order to encourage the introduction of new energy in Japan, including PV power generation, a policy—the Basic Guidelines for New Energy Introduction—was approved by the Cabinet in December 1994. It set PV power generation targets of 400 MW in 2000 and 4600 MW in 2010 (see Kurokawa & Ikki, 2001, p. 459; Tatsuta, 1996, p. 40). The central government actions were followed by local authorities which began their own energy planning in 1995 as part of the Vision for Regional New Energy (see Fukuda & Fujii, 2015, p. 1062; Ikki, 2003, p. 731). In addition, the Economic Structure Plan developed by MITI in 1996 established a target for new industry creation in the field of new energy, with a focus on supporting the PV industry (Chowdhury et al., 2014, p. 289).

4

MAKING THE ELECTRICITY SECTOR RENEWABLE

145

The enactment of the new legislation in 1997 provided an additional boost to renewables in Japan. Such was the case with the Act on the Promotion of New Energy Usage (1997)61 which was adopted to facilitate the utilisation of new energy sources (Act on New Energy). In terms of definitions, the Act on New Energy refers to these established by the Act on Alternative Energy to Petroleum (1980), while with respect to measures promoting new energy use it delegated the power to MITI, obliging it to establish a basic policy regarding the promotion of new energy use. It also complemented wider action on climate (see Chapter 3 of this book) by accelerating the introduction of new energy sources: photovoltaics, wind power, biomass, and waste-to-energy (see GWPH, 1998). This legislation outlines the roles of various actors, including central and local governments, businesses, and energy users (Morita & Matsumoto, 2014, p. 5). As under the Act on Alternative Energy to Petroleum (1980), the Act on New Energy (1997) offers a soft approach, rather encouraging than obliging energy users and energy utilities to use new energy sources.62 The basic policy also had an impact on local governments—the 1997 legislation introduced a requirement to consider this policy when developing and implementing regional actions to promote the use of new energy.63 Other promotion measures delivered by the Act on New Energy (1997) cover the guidelines on new energy use, including their technical characteristics; however, this had more of a regulatory character, as it was MITI (then METI) that published and revised them (see GWPH, 1998).64 Regulatory power is also visible in the plans that business entities, intending to employ new energy sources, have been required to prepare and submit for certification and—if requested— report on their implementation status.65 The failure to submit a report or fabricating it has resulted in a fine.66 To balance the certification duty, a subsidy mechanism was offered to those planning to construct new energy installations, starting from 1997 (see Ikki, 2003, p. 731). In addition, debt guarantees for PV and wind power installations were offered (Yamaji, 2015, p. 118). As a result of these measures, until the early 2000s, Japan was a world leader in developing and popularising PV systems (Yamaji, 2015, p. 118; see Chang et al., 2016, p. 434). However, these demandside policies were fraught with uncertainty because, even with such a high level of subsidy, residential solar PV systems were not economical at the

146

M. M. SOKOŁOWSKI

time, but the incentive was significant enough to entice a number of highincome, environmentally conscious individuals to invest (Li et al., 2019, p. 5). 4.2.2

The 2002 Renewable Portfolio Standard and Regulatory Flaws

While Japan’s successful New Sunshine Program, as the country’s flagship energy policy product in the 1980s and 1990s, placed it as the global frontrunner in solar energy, with later reduction and discontinuation of subsidies the Japanese PV market has stagnated or even deteriorated (see Chowdhury et al., 2014, p. 289). In 2000, Japan, together with Germany, accounted for roughly 60% of the global PV market; however, when the Japanese subsidy programme for PV installations expired in 2005, the rise of this sector in Japan stalled and Japan lost its status as the world leader in PV (Wen et al., 2020, p. 17). Also in 2005, the Residential PV System Dissemination Program was abandoned, and the Japanese PV market decreased from 260 MW in 2005 to just 180 MW in 2007 (Myojo & Ohashi, 2018). The principal grounds for the abolition of the subsidies were presented in the 2003 Ministry of Finance fiscal budget audit, which analysed the impact of PV installation subsidies and the need for continuous support 10 years after the system’s adoption (Asano, 2014, p. 163). Three main circumstances were discovered: first, the subsidy rate (the ratio of subsidy amounts to system costs) was decreasing each year, resulting in lowered incentives for PV installation; second, local governments were increasing the subsidies; and third, system costs had fallen to the initial goal of 400,000 JPY/kW, implying that the subsidies’ goal—the establishment of a solar power market—had been more or less met (Asano, 2014, p. 163). Apart from that, Prime Minister Junichiro Koizumi (2001–2006) initiated a general shift in favour of market-based policies, and the changes in the renewable energy support scheme were consistent with these assumptions (see Moe, 2012, p. 264). As a result, Japan—the clear leader in the global PV industry in 1995— lost its position in the following years due to a limited demand-pull policy support. Consequently, PV capacity additions have stagnated since 2003, the Japanese solar cell manufacturers’ production volume growth was also significantly lower than the market average between 1995 and 2009, and Japan has fallen from the first place in PV innovation in terms of patents (Peters et al., 2012, p. 1300). Symbolically, in 2007, Sharp lost its position as the world’s largest producer of solar panels (Moe, 2012, p. 264).

4

MAKING THE ELECTRICITY SECTOR RENEWABLE

147

Under these changed conditions, Germany became the largest market for PV installations, the US took the lead in terms of inventive activity, while China and Taiwan emerged as the key manufacturing base for solar cells (see Peters et al., 2012, pp. 1299–1300). However, this does not imply that there was a policy gap over this period. In April 2003, the Renewable Portfolio Standard legislation came into force. This happened with the adoption of the RPS Act—i.e. Act on Special Measures Concerning the Use of New Energy by Electricity Companies (2002).67 As defined in the RPS Act (2002), the new energy covered wind, PV, geothermal, and hydro power (small power plants— less than 1 MW), as well as biomass and other non-petroleum-based energy sources (Takase & Suzuki, 2011, p. 6736).68 The axis of the new legislation was the RPS mechanism. It consisted of three elements: first, the amount (quota) of electricity the government required under the mandatory targets of electricity provided from RES (imposed primarily on electricity suppliers) (see Fraser & Aldrich, 2020, p. 3); second, green electricity certificates issued to renewable companies based on their output; and third, a set quota of certificates traded between the compulsory targets and renewable companies (Asano, 2013, p. 1). The electricity companies could fulfil the RPS requirement in three ways: first, by renewable self-generation; second, by buying electricity from RES; or third, by acquiring green certificates on the certificate market (Dong & Shimada, 2017, p. 591). With respect to regulatory tools, the RPS Act (2002) granted certain regulatory powers to METI. If METI discovered that an electricity company had not met the set quota for renewable electricity, and there was no justifiable reason for this, it was given a soft power to recommend that a deadline be established to achieve the set quota. Another possible— and stronger—measure was to order this entity to meet the quota under a fixed deadline,69 with a financial sanction (a fine) for non-compliance.70 In, reality, the quotas announced by the electricity companies in 2003 totalled 330 MW, whereas wind power bids accounted for 2400 MW. This was indicative of the state of fierce competition, and, as a result of these disparities, numerous investors have had to cancel their plans for new wind power plants (Maruyama et al., 2007, p. 2762).71 In this light, when compared to the EU, the Japanese targets were very low. The overall RPS target for electricity companies in Japan was set at 7.32 TWh in 2003, 12.2 TWh in 2010, and 16 TWh in 2014. However, the actual amount of renewable generation that utilities were obligated

148

M. M. SOKOŁOWSKI

to produce was reduced to 3.28 TWh in 2003, and has continued to be reduced through 2009)—this accounted for 0.39% of total electricity sales by all distributors in 2003, 1.29% in 2010, and 1.6% in 2014 (Takase & Suzuki, 2011, p. 6736). This was in contrast to about 22% indicative share of electricity set to be produced from RES in the total EU-15 electricity consumption by 2010 (Sokołowski, 2021b, pp. 150–151). Moreover, the RPS system’s architecture had a number of flaws (such as the certificate market’s lack of transparency, which created uncertainty among potential investors). The most significant of them was the disproportionately low target to attract significant investments in new RES, which resulted in overall poor system performance (Fugazza & Schlirf, 2006, p. 122). In addition, banking of certificates resulted in a reduction in renewable energy deployment,72 allowing the electricity companies that made up 99.5% of the market under the RPS to cut wind power off from the grid (Takase & Suzuki, 2011, p. 6736). 4.2.3

The 2011 Feed-in-Tariff, Rural Renewables, and the 2016 System Revision

As the Japanese PV producers began to lose their position in the global market in the late 2000s, discussions about modifying the RPS system emerged (Li et al., 2019, p. 5). However, a certain divergence between the development priorities for renewable energy sources occurred at the policy level, emphasising the importance of PV in comparison to other types of RES. Soon, this direction was reflected in high-level political announcements (see Li et al., 2019, pp. 5–6). This preference for solar over wind was not based on cost-effectiveness, but rather on a political decision to use the most expensive form of renewable energy at that time.73 It stemmed from Japan’s long history of using solar power for water heaters, weather and land factors that prevented widespread installation of wind power sources, and a commercial strategy to create export products—PV panels; incidentally, the promotion of exports has always been the cornerstone of MITI/METI’s work (see Moe, 2012, p. 265). In 2009, the government of Japan announced national goals of increasing PV capacity to—by referring to 2005 levels—20 times by 2020, and 40 times by 2040—accordingly. This would amount to a deployment of 28 GW in 2020, and 56 GW in 2040 (Chowdhury et al., 2014, p. 289). When it became evident that the renewable energy target for 2010 (1.35%) would not be attained, Japan reverted to a feed-in tariff

4

MAKING THE ELECTRICITY SECTOR RENEWABLE

149

(FIT) scheme (Huenteler et al., 2012, p. 7). This finally happened in August 2011, when three months after the Fukushima 2011 nuclear accident, the Act on Special Measures Concerning Procurement of Electricity from Renewable Energy Sources by Electricity Companies (2011) was passed (FIT Act).74 The new legislation explicitly stated the role of renewable energy in Japan, emphasising its relevance in ensuring a steady and appropriate energy supply as well as lowering the environmental burden associated with energy usage.75 The core of this law is the effective—from July 2012—FIT scheme (see Dong & Shimada, 2017, p. 591) which evolved from PV net metering scheme and incorporated it (Morita & Matsumoto, 2014, p. 8). Like its predecessor, FIT has obliged regional electricity utilities to purchase electricity from RES (not only PVs as in the metering scheme) (Morita & Matsumoto, 2014, p. 10), providing long-term contracts for renewable producers, and guaranteeing a fixed purchase price (Dong & Shimada, 2017, p. 591). The FIT system expedited renewable energy investment: by the end of December 2013, installed renewable energy capacity has grown by 34% compared to the period prior to FIT (METI, 2014, p. 10). Under the FIT Act (2011) METI has been given the power to organise the procurement of renewable electricity by determining (after consultations with other ministries) the price and period for which the price was to be offered, in division for types and scales of installations.76 METI has also been authorised to intervene in contracts between electricity companies and suppliers of RES-generated electricity. METI could provide guidance and recommendations to the electricity company, advocate completing a specific contract, and—if the recommendation has not been followed without a legitimate cause—order the company to conclude this contract.77 Similar powers apply to the RES grid connection, with METI having the authority to order its implementation after a series of milder measures such as guidance and recommendations, if it deemed it essential.78 A fine of not more than one million JPY has been introduced for breaking these orders.79 Among other regulatory powers, the FIT Act (2011) empowered METI to require reports from electricity companies, control documentation, and perform on-site inspections of renewable installations used by suppliers of electricity produced in RES. In 2013, in order to revitalise the abandoned rural areas and optimise energy mix by utilising RES, the Act on Promoting Generation of Electricity from Renewable Energy Sources Harmonised with Sound Development of Agriculture, Forestry and Fisheries (2013) was passed.

150

M. M. SOKOŁOWSKI

The Promotion Act (2013) intensifies the collaboration among municipalities, the energy industry, agriculture, forestry, and fisheries, as well as local residents, to increase the vibrancy and sustainability of rural regions, driven by the development of RES generation there.80 This system, which aimed to revamp rural areas through renewable projects, introduced a framework of policies adopted at the ministerial level, as well as municipal plans based on them, influencing investors willing to build RES within a given municipality, thereby creating a system of approvals.81 This has been complemented by governmental plans to use biomass for power generation and heat production based on a consistent and efficient supply of unutilised resources, also from the forestry industry, and supported with the use of the FIT (see METI, 2018, p. 51). Despite some reservations about the use of renewables in the electricity system in terms of supply stability and cost, it was declared a ‘promising, multi-characteristic and important energy source which can contribute to energy security as it can be domestically produced free of greenhouse gas emissions’ (METI, 2014, p. 21). Their promotion continued in the direction of lowering reliance on nuclear power generation to the greatest degree possible (Koppenborg, 2021, p. 4), accompanied by energy conservation and enhancing the efficiency of thermal power plants (see this chapter). Nonetheless, the introduction of some sorts of renewables, such as wind power, encountered issues relating to collaboration with local communities, environmental assessment, and efforts to conform to construction rules (METI, 2014, p. 41). Even with the FIT scheme, the introduction of wind and geothermal power has lagged behind that of PV since the latter had fewer regulatory constraints (see METI, 2014, pp. 41–42). In this regard, the relaxed distributed energy policies have also aided Japanese small energy consumers in gaining greater control over their energy management (see D’Alessandro et al., 2021, p. 155). In 2016, the Act to Partially Revise the Act on Special Measures Concerning Procurement of Electricity from Renewable Energy Sources by Electricity Companies (2016) was passed (Revised FIT Act) and the FIT Act (2011) was amended. Despite the fact that METI (2016) reported a significant increase in renewable capacity since the FIT was introduced in 2012, the scheme had some flaws, such as the dominance of over 10 kW PV sources (approximately 90% of the total amount of electricity authorised under the FIT scheme). It also generated high costs (public expenditures have reached around 1.8 trillion JPY), and faced

4

MAKING THE ELECTRICITY SECTOR RENEWABLE

151

market distortions—in 2014, five electricity utilities, including Kyushu Electric Power Company, suspended the applications for grid connection of RES. In light of this, the revised FIT Act (2016) has been designed to tackle the shortcomings of the FIT scheme by proposing a new approach driven by pursuing two objectives: maximising the use of RES while decreasing the financial burden on the state’s budget (see METI, 2016). The revised FIT Act (2016) established a new authorisation system aimed at ensuring grid connection with business plans that a renewable energy power generation utility must submit before entering the market; it also revised the method of setting procurement prices (an auction), and changed the scope of agents required to purchase renewable electricity from retail to transmission and distribution (see METI, 2016). 4.2.4

Energy for Carbon Neutrality: Renewables in the Japanese 2020s Policy Framework

The framework that can boost the development of renewables in Japan is 2050 carbon neutrality (see Chapter 3 of this book). Here, the LongTerm Strategy Under the Paris Agreement (Government of Japan, 2019) bringing the vision of decarbonised society as Japan’s ultimate goal, includes the promotion of renewables as the primary carbon-free power source, taking into account that, before 2050, renewables will become economically self-sustained (Government of Japan, 2019, p. 23). In this context, the FIT rate for PVs has experienced cyclical decreases82 : at the time of the system debut in 2012, it was 42 JPY/kWh, but in 2019 it was 24 JPY/kWh—for residential installations under 10 kW (Sakuma, 2019).83 This aligns with the plans for cost reduction and renewable selfreliance, with actions to appropriate FIT operation, by utilising an auction system to reduce costs and lower tariffs with the Top Runner approach to reach the price target in particular (see Government of Japan, 2019, p. 23; Sugiyama et al., 2021, p. 357). Apart from the cost concerns, Japan will continue to promote smooth and large-scale RES, focusing on the efforts to make renewable energy a long-term stable power source, overcome power grid constraints, and secure appropriate flexibility—here, a traditional technological approach is offered, with improvements brought by innovations.84 Proposed actions include: incentives for VPPs that use distributed energy resources installed on the customer side, such as stationary storage batteries; cogeneration; electric vehicles; vehicle-to-grid (V2G), which controls the reverse power

152

M. M. SOKOŁOWSKI

flow from electrified vehicles; storage batteries for system stabilisation; cogeneration, and, in the long run, hydrogen and fuel cells (Government of Japan, 2019, p. 25). Moreover, to build a stable renewable capacity, Japan stipulates the development of offshore wind farms. To stimulate their development, the necessary regulatory steps were taken with the adoption of the Act on Promoting Utilisation of Sea Areas for the Development of Marine Renewable Energy Power Generation Facilities (Offshore Act, 2018). The purpose of the 2018 Offshore Act is to provide a long-term, stable, and efficient framework for operating offshore wind power by taking measures to formulate a basic policy, designate promotion zones for the development of offshore facilities, and create a system for certification of plans for exclusive occupancy and the use of sea areas within these zones.85 Prior to the 2018 Offshore Act, there was no overarching legislation clarifying site uses in sea areas, which were traditionally felt to be under the discretion and accountability of local governments. There were also no well-defined legal procedures to follow for resolving the conflicts between stakeholders, and lease agreements were commonly very short, ranging from three to ten years (Li, 2022, p. 7). As in the case of rural rejuvenation by the use of renewables, the 2018 Act also introduces the cooperation principle aimed at joint efforts for the needs of offshore development,86 with duties of national and local governments, as well as offshore investors.87 In December 2020, the Public–Private Council on Enhancement of Industrial Competitiveness for Offshore Wind Power Generation (Offshore Council), presented the Vision for Offshore Wind Power Industry (2020) which was formed to promote collaborative efforts by the government and business to expand the use of offshore wind power in Japan, enhance the competitiveness of related businesses, and establish domestic production bases and infrastructure. According to the 2020 Vision, Japan will continue to designate promotion zones to generate around 1 GW of offshore wind power each year for the next ten years, with the capacity of 10 GW awarded by 2030 and 30–45 GW, including floating offshore wind, awarded by 2040 (Offshore Council, 2020, pp. 5–6). To achieve these goals, the Offshore Act (2018)—similarly to the Promotion Act (2013)—establishes a system driven by a basic policy to comprehensively and systematically encourage measures for promoting the utilisation of sea areas for the development of offshore wind farms with designated zones of the territorial and inland waters of Japan as the

4

MAKING THE ELECTRICITY SECTOR RENEWABLE

153

offshore promotion zones.88 The 2018 Offshore Act also provides the rules for the public tender process aimed at selecting an investor within a given zone.89 In 2018, METI categorised offshore wind projects into two groups: fixed foundation and floating foundation, and in 2020, bidding was introduced to fixed foundation with the FIT price for floating foundation at JPY 36/kWh (Li, 2022, p. 8; see Midford, 2021, p. 107).90 The same year public bids were held in four locations, with around 1.5 GW of offshore wind power scheduled to be constructed (Offshore Council, 2020, p. 3). The bidding scheme did not last long, since with the announcement of carbon neutrality by 2050, METI readjusted its FIT programmes for offshore wind, discontinuing bidding in March 2021, with FIT rates set at JPY 32/kWh and JPY 36/kWh, respectively, for fixed and floating foundations (Li, 2022, p. 8). Moreover, Japan stipulates the promotion of self-consumption from RES with regional renewable energy supply, contributing to regional rejuvenation and disaster prevention (see Government of Japan, 2019, p. 23). This is consistent with the rural development offered by the framework of the Act on Promoting Generation of Electricity from Renewable Energy Sources Harmonised with Sound Development of Agriculture, Forestry and Fisheries (2013). This includes actions to boost renewable installations in abandoned areas as well as those used for applying ‘farming-photovoltaics’—installing PVs above farm fields, in a manner that allows farming to continue undisturbed (see Sokołowski, 2021b, pp. 153–154). This is complemented by a certification mechanism for regional decarbonisation promotion project plans (see Chapter 3 of this book) that use RES in a simplified manner under the amended Act on Promotion of Global Warming Countermeasures (2021), which adds to the expected development of regional renewable energy supply. The aforementioned moves show that Japan has been trying to adjust its energy mix following the Fukushima disaster in 2011, not only by utilising conventional fuels including natural gas and oil, but also—as previously indicated—by attempting to boost the use of RES (Sokołowski, 2015, p. 232). Although these actions have not always been consistent at the national level, some regional leaders have emerged, such as Fukushima Prefecture, which plans to meet 100% of its energy demand with renewables by 2040, Amori and Akita Prefectures with community wind, and Nagano Prefecture with community PV projects (see Sokołowski, 2021b, pp. 151–152). The announcement in 2020 carbon neutrality by 2050 gives these incentives a national framework (see Chapter 3 of this book).

154

M. M. SOKOŁOWSKI

According to the new Strategic Energy Plan (METI, 2021, p. 25), Japan sees the deployment of renewables as significant power sources as the top priority in its attempts to achieve carbon neutrality by 2050. Apart from addressing the optimisation of putting renewable installations under plans and zoning systems, and introducing actions aimed at cost reduction and RES market integration, grid use regulations will be revised so that renewable energy can utilise the system preferentially over coal-fired power units (Agency for Natural Resources & Energy, 2021, p. 7). This will be in contrast to grid operation based on a logical assumption that baseload power, in which—rather than adhering to a merit order rationale that gives priority to renewable sources with no fuel costs—the general electricity utilities that own and operate the grid use the formalised system of ‘first-come, first-served’ (Trencher et al., 2020, p. 8). Accordingly, the utilisation of the renewable potential requires the enhancement of the grid, and so, to improve resilience (also in case of major disaster like earthquake or tsunami), a master plan to systematically promote the establishment of a wide-area interconnection system will be developed. This is especially important due to future transmission of electricity from offshore wind power plants from northern Japan (Hokkaido) and it will require an assessment of the development of the direct current grid (see METI, 2021, pp. 55–56). To increase grid flexibility and promote decarbonisation of balancing power, practical application of storage (batteries and water electrolysis) through cost reduction, with clear positioning of storage for grid needs under the Electricity Business Act (1964) will be addressed (see Chapter 2 of this book). Furthermore, Japan will review existing legislation such as the Natural Parks Act, the Hot Springs Act, and the Forest Act in order to introduce and expand geothermal power (Agency for Natural Resources & Energy, 2021, p. 7). In their current shape, these laws stop investments in geothermal projects, blocking the utilisation of geothermal energy potential in Japan (see Hymans, 2021, pp. 55–56).91 Actions on renewable facility safety should also be noted, with reporting standards under the amended Electricity Business Act (1964) regarding incidents in small installations—this is consistent with technical standards for promoting safety measures (METI, 2021, p. 55). As in the past, the 2021 Strategic Energy Plan promotes technical development through approaches such as PV mounted on building walls, floating wind, and deep geotherm

4

MAKING THE ELECTRICITY SECTOR RENEWABLE

155

(Agency for Natural Resources & Energy, 2021, p. 7). This will necessitate regulatory action, at least in terms of technical standards and environmental regulations.

4.3

Summary

Renewable energy promotion has long been a cornerstone of the European energy policy, dating back to the 1980s. Renewables were given dedicated programmes, such as Joule-Thermie or Altener, as well as funding for development and promotion. Japan began public action on renewable energy in the 1970s with the Sunshine Project. This was followed by subsequent governmental programmes aimed at developing new technologies to provide clean energy, and legislation with targets for renewable energy use and institutional developments, especially with the establishment of the NEDO in the 1980s. Many solutions developed by Japan were pioneering and set Japan as the leader in the field of renewable technology, while also influencing the replication of this success in other nations, also in Europe. This approach to technology for the sake of executing energy policy has already become not only a permanent component, still employed in Japan today, but also a type of hallmark of the Japanese regulatory approach. The time of prosperity, however, was cut short by unfavourable external trends created by the late 1980s oil crisis, as well as domestic conditions relating to the economic collapse triggered by the bursting of the speculative bubble. This was also seen in the energy sector, when renewable programme objectives were not attained. In contrast, as a result of international climate action, particularly the Kyoto Protocol, the work on European renewable energy policy accelerated in the 1990s, and a strategic approach to renewable energy was proposed. Renewables’ further development, as an element of the internal energy market, necessitated a European approach that added value to national activities directed at increasing the overall impact of renewables, and ensuring the necessary coordination and standardisation in implementing these policies at various levels. Resulting from these concerns, the subsequent renewable energy directives were enacted: the RES of 2001, the RED I of 2009, and the RED of 2018. Each implemented regulatory mechanisms targeted at increasing the share of renewables in the electricity production in the internal market. This relates to renewable energy targets in national energy mixes,

156

M. M. SOKOŁOWSKI

support schemes such as investment aid, tax exemptions, tax reductions, tax refunds, green certificates, FIT schemes, and guarantees of origin. These tools have evolved from indicative to obligatory during the phases of the electricity market reform (see Chapter 2 of this book) being defined both as pan-European aims and national goals, with additional aspects emphasised as price signals that must be incorporated. This made them more market-based mechanisms, and therefore tendering, delivered at the lowest possible cost to consumers and taxpayers, is now preferred when creating support schemes and assigning assistance, in order to minimise the total system cost. This led to legislative changes, as some Member States altered their support schemes, abandoning green certificates to replace them with tendering. In this respect, Japan has experimented with many ways of boosting renewable energy throughout the years. Aside from successful R&D efforts driven by public programmes, there were more or less successful experiments with support schemes hampered by the underestimated or overestimated stream of public funds allotted for financing renewable projects. Starting much earlier than the EU, Japan attempted to move towards more market-driven mechanisms, but it was too early for renewable technologies. Consequently, after the highly successful iconic PV incentives of the 1980s and 1990s which established Japan as the global trailblazer in solar technologies, with subsidy decrease and withdrawal, in the 2000s the Japanese PV market stalled or even regressed. This experience influenced the structure of the chosen regulatory mechanisms to some extent—there were still some miscalculations about the magnitude of financing—but resulted in a return to supporting renewable energy sources, with PV given a priority in this mix. In contrast to Japan’s solar priority, the EU took a more holistic approach to renewable energy, taking into consideration the diverse development potential of various technologies in the member countries. This, however, does not explain the delay in the growth of Japan’s offshore sector, which was not fully acknowledged at the regulatory level for a long time due to political considerations. Japan’s attitude to offshore wind farms has shifted with the adoption of a new strategy and the 2018 legal solutions of the Offshore Act. Like the EU, Japan has been introducing national goals for obtaining a certain share or capacity of renewable installations, and industry targets. The latter, like many other measures in the power industry, such as net billing under voluntary programmes implemented by electricity utilities, was fully voluntary. Nonetheless, these measures were followed and

4

MAKING THE ELECTRICITY SECTOR RENEWABLE

157

thus made effective (enabling the development of renewable technologies and building a national production capacity in the production of renewable solutions based on recognised Japanese manufacturers), distinguishing the Japanese soft approach from the European one, which was progressively regulatory oriented, with increasing powers of energy regulators. However, this does not imply deregulation (see Chapter 2 of this book). Although many actions taken by Japanese businesses were voluntary, certain elements of the regulatory power could be seen in plans that business entities (those intending to use new energy sources) were required to prepare and submit for certification, and in reports on their implementation status, with the possibility of imposing fines for non-compliance. In Europe, the renewable directives made EU Member States more oriented towards renewables, also those installed by energy prosumers, both active consumers and energy communities, by offering them enabling frameworks. Directives have clarified the national legislation on RES, facilitated administrative procedures, and streamlined authorisation, certification, and licencing related to renewables. These procedures were set to be less discriminative, while also more proportionate, objective, adjusted to specifics of given renewable technology, clearly defined, and well-coordinated with transparent timetables and comprehensive information on processing. Moreover, this pro-renewable legal regime requires the removal of regulatory and non-regulatory barriers to electricity production from RES; it also calls for the energy regulators to be more focused on monitoring the market to promote RES. Special attention has been given to gird issues, with rules on priority dispatching and reduced renewable electricity curtailment, to establish a more comprehensive framework that governed the relationships between RES, DSOs, and TSOs. This was motivated by the need to provide renewable installations with easier access to the grid, especially under a simple-notification procedure. The EU directives have facilitated the role of the Commission, given new duties in terms of the holistic approach to the European renewable capacity; they also addressed the exemplary role which national, regional, and local public entities should perform in terms of the development of renewables, as in case of those installed on public buildings. The passing years made each regulatory action broader and deeper in terms of the solutions offered. In Japan, although the central government and national parliament had all the powers necessary to establish

158

M. M. SOKOŁOWSKI

stricter rules, the adopted laws offered a soft approach, rather encouraging than obliging energy users and energy utilities to use the new energy sources. Such was the case with the Act on Alternative Energy to Petroleum (1980) or the Act on New Energy (1997). Nevertheless, these have evolved into obligations under the RPS Act (2002) that provided the mandatory targets for electricity suppliers to reach a fixed percentage of electricity from RES, and under the 2011 FIT scheme. Moreover, basic policies established under different legal acts, as in the case of the 1997 Act on New Energy or the 2018 Offshore Act, have been the platforms for the measures to facilitate the development of RES. They delegated the powers related to the facilitation of renewables in the electricity systems to the ministerial level, with the leading position accorded to the MITI and then—after its reorganisation—the METI. Powers and duties such as: rates for renewables under the established tariffs systems like FIT, procurement of renewable electricity, guidelines and technical standards, recommendations, control documentation, and on-site inspections of renewable installations, as well as orders (with the possibility to impose a fine like for noncompliance)’ granted MITI/METI a central position in the regulatory system. The evolution of the regulatory approach refers also to the European legal environment which brought about the solutions offered to RES and adopted as part of Energy Packages, such as the 2009 Climate and Energy Package and the 2018 Clean Energy Package. These packages make the European policy in the field of renewable energy more and more integrated, first of all in the field of emission reduction. However, with the energy efficiency first principle (see this chapter), as in the case of biofuels, or the use of unavoidable waste heat and cold, the rationalisation of energy use also gets its recognition under the renewable pillar of the European energy policy. Nevertheless, the EU has regarded the future expansion of renewables as the key element of the package of actions needed to decrease GHG emissions under the framework of the European Green Deal and Fit for 55% package. This was driven by the 2015 Paris Agreement’s reduction pledge and the 2030 EU climate plan with emission cuts, as well as the 2050 climate neutrality. Because of these ambitions, the recent European regulatory framework comprises the enhanced use of EU funds including additional ones to facilitate a just transition of carbon intensive regions towards an increased share of renewables. In particular, the provided financial instruments covered various purposes, such as reducing the cost of capital

4

MAKING THE ELECTRICITY SECTOR RENEWABLE

159

for renewable energy projects, and developing projects and programmes for: integrating renewables into the energy system, increasing the flexibility of the energy system, maintaining grid stability, and managing grid congestions. Other related purposes included developing transmission and distribution grid infrastructure, intelligent networks, storage facilities and interconnections, enhancing regional and international cooperation through joint projects and support schemes, and the opening of support schemes for renewable electricity to producers located in other countries. The legislation enacted in Japan focuses on the roles of various stakeholders, including national and local governments, companies, and energy users. Aside from the regulatory function of the central government, many legal acts address the activity of local governments in terms of energy planning, influencing the creation and execution of regional activities to encourage the use of RES. In this context, subsequent renewable energy legislation, such as the Promotion Act (2013) and the Offshore Act (2018), strengthens the engagement among municipalities, the energy industry, agriculture, forestry and fisheries sectors, and the local population. This in turn enhances the sustainability of rural regions, steered by the development of renewables generation as a measure of the revival of and disaster prevention in these areas. Furthermore, the Japanese laws on renewables emphasise their importance in guaranteeing a consistent and suitable energy supply and minimising the environmental burden related to energy consumption. It also alludes to their advocacy for reducing the reliance on nuclear power generation to the fullest extent possible (as a result of the 2011 Fukushima disaster), and constituting a steady renewable capacity, such as offshore power. Still, some issues require additional attention, such as optimising the position of renewable installations in plans and zoning systems; initiating actions aimed at cost reduction and RES market integration, with grid usage regulations so that renewable energy can use the system preferentially over coal-fired power units; looking into the matter of developing of direct current grid; promoting grid flexibility, and incorporating storage into the electricity system. The framework that can boost renewable development in Japan is 2050 carbon neutrality, bringing the vision of a decarbonised society as Japan’s ultimate goal. This involves the promotion of renewables as the primary carbon-free power source, taking into account that renewables will become economically self-sustaining before 2050.

160

M. M. SOKOŁOWSKI

Notes 1. 2. 3. 4. 5.

6.

7.

8. 9. 10. 11. 12. 13. 14.

15. 16. 17. 18. 19. 20. 21. 22. 23. 24. 25. 26.

Cooperation with third countries and international organisations. See Article 3 and Annex II of 93/500/EEC Council Decision (1993). See Annex I of 93/500/EEC Council Decision (1993). Of gross inland consumption. Under Article 2(a) of the RES Directive (2001) these were ‘renewable non-fossil energy sources (wind, solar, geothermal, wave, tidal, hydropower, biomass, landfill gas, sewage treatment plant gas and biogases)’. According to Article 2(b) of the RES Directive (2001) this was ‘the biodegradable fraction of products, waste and residues from agriculture (including vegetal and animal substances), forestry and related industries, as well as the biodegradable fraction of industrial and municipal waste’. It was defined in Article 2(c) of the RES Directive (2001) as ‘electricity produced by plants using only renewable energy sources, as well as the proportion of electricity produced from renewable energy sources in hybrid plants also using conventional energy sources and including renewable electricity used for filling storage systems, and excluding electricity produced as a result of storage systems’. See Articles 3(2)–(4) and 8 of the RES Directive (2001). See Article 4 of the RES Directive (2001). See Article 5 of the RES Directive (2001). See Article 6 of the RES Directive (2001). See Article 7 of the RES Directive (2001). See Article 7(7) of the RES Directive (2001). TSO and DSO, under Article 7(4) of the RES Directive (2001), were required to furnish each new renewable electricity producer wanting to be connected with a full and detailed assessment of the costs associated with the connection. See Article 7(2)–(3) of the RES Directive (2001). See Article 7(2)–(3) of the RES Directive (2001). See part A of Annex I of the RED I (2009). Of gross final consumption of energy, see Article 2(f) of the RED I (2009). See Recital 15 of the preamble to the RED I (2009). See Articles 7, 9, and 11 of the RED I (2009). See Article 2(k) of the RED I (2009). See Article 4 of the RED I (2009). See Article 15 of the RED I (2009). See Article 13(1)(a)–(d) of the RED I (2009). See Article 13(4) of the R RED I (2009). See Article 16(1) of the RED I (2009).

4

27. 28. 29. 30. 31. 32. 33. 34. 35.

36. 37.

38.

39. 40. 41. 42. 43. 44. 45. 46. 47. 48. 49. 50. 51. 52. 53.

54.

MAKING THE ELECTRICITY SECTOR RENEWABLE

161

See Article 16(2) of the RED I (2009). See Article 16(4) of the RED I (2009). See Article 16(3) of the RED I (2009). See Article 16(5) of the RED I (2009). In gross final consumption of energy, see Article 3(1) of RED II (2018). See Recitals 9 and 10 of the preamble to the RED II (2018). See Chapter 2 of the Governance Regulation (2018). See Article 3(5) the RED II (2018). In this light, according to Article 4(3) of the RED II (2018), the direct price support incentives of a market premium character might be either sliding or fixed. See Article 6 of the RED II (2018). Article 4(4) of the RED II (2018). See also Article 4(6) of the RED II (2018) which establishes the rules to enhance transparency and nondiscriminance of tendering procedures by introducing the criteria to qualify for the auction, the obligation to set clear dates and rules for the delivery of the project, and publish information about previous tendering procedures, including project realisation rates. According to Paragraph 127 of the Guidelines on State Aid (Commission, 2014) aid may be granted without a competitive bidding process to installations with an installed electricity capacity of less than 1 MW, or demonstration projects, except for electricity from wind energy, for installations with an installed electricity capacity of up to 6 MW or 6 generation units. See Recital 19 of the preamble to the RED II (201). See Article 4(4) of the RED II. See Article 4(8) of the RED II. See Article 15(1) of the RED II. See Article 15(3) of the RED II. See Article 15(8) of the RED II. See Article 16 of the RED II. Or equivalent for connections other than three-phase connections. See Article 17(1) of the RED II. See Article 19 of the RED II. See Article 21(2) of the RED II. See Article 21(6) of the RED II. See Article 22(4) of the RED II. See Article 22(4)(d) of the RED II. Provided that their membership in an energy community does not represent a private undertaking’s principal commercial or professional activity, see Article 22(1) of the RED II. See Article 22(1) of the RED II.

162

M. M. SOKOŁOWSKI

55. Also known as: Law Concerning the Promotion of Development and Introduction of Oil Alternative Energy. 56. In Japanese: 石油代替エネルギー [sekiyu daitai enerug¯ı]. 57. According to this estimate, if 22% of all private houses in Japan were used for 3 kW roof arrays (as for 1987), their potential would account for 27.6 GW, with additional roof spaces of multi-family residences providing another 8.13 GW PV installation potential (in total 35.73 GW), and assuming a 12% capacity factor, it would correspond to 37.6 TWh per year—as Japanese gross energy consumption (Kurokawa & Ikki, 2001, p. 458). 58. Since the start of the project the cost of solar cells has decreased from 30,000–20,000 JPY per W to 720 JPY per W, and the conversion efficiency of the crystal type has hit 15% and that of the amorphous type reached 10% (Gotoh, 1992, pp. 106–107). 59. The Moonlight Project, started in 1978, was created to develop energy conservation technologies combining research and development works of government and industry (Fukasaku, 1995, p. 1067; Tatsuta, 1996). 60. This programme subsidised a specific portion (12% in FY 2003) of the cost of PV systems installed in individual homes, resulting in the rapid growth of the residential PV sector (Otani et al., 2004, p. 450). 61. Also known as: Act on Special Measures Concerning Promotion of New Energy Use. 62. See Article 4 of the Act on New Energy (1997). 63. See Article 7 of the Act on New Energy (1997). 64. See Article 5 of the Act on New Energy (1997). 65. MITI (then METI) and the ministry in charge of the business area in which a company operated shared these accreditation and control powers, see Article 15(ii) of the Act on New Energy (1997). 66. According to Article 16 the Act on New Energy (1997) it is a fine of no more than 200,000 JPY. 67. Also known as: Act on Special Measures Concerning New Energy Use by Operators of Electricity Utilities. 68. See Article 2(2) of the RPS Act (2002). 69. See Article 8 of the RPS Act (2002). 70. According to Article 15 of the RPS Act (2002) it was a maximal fine of one million JPY. 71. Following this, in 2004, the Kyushu Electric Power Company established a quota of 50 MW, receiving offers from wind power sources totalling more than 700 MW (Maruyama et al., 2007, p. 2762). 72. Since the fiscal year (FY) 2006, electricity companies’ accumulated banking of certificates has exceeded RPS obligations, reaching 6.8 TWh in FY 2007, and 7 TWh in FY 2008 (Takase & Suzuki, 2011, p. 6736).

4

MAKING THE ELECTRICITY SECTOR RENEWABLE

163

73. According to METI (2010), the cost of electricity produced in largescale wind power plants ranged from 9 to 14 JPY/kWh, whereas in PV installation it accounted for 49 JPY/kWh. 74. Also known as: Act on Special Measures Concerning Procurement of Electricity from Renewable Energy Sources by Electricity Utilities. 75. See Article 1 of the FIT Act (2011). 76. See Article 3 of the FIT Act (2011). 77. See Article 4 of the FIT Act (2011). 78. See Article 4 of the FIT Act (2011). 79. See Article 45 of the FIT Act (2011). 80. See Article 2(1) of the Promotion Act (2013). 81. See Articles 4, 5, and 7 of the of the Promotion Act (2013). 82. Sugiyama et al. write that (2021, p. 357) ‘FIT also led to a gargantuan price tag of trillions of yen per year’. 83. Nevertheless, the demand for PV modules has fallen, while the number of dormant PV projects in Japan has grown (Takeuchi & Miyamoto, 2021, pp. 219–221). 84. As highlighted in the 2018 Strategic Energy Plan ‘the power generation cost of solar power is high, and there are supply problems such as the fact that power output is unstable. Therefore, further technological innovation is necessary’ (METI, 2018, p. 21). 85. See Article 1 of the Offshore Act (2018). 86. See Article 3 of the Offshore Act (2018). 87. See Articles 4–6 of the Offshore Act (2018). 88. See Chapters II and III of the Offshore Act (2018). 89. See Articles 13–16 of the Offshore Act (2018). 90. In 2012, under the FIT scheme a level of JPY 22/kWh for 20 years was initially set for both onshore and offshore wind, which was too low to incentivise offshore wind investment; therefore the price level for offshore wind was raised to JPY 36/kWh in 2014 (Li, 2022, p. 8). 91. This is an example of the Hot Springs Act, which allows onsen ryokan business a virtual veto over geothermal development in their neighbourhood (Hymans & Uchikoshi, 2021, p. 7).

References 93/500/EEC: Council Decision of 13 September 1993 Concerning the Promotion of Renewable Energy Sources in the Community (Altener Programme) (1993) OJ L 235, 18.9.1993.

164

M. M. SOKOŁOWSKI

Act on Promoting Generation of Electricity from Renewable Energy Sources Harmonised with Sound Development of Agriculture, Forestry and Fisheries [農林漁業の健全な発展と調和のとれた再生可能エネルギー電気の 発電の促進に関する法律, n¯ orin gyogy¯ o no kenzen’na hatten to ch¯ owa no toreta saisei kan¯ o enerug¯ı denki no hatsuden no sokushin ni kansuru h¯oritsu]. (2013). Act No. 81, 25.11.2013. Act on Promoting the Utilisation of Sea Areas for the Development of Marine Renewable Energy Power Generation Facilities [海洋再生可能エ ネルギー発電設備の整備に係る海域の利用の促進に関する法律, kaiy¯ o saisei kan¯o enerug¯ı hatsuden setsubi no seibi ni kakaru kaiiki no riy¯ o no sokushin ni kansuru h¯ oritsu]. (2018). Act No. 89, 7.12.2018. Act on the Promotion of Development and Introduction of Alternative Energy to Petroleum [石油代替エネルギーの開発及び導入の促進に関する法律, sekiyu daitai enerug¯ı no kaihatsu oyobi d¯ ony¯ u no sokushin ni kansuru h¯ oritsu]. (1980). Act No. 71, 30.5.1980. Act on Special Measures Concerning Procurement of Electricity from Renewable Energy Sources by Electricity Companies [電気事業者による再生可能エ ネルギー電気の調達に関する特別措置法, denki jigy¯o-sha ni yoru saisei kan¯o enerug¯ı denki no ch¯ otatsu ni kansuru tokubetsu sochi-h¯ o]. (2011). Act No. 108, 30.8.2011. Act on Special Measures Concerning the Use of New Energy by Electricity Companies [ 電気事業者による新エネルギー等の利用に関する特別措置法, denki jigy¯ o-sha ni yoru shin enerug¯ı-t¯o no riy¯ o ni kansuru tokubetsu sochi-h¯ o]. (2002). Act No. 62, 7.6.2002. Act on the Promotion of New Energy Usage [新エネルギー利用等の促進に関す o-t¯o no sokushin ni kansuru tokubetsu sochiる特別措置法, shin enerug¯ı riy¯ h¯ o]. (1997). Act No. 37, 18.4.1997. Act to Partially Revise the Act on Promotion of Global Warming Countermeau sures [地球温暖化対策の推進に関する法律の一部を改正する法律, chiky¯ ondanka taisaku no suishin ni kansuru h¯ oritsu no ichibu o kaisei suru h¯ oritsu]. (2021). Act No. 54, 3.6.2021. Act to Partially Revise the Act on Special Measures Concerning Procurement of Electricity from Renewable Energy Sources by Electricity Companies [電気事業者による再生可能エネルギー電気の調達に関する特別措置法 等の一部を改正する法律, denki jigy¯ o-sha ni yoru saisei kan¯o enerug¯ı denki no ch¯ otatsu ni kansuru tokubetsu sochi-h¯ o-t¯o no ichibu o kaisei suru h¯oritsu]. (2016). Act No. 59, 3.6.2016. Agency for Natural Resources and Energy. (2021). Outline of strategic energy plan. https://www.enecho.meti.go.jp/en/category/others/basic_plan/pdf/ 6th_outline.pdf. Accessed 27 Nov 2021. Asano, K. (2013). Costs estimation for renewable electricity policies in Japan. In 2013 IEEE Region 10 Humanitarian Technology Conference (pp. 1–6). IEEE.

4

MAKING THE ELECTRICITY SECTOR RENEWABLE

165

Asano, K. (2014). Early promoter of solar photovoltaics: Forty years of development of policy and technology in Japan. The political economy of renewable energy and energy security (pp. 157–174). Palgrave Macmillan. Avril, S., et al. (2012). Photovoltaic energy policy: Financial estimation and performance comparison of the public support in five representative countries. Energy Policy, 51, 244–258. Batlle, C. (2011). A method for allocating renewable energy source subsidies among final energy consumers. Energy Policy, 39(5), 2586–2595. Beurskens, L. W., Hekkenberg, M., & Vethman, P. (2011). Renewable energy projections as published in the national renewable energy action plans of the European Member States (ECN-E—10-069). Energy Research Centre of the Netherlands. Bilgen, S., Kaygusuz, K., & Sari, A. (2004). Renewable energy for a clean and sustainable future. Energy Sources, 26(12), 1119–1129. Boscán, L. R. (2020). European Union retail electricity markets in the green transition: The quest for adequate design. Wiley Interdisciplinary Reviews: Energy and Environment, 9(1), e359. Chang, Y., Fang, Z., & Li, Y. (2016). Renewable energy policies in promoting financing and investment among the East Asia Summit countries: Quantitative assessment and policy implications. Energy Policy, 95, 427–436. Chowdhury, S., et al. (2014). Importance of policy for energy system transformation: Diffusion of PV technology in Japan and Germany. Energy Policy, 68, 285–293. Commission. (1996). Communication from the Commission Energy for the Future: Renewable Sources of Energy Green Paper for a Community Strategy. Brussels, 20.11.1996, COM(96) 576 final. Commission. (1997). Communication from the Commission Energy for the Future: Renewable Sources of Energy. White Paper for a Community Strategy and Action Plan. Brussels, 26.11.1997, COM(97) 599 final. Commission. (2007). Communication from the Commission to the Council and the European Parliament Renewable Energy Road Map—Renewable Energies in the 21st Century: Building a More Sustainable Future. Brussels, 10.1.2007, COM(2006) 848 final. Commission. (2014). Communication from the Commission—Guidelines on State Aid for Environmental Protection and Energy 2014–2020. OJ C 200, 28.6.2014. Commission. (2019). Communication from the Commission to the European Parliament, the European Council, the Council, the European Economic and Social Committee and the Committee of the Regions the European Green Deal. Brussels, 11.12.2019, COM(2019) 640 final. Commission. (2021). Communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the

166

M. M. SOKOŁOWSKI

Committee of the Regions Empty “Fit for 55”: Delivering the EU’s 2030 Climate Target on the Way to Climate Neutrality. Brussels, 14.7.2021, COM(2021) 550 final. Council. (1986). Council Resolution of 16 September 1986 Concerning New Community Energy Policy Objectives for 1995 and Convergence of the Policies of the Member States, OJ C 241, 25.9.1986. Council. (1988). 88/611/EEC: Council Recommendation of 8 November 1988 to Promote Cooperation Between Public Utilities and Auto-Producers of Electricity, OJ L 335, 7.12.1988. D’Alessandro, K., Dargusch, P., & Chapman, A. (2021). Disruption, disaster and transition: Analysis of electricity usage in Japan from 2005 to 2016. International Journal of Sustainable Energy Planning and Management, 31, 143–160. Del Rio, P. (2014). On evaluating success in complex policy mixes: The case of renewable energy support schemes. Policy Sciences, 47 (3), 267–287. Directive (EU) 2018/2001 of the European Parliament and of the Council of 11 December 2018 on the Promotion of the Use of Energy from Renewable Sources (2018) OJ L 328, 21.12.2018. Directive 2001/77/EC of the European Parliament and of the Council of 27 September 2001 on the Promotion of Electricity Produced from Renewable Energy Sources in the Internal Electricity Market (2001) OJ L 283, 27.10.2001. Directive 2009/28/EC of the European Parliament and of the Council of 23 April 2009 on the Promotion of the Use of Energy from Renewable Sources and Amending and Subsequently Repealing Directives 2001/77/EC and 2003/30/EC (2009) OJ L 140, 5.6.2009. Dong, Y., & Shimada, K. (2017). Evolution from the renewable portfolio standards to feed-in tariff for the deployment of renewable energy in Japan. Renewable Energy, 107 , 590–596. o-h¯ o]. (1964). Act No. 170, Electricity Business Act [電気事業法, denki jigy¯ 11.7.1964. European Council. (2006). Presidency Conclusions of the Brussels European Council (23/24 March 2006). Brussels, 18.5.2006, 7775/1/06 REV 1. European Council. (2007). Presidency Conclusions of the Brussels European Council (8/9 March 2007). Brussels, 2.5.2007, 7224/1/07 REV 1. European Parliament. (1993). Resolution on the Promotion of Renewable Forms of Energy, Strasbourg, 19.1.1993, A3-0405/92. European Parliament. (1996). Resolution on a Community Action Plan for Renewable Energy Sources, Brussels, 4.6.1996, A4-0188/96. European Parliament. (2006). European Parliament Resolution on a European Strategy for Sustainable, Competitive and Secure Energy—Green Paper, Strasbourg, 14.12.2006, A6-0426/2006.

4

MAKING THE ELECTRICITY SECTOR RENEWABLE

167

Fagiani, R., Barquín, J., & Hakvoort, R. (2013). Risk-based assessment of the cost-efficiency and the effectivity of renewable energy support schemes: Certificate markets versus feed-in tariffs. Energy Policy, 55, 648–661. Fouquet, D. (2013). Policy instruments for renewable energy—From a European perspective. Renewable Energy, 49, 15–18. https://doi.org/10.1016/j. renene.2012.01.075 Fraser, T., & Aldrich, D. P. (2020). The Fukushima effect at home: The changing role of domestic actors in Japanese energy policy. Wiley Interdisciplinary Reviews: Climate Change, 11(5), e655. Fugazza, F., & Schlirf, R. (2006). Renewable energy and regulation of energy markets. In D. Aßmann, U. Laumanns, & D. Uh (Eds.), Renewable energy: A global review of technologies, policies and markets (pp. 115–130). Earthscan. Fukasaku, Y. (1995). Energy and environment policy integration: The case of energy conservation policies and technologies in Japan. Energy Policy, 23(12), 1063–1076. Fukuda, Y., & Fujii, M. (2015). Biomass resource mapping and potential evaluation in Hokkaido. Journal of the Japan Institute of Energy, 94(9), 1057–1065. Gochenour, C. (2001). District energy trends, issues, and opportunities: The role of the World Bank. World Bank (World Bank Technical Paper, 493). Gotoh, T. (1992). A strategy for the development of new energy technology in the global environment era (the revised Sunshine Project). International Journal of Solar Energy, 11(1–2), 105–115. Government of Japan. (2019). The long-term strategy under the Paris Agreement. Tokyo, 11(7), 2019. GWPH. (1998, June 19). Guidelines for measures to prevent global warming. Tokyo. https://www.env.go.jp/en/earth/cc/gw/index.html. Accessed 17 Aug 2021. Hamakawa, Y. (1979). Present status of solar photovoltaic R&D projects in Japan. Surface Science, 86, 444–461. Horstink, L., Wittmayer, J. M., & Ng, K. (2021). Pluralising the European energy landscape: Collective renewable energy prosumers and the EU’s clean energy vision. Energy Policy, 153, 112262. Huenteler, J., Schmidt, T. S., & Kanie, N. (2012). Japan’s post-Fukushima challenge—Implications from the German experience on renewable energy policy. Energy Policy, 45, 6–11. Huhta, K. (2020). Anchoring the energy transition with legal certainty in EU law. Maastricht Journal of European and Comparative Law, 27 (4), 425–444. Hymans, J. E. (2021). Losing steam: Why does Japan produce so little geothermal power? Social Science Japan Journal, 24(1), 45–65. Hymans, J. E., & Uchikoshi, F. (2021). To drill or not to drill: Determinants of geothermal energy project siting in Japan. Environmental Politics, 31, 1–22.

168

M. M. SOKOŁOWSKI

Ikki, O. (2003). Present status and future prospects of PV activities in Japan. Solar Energy Materials and Solar Cells, 75(3–4), 729–737. Iliopoulos, T. (2018). Dilemmas on the way to a new renewable energy directive. European Energy and Environmental Law Review, 27 (6), 210–222. Iliopoulos, T. (2020). Price support schemes in the service of the EU’s lowcarbon energy transition. In T. Zachariadis et al. (Eds.), Economic instruments for a low-carbon future. Edward Elgar Publishing. Iliopoulos, T. G. (2021). The promotion of renewable energy communities in the European Union. In D. Borge-Diez & E. Rosales-Asensio (Eds.), Energy services fundamentals and financing (pp. 37–53). Academic Press. Iliopoulos, T. G., Fermeglia, M., & Vanheusden, B. (2020). The EU’s 2030 climate and energy policy framework: How net metering slips through its net. Review of European, Comparative & International Environmental Law, 29(2), 245–256. Inês, C., et al. (2020). Regulatory challenges and opportunities for collective renewable energy prosumers in the EU. Energy Policy, 138, 111212. Jäger-Waldau, A., et al. (2011). Renewable electricity in Europe. Renewable and Sustainable Energy Reviews, 15(8), 3703–3716. Jankowski, J. M. (2010). A European legal perspective on wind energy. Journal of Energy & Natural Resources Law, 28(2), 265–297. Kamimoto, M., & Hayashi, H. (1982). Sunshine project solar photovoltaic program and recent activities in Japan. International Journal of Solar Energy, 1(3), 185–195. Koppenborg, F. (2021). Japan’s energy transition 10 years after the Fukushima nuclear accident: Special issue introduction. Social Science Japan Journal, 24(1), 3–7. Krug-Firstbrook, M., Haggett, C., & van Veelen, B. (2019). Consumer (co-) ownership in renewables in Scotland (UK). In J. Lowitzsch (Ed.), Energy transition: Financing consumer co-ownership in renewables (pp. 395–419). Palgrave Macmillan. Kurokawa, K., & Ikki, O. (2001). The Japanese experiences with national PV system programmes. Solar Energy, 70(6), 457–466. Lauber, V., & Schenner, E. (2011). The struggle over support schemes for renewable electricity in the European Union: A discursive-institutionalist analysis. Environmental Politics, 20(4), 508–527. Li, A. (2022). Centralization or decentralization: Divergent paths of governing offshore wind between China and Japan. Energy Research & Social Science, 84, 102426. Li, A., Xu, Y., & Shiroyama, H. (2019). Solar lobby and energy transition in Japan. Energy Policy, 134, 110950.

4

MAKING THE ELECTRICITY SECTOR RENEWABLE

169

Lowitzsch, J. (2019). Investing in a renewable future—Renewable energy communities, consumer (co-) ownership and energy sharing in the clean energy package. Renewable Energy Law and Policy Review, 9(2), 14–36. Ludwig, G., et al. (2019). A step further towards a European energy transition: The “Clean Energy Package” from a legal point of view. In E. Gawel (Ed.), The European dimension of Germany’s energy transition (pp. 83–94). Springer. Mäntysaari, P. (2015). EU Electricity trade law: The legal tools of electricity producers in the internal electricity market. Springer. Marukawa, T. (2012). The compressed development of China’s photovoltaic industry and the rise of suntech power (RIETI Discussion Paper Series 12-E-051). Maruyama, Y., Nishikido, M., & Iida, T. (2007). The rise of community wind power in Japan: Enhanced acceptance through social innovation. Energy Policy, 35(5), 2761–2769. Matsumoto, M. (2005). The uncertain but crucial relationship between a ‘New energy’ technology and global environmental problems: The complex case of the ‘Sunshine’ project. Social Studies of Science, 35(4), 623–651. Menegaki, A. N. (2011). Growth and renewable energy in Europe: A random effect model with evidence for neutrality hypothesis. Energy Economics, 33(2), 257–263. METI. (2010). 2010 Annual report on energy. METI. (2014, April). Strategic energy plan. METI. (2016). Promulgation of the partial revision of the Act on Special Measures Concerning Procurement of Electricity from Renewable Energy Sources by Electricity Utilities. https://www.meti.go.jp/english/press/2016/0603_06. html. Accessed 18 Sept 2021. METI. (2018, July). Strategic Energy Plan. METI. (2021). 6th Strategic energy plan [第 6 次エネルギー基本計画, dai rokuji enerug¯ı kihon keikaku]. Midford, P. (2021). The politics of nuclear power plant restarts versus renewable energy promotion. In P. Midford & E. Moe (Eds.), New challenges and solutions for renewable energy: Japan, East Asia and Northern Europe (pp. 101–134). Palgrave Macmillan. Moe, E. (2012). Vested interests, energy efficiency and renewables in Japan. Energy Policy, 40, 260–273. Monti, A., & Martinez Romera, B. (2020). Fifty shades of binding: Appraising the enforcement toolkit for the EU’s 2030 renewable energy targets. Review of European, Comparative & International Environmental Law, 29(2), 221– 231. Morishita, H., et al. (1991). The development of photovoltaic power generation system under the Sunshine Project of Japan. In A. Luque, et al. (Eds.), Tenth EC photovoltaic solar energy conference (pp. 1326–1329). Springer.

170

M. M. SOKOŁOWSKI

Morita, K., & Matsumoto, K. (2014). Renewable energy-related policies and institutions in Japan: Before and after the Fukushima nuclear accident and the feed-in tariff introduction. In A. Ming-Zhi Gao & C. T. Fan (Eds.), Legal issues of renewable electricity in Asia region: Recent development at a postFukushima and post-Kyoto protocol era (pp. 3–28). Kluwer Law International. Myojo, S., & Ohashi, H. (2018). Effects of consumer subsidies for renewable energy on industry growth and social welfare: The case of solar photovoltaic systems in Japan. Journal of the Japanese and International Economies, 48, 55–67. Nysten, J. (2016). Priority rules for renewable energy—Relevance in times of direct marketing. Renewable Energy Law and Policy Review, 7 (2), 172–179. Offshore Council. (2020). Vision for offshore wind power industry (1st ed.). Okamura, L. (2020). Renewable energy in Japan. In M. Lutz, L. Okamura, & H. Weidner (Eds.), The ecological modernization capacity of Japan and Germany: Comparing nuclear energy, renewables, automobility and rare earth policy (pp. 103–118). Springer VS. Otani, K., et al. (2004). Field experience with large-scale implementation of domestic PV systems and with large PV systems on buildings in Japan. Progress in Photovoltaics: Research and Applications, 12(6), 449–459. Pan, W., & Ning, Y. (2015). A socio-technical framework of zero-carbon building policies. Building Research & Information, 43(1), 94–110. https:// doi.org/10.1080/09613218.2015.955759 Peeters, M. (2014). Governing towards renewable energy in the EU: Competences, instruments, and procedures. Maastricht Journal of European and Comparative Law, 21(1), 39–63. Peters, M., et al. (2012). The impact of technology-push and demand-pull policies on technical change—Does the locus of policies matter? Research Policy, 41(8), 1296–1308. Presno, M. J., & Landajo, M. (2021). EU-28’s progress toward the 2020 renewable energy share: A club convergence analysis. Environmental Science and Pollution Research, 28(47), 66830–66844. Regulation (EU) 2018/1999 of the European Parliament and of the Council of 11 December 2018 on the Governance of the Energy Union and Climate Action, Amending Regulations (EC) No 663/2009 and (EC) No 715/2009 of the European Parliament and of the Council, Directives 94/22/EC, 98/70/EC, 2009/31/EC, 2009/73/EC, 2010/31/EU, 2012/27/EU and 2013/30/EU of the European Parliament and of the Council, Council Directives 2009/119/EC and (EU) 2015/652 and Repealing Regulation (EU) No 525/2013 of the European Parliament and of the Council (2018) OJ L 328, 21.12.2018.

4

MAKING THE ELECTRICITY SECTOR RENEWABLE

171

Reis, I. F. G., et al. (2021). Business models for energy communities: A review of key issues and trends. Renewable and Sustainable Energy Reviews, 144, 111013. Roberts, J. (2020). Power to the people? Implications of the Clean Energy Package for the role of community ownership in Europe’s energy transition. Review of European, Comparative & International Environmental Law, 29(2), 232–244. Rowlands, I. H. (2005). The European directive on renewable electricity: Conflicts and compromises. Energy Policy, 33(8), 965–974. Sakuma, Y. (2019, October 8). VPP/EV aggregation project in Japan. Tokyo. https://www.nedo.go.jp/content/100898203.pdf Savaresi, A. (2019). The rise of community energy from grassroots to mainstream: The role of law and policy. Journal of Environmental Law, 31(3), 487–510. Segura, M., Clayton, M., & Manuel, L. (2021). State aid rules for environmental purposes: An effective instrument for implementing EU policy priorities? ERA Forum, 21(4), 667–679. Shimamoto, M. (2020). National project management the sunshine project and the rise of the Japanese solar industry. Springer. Shum, K. L., & Watanabe, C. (2009). An innovation management approach for renewable energy deployment—The case of solar photovoltaic (PV) technology. Energy Policy, 37 (9), 3535–3544. Sokołowski, M. M. (2012). Energy as a conflict trigger: Comparative analysis of international disputes in the Middle East with energy relations in the background. In A. Garnuszek, A. Surma, & L. Mazur (Eds.), International disputes—A challenge for the contemporary world (pp. 107–145). Faculty of Law and Administration, University of Warsaw. Sokołowski, M. M. (2015). Priorities of energy policy of Japan under Abenomics. In M. Sitek & M. Ł˛eski (Eds.), Opportunities for cooperation between Europe and Asia (pp. 227–240). WSGE. Sokołowski, M. M. (2016). Regulation in the European electricity sector. Routledge. Sokołowski, M. M. (2018). European law on the energy communities: A long way to a direct legal framework. European Energy & Environmental Law Review, 27 (2), 60–70. Sokołowski, M. M. (2019). Renewable energy communities in the law of the EU, Australia, and New Zealand. European Energy and Environmental Law Review, 28(2). Sokołowski, M. M. (2020a). European law on combined heat and power. Routledge.

172

M. M. SOKOŁOWSKI

Sokołowski, M. M. (2020b). Renewable and citizen energy communities in the European Union: How (not) to regulate community energy in national laws and policies. Journal of Energy & Natural Resources Law, 38(3), 289–304. Sokołowski, M. M. (2021a). Energy efficiency at energy production level: Promoting combined heat and power. In M. M. Roggenkamp, K. J. de Graaf, & R. C. Fleming (Eds.), Energy law, climate change and the environment (pp. 753–763). Edward Elgar Publishing (Elgar Encyclopedia of Environmental Law, IX). Sokołowski, M. M. (2021b). Models of energy communities in Japan (enekomi): Regulatory solutions from the European Union (rescoms and citencoms). European Energy and Environmental Law Review, 30(4), 149–159. Sokołowski, M. M. (2021c). Artificial intelligence and climate-energy policies of the EU and Japan. In D. Bielicki (Ed.), Regulating artificial intelligence in industry (pp. 138–155). Routledge. Steurer, M., et al. (2017). Curtailment: An option for cost-efficient integration of variable renewable generation? In M. Welsch, et al. (Eds.), Europe’s energy transition (pp. 97–104). Academic Press. Sugiyama, M., et al. (2021). EMF 35 JMIP study for Japan’s long-term climate and energy policy: Scenario designs and key findings. Sustainability Science, 16(2), 355–374. Szalay, Z., & Zöld, A. (2014). Definition of nearly zero-energy building requirements based on a large building sample. Energy Policy, 74, 510–521. Takahashi, K. (1989). Sunshine project in Japan-solar photovoltaic program. Solar Cells, 26(1–2), 87–96. Takase, K., & Suzuki, T. (2011). The Japanese energy sector: Current situation, and future paths. Energy Policy, 39(11), 6731–6744. Takeuchi, K., & Miyamoto, M. (2021). Renewable energy development in Japan. In T. Matsuda, J. Wolff, & T. Yanagawa (Eds.), Risks and regulation of new technologies (pp. 217–233). Springer. Tatsuta, M. (1996). New sunshine project and new trend of PV R&D program in Japan. Renewable Energy, 8(1–4), 40–43. Trencher, G., et al. (2020). Revisiting carbon lock-in in energy systems: Explaining the perpetuation of coal power in Japan. Energy Research & Social Science, 69, 101770. Veum, K., & Bauknecht, D. (2019). How to reach the EU renewables target by 2030? An analysis of the governance framework. Energy Policy, 127 , 299–307. Watanabe, C. (1995). Identification of the role of renewable energy: A view from Japan’s challenge: The new sunshine program. Renewable Energy, 6(3), 237–274. Watanabe, C., Wakabayashi, K., & Miyazawa, T. (2000). Industrial dynamism and the creation of a “virtuous cycle” between R&D, market growth and

4

MAKING THE ELECTRICITY SECTOR RENEWABLE

173

price reduction: The case of photovoltaic power generation (PV) development in Japan. Technovation, 20(6), 299–312. Wen, D., et al. (2020). Development of solar photovoltaic industry and market in China, Germany, Japan and the United States of America using incentive policies. Energy Exploration & Exploitation [Preprint]. https://doi.org/10. 1177/0144598720979256 Wyns, T., & Khatchadourian, A. (2016). Situational analysis of EU renewable energy legislation. Climate Policy, 16(5), 568–585. Yamaji, K. (2015). Japan’s energy and environmental policy. Climate change and energy: Japanese perspectives on climate change mitigation strategy (pp. 57– 132). Imperial College Press. Yordi, B., et al. (1997). The Commission of the European Communities’ (EC) demonstration and thermie programmes for photovoltaic (PV) applications. Solar Energy, 59(1–3), 59–66.

CHAPTER 5

Making the Electricity Sector Energy Efficient

5.1 Energy Efficiency in Energy Transition of the EU One should look for the beginning of the world’s interest in energy efficiency somewhere around the 1970s, when an urgent demand for rationalisation of energy use arose as a result of the first energy crisis (see Rao, 2019; Sokołowski, 2012). In response to the growing energy problems, European leaders, assembled in Paris in October 1972, instructed the European Community’s institutions to develop an energy policy assuring secure and long-term supplies (see ‘Statement from the Paris Summit’, 1972). This eventually occurred nearly two years later, when in the wake of the 1973 oil shock the Commission (1974c) established a framework for the new energy strategy, with one of the goals to make better use of energy resources in order to minimise energy dependency on the rest of the world to the greatest extent possible (Sokołowski, 2020, p. 31). In this framework, a more rational use of energy, driven by the Community’s research incentives and national actions bringing legal measures or technical norms, was expected to result in a 10% reduction in energy consumption by 1985 (see Commission, 1974c, p. 8). Recognising the line established during the 1972 Paris Summit and the framework offered by the Commission, the Council (1974b) adopted the guidelines on energy efficiency, announcing a ‘reduction of the rate © The Author(s), under exclusive license to Springer Nature Switzerland AG 2022 M. M. Sokołowski, Energy Transition of the Electricity Sectors in the European Union and Japan, https://doi.org/10.1007/978-3-030-98896-8_5

175

176

M. M. SOKOŁOWSKI

of growth of internal consumption by measures for using energy rationally and economically without jeopardising social and economic growth objectives’. Soon after, the Council (1974a), motivated by the rise in energy resource prices, issued another policy statement on energy efficiency, calling for improving energy performance ‘by reducing losses and gradually eliminating non-essential consumption’, and approved a new Community energy saving objective for 1985.1 The foundation for the 1985 reduction goal was a programme for the rational use of energy (Commission, 1974a) aimed at reducing the Community’s energy consumption (see Knodt, 2018, p. 228)—but without impeding Europe’s economic and social growth (Commission, 1974a, p. 8). This was complemented with further 1970s action proposals like the concept of exchanging expert information on rationalisation of energy use and recommendations for heating, recognising the prospect of obtaining significant short-term energy savings in building heating systems (see Sokołowski, 2020, p. 33). The agenda of rational energy use was continued in the 1980s. The Commission (1982) provided an action programme on the investments in the rational use of energy (which were ‘regarded as an essential instrument of economic policy’) that included measures to overcome the barriers to such investments. To improve these steps, the programme highlighted the aid for renovation, continuity of assistance (financial and technical), greater information for homeowners, and the involvement of gas and electricity providers (see Commission, 1982, p. 27). Furthermore, in 1986 the Community established its new 1995 energy policy objectives (Council, 1986). This formed horizontal goals, including energy savings and the rational use of energy, with improving energy efficiency recognised as one of the balanced approaches for the energy and environment (Sokołowski, 2020, p. 38). In addition, the Community’s energy sectoral objectives were set (see Haghighi, 2007, p. 61), with the efficiency of final energy in demand per unit of gross national product to be increased by at least 20% by 1995. This, however, was just an indicative target designed to aid in assessing the convergence and coherence of Member States’ 1986–1995 energy policies (see Sokołowski, 2020, p. 38). The 1995 goal was under the Commission’s monitoring, and in 1988 the Commission released an assessment of the Member States’ activities in the energy sector, revealing difficulties in reaching the 20% target: between 1982 and 1986 energy efficiency in the Community improved only about 2%, making the attainment of the 20% savings the final energy

5

MAKING THE ELECTRICITY SECTOR ENERGY EFFICIENT

177

demand unrealistic (Commission, 1988, pp. 4–5). In this context, the Commission (1988, p. 6) determined that additional policy measures at the Community and/or national levels were required, since achieving the 20% increase in energy efficiency by 1995 was deemed unachievable without them. To address this energy efficiency challenge, the Community developed new financial initiatives (see Paterson, 1993), including the Joule, Thermie, and SAVE programmes. 5.1.1

Joule, Thermie, and SAVE Programmes

In the mid-1980s, the Community started working on a bigger energy policy agenda driven by the development of technologies. For instance, to stimulate demonstration and industrial pilot projects in the field of energy Regulation 3640/85/EEC (1985), a proposal for financial support for these actions was adopted (see Morris et al., 1991, p. 55). This focus did not exclude energy efficiency, as demonstration projects leading to substantial energy savings were covered by its scope (see Sokołowski, 2020, p. 40). Moreover, by enacting Decision 89/236/EEC, the Council (1989a) launched the Joule (Joint Opportunities for Unconventional or Long-term Energy Supply) programme with the objective of boosting Europe’s scientific and technical capabilities and increasing its global competitiveness. The Joule initiative, which received 122 million ECU, was intended to create energy solutions that would fit within the Community’s energy policy (see Clément et al., 2002; Gaudiosi, 1999; Infield, 1994). It comprises aims such as enhancing energy supply security by lowering energy imports, while keeping environmental issues in mind, since the research efforts were to considerably reduce the nuisance and pollution caused by energy production and use (Sokołowski, 2020, p. 40). The way to achieve the assumed goals was seen in the techniques, processes, products, and models developed and made available for the Community’s energy and environmental agenda, which included increasing the capacity of renewable energy sources and improving energy efficiency (see Sokołowski, 2020, p. 40). In terms of financial details, the Joule incentive included covering the expenditures2 of several of the programme’s participants (companies, research institutions and universities, as well as individuals, or a partnership of these entities if established in the Community) chosen through an official call (see Sokołowski, 2020, p. 40).

178

M. M. SOKOŁOWSKI

The Thermie programme (1990) delivered by Council Regulation (EEC) No 2008/90 was another Community endeavour to enhance energy efficiency initiated by promoting the development of innovative energy technology due to its benefits for economic, social, and environmental welfare (Sokołowski, 2020, p. 41). With 350 million ECU deemed necessary for its implementation between 1990 and 1992, the Thermie programme began financing projects aimed at advancing, implementing, and promoting innovative energy technologies in four areas including energy efficiency (see Council, 1990). Financial support under the programme was set at a maximum of 40% of the eligible cost for innovative projects, or 35% for dissemination projects. In the case of energy efficiency, both types were to be designed in a way leading to significant energy savings in sectors such as buildings, industry, energy, and transportation (see Sokołowski, 2020, p. 41). The SAVE (Specific Actions for Vigorous Energy Efficiency) programme was the next action for energy efficiency, launched by Decision 91/565/EEC (Council, 1991). By referencing Decision 89/364/EEC (Council, 1989b) the SAVE programme, with a five-year schedule and a budget for implementation of 35 million ECU, integrated, and also enlarged, the financial framework for improving energy efficiency (Sokołowski, 2020, p. 41). Financing was provided for a variety of energy efficiency actions, including technical assessments for the needs of standards and specifications, as well as measures to develop energy infrastructure, promote the coordination of energy efficiency activities, and implement Decision 89/364/EEC (Council, 1989b) in terms of its programme for improving electricity use efficiency (Sokołowski, 2020, p. 41). The SAVE programme offered both full funding (technical assessment) and proportional support ranging from 30 to 60% for consumer information, technical advice, demonstration projects, and studies related to enhancing energy efficiency and improving the efficiency of electrical appliances and equipment (Sokołowski, 2020, p. 41). The latter included, inter alia, the action by public authorities to guarantee that, in all operations for which they are responsible and in all the buildings owned or occupied by them (also with respect to street lighting), electrical appliances and equipment are of high efficiency and efficiently operated (Council, 1989b).

5

5.1.2

MAKING THE ELECTRICITY SECTOR ENERGY EFFICIENT

179

The 2000s Framework on Energy Efficiency

With the acceleration of the European climate change agenda in the twenty-first century, the EU called for concrete action to cut energy demand and promote energy efficiency outside the electricity sector. An example of that could be stronger minimum standards for buildings and labelling of equipment (see Commission, 2001, p. 11). It also concerned, for instance, improvements within the labelling system3 as brought about by Regulation (EC) No 2422/2001 (2001) on energy labelling of office equipment, or other incentives emerging at the beginning of the century. Here one can mention, for example, Directive 2002/91/EC (2002) on the energy performance of buildings. It established minimal requirements with respect to new and renovated buildings, conditions of energy certification for buildings, and regular inspection of boilers and air-conditioning systems in buildings. Moreover, following a long legislative process (see Commission, 2003), another option to promote energy efficiency was established when Directive, 2006/32/EC (2006), i.e. Energy Services Directive was passed. The Directive (2006) was motivated by the need to improve energy end-use efficiency and manage energy demand, with the following assumptions: improved energy end-use efficiency might lead to greater (more cost-effective) exploitation of possible cost-effective energy savings; realised energy savings could lessen the Community’s energy reliance; more energy-efficient technology has the potential to increase European competitiveness and innovation; and, finally, better energy efficiency was expected to contribute to the reduction of CO2 and other GHG emissions and, as a result, to the action on climate change (see Sokołowski, 2020, p. 115). These enhancements were to be employed by each Member State using an aggregate national indicative energy savings objective of 9% for the ninth year of the Directive’s implementation (i.e. 2016).4 This, however, was a soft regulatory approach—the Directive’s goal was not obligatory, but indicative (see Filippini et al., 2014, p. 74).5 Much relied on each country’s selected method on recognising energy efficiency as a priority, including the deployment of pro-efficiency instruments (see Sokołowski, 2020, pp. 115–116). These were the ‘energy efficiency improvement measures’—efforts that generally led to demonstrable, quantifiable, or estimable improvements in energy efficiency,6 with examples included in the Energy Services Directive’s Annex III. The regulatory

180

M. M. SOKOŁOWSKI

approach could offer two types of measures: cross-sectoral (with standards and norms aimed primarily at improving the energy efficiency of products and services, including buildings; energy labelling schemes; intelligent metering systems; training and education) or horizontal (regulations, taxes—having the effect of reducing energy end-use consumption; focused information campaigns promoting energy efficiency improvement with relevant measures). Nonetheless, Member States were to implement voluntary agreements7 and/or alternative market-oriented tools, such as white certificates applied by energy distributors, DSOs, and/or retail energy sales companies. At least one of the following goals was to be met by these schemes: availability of competitively priced energy services for final customers; availability of competitively priced independent energy audits; contribution to funds and funding mechanisms to subsidise the delivery of energy efficiency improvement programmes and other energy efficiency improvement measures.8 Following the Energy Services Directive, to strengthen the policy aimed at more energy-efficient consumption and production patterns, and double the rate of improvement in energy efficiency to over 20% estimated savings potential in the EU annual primary energy consumption by 2020, the Commission (2006) proposed Action Plan for Energy Efficiency. Within this framework, a great opportunity for enhancing energy efficiency in energy production and distribution was identified in the EU-25 (this resulted from huge transformation losses).9 To address this, certain measures were considered. These included: developing minimum efficiency requirements for new electricity, heating, and cooling capacity of less than 20 MW (and considering such requirements for larger production units if necessary); elaborating supply industry guidelines on good operating practises for existing capacity, or proposing a new regulatory framework for the promotion of grid access and connection of decentralised generation (see Commission, 2006, pp. 21–22). 5.1.3

Cogeneration in the EU Action on Energy Efficiency

Within the action on energy efficiency, one can place technology of pro-energy efficiency nature: combined heat and power (CHP) or cogeneration. CHP was listed among potential areas for action in the energy policy, as any progress in the development of cogeneration could result in a significant efficiency improvements in the Community (Commission, 1997b, p. 8), where enhancing energy efficiency was to lead to a more

5

MAKING THE ELECTRICITY SECTOR ENERGY EFFICIENT

181

sustainable energy policy and greater security of supply, as reported by the Commission (see Commission, 1998a). Though energy intensity has reduced gradually, but steadily, in recent years, it was critical to take the steps required to guarantee that European energy efficiency is significantly improved and that impediments to its growth are removed (Commission, 1998a, p. 1). In this context, in the late 1990s, this pro-efficiency technology received a dedicated strategy to accelerate its development in the Community. Despite the fact that the CHP Strategy (Commission, 1997a) identified some hurdles to the growth of cogeneration in the EU, it took a largely non-regulatory approach to cogeneration in the European Union, leaving its promotion to the Member States’ discretion (see Sokołowski, 2020, pp. 60–61). For example, the CHP Strategy (1997) assessed the financial funds which might be made available under the 5th Framework programme for various initiatives in the field of CHP, such as the Joule-Thermie, SAVE, or ALTENER programmes, with their renewals (see Flin, 2010, pp. 88–90). This included both the development of CHP technology (as in the Joule-Thermie programme)10 and the expansion of CHP capacity in the European energy market—as in the continuations of the SAVE and ALTENER programmes (Sokołowski, 2020, p. 62; Sokołowski, 2021a, p. 756). This is especially true for the SAVE II programme (see Commission, 1998b, p. 12), which, according to the CHP Strategy (1997a, p. 13), was supposed to increase awareness about financial solutions and the Energy Service Company (ESCO)’s involvement in CHP projects (see Pantaleo et al., 2014), map demand for energy services that could be met by cogeneration, or examine any barriers to CHP in the liberalised energy market coupled with finding the ways to tackle them. The finance programmes sought to increase cogeneration capacity as part of an ambitious plan to double the 9% share of CHP in the overall gross energy generation in the EU (see van Gerwen, 2003, p. 369, Michaelowa, 1998, p. 157), with a revolutionary goal of achieving at least 18% cogeneration in the European energy mix by 2010 (Hammons, 2011, p. 263; see Lazaro et al., 2006, p. 163; Sokołowski, 2020, p. 62). Apart from doubling the 1990s cogeneration capacity (67 GW producing 204 TWh of electricity in 1994), this required a 30% increase in the yearly load factor, as well as actions on the part of the Member States, which were urged to remove various impediments to the development

182

M. M. SOKOŁOWSKI

of cogeneration in their energy systems. Although rather ambitious, the Commission saw this agenda as ‘realistically achievable’ (Commission, 1997b, p. 10; see Verbruggen, 2005, p. 37). Furthermore, the 18% goal for CHP in electricity generation had an added environmental dimension (see Sokołowski, 2020, p. 62): by doubling CHP use in the Community by 2010, a reduction of over 65 Mt CO2 per year was expected (see Commission, 2000b, p. 66). This should be linked with the fact that the potential for cogeneration in the Community’s energy sector has been estimated to be generally greater, even tripled, if CHP was given the correct framework in the liberalised market (see Commission, 2000b, p. 66; Sokołowski, 2020, p. 62). Moreover, CHP was recognised as ‘critical for energy efficiency’, implying the need to promote cogeneration at both the European and national levels (Commission, 1998a, p. 15). On the one hand, in 2000, increasing the use of CHP was listed as one of the European Climate Change Programme’s measures on climate change (see Commission, 2000a, pp. 5–6, 11).11 On the other hand, ‘[c]ogeneration is not a target in itself … but can be an efficient tool’ (as it improves energy efficiency and allows for a certain reduction in CO2 emissions), the Commission (2002, p. 2) stated in its proposal for the CHP Directive. This way, despite the fact that CHP was designated as one of the EU’s areas to develop (see Sokołowski, 2021a), it was set to be promoted as part of a larger policy agenda on energy efficiency, which was to be linked to the action on renewables (see Sokołowski, 2020, pp. 112–113). Therefore, the proposed law was to be incorporated into the Community’s overall energy efficiency effort, with the legal framework created by Directive 2001/77/EC (2001) serving as the standard for the regime on CHP (Sokołowski, 2020, p. 112). This had a practical dimension as well, because both renewables and cogeneration faced comparable problems, such as the lack of internalisation of external costs, grid uncertainty, and administrative burdens (Commission, 2002, p. 5). When the CHP Directive (2004) was passed, cogeneration received the much-anticipated Community framework established at the EU level, bringing with it the measures dedicated to the development of CHP (also high-efficiency cogeneration) including support systems, facilitating grid access, and dealing with administrative procedures (see Sokołowski, 2020, pp. 113–115). The adoption of CHP Directive (2004), however, was not the end of the regulatory road for European cogeneration, as the legal landscape for CHP has changed over time (see Verbruggen, 2007).

5

MAKING THE ELECTRICITY SECTOR ENERGY EFFICIENT

183

Further steps in the development of cogeneration in the EU (2007–2011) included such elements as the harmonisation of high-efficiency CHP calculation methods and electronic guarantees of origin, stricter requirements for market regulators to promote CHP, identification of national waste heat potential, and adoption of minimum efficiency requirements for district heating based on new norms (Commission, 2006, p. 22). In an attempt to maximise the potential of cogeneration for the needs of the EU’s energy efficiency goal, the focus of future stages was on high-efficiency CHP. Therefore, more regulatory steps had to be taken to ensure the economic potential of high-efficiency cogeneration, overcome market obstacles, introduce instruments to connect heat demand with waste heat supply, and improve transparency and non-discrimination (see Commission, 2011a, pp. 58–59). As a result of implementing these steps, this kind of cogeneration was to be developed—as proven by subsequent regulatory actions (see Sokołowski, 2020, pp. 123–127). 5.1.4

The 2020 Goal for Energy Efficiency

In 2007, the basic assumptions of the EU climate agenda for 2020 were provided, with three pillars: greenhouse gases (see Chapter 3 of this book), renewable energy sources (see Chapter 4 of this book), and energy efficiency. The order is significant. Improving energy efficiency, in contrast to the reduction of emissions and growth of renewables, was not enhanced by the binding targets when the EU 3 × 20% goals for 2020 were introduced (see Carey, 2015). This was notwithstanding the policy attention offered to energy efficiency, which was placed in the centre of any future EU energy strategy (Commission, 2005), and its promising technological potential to reduce GHG emissions (see Pacala & Socolow, 2004, p. 970), as a form of a response to the rising environmental and energy security issues (see Filippini et al., 2014, p. 74). This way, although energy efficiency was one of the key elements of the Climate and Energy Package (Sokołowski, 2016, p. 207), it was not treated in the same way as the promotion of renewable energy sources and the reduction of emissions; their 20% goals for 2020 were confirmed and strengthened by binding legislation, whereas the energy-saving goal was non-binding (Ruzzenenti & Bertoldi, p. 149). Remarkably, the non-binding 20% savings target had a favourable influence on the legal climate for energy efficiency. The impending change was a result of the failure of the CHP Directive (2004) and the Energy

184

M. M. SOKOŁOWSKI

Services Directive (2006). Their mid-term reviews revealed that these directives were not as supportive as they should have been in order to achieve the 20% objective, since their fairly soft and open language was insufficient to overcome the key hurdles to energy saving (see Commission, 2011a, pp. 5, 11–13). While the CHP Directive (2004) did not provide the necessary investment security to reduce administrative burdens and create a level playing field for cogeneration, the Energy Services Directive (2006) did not fully exploit the potential for energy savings in the sectors it covered (see Sokołowski, 2020, pp. 117–118). It was anticipated that, assuming that Member States exceed the energy efficiency goal of 2016, the primary energy savings coming from the implementation of the Energy Services Directive (2006) would be just 50–95 Mtoe in 2020, whereas meeting the 20% savings objective needed greater savings—368 Mtoe (Commission, 2011a, p. 11). As a result, the primary motivation for revising the EU’s legislative framework on energy efficiency was the non-binding 20% target set for 2020, as estimates indicated that the EU was not on track to fully realise cost-effective energy savings, and that it would achieve less than half of the target by 2020 (see Commission, 2011b, p. 1). There was no significant progress towards achieving the energy efficiency objective because supporting the European energy efficiency goal was insufficient; therefore, a new legislative framework aimed at altering this status was to be supplied shortly (see Sokołowski, 2020, pp. 118–122). This was the case with Energy Efficiency Directive (2012)—which, in order to satisfy the needs of the 2020 energy efficiency 20% target, developed the EU joint framework for energy efficiency promotion, with the determination of indicative national energy efficiency objectives for 2020 (see Zangheri et al., 2019). Each Member State had to establish them, based on either primary or final energy consumption, primary or final energy savings, or energy intensity, while keeping in mind that the EU’s 2020 energy consumption cannot exceed 1474 Mtoe of primary energy or 1078 Mtoe of final energy.12 The possibility of attaining the overall EU target and the extent to which individual efforts were adequate to fulfil the common goal was under the Commission’s evaluation.13 Moreover, the Energy Efficiency Directive (2012) introduced several extra requirements on public institutions. This concerns the exemplary role of public buildings, which had to be refurbished every year to satisfy at least the minimal energy performance requirements14 and high

5

MAKING THE ELECTRICITY SECTOR ENERGY EFFICIENT

185

energy-efficiency performance purchases of products, services, and buildings made by central governments.15 The latter was to be followed by regional and municipal governments that were to be encouraged towards these types of purchases.16 The Energy Efficiency Directive (2012) also obliged the Member States to establish an energy efficiency obligation scheme involving energy distributors and/or retail energy sales companies to meet a cumulative end-use energy savings target by the end of 2020 (see Fawcett et al., 2019).17 Alternatively, Member States could decide to implement other policies to achieve these energy savings, as long as those policies met the Directive’s (2012) criteria, most notably that the annual amount of new energy savings achieved through this approach was equal to the amount under the energy efficiency obligation scheme. These alternative options having the effect of reducing the end-use energy consumption included, among others, energy or CO2 taxes, additional standards, norms, energy labelling schemes, and financing schemes and instruments. Other options involved fiscal incentives, regulations, voluntary agreements, training and education, including energy advisory programmes—that lead to the application of energy-efficient technology or techniques.18 Regarding CHP, despite the fact that the CHP Directive (2004) was replaced by the Energy Efficiency Directive (2012), some of the prior legislative provisions focusing on cogeneration were maintained and/or amended—this concerns, for instance, the guarantees of origin (see Sokołowski, 2020, p. 123). Moreover, the Energy Efficiency Directive (2012), adopted two types of other measures to promote CHP, one of a softer and the other of a stronger regulatory character. Among the former are the provisions on instruments to encourage cogeneration under 20 MW, administrative procedures for small and medium-sized CHP, and policies in favour of high-efficiency CHP at the local and regional levels,19 as they leave room for the implementation to be skipped, implemented incorrectly, or not implemented at all (Sokołowski, 2020, p. 123). The latter comprises those provisions of the Energy Efficiency Directive (2012) which deal with the rules for equipping new and modernised CHP installations with high-efficiency cogeneration (see Gvozdenac et al., 2017),20 the obligations of the system operators21 with the rules on priority or guaranteed grid access for high-efficiency CHP,22 as well as comprehensive assessments of national potential for developing high-efficiency cogeneration (see Sokołowski, 2020, pp. 123–126).23

186

M. M. SOKOŁOWSKI

When summarising the framework provided by the Energy Efficiency Directive (2012), it is important to note its dual character, as reflected by the indicative energy efficiency objective and pro-efficiency mandatory measures (Geiss, 2013, p. 55, cf. Schiavo, 2013). In terms of particular aims, such as the intention to foster high-efficiency cogeneration, the Directive (2012) has, in many respects, been insufficient to encourage the development of CHP and exploit its potential in the EU (ColmenarSantos et al., 2015, p. 411). Lastly, the Energy Efficiency Directive was enacted as part of the climate and energy action for 2020, and its 20% targets—with eight years to achieve them (2012–2020)—are no longer applicable (see Sokołowski, 2020, pp. 126–127). Still, more efforts were needed to meet the EU’s energy-saving target by 2020, as the implementation of the EU legislation framework lagged in the mid-2010s, and any progress towards it was hampered by lower-than-expected growth during the financial crisis (Commission, 2014, p. 4). It was critical to avoid false complacency about meeting it, and not underestimating the efforts that will be required in relation to any new target for the period after 2020 (see Commission, 2014, p. 4). 5.1.5

The 2030 Framework and Beyond

Thinking forwards to 2030, the EU has set new targets for climate and energy policy, with energy efficiency being one of them. The 2030 energy efficiency objective was established at a level of minimum 27%, which was analogous to the renewables goal (also 27%); the efficiency goal, however, was only indicative at the EU level, whereas the renewable goal was mandatory (European Council, 2014, p. 5). This was in contrast to the European Parliament’s position (2015) that saw the 2030 targets ‘weak’, and repeatably called for strengthening them to at least 40% reduction in GHG emissions, 30% for renewables, and 40% for energy efficiency of a binding character. To address these demands, the Commission (2016) proposed a new objective for boosting energy efficiency, namely 30% by 2030, which would necessitate certain modifications of the European legal framework. This move was projected to result in an additional 70 EUR billion in gross domestic product and 400,000 new jobs, as well as a further reduction in the EU’s fossil fuel import bill, assisting in attaining the 2030 GHG reduction and renewables objectives (Commission, 2016, p. 4). Furthermore, energy efficiency measures were chosen as a tool

5

MAKING THE ELECTRICITY SECTOR ENERGY EFFICIENT

187

for addressing another European challenge—energy poverty (Sokołowski, 2016, p. 208), which has been linked to low incomes and inefficient housing—paving the way for a new approach to protecting vulnerable consumers by assisting them in lowering energy costs through energy efficiency investments (Commission, 2016, p. 11). To arrive at these conclusions, the Energy Efficiency Directive (2012) was revised (2018) as part of a wider legislative framework—the Clean Energy Package (see Dupont, 2020). This initiative, aimed at modernising the European economy and increasing investments in clean energy-related fields, prioritises energy efficiency with the tagline ‘energy efficiency first’ (see Sokołowski, 2020, p. 198). Putting energy efficiency first, as the most widely available source of energy, reflects the notion that the cheapest and cleanest source of energy is energy that does not need to be generated or utilised (Commission, 2016, p. 4). With the revision of the Energy Efficiency Directive (2018) this approach found a legal basis, making energy efficiency first a principle to be considered not only when setting the new rules for the supply side and other policy areas, but also whenever any decisions relating to energy system planning or financing are made or recognised as a critical element and priority consideration in future investment decisions on the EU’s energy infrastructure.24 In this regard, the 2018 revision establishes a common framework of measures to promote energy efficiency throughout the EU in order to ensure that energy efficiency targets of 20% (2020) and at least 32.5% (2030) are met, and to lay the groundwork for further energy efficiency improvements beyond those dates. This would be done with tools to reduce any obstacles in the energy market (see Chapter 2 of this book) and solve market failures that hamper efficiency in energy supply and use.25 Hence, the Member States are obliged to establish indicative national energy efficiency contributions towards the EU 2030 target, taking into account that the 2030 energy consumption in the EU has to be no more than 1273 Mtoe of primary energy and/or no more than 956 Mtoe of final energy (Sokołowski, 2020, p. 201). Other elements of this framework are related to energy savings obligation (see Sokołowski & Heffron, 2022, p. 4). This includes a requirement to achieve nationally cumulative end-use energy savings at least equivalent to new savings each year from 1 January 2021 to 31 December 2030 of 0.8% of the final annual energy consumption; it should be averaged over the most recent threeyear period prior to 1 January 2019, with continuous new annual savings for ten-year periods after 2030, unless the Commission concludes, by

188

M. M. SOKOŁOWSKI

2027 and every ten years afterwards, that this is not essential to meet the EU’s long-term energy and climate ambitions for 2050.26 If alternative measures are not introduced (for instance taxation), energy obligations schemes are among the tools established to fulfil the responsibilities of achieving the required amount of energy savings. Energy distributors or retail energy sales companies are the parties obliged to savings in the electricity sector, taking into account the objective and non-discriminatory criteria,27 and the rights of energy consumers.28 Finally, energy efficiency, as another element of the European agenda finds its coverage in the Fit for 55% package adopted within the framework of the European Green Deal (see Chapter 3 of this book), where the Commission (2019, p. 6) clearly states that energy efficiency ‘must be prioritised’ (see Nigohosyan et al., 2021). In this context, to streamline the energy efficiency first principle, the Commission (2021, p. 9) proposes a revision of the Energy Efficiency Directive to raise the level of the EU’s energy efficiency targets and make them mandatory. This would include the national indicative benchmarks for energy efficiency calculated using a new formula, to achieve a 9% reduction in energy consumption by 2030 compared to baseline projections. Apart from the Energy Efficiency Directive, the revision of the Energy Performance of Buildings Directive is planned, to address the policy steps aimed at accelerating the process of building renovations, contributing to energy efficiency and renewable goals, and bringing about reductions in greenhouse gas emissions in the building sector.

5.2 Energy Efficiency in Energy Transition of Japan Up until the 1970s, Japan’s economic development and energy consumption growth were in lockstep; however, following 1973, the changes in production growth and energy consumption diverged from policy- and technology-driven energy conservation key-contribution to changes in decreasing industrial energy demand between the mid-1970s and mid1980s (see Fukasaku, 1995, pp. 1063–1064). After World War II, Japan’s most pressing problem was providing an adequate supply of energy for the post-war industrial output. This was found in domestic coal, with the government allocating a substantial share of reconstruction loans to the coal mining sector in the late 1940s (Fukasaku, 1995, p. 1064). This occurred with the establishment of the Reconstruction Bank in 1947,

5

MAKING THE ELECTRICITY SECTOR ENERGY EFFICIENT

189

which was created to provide operating funds and subsidise the difference between production costs and the decreed maximum price; one year later it began to offer loans for capital investment, becoming the largest source of capital for various industries, including coal (Yamamura, 1967, pp. 4–5). Domestic coal held the leading position in Japanese energy until the early 1960s, when, despite various government measures, the coal mining industry was rapidly scaled down. With a much lower price of imported petroleum, the growth in energy demand was increasingly met by petroleum, and its share in the primary energy supply had surpassed that of coal (see Fukasaku, 1995, p. 1064). As a result, during the 1960s, the government policy shifted towards imported petroleum as the primary source of energy for Japan’s quickly growing economy, and the Petroleum Industry Law (1962) was passed, with the goal of assuring low-cost petroleum supplies under stronger governmental involvement (Fukasaku, 1995, p. 1064; Kikkawa, 2000, p. 32).29 When the 1973 oil crisis struck, petroleum accounted for about 80% of the total energy demand in Japan. The crisis caused widespread alarm, prompting the government to take emergency steps to reduce petroleum use as much as possible, clearly showing that the oil promotion strategies, which have been in place since the 1960s, had to be abandoned (see Fukasaku, 1995, p. 1066). Energy conservation was the overarching feature of this time (Nakagami, 1996, p. 1160). In 1975, the Advisory Committee for Energy drafted a new set of energy policy recommendations, with energy supply security as the top priority to be achieved by (1) reducing reliance on petroleum by diversifying energy sources; (2) stabilising petroleum supplies; (3) promoting energy conservation; and (4) research and development of new energy sources, with the focus on stabilising petroleum supplies and conserving energy (Fukasaku, 1995, p. 1067). In 1977 the Advisory Committee for Energy proposed the adoption of a law to promote energy conservation (Fukasaku, 1995, p. 1067), and two years later the Act on Rationalisation of Energy Use (1979) was passed.30 5.2.1

The 1979 Act on Rationalisation of Energy Use

With the purpose of contributing to the sound development of the Japanese economy,31 the Act on Rationalisation of Energy Use (1979), which was later changed multiple times,32 laid the groundwork for the majority of Japan’s energy efficiency policies (see Ren & Du, 2012,

190

M. M. SOKOŁOWSKI

p. 175) and measures, such as minimum energy performance standards (see Geller et al., 2006, p. 561). Given the reliance of Japan on fuel imports, in order to help ensuring the effective use of fuel resources and energy for factories, buildings, machinery, and equipment, the 1979 legislation provided some general measures for energy rationalisation, with efforts to be made by business energy consumers.33 These concerned, for instance, energy loss prevention and improving energy conversion.34 Nevertheless, the Act (1979) extended the scope of regulation, by incorporating electricity into action on energy conservation (see Toichi, 1983, p. 102),35 and introduced the energy conservation measures designed to ease shortages and financial strain caused by the second oil crisis (see Nakagami & Litt, 1997, p. 71; Kawamoto, 1995). In this regard, the primary tenet of the Act on Rationalisation of Energy Use (1979) was the guidelines for energy conservation measures, together with government counsel and instruction to entities that did not follow the standards (Toichi, 1983, p. 102). To facilitate the implementation of the Act (1979), fiscal measures were applied: low-interest loans from the Japan Development Bank for the installation of energy-saving equipment in factories, insulation in buildings from the public housing loan service, as well as tax benefits and depreciation schemes (see Fukasaku, 1995, p. 1067; Toichi, 1983, p. 103).36 Moreover, theAct on Rationalisation of Energy Use (1979) introduced a requirement, imposed on significant energy consumers from the production sector, to appoint an energy manager and record energy use (Kojima, 2021, p. 123).37 These were waste heat and electricity specialists who would go through a rigorous government training programme before returning to their companies. They would have the authority to inspect company records and issue binding instructions, and thus enforce the government’s standards for energy conservation in productive processes and building insulating, heating, and cooling (McKean, 1983, p. 387). Other measures included increasing the public understanding of rationalisation of energy use (bringing educational and public relations activities)38 and promoting research and development in this field.39 The latter corresponds to the late 1970s activities of the Japanese government, with the Moonlight Project of 1978, which Japan established to steer the development of energy conservation technologies (see Tatsuta, 1996, p. 40). The Moonlight Project was aimed at conducting

5

MAKING THE ELECTRICITY SECTOR ENERGY EFFICIENT

191

joint government-industry research and development on major energysaving technologies that were too costly and risky for the private sector to implement alone, such as advanced gas turbines, waste heat utilisation technology, and fuel cell power generation (Fukasaku, 1995, p. 1067; see Noguchi, 1994, p. 1342).40 Under the close collaboration of industry, government, and science, the Moonlight Project successfully managed research and development schedules, providing effective results for basic technologies and their practical applicants, also in the promising, but at the time marginal, areas (see Tatsuta, 1996, p. 40). Later, in response to the stagnating tendencies of the 1990s, the Moonlight Project was integrated with the renewable incentives of the Sunshine Project), and together with the Global Environmental Technology Program, it evolved into the New Sunshine Program of 1993 (Watanabe, 1995, p. 238). The goal of this new incentive was to develop innovative technologies to promote long-term growth while addressing energy and environmental concerns (Tatsuta, 1996, p. 40).41 5.2.2

The 1990s Agenda on Energy Rationalisation

The approach offered under the New Sunshine Project was consistent with Japan’s 1990 GHG emission reduction strategy. The Action Programme to Arrest Global Warming (1990),42 urged for the prompt adoption of global warming mitigation measures consistent with longterm economic development, international collaboration, and structural changes in Japan (see Fukasaku, 1995, p. 1073). Energy conservation was a major component of this strategy. First, energy conservation was identified as a primary instrument for lowering CO2 emissions in the Action Programme (1990); and second, energy conservation technologies were predicted to be a crucial component of advancements to combat global warming (Fukasaku, 1995, p. 1073). In truth, this was a return to the use of energy conservation as a policy instrument. While the Act on Rationalisation of Energy Use (1979) was successful in stabilising energy use in the industrial sector during oil shocks, energy use in the transportation, residential, and commercial sectors has continuously increased (Ren & Du, 2012, p. 174). Therefore, this comeback to energy efficiency was fuelled by the rise of global environmental challenges at the end of the 1980s, and a reversal of oil crisis tendencies.43 In this context, energy conservation has been viewed as a crucial tool for combating global warming by lowering CO2 emissions, becoming a

192

M. M. SOKOŁOWSKI

much more visible aspect of environmental and energy policy than previously (Fukasaku, 1995, p. 1072). Legislation enacted in the early 1990s provided additional impetus for energy efficiency. It is worth noting here that the Basic Environmental Act (1993) superseded the Basic Law for Environmental Pollution Control (1967), with the goal of creating a society that ensures sustainable growth while reducing environmental burden (Tanaka, 1996, p. 174). That same year the Act on Temporary Measures to Promote Business Activities for the Rational Use of Energy and the Utilisation of Recycled Resources (1993) was also passed.44 The Act (1993), driven by environmental conservation,45 revised the previous energy conservation framework (1979) and significantly enhanced energy efficiency policies by allowing for very low-interest financing, tax incentives, and other incentives for related capital investments to help companies commit themselves to voluntary energy conservation (Tanaka, 1996, p. 174; Tomitate, 1993, pp. 303–304). As a result, investments in energy-efficient technologies, such as CHP, district heating and cooling systems, high-efficiency electric trains, or energy-efficient textile manufacturing equipment, were enhanced by the 1993 legislation. It established the framework for a 30% accelerated depreciation allowance and a 7% tax rebate on the purchase of energy-efficient equipment for small and medium-sized companies (Price et al., 2008, pp. 33–34). In 1998, 1 year after the adoption of the Kyoto Protocol, energy conservation was given a central role in the Guidelines for Measures to Prevent Global Warming (1998), which replaced the Action Program from 1990, and the Act on Promotion of Global Warming Countermeasures (1998) was introduced (Kimura, 2013, p. 587). The Guidelines (1998) were set for the year 2010, covering a set of policy directions,46 with the focus on energy conservation, promotion of energy saving, and the introduction of new energy-efficient technologies. Also in 1998, the Act on Rationalisation of Energy Use (1979) was revised to enhance energy management and improve the energy performance of products; additionally, the Top Runner Programme was launched. The Programme, which arose from the 1998 amendment, was implemented as the new mechanism for establishing efficiency criteria for specific products (see Kimura, 2014, p. 233; Sugiyama & Takeuchi, 2008, p. 426). Under the Top Runner approach all categories of selected products (new items, including imports) were obliged to meet the efficiency level of the most efficient product in the product class at the time the

5

MAKING THE ELECTRICITY SECTOR ENERGY EFFICIENT

193

standard was created, by a specific date, usually between 2003 and 2007 (Geller et al., 2006, p. 561). The categories covered included, inter alia, passenger vehicles and trucks, air conditioners, fluorescents, televisions, copying machines, computers, refrigerators, and freezers (Arima, 2000, p. 2). Manufacturers of the listed goods were required to improve their energy efficiency to the best available energy efficiency level in the market, in accordance with the Programme’s standards, either by inventing new models or new products (see Kimura, 2013, p. 587; Lau et al., 2009, p. 4775); the same obligation applied to importers. If a producer or importer did not meet the efficiency criteria by the target year, the MITI issued them with a recommendation, and if this, in turn, was not followed, the infringing entity’s name was made public, or an administrative order was issued as the last resort (Arima, 2000, p. 3; Kimura, 2014, p. 236). In Japan, this ‘name and shame’ approach was a strong tool employed against transgressing producers and importers in order to achieve the Top Runner’s standards (see Arima, 2000, p. 3; Kimura, 2014, p. 236; Siderius & Nakagami, 2007, p. 1121). 5.2.3

CHP in Japan’s Energy Efficiency Agenda

In Japan, the final energy consumption is made mostly for non-power applications, mainly the use of heat; therefore, in order to improve energy efficiency, it is crucial to utilise heat more efficiently. To that end, it is necessary to strengthen the measures also for local heat sources—cogeneration, which creates a mix of heat and electricity, is one of the methods to utilise energy most efficiently by employing heat and power at the same time (see METI, 2018, p. 28). The first CHP installation in Japan commenced operation in 1981, and after a grid-connection guideline was developed in 1986, the installation rate quickly increased (Harris, 2003, p. 23). However, due to the sluggish economy and deregulation of the electricity sector, in which electric rates were reduced to impact midsize distributed generation systems, the annual installed capacity of CHPs was almost saturated in the 1990s, at around 300–400 MW built annually, reaching about 6.5 GW in total as of 2002. This accounted for around 2% of total electricity generation capacity in Japan (Harris, 2003, p. 24). Nonetheless, cogeneration, representing dispersed energy sources (see Government of Japan, 1994, p. 66) which improve competition,47 was offered promotion policies (taxation and financial support). These included a 30% depreciation rate or a 7% tax exemption in the first year

194

M. M. SOKOŁOWSKI

of operation, as well as one-third of the installation cost for companies and half for municipalities for investment in natural gas-fired CHP plants (Geller et al., 2006, p. 562). Such incentives were created to support the achievement of 4550 MW and 10,020 MW installation objectives for gas-fired CHP systems and all CHP systems, respectively (Harris, 2003, p. 24). As in the 2000s (see Government of Japan, 2005, pp. 54–56), also in the 2010s, the use of natural gas as a fuel for high-efficiency cogeneration systems, which save significant amounts of energy, was still seen as an essential component of the Japanese energy strategy (see METI, 2018, pp. 85–86). Furthermore, cogeneration was labelled as a backup technology in the event of a power outage in an emergency, and also the technology using energy in the most efficient way (METI, 2014, p. 29). Although the introduction of cogeneration has been sluggish in recent years, there have been some signs of progress due to the rise in electricity costs. It was, thus, necessary to expand the introduction of cogeneration by promoting regional utilisation in addition to separating the use by individual buildings, factories, and houses (METI, 2014, p. 29). In this context, the use of efficient CHP has been listed as a flexibility factor that will further alter the demand structure in Japan, with the expansion in the demand-side-led distributed energy systems expected. This expectation is due to the popularisation of local production and consumption driven by renewable energy, technological innovation in storage batteries, and the use of AI and the IoT (see METI, 2018, pp. 6, 18). For Japan, a policy direction is outlined for a move to natural gas for local-level distribution of power sources via cogeneration systems (see METI, 2018, p. 25). Japan will continue to encourage the use of natural gas in industry and other sectors by broadening its applications, such as localised power distribution through cogeneration systems that are compatible with renewable energy (Government of Japan, 2019, p. 26). Furthermore, cogeneration systems have excess generation capacity, so it is expected to serve as a backup to make up for power supply shortages in times of emergency—the use of cogeneration is increasing in the context of rising electricity prices and the progress of energy-saving measures following the 2011 earthquake and tsunami (see METI, 2018, p. 28). Furthermore, Japan will concentrate on developing models for regional energy supply systems that employ digital technologies, storage batteries, fuel cells, and cogeneration to enable the use of self-sustaining

5

MAKING THE ELECTRICITY SECTOR ENERGY EFFICIENT

195

power sources, also powered by renewable energy, even in case of natural disasters (Government of Japan, 2019, p. 65). In this context, the Heat Supply Business Act was revised to implement not only the heat supply system reform in tandem with the electricity and gas reforms (see Chapter 2 of this book), but also the introduction of regional supply of heat through region-wide heat networks and CHP units installed in specific buildings as part of urban redevelopment projects. The goal was to promote the efficient supply of energy, including CHP (see METI, 2018, p. 86). Furthermore, given the progress made in the creation of the environment for CHP as a consequence of the system reform, regional energy use, in the form of local production for local consumption with cogeneration, has been planned to be pushed in particular areas of Japan (see METI, 2018, pp. 86–87). Finally, the government of Japan will take initiatives for future decarbonization of flexibility sources, as outlined in the Long-Term Strategy Under the Paris Agreement (2019, p. 25), utilising next-generation flexibility sources, such as virtual power plants (VPP) based on distributed energy resources installed on customers’ side, with cogeneration as a component of this plan. Moreover, in order to transit to a low-carbon economy, Japan has to extend the use of cogeneration by encouraging regional consumption in addition to individual utilisation by buildings, companies, and homes (see METI, 2018, p. 28). Nonetheless, cogeneration is part of a larger regulatory framework on energy efficiency, as provided by the current Japanese laws and regulations. Because of its pro-efficiency character, it can play an important role in Japan’s energy transition; but still, there are other potential solutions. This corresponds with the Japanese energy sector’s future vision, with decarbonisation as a goal of its energy transition, which entails exploring all options, including energy efficiency (Government of Japan, 2019, p. 1). 5.2.4

Energy Efficiency and 2050 Carbon Neutrality

The energy future vision of Japan, in the policy segment, anticipates ‘drastic improvement of energy efficiency’ with the utmost application of energy-saving technology with promising cost-effectiveness (see Government of Japan, 2019, pp. 2, 4, 34, 37–38). This also includes working towards institutional development of frameworks for comparing and assessing energy efficiency, energy efficiency labelling, and international

196

M. M. SOKOŁOWSKI

standards, with market-based mechanisms promoted under international legal regime (see Government of Japan, 2019, p. 5). The policy measures provided are intended to have a tangible effect in terms of enhanced energy efficiency. According to the Long-Term Strategy Under the Paris Agreement (2019, p. 22), Japan will cut roughly 50 million kilolitres of crude oil equivalent (kl) by FY 2030, when its total energy consumption is around 330 million kl—although this will necessitate some stringent energy efficiency measures.48 Despite the fact that Japan has already held state-wide campaigns, supported the development of energy efficiency in homes and buildings, and hastened the introduction of high-energy-efficiency facilities and equipment, the country will continue to push energy efficiency improvements in a variety of sectors, from industry to households, through regulatory and financial measures targeted at increasing energy efficiency by equipment upgrades and replacement with high-energy-efficiency impacts (see Government of Japan, 2019, pp. 5, 49). State assistance in the investments in energyefficient equipment and facilities, and evaluation of additional space for energy efficiency improvements and governmental guidance on energy efficiency, will be part of the pro-efficiency efforts, as will encouraging company cooperation in this field (see Government of Japan, 2019, p. 30). In the years leading up to 2050, the Japanese government will encourage innovative advancements in energy efficiency efforts in all sectors and on the demand side. In the industrial sector, this will be electrification and hydrogenation driven by energy-efficient technologies, and in the energy-intensive manufacturing industry, the Top Runner Programme’s energy efficiency targets and benchmarks will be updated to reflect international standards. In housing, the net Zero Energy House— which uses advanced energy management systems based on personal energy consumption, and seeks innovative energy uses such as Artificial Intelligence (AI) or the Internet of Things (IoT)—will be promoted (see Government of Japan, 2019, pp. 30–31, 52). Other areas for energy efficiency improvements include public utilities, such as water supply and sewage systems, waste treatment facilities, agriculture, forestry and fisheries industries, transportation, and energy infrastructure (see Government of Japan, 2019, pp. 57–58). Even while Japan relies on the potential of technology in energy transition, as underlined in the Long-Term Strategy Under the Paris Agreement

5

MAKING THE ELECTRICITY SECTOR ENERGY EFFICIENT

197

(2019, p. 69), values such as high efficiency are insufficient for the technology to be embraced in society since the low cost is required; there is still a substantial gap between the cost of decarbonising technology and the cost afforded by the market. As a result, Japan must create a mechanism to lower prices while also considering the environmental values and facilitating the adoption of technology into the society on a big scale (see Government of Japan, 2019, p. 69). Nevertheless, in recent years, the progress in energy efficiency has remained sluggish, notably in the Japanese industry and business (see Government of Japan, 2019, p. 30). What can change this situation is the framework under which energy efficiency ultimately falls, i.e. carbon neutrality, which Japan must achieve by 2050 (see Chapter 3 of this book). The 2021 Strategic Energy Plan not only conforms to the set direction in terms of energy efficiency with its policy tools, but also declares strengthening them—as in the case of the Top Runner’s standards and obligation to comply with energy conservation standards in buildings that will be introduced (see METI, 2021, p. 41). In this context, equipment and building material requirements will be revised so that new buildings constructed after 2030 may fulfil zero energy criteria (Agency for Natural Resources & Energy, 2021, p. 6; see Zhang et al., 2021, p. 8). Furthermore, Japan intends to introduce smart metres to all consumers in principle by 2024 and develop the nextgeneration smart metre system that increases the kinds of data and the frequency of measurement, with the currently used smart metres replaced by 2030 (METI, 2021, p. 47). This will be done in conjunction with the promotion of their utilisation for improving resilience and stabilising the supply and demand of the entire electricity system (see METI, 2021, p. 47).

5.3

Summary

The promotion of energy efficiency has its roots in the 1970s when an urgent demand for the rationalisation of energy use occurred as a consequence of the energy crisis stemming from the 1973 oil shock. Different countries around the world started working on improvements within their energy sectors to save more energy, due to financial constraints. This happened both in Japan and Europe. The crisis stimulated public action, with declarations and policy statements or softer tools such as guidelines, calling for the improvement in energy performance by reducing losses and gradually eliminating non-essential consumption.

198

M. M. SOKOŁOWSKI

When the oil crisis hit Japan, the government made emergency efforts to limit petroleum use by referring to energy conservation, with a new set of energy policy recommendations provided to lessen the reliance on oil, and the 1979 Act on Rationalisation of Energy Use as the axis of the established and later modified framework. Minimum energy performance standards, aimed at preventing energy loss and improving energy conversion, were introduced, alongside obligations to appoint an energy manager and track energy use. Energy managers were required to complete a thorough government training before going back to their companies with the power to scrutinise company records, issue binding instructions, and thus enforce the government’s energy conservation standards. In terms of energy performance standards, the Top Runner Program introduced a new mechanism for establishing efficiency criteria for specific products, based on the most efficient product in the product class at the time the standard was formed. This was followed by MITI/METI recommendations in the event of noncompliance, and finally, the disclosure of the infringing entity’s identity under the ‘name and shame’ policy. Energy efficiency in Europe has also been offered a dedicated legislation, with the Energy Services Directive, CHP Directive, and Energy Efficiency Directive with its revisions bringing further tools to improve it. The regulatory approach includes both the cross-sectoral measures (standards and norms aimed primarily at improving the energy efficiency of products and services such as buildings, energy labelling schemes, intelligent metering systems, training and education) and horizontal measures (regulations, taxes—which have the effect of lowering energy end-use usage, or a focused awareness campaign that promoted energy efficiency improvements). This has been accompanied by voluntary agreements or other market-oriented mechanisms, such as the white certificates used by DSOs and retail companies. Other tools were utilised, with the exemplary role of public buildings, which had to be refurbished every year to meet at least the minimal energy performance requirements, among them. Further tools included high energy efficiency performance purchases of products, services, energy or CO2 taxes, additional standards, norms, and energy labelling schemes, as well as financing schemes and instruments, fiscal incentives, regulations, voluntary agreements, or training and education, including energy advisory programmes, which lead to the application of energy-efficient technology or techniques. Under the established proefficiency legislation, the Commission has carried out monitoring and

5

MAKING THE ELECTRICITY SECTOR ENERGY EFFICIENT

199

provided assessments of the Member State’ performance in the field of rationalisation of energy use. This enabled the identification of issues and constraints that were impeding the energy sector’s ability to meet efficiency goals. In Japan, many of the pro-efficiency activities were voluntary. They were, however, aided by low-interest loans from the Japan Development Bank, tax benefits and depreciation schemes, or increasing the public understanding of energy use rationalisation through educational and public relations activities and awareness campaigns, and promoting R&D in this field. Government programmes, such as the famous 1979 Moonlight Project, have fuelled the latter, as they did in the case of renewables (see Chapter 4 of this book). In this regard, financial initiatives launched by the Community, such as the Joule, Thermie, and SAVE programmes, corresponded on the European side. These programmes, which have been driven by technological advancements, provided financial support for demonstration projects that resulted in significant energy savings. They also included a broader integrated framework for improving energy efficiency by financing a variety of energy efficiency actions, such as technical assessments for the needs of standards and specifications, and measures to develop energy infrastructure, promote the coordination of energy efficiency activities, and improve electricity use efficiency. In Europe, energy efficiency targets were established as early as the 1970s, then adjusted and expanded in response to successive policy changes. Their nature has changed, with indicative, voluntary targets subsequently followed by mandated energy efficiency goals. Nonetheless, the offered approach was both horizontal, including energy savings and the rational use of energy, with improving energy efficiency acknowledged as one of the balanced approaches for the energy and environment, and sectoral with the efficiency being increased in given industries, including the power sector (see Sokołowski, 2021a). Like in Japan, the European energy efficiency agenda was backed by action programmes—aimed at delivering steps to address impediments to energy efficiency investments—and strategies outlining the potential solutions for optimising energy use. As with other pillars of the EU’s climate and energy policy, such as emissions reduction (see Chapter 3) and renewables promotion (see Chapter 4), energy efficiency has shifted from softer measures to stronger regulatory instruments. Actions extended beyond the power industry, affecting buildings, equipment, certification, and labelling rules.

200

M. M. SOKOŁOWSKI

In both the European and Japanese energy efficiency agendas, cogeneration is recognised as a component in the effort to optimise energy consumption. In the EU it was granted a dedicated strategy and financial funds. Designated as ‘critical for energy efficiency’, CHP has played an important role in not just rationalising energy consumption, but also reducing emissions and expanding renewable potential. As a result, cogeneration became a component of the European regulatory activity, with legal solutions supplied in the CHP Directive and other parts of the EU’s legal environment. This included steps aimed at promoting highefficiency cogeneration, such as support systems, easing grid access, and dealing with cumbersome administrative procedures. In Japan, CHP was labelled as technology utilising energy in the most effective way, falling under the framework of energy efficiency. It was given promotion policies (taxation and financial assistance) that included depreciation rates or tax exemptions, and cost-reductions for corporations and municipalities for investment in natural gas-fired CHP plants. The use of efficient CHP has been identified not only as a flexibility factor that will further alter the demand structure in Japan, with its expansion in demand-side-led distributed energy systems anticipated as a result of the popularisation of local production and consumption driven by RES (see Chapter 4 of this book), but also a technological innovation in storage batteries and the use of AI and the IoT. In this manner, CHP has been viewed as a backup technology in the event of a power outage in an emergency, following the 2011 earthquake and tsunami which hit Japan, linked to the developing CHP models for regional energy supply systems that employ digital technologies and storage solutions like batteries (see Sokołowski, 2021b, p. 147). However, when compared to the European wider—though still not the strongest—agenda, this has been a rather narrow framework. The European one brought facilitated administrative procedures for small and medium-sized CHP, policies in favour of high-efficiency CHP at the local and regional levels, rules for equipping new and modernised CHP installations with high-efficiency cogeneration, guarantees of origin for electricity generated in CHP, rules on priority or guaranteed grid access for highefficiency CHP, and comprehensive assessments of the national potential for developing high-efficiency cogeneration. Nonetheless, despite the long-standing recognition of energy efficiency in the European energy policy, with the introduction of the Climate and Energy Package (2009) as the cornerstone of the EU climate action,

5

MAKING THE ELECTRICITY SECTOR ENERGY EFFICIENT

201

energy efficiency has been overshadowed by the reduction of emissions (see Sokołowski, 2018) and promotion of RES (see Haas et al., 2011). Despite previous declarations on the importance of energy efficiency, the binding 2020 EU objectives did not involve an increase in energy efficiency, in contrast to the reduction of emissions and growth of renewables. Because the non-binding 20% target set for energy efficiency resulted in no significant progress towards meeting the energy efficiency goal, a new legal framework, targeted at changing this position, was required. As European climate action is not static, this happened with the introduction of the 2012 Energy Efficiency Directive, which offered solutions aimed at attaining the 2020 energy efficiency target of 20%. Similarly, Japan has a long history of linking pollution reduction to energy efficiency. Japan has recognised energy efficiency as a significant policy tool and a fundamental instrument for cutting CO2 emissions, with energy conservation technology projected to play an essential role in the improvements necessary to tackle global warming. Thus, energy conservation has been regarded as a vital instrument for preventing global warming by cutting CO2 emissions, and it became a much more prominent component of the environmental and energy policy in the 1990s, in line with Japan’s 1990 GHG emission reduction initiatives (see Chapter 3 of this book). The 2019 Clean Energy Package changes (Chapter 3 of this book) prioritised energy efficiency with the flagship ‘energy efficiency first’. Choosing energy efficiency as the most generally available source of energy reflects the idea that the cheapest and cleanest source of energy is energy that does not need to be produced or used. With the revision of the Energy Efficiency Directive (2018), this approach gained legal support. It made energy efficiency the first principle to be taken into account when setting new rules for the supply side and other policy areas, considered whenever decisions regarding energy system planning or financing are made, and recognised as the crucial component and key focus consideration in future investment decisions on the EU’s energy infrastructure. New incentives, such as the Fit for 55% package, prioritise energy efficiency, with rules to streamline the energy efficiency first principle, raise the level of the EU’s mandatory energy efficiency targets and indicative national contributions. Energy efficiency is also one of the pillars of Japan’s carbon neutrality by 2050, which requires the most extensive use of energy-saving technologies with promising cost-effectiveness (see Chapter 3 of this book).

202

M. M. SOKOŁOWSKI

However, this will require changes in the institutional development of the energy efficiency framework, as well as stronger measures, in order to fully utilise its potential for improved energy use. Despite the fact that Japan has already supported state-wide efforts, aided in the development of energy efficiency in homes and buildings, and accelerated the introduction of high-energy-efficiency facilities and equipment, the country must continue to push for energy efficiency improvements in a variety of sectors, from industry to households. This can be achieved through regulatory and financial measures aimed at increasing energy efficiency through equipment upgrades and replacement with highenergy-efficiency technology and resources. To achieve progress in energy efficiency efforts in all sectors and on the demand side en route to 2050, regulatory instruments from a variety of sectors and industries, including the electricity sector, will be required.

Notes 1. This concerned the reduction of consumption in 1985 by 15% to the amount initially estimated for this year by the more efficient use of energy (cf. Commission, 1974b, pp. 2–3), by giving Member States a considerable leeway in achieving this goal on the one hand, and maintaining the authority to adopt separate, short-term energy reduction targets on the other (Sokołowski, 2020, p. 32). 2. Financing 50% of costs was a rule; however, universities and research institutions were given an exemption of 100%. 3. For instance, Council Directive 92/75/EEC (1992) was aimed at allowing the harmonisation of national policies on the publication of information about certain types of household appliances, particularly through labelling and product information, allowing the consumers to make more energy-efficient appliance choices regarding such equipment as refrigerators, freezers, washing machines, driers, dishwashers, ovens, water heaters and hot-water storage appliances, lighting sources, and air-conditioning. 4. See Article 4 of the Energy Services Directive (2006). 5. See Recital 12 of the Energy Services Directive (2006). 6. See Article 3(h) of the Energy Services Directive (2006). 7. As stated in Recital 25 of the preamble to the Energy Services Directive (2006), voluntary agreements between stakeholders and public sector bodies appointed by Member States were to support energy services, energy efficiency improvement programmes, and other energy efficiency improvement measures implemented to meet the energy savings target. 8. See Article 6(2) of the Energy Services Directive (2006).

5

MAKING THE ELECTRICITY SECTOR ENERGY EFFICIENT

203

9. In 2005, the EU-25 consumed 1750 Mtoe of primary energy, with the energy transformation sector accounting for 577 Mtoe (33%) of total primary energy consumption, with energy losses in transmission and distribution responsible for up to 10% of total primary energy consumption (Commission, 2006, p. 13). 10. Improving conversion efficiency, increasing reliability, lowering emissions, developing cost-effective mini (below 30 kWe) and micro-CHP units (as low as 0.5 kWe) or CHP applications for high temperature industries, and cogeneration powered by biomass, low heating value fuels, and other mixed fuels, were all included in CHP action under the Joule-Thermie programme (see Commission, 1997b, p. 12). 11. The Programme was established as an action plan with the goal of bringing together all key stakeholders to collaborate on shared policies to reduce GHG emissions. 12. See Article 3(1) of the Energy Efficiency Directive (2012). 13. See Article 3(2) of the Energy Efficiency Directive (2012). 14. Pursuant to Article 5(1) of the Energy Efficiency Directive (2012) this amounted to 3% of the total floor area of heated and/or cooled buildings owned and occupied by the central government that were to be renovated in accordance with Article 4 of Directive 2010/31/EU (2010). 15. See Article 6(1) of the Energy Efficiency Directive (2012). 16. See Article 6(3) of the Energy Efficiency Directive (2012). 17. That goal was to be at least equivalent to achieving yearly new savings of 1.5% of all energy distributors’ or all retail energy sales companies’ annual energy sales to final customers by volume, averaged over the most recent three-year period prior to 1 January 2013; see Article 7(1) of the Energy Efficiency Directive (2012). 18. See Article 7(9) of the Energy Efficiency Directive (2012). 19. See Article 14(2) of the Energy Efficiency Directive (2012). 20. Recital 35 and Article 14(5) of the Energy Efficiency Directive (2012). 21. System operators (transmission and distribution) were required to behave transparently and fairly, demonstrating an open attitude towards highefficiency cogeneration: this applies to the costs of technical grid adjustments required to integrate high-efficiency CHP with their systems (the rules governing this matter must be established and published by the operators); the information provided to new producers of electricity from high-efficiency CHP intending to connect to the grid (e.g. complex and detailed estimations of costs related to grid connection, a reasonable and accurate timetable process), in addition to harmonised and simplified processes for connecting dispersed high-efficiency CHP to the grid (see Sokołowski, 2020, p. 125). 22. Article 15(5) of the Energy Efficiency Directive (2012); changed in 2019. 23. Article 14(1) of the Energy Efficiency Directive (2012).

204

M. M. SOKOŁOWSKI

24. See Recitals 2 and 3 of the revised Energy Efficiency Directive (2018). 25. See Article 1(1) of the Energy Efficiency Directive (2012), as amended by the revised Energy Efficiency Directive (2018). 26. See Article 7(1) of the Energy Efficiency Directive (2012), as amended by the revised Energy Efficiency Directive (2018). 27. See Article 7a(1)-(3) of the Energy Efficiency Directive (2012), as amended by the revised Energy Efficiency Directive (2018). 28. See Article 7a(3) of the Energy Efficiency Directive (2012), as amended by the revised Energy Efficiency Directive (2018). 29. The Petroleum Industry Law (1962) aimed to continue and strengthen governmental involvement in the petroleum industry by giving the MITI a strong means of administrative intervention in individual companies’ business operations, with the right to approve new and additional capacities, make production adjustments, declare standard prices, and enjoy other regulatory powers (see Kikkawa, 2000, p. 32). 30. This was the title at the time of enactment, in Japanese: エネルギーの使 o no g¯ ori-ka ni kansuru h¯ oritsu], 用の合理化に関する法律 [enerug¯ı no shiy¯ also known as the Energy Conservation Law. 31. See Article 1 of the Act on Rationalisation of Energy Use (1979). 32. These were revisions from 1993, 1998, 2002, 2005, 2008, 2013, 2014, and 2016 (see Energy Conservation Center, Japan, no date). 33. See Article 1 the Act on Rationalisation of Energy Use (1979). 34. See Articles 3–4 of the Act on Rationalisation of Energy Use (1979). 35. In a prior approach under the Heat Management Act (1951), fuel and heat were the primary target of action on energy management. 36. See Article 22 of the Act on Rationalisation of Energy Use (1979). 37. See Articles 8–10 of the Act on Rationalisation of Energy Use (1979). 38. See Article 24 of the Act on Rationalisation of Energy Use (1979). 39. See Article 23 of the Act on Rationalisation of Energy Use (1979). 40. The Moonlight Project provided funding (1991 fiscal year, Japanese fiscal year is from April to March) for the following fields: advanced battery electricity storage system (1082 million JPY), fuel cell power generation technology (3738 million JPY), super heat pump energy accumulation system (1593 million JPY), superconducting technology for electricity equipment 3140, ceramic gas turbine project (1773 million JPY), and others activities (576 JPY) (Shindo, Hakuta and Miyama, 1992, p. 776). 41. See Chapter 4 of this book. 42. See Chapter 3 of this book. 43. A drop in oil prices in the mid-1980s encouraged energy consumption in Japan leading to a growth in energy demand—while it averaged just 0.2% between 1973 and 1986, it later increased to more than 4% between 1987 and 1991 (Fukasaku, 1995, p. 1072). 44. Also known as the Energy Conservation and Recycling Assistance Law.

5

MAKING THE ELECTRICITY SECTOR ENERGY EFFICIENT

205

45. See Article 1 of the Act on Temporary Measures to Promote Business Activities for the Rational Use of Energy and the Utilisation of Recycled Resources (1993). 46. See Chapter 3 of this book. 47. According to MITI, introducing efficient cogeneration would cut current retail electricity rates by 10 to 15%, and MITI was attempting to lower total electricity rates by fostering retail electricity market competition (Shimazaki, 1994, p. 85). 48. The total energy consumption in FY 2013 was 360 million kl; consequently, an annual decrease of roughly 2.8 million kl is necessary to meet the level stated in this energy mix.

References Act on Promotion of Global Warming Countermeasures [地球温暖化対策の推進 に関する法律, chiky¯ u ondanka taisaku no suishin ni kansuru h¯oritsu]. (1998). Act No. 117, 9.10.1998. Act on Rationalisation of Energy Use [エネルギーの使用の合理化等に関する法 o no g¯ ori-ka-t¯ o ni kansuru h¯ oritsu]. (1979). Act No. 49, 律, enerug¯ı no shiy¯ 22.6.1979. Act on Temporary Measures to Promote Business Activities for the Rational use of Energy and the Utilisation of Recycled Resources [エネルギー等の 使用の合理化及び再生資源の利用に関する事業活動の促進に関する臨時措 置法, enerug¯ı-t¯o no shiy¯ o no g¯ ori-ka oyobi saisei shigen no riy¯o ni kansuru jigy¯o katsud¯ o no sokushin ni kansuru rinji sochi-h¯ o]. (1993). Act No. 18, 3.3.1993. Agency for Natural Resources and Energy. (2021). Outline of Strategic Energy Plan. https://www.enecho.meti.go.jp/en/category/others/basic_plan/pdf/ 6th_outline.pdf. Accessed 27 Nov 2021. Arima, J. (2000, April 11–13). Top runner program. In Workshop on best practices in policies and measures (p. 13). https://unfccc.int/sites/default/files/jpnja. pdf. Accessed 1 Nov 2021. o kihon-h¯ o]. (1993). Act No. 91, Basic Environmental Act [環境基本法, kanky¯ 19.11.1993. ogai taisaku Basic Law for Environmental Pollution Control [公害対策基本法, k¯ kihon-h¯ o]. (1967). Law No. 132, 3.8.1967. Carey, E. (2015). The European Union’s 2030 Climate Energy Package and the COP21. Translation version of “Le Paquet Energie-Climat 2030 de l’Union européenne et la Conférence de Paris sur le climat (COP21)”. Annuaire Français des Relations Internationales [French Yearbook of International Relations], Vol. XVI, 433–452.

206

M. M. SOKOŁOWSKI

Clément, A., et al. (2002). Wave energy in Europe: Current status and perspectives. Renewable and Sustainable Energy Reviews, 6(5), 405–431. Colmenar-Santos, A., Rosales-Asensio, E., Borge-Diez, D., & Mur-Pérez, F. (2015). Cogeneration and district heating networks: Measures to remove institutional and financial barriers that restrict their joint use in the EU-28. Energy, 85, 403–414. Commission. (1974a, November 27). Community energy policy objectives for 1985. Communication from the Commission to the Council. COM (74) 1960 final. Commission. (1974b, July 17). Energy for Europe: research and development. Communication of the Commission to the Council. SEC (74) 2592 final. Commission. (1974c, June 26). Towards a new energy policy strategy for the European Community. Communication and proposals from the Commission to the Council. COM (74) 550 final/2. Commission. (1982, February 10). Investment in the rational use of energy. Communication from the Commission to the Council. COM (82) 24 final. Commission. (1988, May 3). The main findings of the commission’s review of member states’ energy policies. The 1995 Community Energy Objectives. Communication from the Commission, Vol. I. COM (88) 174 final. Commission. (1997a, November 15). Communication from the Commission to the Council, the European Parliament, the Economic and Social Committee and the Committee of the Regions a community strategy to promote Combined Heat and Power (CHP) and to dismantle barriers to its development. COM (97) 514 final. Commission. (1997b, May 14). Communication from the Commission to the Council, the European Parliament, the Economic and Social Committee and the Committee of the Regions: The energy dimension of climate change. COM (97) 196 final. Commission. (1998a, April 29). Communication from the commission energy efficiency in the European community—Towards a strategy for the rational use of energy. COM (98) 246 final. Commission. (1998b, November 17). Communication from the Commission to the Council and the European Parliament progress report on the multiannual programme for the promotion of energy efficiency in the community—SAVE II . COM (98) 458 final. Commission. (2000a, March 8). Communication from the Commission to the Council and the European Parliament on EU policies and measures to reduce greenhouse gas emissions: Towards a European Climate Change Programme (ECCP). COM (2000) 88 final. Commission. (2000b, November 29). Green Paper: Towards a European strategy for the security of energy supply. COM (2000) 769 final.

5

MAKING THE ELECTRICITY SECTOR ENERGY EFFICIENT

207

Commission. (2001, May 15). Communication from the Commission a sustainable Europe for a better world: A European Union strategy for sustainable development. COM(2001) 264 final. Commission. (2002, July 22). Directive of the European Parliament and of the Council on the promotion of cogeneration based on a useful heat demand in the internal energy market. COM (2002) 415 final. Commission. (2003, December 10). Proposal for a directive of the European Parliament and of the Council on Energy end-use efficiency and energy services. COM (2003) 739 final. Commission. (2005, February 9). Communication from the Commission to the Council, the European Parliament, the European Economic and Social Committee and the Committee of the Regions: Winning the battle against global climate change. COM(2005) 35 final. Commission. (2006, October 19). Communication from the Commission Action Plan for Energy Efficiency: Realising the potential. COM (2006) 545 final. Commission. (2011a, June 22). Commission staff working paper: Impact Assessment accompanying the document directive of the European Parliament and of the Council on Energy Efficiency and amending and subsequently repealing directives 2004/8/EC and 2006/32/EC. SEC (2011) 779 final. Commission. (2011b, June 22). Proposal for a Directive of the European Parliament and of the Council on Energy Efficiency and Repealing Directives 2004/8/EC and 2006/32/EC. COM (2011b) 370 final. Commission. (2014, July 23). Communication from the Commission to the European Parliament and the Council Energy Efficiency and its contribution to Energy Security and the 2030 framework for Climate and Energy Policy. COM (2014) 520 final. Commission. (2016, November 11). Communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee, the Committee of the Regions and the European Investment Bank Clean Energy for All Europeans. COM (2016) 860 final. Commission. (2019, December 11). Communication from the Commission to the European Parliament, the European Council, the Council, the European Economic and Social Committee and the Committee of the Regions the European Green Deal. COM(2019) 640 final. Commission. (2021, July 14). Communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions Empty “Fit for 55”: Delivering the EU’s 2030 climate target on the way to climate neutrality. COM(2021) 550 final. Council. (1974a). Council resolution of 17 December 1974a on a Community Action Programme on the rational utilization of energy. Council. (1974b). Council Resolution of 17 September 1974b concerning a New Energy Policy Strategy for the Community. OJ C 153, 9.7.1975.

208

M. M. SOKOŁOWSKI

Council. (1986, September 25). Council resolution of 16 September 1986 concerning New Community Energy Policy Objectives for 1995 and convergence of the Policies of the member states. OJ C 241. Council. (1989a, April 11). 89/236/EEC: Council Decision of 14 March 1989a on a Specific Research and Technological Development Programme in the Field of Energy—Non-Nuclear Energies and Rational Use of Energy—1989 to 1992 (joule). OJ L 98. Council. (1989b, June 9). 89/364/EEC: Council Decision of 5 June 1989b on a Community Action Programme for Improving the Efficiency of Electricity Use. OJ L 157. Council. (1990, July 17). Council Regulation (EEC) No 2008/90 of 29 June 1990 concerning the promotion of energy technology in Europe (Thermie Programme). OJ L 185. Council. (1991, November 8). 91/565/EEC: Council decision of 29 October 1991 concerning the promotion of energy efficiency in the community (Save Programme). OJ L 307. Council. (1992, October 13). Council Directive 92/75/EEC of 22 September 1992 on the indication by labelling and standard product information of the consumption of energy and other resources by household appliances. OJ L 297. Council Regulation (EEC) No 3640/85 of 20 December 1985 on the Promotion, by Financial Support, of Demonstration Projects and Industrial Pilot Projects in the Energy Field. (1985). Directive 2001/77/EC of the European Parliament and of the Council of 27 September 2001 on the Promotion of Electricity Produced from Renewable Energy Sources in the Internal Electricity Market. (2001, October 27). OJ L 283. Directive 2002/91/EC of the European Parliament and of the Council of 16 December 2002 on the Energy Performance of Buildings. (2002). Directive 2004/8/EC of the European Parliament and of the Council of 11 February 2004 on the Promotion of Cogeneration Based on a Useful Heat Demand in the Internal Energy Market and Amending Directive 92/42/EEC. (2004). OJ L 52, 21.2004. Directive 2006/32/EC of the European Parliament and of the Council of 5 April 2006 on Energy End-Use Efficiency and Energy Services and Repealing Council Directive 93/76/EEC. (2006, April 27). OJ L 114. Directive 2010/31/EU of the European Parliament and of the Council of 19 May 2010 on the Energy Performance of Buildings. (2010, June 18). OJ L 153. Directive 2012/27/EU of the European Parliament and of the Council of 25 October 2012 on Energy Efficiency, Amending Directives 2009/125/EC and 2010/30/EU and Repealing Directives 2004/8/EC and 2006/32/EC. (2012, November 14). OJ L 315.

5

MAKING THE ELECTRICITY SECTOR ENERGY EFFICIENT

209

Directive (EU) 2018/2002 of the European Parliament and of the Council of 11 December 2018 Amending Directive 2012/27/EU on Energy Efficiency. (2018, December 21). OJ L 328. Dupont, C. (2020). Defusing contested authority: EU energy efficiency policymaking. Journal of European Integration, 42(1), 95–110. Energy Conservation Center, Japan. (n.d). Chronicles of Energy Conservation Laws, ECCJ / Asia Energy Efficiency and Conservation Collaboration Center. https://www.asiaeec-col.eccj.or.jp/chronicles-ec-laws/. Accessed: 1 Nov 2021. European Council. (2014, October 23, 24). European Council—Conclusions. EUCO 169/14. European Parliament. (2015, December 15). Resolution of 15 December 2015 on towards a European Energy Union. P8_TA(2015)0444. Fawcett, T., Rosenow, J., & Bertoldi, P. (2019). Energy efficiency obligation schemes: Their future in the EU. Energy Efficiency, 12(1), 57–71. Filippini, M., Hunt, L. C., & Zori´c, J. (2014). Impact of energy policy instruments on the estimated level of underlying energy efficiency in the EU residential sector. Energy Policy, 69, 73–81. Flin, D. (2010). Cogeneration: A user’s guide. The Institution of Engineering and Technology. Fukasaku, Y. (1995). Energy and environment policy integration: The case of energy conservation policies and technologies in Japan. Energy Policy, 23(12), 1063–1076. Gaudiosi, G. (1999). Offshore wind energy prospects. Renewable Energy, 16(1– 4), 828–834. Geiss, J. (2013). From agreement via legislation to implementation—Will the Cimate and Energy Package deliver until 2020? In R. Hinrichs-Rahlwes (Ed.), Sustainable energy policies for Europe: Towards 100% renewable energy (pp. 44– 62). CRC Press. Geller, H., et al. (2006). Polices for increasing energy efficiency: Thirty years of experience in OECD countries. Energy Policy, 34(5), 556–573. Gerwen van, R. J. F. (2003). Systems and applications. In S. C. Singhal & K. Kendall (Eds.), High-temperature solid oxide fuel cells: Fundamentals, design and applications (pp. 365–392). Elsevier. Government of Japan. (1990). Action programme to arrest global warming. Tokyo, 23(10), 1990. Government of Japan. (1994). Basic environmental plan. Tokyo, 16(12), 1994. Government of Japan. (2005). Kyoto protocol target achievement plan. Tokyo, 28.5.2005, partially revised 11.7.2006, totally revised 28.3. 2008. Government of Japan. (2019). The long-term strategy under the Paris agreement. Tokyo, 11(7), 2019.

210

M. M. SOKOŁOWSKI

Gvozdenac, D., et al. (2017). High efficiency cogeneration: CHP and non-CHP energy. Energy, 135, 269–278. GWPH. (1998, June 19). Guidelines for measures to prevent global warming. https://www.env.go.jp/en/earth/cc/gw/index.html. Accessed 17 Aug 2021. Haas, R., et al. (2011). A historical review of promotion strategies for electricity from renewable energy sources in EU countries. Renewable and Sustainable Energy Reviews, 15(2), 1003–1034. Haghighi, S. S. (2007). Energy security: The external legal relations of the European Union with major oil and gas supplying countries. Hart Publishing. Hammons, T. J. (2011). Electricity infrastructures in the global marketplace. InTech. Harris, R. (Ed.). (2003, June 1–3). Report of working committee 7 “Industrial utilisation & power generation”. In 22nd World Gas Conference. o]. (1951). Act No. 146, Heat Management Act [熱管理法, netsukanri-h¯ 10.4.1951. Infield, D. G. (1994). Wind diesel design and the role of short term flywheel energy storage. Renewable Energy, 5(1–4), 618–625. Kawamoto, T. (1995). Energy Conservation Policy in Japan [日本の省エネルギ o enerug¯ı taisaku ni tsuite]. Surface Technology ー対策について, nihon no sh¯ omen gijutsu], 46(2), 88–90. [表面技術, hy¯ Kikkawa, T. (2000). Deregulation and Japan’s industry: The case of the petroleum industry. Global Economic Review, 29(3), 20–54. Kimura, H. (2013). Climate law and policy in Japan. In E. J. Hollo, K. Kulovesi, & M. Mehling (Eds.), Climate change and the law (pp. 585–595). Springer. Kimura, O. (2014). The role of standards: The Japanese top runner programme for end-use efficiency. In A. Grubler & C. Wilson (Eds.), Energy technology innovation: Learning from historical successes and failures (pp. 231–243). Cambridge University Press. Knodt, M. (2018). EU Energy Policy. In H. Heinelt & S. Münch (Eds.), Handbook of European policies: Interpretive approaches to the EU (pp. 224–240). Edward Elgar. Kojima, M. (2021). The diffusion of energy efficiency policies in Asian countries: Country-specific drivers of policy followers. In E. Michida, J. Humphrey, & D. Vogel (Eds.), The diffusion of public and private sustainability regulations (pp. 120–136). Edward Elgar. Lau, L. C., et al. (2009). A comparative study on the energy policies in Japan and Malaysia in fulfilling their nations’ obligations towards the Kyoto Protocol. Energy Policy, 37 (11), 4771–4778. Lazaro, E. C., Millan, A. R., & Peral, P. R. (2006). Analysis of cogeneration in the present energy framework. Fuel Processing Technology, 87 (2), 163–168.

5

MAKING THE ELECTRICITY SECTOR ENERGY EFFICIENT

211

McKean, M. A. (1983). Japan’s energy policies. Current History, 82(487), 385– 395. METI. (2014, April). Strategic energy plan. METI. (2018, July). Strategic energy plan. METI. (2021). 第6次エネルギー基本計画, dai roku-ji enerug¯ı kihon keikaku [6th Strategic energy plan]. Michaelowa, A. (1998). Impact of interest groups on EU climate policy. European Environment, 8(5), 152–160. Morris, B., Boehm, K., & Geller, M. (1991). European Community 1991/92 (3rd ed.). Macmillan. Nakagami, H. (1996). Lifestyle change and energy use in Japan: Household equipment and energy consumption. Energy, 21(12), 1157–1167. Nakagami, H., & Litt, B. (1997). Appliance standards in Japan. Energy and Buildings, 26(1), 69–79. Nigohosyan, D., Vutsova, A., & Vassileva, I. (2021). Effectiveness and efficiency of the EU-supported energy efficiency measures for SMEs in Bulgaria in the period 2014–2020: Programme design implications. Energy Efficiency, 14(2), 1–18. Noguchi, T. (1994). The status of solar energy systems in Japan. Renewable Energy, 5(5–8), 1342–1349. Pacala, S., & Socolow, R. (2004). Stabilization wedges: Solving the climate problem for the next 50 years with current technologies. Science, 305(5686), 968–972. Pantaleo, A., Candelise, C., Bauen, A., & Shah, N. (2014). ESCO business models for biomass heating and CHP: Profitability of ESCO operations in Italy and key factors assessment. Renewable and Sustainable Energy Reviews, 30, 237–253. Paterson, M. (1993). The politics of climate change after UNCED. Environmental Politics, 2(4), 174–190. o-h¯ o]. (1962). Act No. 128, Petroleum Industry Law [石油業法, sekiyugy¯ 11.5.1962. Price, L., Galitsky, C., & Kramer, K. J. (2008) International experience with key program elements of industrial energy efficiency or greenhouse gas emissions reduction target-setting programs. Lawrence Berkeley National Laboratory. Rao, K. R. (2019). Conservation and efficiency issues. In K. R. Rao (Ed.), Wind energy for power generation (pp. 1275–1330). Springer. Regulation (EC) No 2422/2001 of the European Parliament and of the Council of 6 November 2001 on a Community Energy Efficiency Labelling Programme for Office Equipment. (2001, December 15). OJ L 332. Ren, J., & Du, J. (2012). Evolution of energy conservation policies and tools: The case of Japan. Energy Procedia, 17 , 171–177.

212

M. M. SOKOŁOWSKI

Schiavo, G. (2013). The new EU directive on energy efficiency: Critical view. Maastricht Journal of European and Comparative Law, 20(2), 321–326. Shimazaki, M. (1994). Liberalization of the Japanese electricity market. The Journal of Energy and Development, 20(1), 79–96. Shindo, Y., Hakuta, T., & Miyama, H. (1992). The present status of carbon dioxide removal in Japan. Energy Conversion and Management, 33(5), 773– 779. Siderius, H.-P., & Nakagami, H. (2007, July 4–9). Top runner in Europe? Inspiration from Japan for Eu Ecodesign implementing measures. In ECEEE 2007 Summer study: Saving energy—Just Do It! La Colle sur Loup. Sokołowski, M. M., & Heffron, R. (2022). Defining and conceptualising energy policy failure: The when, where, why, and how—The search for the just solutions. Energy Policy, 161, 112745. Sokołowski, M. M. (2012). Energy as a conflict trigger: Comparative analysis of international disputes in the Middle East with energy relations in the background. In A. Garnuszek, A. Surma, & L. Mazur (Eds.), International disputes—Challenge for the contemporary world? (pp. 107–145). Faculty of Law and Administration, the University of Warsaw. Sokołowski, M. M. (2016) Regulation in the European electricity sector. Routledge. Sokołowski, M. M. (2018). Burning out coal power plants with the industrial emissions directive. The Journal of World Energy Law & Business, 11(3), 260– 269. Sokołowski, M. M. (2020). European Law on combined heat and power. Routledge. Sokołowski, M. M. (2021a). Energy efficiency at energy production level: Promoting combined heat and power. In M. M. Roggenkamp, K. J. de Graaf, & R. C. Fleming (Eds.), Energy law, climate change and the environment (pp. 753–763). Edward Elgar. (Elgar Encyclopedia of Environmental Law, IX). Sokołowski, M. M. (2021b). Artificial intelligence and climate-energy policies of the EU and Japan. In D. Bielicki (Ed.), Regulating artificial intelligence in industry (pp. 138–155). Routledge. ‘Statement from the Paris Summit. (1972). Bulletin of the European Communities No 10. Sugiyama, N., & Takeuchi, T. (2008). Local policies for climate change in Japan. The Journal of Environment & Development, 17 (4), 424–441. Tanaka, S. (1996). Japan’s action report on climate change. In Evaluating climate change action plans (pp. 171–180). Springer. Tatsuta, M. (1996). New sunshine project and new trend of PV R&D program in Japan. Renewable Energy, 8(1–4), 40–43.

5

MAKING THE ELECTRICITY SECTOR ENERGY EFFICIENT

213

Toichi, T. (1983). Present state of energy conservation and government policy in Japan. Energy, 8(1–2), 97–106. Tomitate, T. (1993). Japan’s climate policy: A rejoinder. Security Dialogue, 24(3), 301–304. Verbruggen, A. (2005). CHP (Combined Heat & Power) regulation by the EU for facing the liberalised electricity market. International Energy Journal, 6(1) part 3, 29–45. Verbruggen, A. (2007). What’s needed next to refine the EU directive on cogeneration regulation. The Electricity Journal, 20(2), 63–70. Watanabe, C. (1995). Identification of the role of renewable energy: A view from Japan’s challenge: The new sunshine program. Renewable Energy, 6(3), 237–274. Yamamura, K. (1967). The development of anti-monopoly policy in Japan: The erosion of Japanese anti-monopoly, 1947–1967. Studies in Law and Economic Development, 2(1), 1–22. Zangheri, P., Economidou, M., & Labanca, N. (2019). Progress in the implementation of the EU Energy Efficiency Directive through the lens of the national annual reports. Energies, 12(6), 1107. pp. 1–16. Zhang, S., et al. (2021). Policy recommendations for the zero energy building promotion towards carbon neutral in Asia-Pacific Region. Energy Policy, 159, 112661.

CHAPTER 6

Conclusion

This chapter summarises the issues and subjects explored in this study about the European and Japanese laws and policies on electricity in their energy transition towards 2050. The chapter contrasts the entrance circumstances of the energy transition and provides correlations of the regulatory methods supplied by the EU and Japan during the years of public action in the power sector. In this context, the chapter addresses the momentum and character of conducted activities, including the players and stakeholders of the realised agenda, as well as technologies involved in the energy transition. These topics are followed by policy goals and priorities that guided the energy transition in the EU and Japan, and established models of the electricity sector (see Sokołowski, 2016). This was achieved by addressing the considered regulatory scenarios with regulation as usual, total deregulation, and total regulation, with the convergence of the European and Japanese regulatory models taking into account the mutual influences of the EU on Japan and vice versa. It also identifies the areas where the EU and Japan’s engagement on climate and energy may be enhanced. The chapter concludes with closing remarks on future actions—based on prior experiences—with respect to the transition of the electricity sector in the EU and Japan.

© The Author(s), under exclusive license to Springer Nature Switzerland AG 2022 M. M. Sokołowski, Energy Transition of the Electricity Sectors in the European Union and Japan, https://doi.org/10.1007/978-3-030-98896-8_6

215

216

M. M. SOKOŁOWSKI

6.1

Baseline for Energy Transition

The energy transition of the electricity sector in Japan and Europe is a matter of decades. Despite the recently announced moves, their roots can be observed in previous actions initiated years earlier. Important moves were undertaken to reform the electricity sector to make it more competitive. This was the start of the long way towards the processes of energy transition observed in the 2020s. Before the changing electricity sector— to make it cleaner and more sustainable—became part of the agenda, both Japan and the Community had to struggle with a rigid structure of their electricity sectors. During the post-war era they were highly monopolistic structures, with dominated by national ownership granted exclusive powers over energy production and supply, import and export, and infrastructure. These systems’ features were the operation of vertically integrated entities, historical costs as the basis for remumeration, high degree of planning, consumer objectification, and, as a result, lack of competition. In Europe, this approach derived from the premise of central control over a synchronised system, which assumed critical assets for a national economy. This necessitated the provision of exclusive rights in the fields of electricity generation, transmission, and distribution, having the impact of administrative price fixing, and blocking new entrants’ access. In Western Europe examples of nationalisation resulted in the establishment of EDF in France, the British Electricity Authority and Area Boards in the UK in 1948, and ENEL in Italy in 1962. State-centred influence on the sector and changes in the ownership structure, occurred in Central and Eastern Europe as well, although this was a result of the loss of independence and absorption into the Soviet sphere of influence. Despite having distinct origins and occurring in various policy contexts (democracy and lack thereof), these systems’ features were the operation of vertically integrated entities, remuneration based on historical costs, a high degree of planning, consumer objectification, and, as a result, lack of competition. In Japan, the structure of electricity was built on the government’s wartime ownership of the electricity industry, which—with the 1950s reform—established a relatively simple regulatory framework of regional electricity utilities responsible for production and distribution, and also engaged in the transmission of electricity within a specific geographical area. Together with the established wholesale utilities this closed competition structure was responsible for providing a stable supply of electricity in

6

CONCLUSION

217

a stable regulatory model. It was governed by the long-lasting Electricity Business Act (1964) that remained unchanged until 1995, when the limitations on entrance into the electricity producing and wholesale sectors, slightly liberalised the retail business, and revisited the rate-making rules. In Europe, the 1990s also brought some changes in the electricity sector; some steps, however, were already undertaken in the 1980s. The market changes were not the only moves that started appearing in the processes influencing the electricity sectors in Japan and Europe in the twentieth century. Throughout the post-war decades, the environmental issues have risen to the top of the political agenda in both Europe and Japan. In the 1970s, this trend escalated, resulting in significant policy and legal reforms. Energy has steadily gained importance in these movements, necessitating a response to growing concerns about sustainable development, global warming, and climate change, with the electricity sector serving as the critical component in the commitment to limit GHG emissions. In parallel, both in Europe and Japan energy efficiency has gained importance. It stemmed from the 1970s when an urgent demand for the rationalisation of energy usage come as a consequence of the energy crisis resulting from the 1973 oil shock. The 1970s energy crises stimulated public actions in Japan and the Community, with declarations and policy statements or softer tools like guidelines, calling for improving energy performance by reducing losses and gradually eliminating non-essential consumption. Although in terms of broad direction Europe and Japan are on the same page when it comes to climate action, they differ in terms of the extent and scope of the actions taken; this is due also to internal and external circumstances. This concerns, for instance, renewables. In Japan, unfavourable outside trends, created by the late 1980s oil crisis and domestic conditions relating to the economic collapse triggered the bursting of the speculative bubble. The results of this were observed in the energy sector, when renewable programme objectives were not achieved. In contrast, as a result of international climate action, particularly the Kyoto Protocol, work on European renewable energy policy accelerated in the 1990s, and a strategic approach to renewable energy was proposed. Renewables’ further development, as an element of the internal energy market, necessitated a European approach that added value to national activities directed at increasing the overall impact of renewables, and ensuring the necessary coordination and standardisation in implementing these policies at various levels.

218

M. M. SOKOŁOWSKI

Regarding its reasons of liberalisation, there was a need for a market that would work well and improve the situation of energy consumers. In Japan, this has been mainly driven by the price issues and high costs that hampered their international competitiveness as well as market integration and system coordination to tackle issues related to regional monopolies. In the EU, apart from electricity prices, there was also a need to tackle market fragmentation and establish an internal energy market consisting of 15, then 25, and finally 27 Member States. The aim was to bring about the integration of national energy markets to improve supply security, reduce costs, improve competitiveness, and enhance energy efficiency. This has required transparency and fair rules for cross-border trade and coordination, conducted at different levels, by different entities, including those performing regulatory functions, such as the ACER.

6.2 The EU---Japan Regulatory Approaches and Policy Correlations Different regulatory approaches may be recognised within the regulatory framework for energy transition during the years of changing the power sector in both the EU and Japan. To contrast them, the analysis of the following areas is proposed: timing (when they began), and approach. The latter one includes step-by-step actions taken, different phases of the reforms, the evaluation of the scope of regulatory tools used, actors and stakeholders (main players of the actions undertaken), technologies given regulatory attention, and policy targets and priorities (their characteristics and nature) of the energy transition in the EU and Japan. 6.2.1

Timing

First, in terms of timing, many of Europe’s and Japan’s efforts took place at around the same period. This concerns the action on GHG originating around the 1970s. Japan adopted its 1967 Basic Law for Environmental Pollution Control and the 1968 Air Pollution Control Act, and the Community established its programmes on the environment. Further steps were undertaken to tackle the emissions of SOx and NOx —also those coming from the energy sector—with issues related to building new power plants, thermal discharges, reducing emissions into the atmosphere, and implementing preventive measures to reduce sources of pollution.

6

CONCLUSION

219

The action on renewables also started around the 1970s. Japan began the public action on renewable energy in the 1970s with the Sunshine Project. This was followed by subsequent governmental programmes— chief among which was the NEDO (established in the 1980s)—aimed at developing new technologies to provide clean energy, and legislation with targets for renewable energy use and institutional developments. In the Community, renewables were given dedicated programmes, such as Joule-Thermie or Altener, in the 1980s; funding for development and promotion was also offered. It was the same for the promotion of energy efficiency, which stemmed from the 1970s when an urgent demand for the rationalisation of energy usage occurred as a consequence of the energy crisis related to the 1973 oil shock. Different countries in the world started working on the improvements within their energy sectors to save more energy, due mainly to financial constraints. This happens in both Japan and in Europe. The crisis stimulated public action, with declarations and policy statements or softer tools like guidelines, calling for improving energy performance by reducing losses and gradually eliminating non-essential consumption. In addition, several efforts relating to energy market liberalisation were made in the EU and Japan in the 1990s. In Europe, this was the early 1990s zero-phase (a pre-package), subsequently followed by the ED I (1996), with which the first significant phase of electricity liberalisation in the electricity sector began. In Japan, the 1995 amendments made in the Electricity Business Act (1964) relaxed the limitations on entrance into the electricity producing and wholesale sectors, liberalising the retail business to some degree. 6.2.2

Step-by-Step Approach

What characterises the European action on liberalisation is putting it in a framework on packages. In Japan, although specific legislative packages cannot be distinguished as clearly as in the EU, one can distinguish subsequent phases of electricity market reform as proposed in this book. In Europe, there were four phases triggered by the energy packages in the 1990s, 2000s, and 2010s, with a steady emphasis on broadening the range and depth of the measures undertaken. In Japan, the liberalisation process began in the 1990s, with the initial moves to reform the power sector. It was followed by a moderate continuation of the reforms, with some in-between steps and times of reflection and reluctance (the second,

220

M. M. SOKOŁOWSKI

third, and fourth reforms), and the post-Fukushima impetus (the fifth reform with three stages) which expedited certain changes in the electricity sector, along with the market and its institutional framework. As a result, both the EU and Japan have chosen a step-by-step approach to liberalising the electricity sector. This approach also applies to renewable energy directives, namely the RES of 2001, the RED I of 2009, and the RED of 2018. They have increasingly clarified national legislation, fostered administrative procedures, and streamlined renewables authorisation, certification, and licencing. This was achieved by making them proportionate, objective, non-discriminatory, clearly defined, and well-coordinated, with clear schedules and thorough information on their handling, together with removing regulatory and non-regulatory barriers to the development of RES. The same applies to energy efficiency in Europe which has been offered a dedicated legislation under the step-by-step approach, with Energy Services Directive, CHP Directive, and Energy Efficiency Directive with its revisions bringing further tools to improve it. The evolution of the regulatory approach also pertains to the European legal environment under Energy Packages such as the 2009 Climate and Energy Package and the 2018 Clean Energy Package. These packages make the European renewable energy policy more integrated, introducing a variety of regulatory instruments required for the energy transition. In Japan, the fifth stage, with the three-step electricity reform process, was of great significance, as it provided a full retail choice, full liberalisation of electricity generation, and separate production activities in the transmission and distribution sectors, changing the institutional framework of the electricity sector. Through the legal acts adopted under their framework, this step-by-step approach has established a broad public regime in Japan and the EU, with various regulatory instruments. Among them were obligations imposed on entities in the electricity sector, the introduction of economic incentives to combat climate change, facilitating grid access, and improving the position of energy consumers. This created a dynamic legal context for regulatory instruments, resulting in modifications to and within the regulatory tools and models created to meet the demands of the energy transition.

6

6.2.3

CONCLUSION

221

Evolution of Regulatory Tools and Models

The EU and Japan have both employed a number of regulatory mechanisms to achieve their energy policy objectives. Under the step-by-step approach, the various phases of the electricity sector reform, which were later connected to climate action, resulted in the emergence of a number of regulatory mechanisms. This relates to their breadth and depth. To achieve changes in the electricity sector, uniform rules for electricity generation, transmission, and distribution were required, alongside regulatory instruments to facilitate the process. This demonstrates that, from the start, the energy sector has been liberalised through the employment of regulatory mechanisms, although with different regulatory attention in the EU and Japan. Apart from a tougher regulatory approach, both Japan and the EU used milder ways to address the issue of energyorigin emissions. This includes methods and programmes implemented over time. Many of the adopted regulatory tools have been established in relation to global climate dialogue, providing a perspective for the European and Japanese representatives taking part in dozens of rounds of international talks. Some were the result of international accords, such as the 1990 Action Programme developed by Japan in response to the Noordwijk Conference’s Declaration (1989), or Japanese and European CFC emission systems, the international long-range transboundary air pollution regime (1979). With the beginning of the 1990s and following international developments, such as the emergence of the UNFCCC (1992), the Kyoto Protocol (1997), and the Paris Agreement (2015), efforts to reduce GHG emissions expanded and specialised regulatory measures were developed. In this respect, the Community (then the EU) like at COP15 in Copenhagen—whereas Japan selected a weaker approach to setting emission targets. This was especially prominent during the early stages of the global climate dialogue, when the country defended the principle of the sovereign right to manage natural resources independently. On the contrary, the Community and the EU have always recognised Europe’s role as the leader in international climate talks, even when important partners hold opposing views—as President Trump’s administration demonstrated with its opposition to the Paris Agreement. In this way, while the EU favours a strong regulatory approach and goal-oriented action with legally enforceable measures, Japan advocates a more cooperative, voluntary, and technology-driven approach. This,

222

M. M. SOKOŁOWSKI

however, does not mean that Japan does not offer any regulatory means. In response to the rise of the environmental concerns including the four big pollution diseases, Japan established the Basic Law for Environmental Pollution Control (1967) later followed by the Air Pollution Control Act (1968), subsequently revised and strengthened in 1970. This was accompanied by the implementation of regulations governing total emissions of SOx and NOx , together with a slew of other pro-environmental improvements in Japanese law, such as environmental quality standards, permitted emission limits, and other hazardous-pollutant-control measures. Similar regulatory steps were observed in Europe, with the means intended to harmonise the policy for the resolution of environmental problems associated with energy, improve the protection of human health and the environment, limit and guide values of such gases as SO2 and NO2 , and the establish the rules for their emissions. Aside from the EU-wide installation permit system, the legal framework set benchmarks on which emission limit values, parameters, or equivalent technical measurements must be based (BAT). In Japan, there are also technology benchmarks. Although their effectiveness varies (these are soft measures), the Fifth Strategic Energy Plan (2018) includes a scientific review mechanism to regularly follow the latest changes in technology and the state of affairs in energy technologies, in order to flexibly modify and determine development goals, and the relative value of each alternative, through transparent mechanisms and procedures. This can be linked with the minimum energy performance standards aimed at preventing energy loss and improving energy conversion, like those under the Top Runner Program (with energy efficiency criteria for specific products based on the most efficient one in the product class at the time the standard was formed). Nonetheless, many pro-efficiency actions in Japan have been voluntary, and—to some extent—enhanced by MITI/METI recommendations in the event of non-compliance, including, as the final measure, the disclosure of the infringing entity’s identity under the ‘name and shame’ policy. They were still facilitated by low-interest loans from the Japan Development Bank, fiscal incentives and depreciation schemes; also by improving public understanding of energy use rationalisation through information, education campaigns, and promoting R&D in this field. Government programmes, such as the well-known 1979 Moonlight Project, have fuelled the latter. Financial efforts undertaken by the Community, such as the Joule, Thermie, and SAVE programmes, paralleled on the European

6

CONCLUSION

223

side in this regard. These technologically oriented programmes offered financial support for demonstration projects that resulted in considerable energy reductions. They also included a broader integrated framework for improving energy efficiency, such as technical assessments for the needs of standards and specifications, and steps to develop energy infrastructure, promote coordination of energy efficiency actions, and improve electricity use efficiency. Moreover, the certain directives on efficiency (Energy Services Directive, CHP Directive, and Energy Efficiency Directive with revisions) brought further tools to improve it. The regulatory framework includes both cross-sectoral initiatives—such as standards to improve the energy efficiency of products and services, energy labelling schemes, smart metres, training and education, and horizontal measures—such as taxes to reduce energy end-use usage, or targeted awareness campaigns to promote energy efficiency improvements. This has been accompanied by voluntary agreements or other market-oriented mechanisms, such as the white certificates used by DSOs and retail companies. The exemplary role of public buildings, which had to be refurbished to meet at least the minimal energy performance requirements and high energy efficiency performance purchases of products, services, energy or CO2 taxes, or training and education, including energy advisory programmes—that lead to the application of energy-efficient technology or techniques—have been among other tools used. The EU has given serious consideration to the framework for energy transmission and distribution, which includes a definite shape for the TSOs and DSOs and the use of unbundling. Following the stages of electricity market reforms, grid issues have received special attention, with the rules on priority dispatching and reduced renewable electricity curtailment. This was done in order to form a more comprehensive framework that governed the interactions between RES, DSOs, and TSOs, stimulated by delivering renewable installations with easier grid access, particularly under a simple-notification procedure. Unlike the EU, Japan chose not to conduct unbundling during the early stages of its electricity sector reform. This was driven by the belief that integrated generation and transmission systems were necessary for stable power supply, and the insistence on regional monopolies as the foundation of power utility management. However, it took nearly a decade for Japan to establish legal unbundling (2020) following the Fukushima disaster in 2011.

224

M. M. SOKOŁOWSKI

Furthermore, regulatory mechanisms in the areas of objectivity, transparency, market access, and non-discriminatory behaviour have been introduced to strengthen competition. Both the EU and Japan have opened their energy markets, allowing customers to switch power suppliers, but at a different pace: the EU in 2007 and Japan in 2016. This was complemented by the EU by efforts targeted at improving the position of energy users, including those vulnerable on the one side, with the active ones, and citizen energy communities on the other. Further developments in non-discrimination employed TPA, which provided access to transmission and distribution grids based on published tariffs. It was applicable to all eligible customers, and applied objectively, without discrimination between system users, with enhanced rules for grid access refusal, or eased restrictions on entry into the electricity production and wholesale through competitive bidding. Regulatory tools have evolved from softer to stronger during the course of the electricity market reform, with new components emphasised as price signals that must be applied, as in the case of RES. As a result, tendering, which provides services at the lowest possible cost to consumers and taxpayers, is increasingly being used when establishing support programmes and providing assistance in order to reduce total system costs. As a result, numerous Member States amended their support programmes, forsaking green certificates in favour of tenders. Japan sought to transition to more market-driven procedures far sooner than the EU, but for renewable technology, this was too soon. Some energy policy proposals were never realised in their original form; instead, they developed and returned in a modified form. This is an example of a European fiscal instrument, such as the 1990s energy and carbon content combination tax, that was never implemented in the Community and was later replaced by a market mechanism (auctioning) within the framework of the EU ETS. In this manner, both Japan and the EU are moving in the same direction, propelled by regulatory tools, including those proposed in the European Green Deal and a Japanese vision of a decarbonised society. Nonetheless, it is important to remember that the European and Japanese approaches to attaining the 2050 targets vary. A lot has happened as a result of the approach adopted years ago: the EU wants to become a clear climate leader while Japan intends to be rather a vigilant observer. These positions reflect internal conditions, such as European societies

6

CONCLUSION

225

(especially in the Western Europe) aiming for the fastest possible decarbonisation while already looking to develop non- or low-emission sources, as opposed to Japan’s lack of energy resources and the unexpected shutdown of non-emission nuclear sources as a consequence of the 2011 earthquake and tsunami. 6.2.4

Actors and Stakeholders

The applied regulatory approaches brought certain actors into action. Both the EU and Japan learned from the California crisis, attempting to avoid poorly managed energy liberalisation. Tools to avoid the shortages and unduly high prices connected with handling them were put in the hands of independent regulatory authorities in charge of monitoring the supply/demand balance in the EU. In Japan, the government has maintained a step-by-step approach to developing the electricity market in the long run, focusing on consumers’ expectations of a reliable, stable electricity supply as their top priority, while establishing regulatory authorities in the energy sector (Electricity and Gas Market Surveillance Commission) as a result of the Fukushima disaster. In Japan, under the national model, it has been the government, with ministries such as MITI and METI, providing administrative power in many parts of the energy policy pertaining to the electricity sector. These were guidelines, orders, instructions, and regulations, concerning issues such as energy tax rates, pollution control, emission standards, air quality, loans for energy investments, power plant placement and phase-out, and various other schemes and programmes related to energy efficiency or RES. This framework should also include a regulatory approach to technology geared towards improving the realisation of energy policy goals. This has already become a long-term policy aspect that is still used in Japan, and a form of Japanese regulatory approach. While Japan has retained these powers in the hands of its ministries (primarily MITI/METI), the EU introduced a rule to establish energy regulators, who, over the years, have been guaranteed stringer positions secured by the European law. These were the powers and duties guaranteeing energy regulatory authorities the ability to fix or approve tariffs, monitor market players’ activities, grid security and reliability, and also review gird operators’ plans. To promote effective competition and ensure the effectiveness of consumer protection measures, energy regulators have been given the power to investigate, obtain all required information,

226

M. M. SOKOŁOWSKI

and issue binding decisions backed up by dissuasive sanctions. Energy Packages adopted at the EU level and implemented by the Member States offered regulators a framework driven by independence, with a far-reaching model of regulatory independence covering functional independence and financial and operational position with autonomy in the budget, proper human and financial resources, and autonomous management. Moreover, to create a working common market in the EU, based on the same regulatory tests and standards, a framework facilitating the active exchange of information, experience, and expertise was required. Thus, various actors, such as the Florence Forum, ERGEG, and finally the ACER were used to coordinate national regulatory authorities’ actions. When it comes to regional electricity utilities, system coordination affects Japan as well, so the newly established OCCTO’s role in providing studies and expertise in terms of system operation, regional grid connectivity, long-term planning, and also expanding electricity transmission infrastructure, should be noted. Furthermore, the Energy Packages have facilitated the Commission’s role in the energy transition by granting new duties in terms of a holistic approach to electricity market, reduction of emissions, promotion of RES, and enhancing energy efficiency. Aside from powering energy reforms, providing guidelines and assistance, and reporting, the Commission— which operates in the political and social spheres on the basis of a treaty mandate, coordinating the actions of national governments and collaborating with other European organisations—has monitored and assessed Member States’ performance in a variety of areas. These included energy use rationalisation within the framework established by pro-efficiency legislation, assessment of national support schemes for renewables, and integrated national energy and climate plans. It also enabled the identification of problems and constraints impeding the energy transition, clearing the way for monitoring the established climate and energy targets. The legislation established in Japan focuses on the roles of many stakeholders, including national and local governments, businesses, and energy users. Apart from the central government’s regulatory responsibility, several legal acts address the activity of local governments in terms of energy planning, having an impact on the creation and execution of regional actions to stimulate the use of RES. In this context, successive renewable energy legislation, such as the Promotion Act (2013) and the Offshore Act (2018), reinforces the engagement among municipalities, the energy industry, agriculture, forestry, and fisheries sectors, and the

6

CONCLUSION

227

local population. The aim is to improve sustainability of rural regions, guided by the development of renewable energy generation as a measure of revival and disaster prevention within those areas. 6.2.5

Technologies

Over the years, Japan has engaged in a number of strategies to boost renewable energy. Aside from the successful R&D efforts, fuelled by public funding, there were more or less effective trials with support schemes hampered by an under- or overestimated stream of public funds available to fund renewable energy initiatives. In this light, Japan attempted to move to more market-driven mechanisms much earlier than the EU. This was, however, too early for green technologies, and after effective and recognisable PV incentives established Japan as a global front-runner in solar technologies in the 1980s and 1990s, the Japanese PV market ground to a halt or even reversed in the 2000s, mainly due to subsidy reduction and withdrawal. To some extent, this experience influenced the shape of the regulatory mechanisms adopted—there were still some miscalculations about the financing scale, but it resulted in a return to supporting renewables, with PV a priority in this mix. In contrast to Japan’s solar focus, the EU pursued a more comprehensive strategy to renewable energy, taking into account the varying development possibilities of various technologies among the Member States. However, the technological approach does not explain the protracted delay in the expansion of Japan’s offshore industry, which was not fully recognised at the regulatory level for a long time, owing to political reasons. With the adoption of a new strategy and the Offshore Act’s 2018 legislative changes, Japan’s stance towards offshore wind farms has evolved. With respect to energy efficiency, cogeneration has been recognised as an important component in the efforts to optimise energy use in both the European and Japanese agendas. It was granted a strategic approach, an orientational goal, and financial resources to reach the EU level. CHP, which has been designated as ‘critical for energy efficiency’, has played a vital role not only in rationalising energy usage, but also in decreasing emissions and increasing renewable potential. As a result, cogeneration became a component of the European regulatory action, with legal solutions provided in the CHP Directive and other elements of the EU’s legislative framework. This includes the initiatives to promote high-efficiency cogeneration, such as support systems, simplifying grid

228

M. M. SOKOŁOWSKI

access, and dealing with time-consuming administrative procedures. CHP was labelled as the technique using energy most efficiently in Japan, coming under the framework of energy efficiency. It was provided with promotion policies with taxation and financial support, as well as costcutting measures for firms and municipalities investing in natural gas-fired CHP facilities. Moreover, with the rise of the demand-side-led distributed energy systems—expected as a result of the popularisation of local production and consumption driven by RES, technological advancement in energy storage, and utilisation of such solutions as AI and the IoT, following the 2011 earthquake and tsunami in Japan—CHP has been evaluated as a backup technology in the case of a power loss in an emergency. This opened the way for building CHP models for regional energy supply systems. 6.2.6

Policy Targets and Priorities

The EU’s long-standing climate-binding objectives are: a 20% reduction in GHG emissions by 2020 compared to 1990 levels, and a 40% reduction by 2030 (compared to 1990 levels). The Japanese reduction objectives, on the other hand, were non-binding pledges, such as a targeted 25% reduction from 1990 under the ambit of a non-binding Copenhagen Accord. Nonetheless, with the announcement of carbon neutrality 2050, this activity has been given a new framework for organising efforts at all levels, with national and regional authorities working to realise this goal in Japan. A broad approach, with the new-old priorities in the climate action (higher targets for already established pillars of climate and energy policy: reduction of GHG emissions, growth of renewables, and strengthening energy efficiency) are to be enhanced by the framework of the European Green Deal and Fit for 55% package. It is driven by the 2015 Paris Agreement’s reduction pledge and the 2030 EU climate action, as well as by the 2050 climate neutrality. Much has changed in recent years in the fields of climate and energy policy, and regulatory frameworks for the power industry. Independent forces, such as the climate emergency and specific international commitments, such as the Paris Agreement, have accelerated the climate agenda in both the EU and Japan. Climate neutrality through decarbonisation is now an unified European and Japanese aim for 2050. Nonetheless, as with the climate and energy policy, the paths leading to it are different. The passing years made each regulatory action broader and deeper in terms of solutions offered.

6

CONCLUSION

229

Regarding the nature of these goals, there have been both mandatory objectives and indicative and voluntary targets. The evolutionary approach towards obligations can be noticed with shares of certain capacities (as in renewables), to be reached, volume of gases reduced, or amount of energy saved (as in the case of energy efficiency). This has been given for countries in the EU, and industries in Japan. When discussing these goals, one should notice both the nature of European goals based on a pan-European targets, and the indicative national goals to reach them (with an exception of Climate and Energy Package of 2009 when national goals were obligatory), as well as the rather softer - but still followed Japanese approach to targets. Although many actions taken by Japanese businesses were voluntary, some elements of regulatory power could be seen in the plans that business entities, intending to use new energy sources, were required to prepare and submit for certification, alongside reports on their implementation status, with the possibility of imposing fines for non-compliance.

6.3

Regulatory Models of Electricity Sector in the EU and Japan

Issues discussed in this study, related to the European and Japanese laws and policies on electricity in their energy transition towards 2050, allow for the evaluation of the regulatory approach which the EU (and earlier the Community) and Japan applied to energy and climate policies. Here, the following options are explored: regulation as usual, total deregulation, and total regulation—with their negation. This is coupled with the selected convergence of the European and Japanese regulatory models taking into account the mutual influences of the EU on Japan and vice versa. 6.3.1

No Regulation as Usual

The static approach named as ‘regulation as usual’ does not exist in either the EU or Japan. Although there were periods of regulatory stability, in general, driven by successive rounds of power market changes and climate action, both Japan and the EU demonstrate a step-by-step approach with regulation changing its scope; however, occasional periods of stability—at least in terms of legislation—have been observed. In this sense, it is more a case of ‘progressive regulation’ although with different pace of policy

230

M. M. SOKOŁOWSKI

actions formed in different stages of the reforms targeted at achieving certain aims. Furthermore, certain modifications in the regulatory approach have been seen. New regulatory measures have been required as a result of the rise of renewable capacity, changes in power consumption, the usage of AI and IoT, energy storage, prosumerism, active consumers, as energy communities, or the identification of vulnerable customers or energy poverty. In this case, the regulation does not come to an end at a specific point. Its progress is being observed. This does not affect the reality that institutions with regulatory powers should proactively apply their competencies—and hence reject ‘regulation as usual’. This is especially important given the energy market’s pricing concerns and social conflicts, and the need to address climate change. In this approach, it is more likely that regulation will follow the path of modifications and adjustments. Any future legislation in the EU and Japan will cause minor changes to the chosen approaches, and mostly maintain what has been established. The challenges that lie ahead necessitate action. In this case, at least two scenarios are possible: resignation from the regulatory approach or continuing down the regulatory road. Which of them is more accurate? The next section aims to provide some answers. 6.3.2

No Deregulation at All Cost (No Total Deregulation)

Although liberalisation of the energy sector is occasionally referred to as ‘deregulation’ in the literature, the reforms implemented in the EU and Japan demonstrate that this approach cannot be labelled ‘deregulation’. The activities carried out over time, driven by public policies, programmes, and public institutions performing regulatory functions, demonstrate that liberalisation was carried out through regulation. It was achieved by establishing a liberalised—more competitive and open—electricity sector, with significant public attention directed at it by providing new elements of public law regulation combined with enhanced existing tools. The relevance of public law and its regulatory measures, such as tariffs, operators’ duties, grid access, authorisation, certification, fines, orders, or guidance, has been demonstrated by market changes in the EU. The regulatory response presented to energy transition highlights the regulatory approach adopted to make the internal market operate, build a more

6

CONCLUSION

231

open and competitive electricity market, and ensure energy supply. It is not only the case of electricity market liberalisation, but also climate action linked to emissions reduction, renewable energy promotion, and energy efficiency improvement, where both Japan and the EU used a variety of regulatory mechanisms to meet the established energy transition targets. In this sense, the energy transition in the power sector in Europe and Japan has not followed a deregulatory path. Some visible features of deregulatory activity have been detected in the EU and Japan, especially in terms of institutions that have been revoked only to be replaced by newly formed organisations. However, as explained in this study, deregulation as a blanket term for improvements in the electricity sector particularly when considering energy transitions steered by public action - is inaccurate. If not deregulation, what about the prospect of total regulation? 6.3.3

No Regulation to the Max: (No Total Regulation)

With the California crisis and the repercussions of an unlimited energy market liberalisation in mind, policymakers in Japan and the EU chose to strengthen and widen the regulatory model utilised for the energy market’s needs, including electricity. As shown by this study, the energy authorities differed in terms of specific solutions and general directions aimed at achieving the European internal energy market and reforming the electricity market in Japan. Both goals were accomplished through the use of public law regulation and various regulatory tools. However, the chosen regulatory path has its limitations. As a result, the legislation does not cover the whole energy sector—it provides room for new players and companies entering the market by using regulatory mechanisms to open the market. In this sense, it establishes boundary constraints—but not as an alternative to the market (i.e., no return to the monopoly structure)—and also allows for intervention in the case of market failure. At the same time, due to the involvement of the state in the execution of energy transformation postulates and actions in the areas of greenhouse gas emissions reduction, renewable energy, and energy efficiency, it does not leave the market to itself. Furthermore, the established independent regulatory bodies—such as those in the EU, or those exercising regulatory tasks in Japan—are not omnipotent, do not have unrestricted authority, and their judgements may be challenged in court. Moreover, they participate in a variety of

232

M. M. SOKOŁOWSKI

coordination and consultation processes, ensuring national and regional collaboration. As a result, while regulation is becoming more important, it is being carried out in the name of energy market reform and energy transition. This does not exclude new private entrants and players, such as energy prosumers and energy communities, from participating. These organisations are making the electrical industry more competitive and citizen driven, while maintaining the state’s control over the sector. As a result, both in Japan and the EU regulation has its limits. While it will expand to encompass new market elements, such as new energy technologies and an increased use of AI and IoT (see Sokołowski, 2021b), it will not be a complete regulatory framework. Despite access to more and more technology options of monitoring implementation, especially at the level of individual customers (smart metres), unregulated areas will exist, even in the more regulated organisational structures of the energy market. This is related to the need of defending fundamental rights and freedoms, which regulators must also carry out. As a result, total regulation is not the method that the EU and Japan used during the electricity sector’s energy transition. 6.3.4

Convergence of the European and Japanese Regulatory Models

For many years, Europe has been watching Japan’s growth with great attention. Japanese technological solutions, also in the sphere of energy, supported by technology projects, served as a model for many actions carried out in the EU. Government programmes, such as the Moonlight Project, or the Sunshine Project have found their counterparts in the Community actions within Joule-Thermie, Altener, or SAVE. Energy conservation and saving actions have also served as a significant benchmark for Europe, with the introduction of minimum energy performance standards aimed at minimising energy loss and boosting energy conversion, and an obligation to designate an energy manager and track energy consumption. These were some of the previous approaches that affected European regulatory models. Besides these positive experiences, one should take note of the regulatory changes and policy choices about nuclear phase-outs in various European nations as a result of the 2011 Fukushima disaster. On the on hand, many of the solutions developed by Japan were pioneering and established Japan as the 1980s/1990s leader in the field of renewable technology, while also influencing the application of this

6

CONCLUSION

233

success in other countries, also in Europe. On the other hand, when the Japanese environmental law underwent a significant change, owing in part to the influence of international and European legal solutions, climate change was also a factor in this move. Furthermore, in terms of electricity market reform, the EU has long been an important benchmark for Japan, with regulatory institutions developed in the internal energy market, such as unbundling or steps offered to open the market and allow switching energy suppliers. Moreover, as already discussed in this study, the European climate action with increasing climate goals share many common points with Japanese climate efforts, including the timetable of actions carried out in Japan. As shown at several climate summits, the EU’s climate action has had a considerable impact on the Japanese agenda. This also applies to the European regulatory approach, particularly in the area of renewables, where the solutions supplied to energy communities may encounter a warm reception in Japan. This includes the idea of adopting the European framework on energy communities and implementing it in Japan to meet the demands of establishing local resilient communities led by the carbon neutrality framework (see Sokołowski, 2021c; Cassotta & Sokołowski, 2022). Models of regulation with the smart solutions implemented are additional factors where regulatory convergence may arise. This is about the broader application of AI in regulatory action, like in the day-watchman concept. Because regulatory activity on energy transition towards 2050 is not static, future modifications in the chosen regulatory framework may be seen. The past provides important lessons, as do the helpful benchmarks provided by both Europe and Japan.

6.4

Moving Forward While Looking Back

Energy transition of the electricity sector in Europe and Japan had various moments with more and less successful steps, driven by different circumstances and factors. On the way to successive goals, mistakes were made. Sometimes it was necessary to take into account external circumstances, sometimes of tragic consequences (the 2011 earthquake and tsunami), to speed up certain actions or make decisions. Often, there was a lack of ambition and consensus among individual countries (EU) or ministries (Japan). Compliance with obligations was also problematic—in the EU, it was, in particular, an incorrect implementation of the proposed provisions. Certain leaders in the process of change can be indicated—both

234

M. M. SOKOŁOWSKI

at the level of individual countries in the EU, or in regions, cities, and energy companies in Japan. Sometimes the regulatory instruments were too weak to deal with too difficult problems—it took time to adapt them to the scale of the challenge, adjusting softer instruments to market issues and offering stronger regulatory approaches. The action in the European energy agenda links climate action with the electricity market reform, and the Clean Energy Package, where the former elements of a separate climate move with renewables and energy efficiency, have been integrated with legislation on the energy market. This made the new framework not only oriented towards competitiveness and energy affordability, but also directed towards ambitious climate policy and clean energy. The examination of the present legal regime of the European energy market and its main component - the electricity sector, reveals that the balance of the internal market process has shifted to the climate component, with the regulatory features of market action secured. This approach has not been as clear in Japan: the 2011 earthquake and tsunami posed a significant challenge to the country, requiring it to secure affordable energy production—using a variety of energy sources, with conventional units (see Sokołowski, 2015)—develop renewable capacity, and thus consider further use of nuclear power plants. One should, however, note the evolution of the Japanese energy policy towards lowemission. This is due to the fact that climate action has become the key driver of modern economies and society all over the world, powered by environmental issues and the COVID-19 pandemic, with green investments as part of the recovery efforts and energy transitions to attain carbon neutrality by 2050 (see Mukanjari & Sterner, 2020). It has been accepted in the EU and Japan, and became a critical long-term aim of the transition to achieve sustainability. Some issues still require additional attention in Japan, such as optimising the position of renewable installations in plans and zoning systems, or actions geared towards cost reduction and RES market integration, with grid usage regulations, so that renewable energy can use the system preferentially over coal-fired power units. Other issues include investigating the development of the direct current grid, promoting grid flexibility, and incorporating storage into the electricity system. The framework that can boost renewable development in Japan is 2050 carbon neutrality. It brings the vision of a decarbonised society as Japan’s ultimate

6

CONCLUSION

235

goal, and includes the promotion of renewables as the primary carbonfree power source, with the assumption that renewables will become economically self-sustaining before 2050. In Europe, the process of adjusting the laws included in the European Green Deal is now underway, with an open debate on the final design, which includes leaving the door open for nuclear power in the taxonomy approach and the modification of the carbon trade. What appears to be gaining relevance, owing to the recent energy price crisis in Europe, with spiking gas prices and new records of CO2 costs in the EU ETS and Japan—due to dependency on LNG imports—is an issue of fully utilising the potential of energy efficiency. Energy efficiency objectives were set in both Japan and the EU as early as the 1970s, then tweaked and enlarged in response to consecutive policy changes. Their nature has altered, beginning with indicative, voluntary targets and progressing to enforced energy efficiency goals. Nonetheless, the offered approach was both horizontal—including energy savings and rational energy use, with improving energy efficiency recognised as one of the balanced approaches for energy and environment, and sectoral—with efficiency being increased in specific industries, including the power sector (see Sokołowski, 2021a). Both the EU and Japan have been promoting an energy efficiency agenda backed up by action plans aiming at removing barriers to energy efficiency investments and strategies detailing viable solutions for optimising energy consumption. Energy efficiency, like the other pillars of the EU’s climate and energy policy, has transitioned from lighter measures to stronger regulatory tools, as has emissions reduction and renewables promotion. The actions went beyond the electricity industry, impacting buildings and equipment as well as certification and labelling requirements. The 2019 Clean Energy Package improvements in Europe prioritised energy efficiency, with the centrepiece policy ‘energy efficiency first’. Choosing energy efficiency as the most widely available source of energy represents the notion that the cheapest and cleanest source of energy is energy that does not need to be generated or consumed. This approach gained legal support with the revision of the Energy Efficiency Directive (2018), which made energy efficiency the first principle to be considered when setting new rules for the supply side and other policy areas, or whenever any decisions regarding energy system planning or financing are made. It was recognised as the critical component and key focus consideration in future investment decisions on the EU’s energy infrastructure.

236

M. M. SOKOŁOWSKI

New incentives, such as the Fit for 55% package, prioritise energy efficiency by streamlining the energy efficiency first principle, raising the degree of ambition of the EU’s mandated energy efficiency objectives, and requiring indicative national contributions. Energy efficiency is also one of the pillars of Japan’s carbon neutrality by 2050, which requires the most extensive use of energy-saving technologies with promising cost-effectiveness However, this will require changes in the institutional development of the energy efficiency framework, as well as stronger measures, in order to fully utilise its potential for the improved energy use. Despite the fact that Japan has already introduced state-wide efforts, aided in the development of energy efficiency in homes and buildings, and accelerated the introduction of highenergy-efficiency facilities and equipment, the country must continue to push for energy efficiency improvements in a variety of sectors, ranging from industry to households. These improvements can be achieved through regulatory and financial measures aimed at increasing energy efficiency through equipment upgrades and replacement with highenergy-efficiency technology and resources. To achieve progress in energy efficiency efforts in all sectors and on the demand side en route to 2050, regulatory instruments from a variety of sectors and industries, including the electricity sector, will be required. ‘Together, we are calling for a new energy policy to be introduced as soon as possible. We all agree that energy efficiency is the most profitable fuel. This fuel is likely to have the fewest opponents’ once Professor ˙ Krzysztof Zmijewski said.1 As a result, energy efficiency may contribute to a more just approach to energy transition, in which no one is left behind (see Sokołowski & Heffron, 2022; Sokołowski & Kurokawa, 2022). This is especially significant when considering the still-untapped potential of energy efficiency in the electricity market’s energy transition, where a regulatory approach—which not only follows but also drives technical progress—might enable its utilisation.

Note ˙ 1. Krzysztof Zmijewski (1949–2015) was a professor at the Warsaw University of Technology. Between 1990 and 2001 he held positions in state administration (Deputy Minister, Undersecretary of State in the Ministry of Construction), government agencies (president of the National Energy

6

CONCLUSION

237

Conservation Agency), boards of the largest Polish energy (president of Polskie Sieci Elektroenergetyczne) and telecommunications companies (member of the management board of Polkomtel). In his final years, he was an advisor to the Deputy Prime Minister, Minister for Economy when he was appointed the Secretary General of the Public Board for the National Programme for Reduction of Emissions.

References Act on Promoting Generation of Electricity from Renewable Energy Sources Harmonised with Sound Development of Agriculture, Forestry and Fisheries [農林漁業の健全な発展と調和のとれた再生可能エネルギー電気の 発電の促進に関する法律, n¯ orin gyogy¯ o no kenzen’na hatten to ch¯ owa no toreta saisei kan¯ o enerug¯ı denki no hatsuden no sokushin ni kansuru h¯ oritsu]. (2013). Act No. 81, 25.11.2013. Act on Promoting the Utilization of Sea Areas for the Development of Marine Renewable Energy Power Generation Facilities [海洋再生可能エ ネルギー発電設備の整備に係る海域の利用の促進に関する法律, kaiy¯ o saisei kan¯ o enerug¯ı hatsuden setsubi no seibi ni kakaru kaiiki no riy¯ o no sokushin ni kansuru h¯ oritsu]. (2018). Act No. 89, 7.12.2018. Air Pollution Control Act [大気汚染防止法, taiki osen b¯ oshi-h¯ o]. (1968). Act No. 97, 10.6.1968. Basic Law for Environmental Pollution Control [公害対策基本法, k¯ ogai taisaku kihon-h¯ o]. (1967). Law No. 132, 3.8.1967. Cassotta, S., & Sokołowski, M. M. (2022). Regulatory models of community energy (CE) in a multi-regulatory approach: Juxtaposing the global, the EU, the Japanese and Swedish cases. European Energy and Environmental Law Review, 31(3), 189–199. Convention on Long-Range Transboundary Air Pollution (1979) adopted on 13.11.1979, entered into force on 16.3.1983. Directive 96/92/EC of the European Parliament and of the Council of 19 December 1996 concerning common rules for the internal market in electricity (1996) OJ L 27, 30.1.1997. Electricity Business Act [電気事業法, denki jigy¯o-h¯ o]. (1964). Act No. 170, 11.7.1964. Kyoto Protocol to the United Nations Framework Convention on Climate Change (1997). METI. (2018, July). Strategic energy plan. Mukanjari, S., & Sterner, T. (2020). Charting a “green path” for recovery from COVID-19. Environmental and Resource Economics, 76(4), 825–853. Noordwijk Declaration on climate change (1989) Noordwijk, 6-7.11.1989.

238

M. M. SOKOŁOWSKI

Paris Agreement to the United Nations Framework Convention on Climate Change (2015) adopted on 12 December 2015, entered into force on 4 November 2016. Sokołowski, M. M. (2015). Priorities of energy policy of Japan under Abenomics. In M. Sitek & M. Ł˛eski (Eds.), Opportunities for cooperation between Europe and Asia (pp. 227–240). WSGE. Sokołowski, M. M. (2016). Regulation in the European electricity sector. Routledge. Sokołowski, M. M. (2021a). Energy efficiency at energy production level: Promoting combined heat and power. In M. M. Roggenkamp, K. J. de Graaf, and R. C. Fleming (Eds.), Energy law, climate change and the environment (pp. 753–763). Edward Elgar Publishing (Elgar Encyclopedia of Environmental Law, IX). Sokołowski, M. M. (2021b). Artificial intelligence and climate-energy policies of the EU and Japan. In D. Bielicki (Ed.), Regulating artificial intelligence in industry (pp. 138–155). Routledge. Sokołowski, M. M. (2021c). Models of energy communities in Japan (Enekomi): Regulatory solutions from the European Union (Rescoms and Citencoms). European Energy and Environmental Law Review, 30(4), 149–159. Sokołowski, M. M., & Kurokawa, S. (2022). Energy justice in Japan’s energy transition: Pillars of just 2050 carbon neutrality. The Journal of World Energy Law & Business [Preprint]. Sokołowski, M. M., & Heffron, R. (2022). Defining and conceptualising energy policy failure: The when, where, why, and how—The search for the just solutions. Energy Policy, 161, 112745. United Nations Framework Convention on Climate Change, adopted 9 May 1992, entered into force 21 March 1994 (1992).

Index

0–9 2011 earthquake and tsunami, 22, 41, 46, 53, 55, 106, 194, 200, 225, 228, 233, 234 2050, 4, 5, 11, 12, 73, 82, 84, 85, 98–102, 105, 139, 141, 151, 153, 154, 158, 159, 188, 196, 201, 215, 228, 229, 233, 234, 236 3 x 20% goals, 183 30% energy efficiency goal, 186 32.5% energy efficiency goal, 6, 187 A Abe, Shinzo, 98 Action Programme to Arrest Global Warming (1990), 91, 191 Act on Promoting Generation of Electricity from Renewable Energy Sources Harmonised with Sound Development of Agriculture, Forestry and Fisheries (2013), 149, 153

Act on Promoting Utilisation of Sea Areas for the Development of Marine Renewable Energy Power Generation Facilities, 152 Act on Promotion of Global Warming Countermeasures (1998), 93, 94, 101, 192 Act on Rationalisation of Energy Use (1979), 12, 189–192, 198 Act on Special Measures Concerning Procurement of Electricity from Renewable Energy Sources by Electricity Companies (2011), 149 Act on Special Measures Concerning the Use of New Energy by Electricity Companies (2002), 147 Act on Temporary Measures to Promote Business Activities for the Rational Use of Energy and the Utilisation of Recycled Resources (1993), 192

© The Editor(s) (if applicable) and The Author(s), under exclusive license to Springer Nature Switzerland AG 2022 M. M. Sokołowski, Energy Transition of the Electricity Sectors in the European Union and Japan, https://doi.org/10.1007/978-3-030-98896-8

239

240

INDEX

Act on the Promotion of Development and Introduction of Alternative Energy to Petroleum (1980), 142 Act on the Promotion of New Energy Usage (1997), 145 Adenauer, Konrad, 23 administration, 34, 46, 88, 89, 99, 221 administrative barriers, 140, 141 administrative procedures, 136, 139, 157, 182, 185, 200, 220, 228 Advisory Committee for Natural Resources and Energy, 45 Agency for the Cooperation of Energy Regulators (ACER), 11, 22, 32, 33, 36, 37, 52, 54, 218, 226 Agency of Industrial Science and Technology, 142 aggregation, 38, 39 agriculture, 74, 150, 159, 196, 226 air pollution, 75, 76, 86, 87, 89, 92, 103 air quality, 88, 90, 225 Akita Prefecture, 153 Altener programme, 130, 181 Amori Prefecture, 153 Artificial Intelligence (AI), 196 auctions, 15, 139 Austria, 133 B Basic Environmental Plan (1994), 92 Basic Law for Environmental Pollution Control (1967), 87, 192, 218, 222 Belgium, 23 benchmarks, 5, 92, 104, 188, 196, 222, 233 bidding scheme, 153 biomass, 77, 93, 133, 139, 145, 147, 150

British Electricity Authority and Area Boards, 23, 216 bubble economy, 143 Bulgaria, 135 Bureau of Pollution, 89 buy-back, 131 C California, 8, 11, 22, 28, 35, 45, 54, 225, 231 cap regulation, 42 carbon dioxide (CO2 ), 92, 96 carbon leakage, 83 carbon neutrality, 4, 5, 11, 73, 101, 102, 151, 153, 154, 159, 197, 201, 228, 233, 234, 236 Central and Eastern Europe, 23, 216 certification, 15, 101, 136, 145, 152, 153, 157, 179, 199, 220, 229, 230, 235 chlorofluorocarbon (CFC), 76, 104, 221 CHP Directive (2004), 182–185 clean development mechanism (CDM), 80, 95 Clean Energy Package, 9, 11, 21, 37, 40, 55, 73, 84, 105, 158, 187, 201, 220, 234, 235 climate action, 2, 4, 6, 10, 12, 55, 80, 103, 155, 200, 217, 221, 228, 229, 231, 233, 234 Climate and Energy Package, 6, 81, 105, 134, 158, 183, 200, 220, 229 climate change, 2, 3, 5, 74, 76, 77, 79–81, 84, 86, 90, 91, 93, 103–105, 179, 230, 233 climate neutrality, 5, 84, 85, 105, 158, 228 climate strikes, 4 coal-fired power sources, 101, 154, 159, 234

INDEX

coal mining, 188, 189 cogeneration, 24, 41, 129, 151, 180–186, 193–195, 200, 227 competition, 2, 10, 22, 23, 26, 27, 29–35, 37, 42, 43, 45–47, 50, 51, 99, 193, 216, 224, 225 consumer protection, 10, 27, 33, 54, 225 Council of the European Union, xxi, 5, 16, 36, 75–78, 129, 130, 139, 177, 178 Copehagen COP15, 81, 97, 221 Copenhagen Accord, 81, 105, 228 COVID-19 pandemic, 4, 234 cross-border trade, 52, 218 Cyprus, 135 Czech Republic, 135 D Davis, Grey, 8, 16 day-watchman regulation, 233 decarbonisation, 37, 84, 99–102, 106, 139, 141, 153, 154, 195, 225 Democratic Party of Japan (DPJ), 97 Denmark, 26, 133, 135 deregulation, 8, 12, 15, 157, 193, 215, 229–231 district heating and cooling, 192 E Economic Partnership Agreement, 2, 13 Electricity and Gas Market Surveillance Commission (EGMSC), 48, 49, 54, 225 Electricity Business Act (1964), 41, 42, 44, 45, 48, 50, 51, 154, 217, 219 Electricity Market Surveillance Commission, 48 electricity pricing, 42

241

Electric Power Development Company, 41 Electric Power System Council of Japan (ESCJ), 46 electric vehicles, 151 emission standards, 76, 103, 225 end-use efficiency, 179 Energy and Environmental Council, 97, 98 energy communities, 12, 37–39, 52, 129, 141, 157, 224, 230, 232, 233 energy conservation, 6, 15, 91, 93, 150, 188–192, 197, 198, 201, 232 energy crisis, 4, 6, 8, 142, 175, 197, 217, 219 energy efficiency, 2–6, 11–13, 15, 25, 28, 37–40, 52, 55, 77, 80, 82, 83, 96, 100, 139, 141, 158, 175–180, 182–189, 191–193, 195–202, 217–220, 222, 223, 225, 227–229, 231, 234–236 Energy Efficiency Directive (2012), 82, 184–187, 201 energy efficiency first, 187, 201, 235, 236 energy infrastructure, 178, 187, 196, 199, 201, 223, 235 energy justice, 1 energy labelling, 179, 180, 185, 198, 223 energy poverty, 33, 38, 187, 230 energy saving, 77, 93, 96, 176–179, 183–185, 187, 188, 192, 199, 235 energy savings objectives, 176, 179, 184 energy security, 2, 37, 150, 183 Energy Services Directive (2006), 179, 180, 184 energy storage, 39, 228, 230

242

INDEX

energy taxation, 36, 78 energy transition, 1–5, 7, 10–13, 15, 21, 37, 55, 100, 195, 196, 215, 216, 218, 220, 226, 229–234, 236 energy utilities, 27, 44, 96, 145, 158 Enron, 8 Environmental Agency, 88, 96 environmental protection, 10, 25, 74, 87, 92 Estonia, 135 EU-15, 131, 148 EU-25, 31, 180 EU-27, 135 EU–Japan Strategic Partnership Agreement 2018, 2 European Coal and Steel Community (ECSC), 23 European Commission, 84 European Council, 77, 81–84, 135, 186 European Economic Community, 23 European Electricity Regulation Forum (Florence Forum), 26 European energy regulator, 27 European Green Deal, 4, 11, 73, 84, 85, 105, 141, 158, 188, 224, 228, 235 European Parliament, 2, 36, 77, 130, 134, 186 European Regulators’ Group for Electricity and Gas (ERGEG), 11, 22, 30, 54, 226 European Union mission Trading System (EU ETS), 36, 79

F feed-in tariffs, 15, 136 Finland, 25, 26, 135 First Electricity Directive (1996), 24 First Energy Package, 24, 25

Fit for 55% package, 141, 158, 188, 201, 228, 236 Forest Act, 154 fossil fuel tax, 101 four big pollution diseases, 87, 222 France, 23, 100, 216 fuel cells, 152, 194 Fukushima Daiichi Nuclear Power Plant, 9, 46 Fukushima Prefecture, 153 G Geneva Climate Change Conference (1991), 91 geothermal energy, 154 Germany, 26, 100, 146, 147 global warming, 76, 77, 79, 90–93, 96, 101, 103, 104, 191, 192, 201, 217 Global Warming Prevention Headquarters (GWPH), 93, 145 Great East Japan Earthquake (2011), 97 Greece, 26, 133, 135 green certificates, 136, 147, 156, 224 greenhouse effect, 76, 77, 104, 130 greenhouse gas emissions, 3, 5, 6, 12, 73, 85, 102, 141, 150, 188, 231 grid connection, 15, 137, 138, 140, 149, 151 guarantees of origin, 133, 136, 140, 156, 183, 185, 200 H harmonisation, 26, 78, 183 Heat Management Act (1951), 204 Heat Supply Business Act (1972), 195 high-efficiency cogeneration, 183, 185, 194, 200, 227 Hot Springs Act (1948), 154 household customers, 30, 59

INDEX

Hungary, 135 hydrogen, 3, 6, 100, 102, 103, 142, 152 hydro power, 46, 147

I incentive regulation, 43 Internet of Things (IoT), 194, 196, 200, 228, 230, 232 Ireland, 26, 132 Italy, 23, 216

J Japan, 1–8, 10–15, 21, 22, 40–44, 46–54, 73, 78, 81, 82, 86–92, 94–104, 129, 142, 143, 145–148, 151, 152, 154–157, 189, 191, 193–197, 199–201, 215–236 Japan Atomic Power Company, 41 Japan Development Bank, 88, 190, 199, 222 Japan Electric Power Exchange (JEPX), 45 Joint implementation (JI), 80, 95 Joule programme, 12, 177, 199, 222 Joule-Thermie programme, 11, 129, 130, 155, 181, 219, 232

K Keidanren, 96 Koizumi, Junichiro, 146 Kyoto, 79, 86, 89, 96, 109, 217 Kyoto Prefectural Environmental Pollution Control Ordinance (1971), 89 Kyoto Protocol (1997), 6, 13, 79, 93, 94, 130, 192, 221 Kyoto Protocol Target Achievement Plan (2005), 94

243

L large combustion plants (LCP), 76 Latvia, 135 Lehman Brothers Holdings, 98 liberalisation, 4, 11, 21, 24, 25, 28, 35, 40, 41, 44, 45, 48, 50–52, 54, 218–220, 225, 230, 231 licences, 15, 73, 101 liquefied natural gas, 142 Lithuania, 135 long-term planning, 54, 226 Long-Term Strategy Under the Paris Agreement (2019), 5, 11, 73, 100, 101, 151, 195, 196 Luxembourg, 23, 135

M Malta, 135 market access, 24, 52, 224 market liquidity, 31 market opening, 25, 27, 28, 32, 33, 44 market reform, 8, 11, 14, 21, 24, 30, 35, 40–42, 44, 45, 51, 55, 81, 156, 219, 223, 224, 232–234 merit order, 48, 154 Ministry of Economy, Trade and Industry (METI), 11, 13, 22, 45, 47, 48, 50, 54, 97, 99, 100, 102, 103, 145, 147–151, 153, 154, 158, 193–195, 197, 198, 222, 225 Ministry of Health and Welfare, 88 Ministry of International Trade and Industry (MITI), 11, 22, 41, 42, 44, 45, 54, 87, 91, 142–145, 158, 193, 225 Ministry of Trade and Industry, 88 Minobe, Ryokichi, 89, 108 Monet, Jean, 23 monopoly, 22, 41, 44, 46, 231

244

INDEX

Moonlight Project, 6, 12, 144, 190, 191, 199, 222, 232

N name and shame, 193, 198, 222 Natural Parks Act (1957), 154 Netherlands, 8, 23, 26, 90, 133, 135 net metering, 149 net zero, 5, 85 New Energy Development Organization, 143 New Energy Foundation, 144 new entrants, 27, 43, 44, 50, 51, 216 New Sunshine Program, 7, 11, 129, 144, 146, 191 nitrogen oxides emissions, 75, 87 nitrous oxide (N2 O), 76, 92 non-discrimination, 29, 50, 53, 183, 224 Noordwijk Ministerial Conference (1989), 90 nuclear energy, 77

O oil crisis, 155, 189–191, 198, 217 Organisation for Cross-regional Coordination of Transmission Operators (OCCTO), 11, 22, 48, 49, 54, 226

P Paris Agreement (2015), 3, 4, 7, 10, 101, 138, 158, 221, 228 Paris Summit (1972), 175 photovoltaics, 93, 145 Poland, 135 pollution control, 86, 88, 89, 103, 225 Pollution Diet (1970), 88 Pollution Research Institute, 89

Portugal, 26, 133, 135 post-war development, 23, 40 priority dispatch, 134, 137, 157, 223 prosumerism, 141, 230 public law regulation, 5, 13, 14, 25, 32, 33, 35, 81, 230, 231 public obligations, 25, 27

Q qualitative proposals, 27 quantitative proposals, 27 quota systems, 15

R reduction pledges, 138, 158, 228 regulation, 5, 8–12, 15, 21, 23, 29, 32, 34, 35, 44, 74, 87, 90, 154, 155, 159, 185, 190, 195, 198, 215, 222, 225, 229, 230, 232, 234 regulator, 31–33, 40, 54, 79 regulatory gap, 31, 33 regulatory models, 1, 4, 12, 15, 215, 229, 232 regulatory tools, 5, 10, 12, 13, 21, 27, 52, 104, 147, 218, 220, 221, 224, 231, 235 Renewable Directive I (2009), 134–139, 155, 220 Renewable Directive II (2018), 138–140, 161 renewable energy, 3, 6, 7, 15, 40, 100, 103, 129, 131–133, 135–143, 146, 148, 149, 151, 153–156, 158, 159, 194, 195, 217, 219, 220, 226, 227, 231, 234 renewable targets, 131, 134 Renewable-Waste-Cogeneration auto-producers, 11, 129

INDEX

Residential PV System Dissemination Program, 144, 146 retail market, 31, 44, 45, 49 Rio de Janeiro Earth Summit (1992), 78, 92 Romania, 135 S sanctions, 34, 54, 226 Schuman, Robert, 23 Second Electricity Directive (2003), 28 Second Energy Package, 27 self-consumers, 140 Single European Act, 24, 74 Slovakia, 135 Slovenia, 135 smart energy, 141, 197, 233 solar cells, 7, 144, 147 solar energy, 6, 7, 142, 146 Soot and Smoke Emissions, 86, 88 Soviet Union, 90 Spain, 26, 133, 135 Specific Actions for Vigorous Energy Efficiency (SAVE), 12, 177, 178, 181, 199, 222, 232 step-by-step approach, 40, 45, 52, 54, 220, 221, 225, 229 Strategic Energy Plan, 97, 99, 154, 197 subsidies, 30, 36, 96, 131, 143, 146 Suga, Yoshihide, 5, 101 sulphur dioxide emissions, 75 Sunshine Project, 6, 7, 11, 129, 142–144, 155, 191, 219, 232 support schemes, 133, 136, 138–140, 156, 159, 226, 227 sustainable development, 3, 74, 75, 101, 103, 217 Sustainable Development Goals (SDGs), 7, 74 Sweden, 25, 100, 135

245

T tariffs, 11, 28–30, 34, 36, 42, 53, 54, 88, 151, 158, 224, 225, 230 Thermie programme, 12, 177, 178, 199, 222 Third Electricity Directive (2009), 33, 81 Third Energy Package, 32, 33, 35, 81, 105 Third-Party Access (TPA), 14, 21 Tohoku, 46, 47 Tokyo, 47, 49, 86, 96 Tokyo Electric Power Company (TEPCO), 60 Tokyo Metropolitan Environmental Pollution Control Ordinance (1969), 89 Top Runner, 151, 192, 196–198, 222 transmission system operator (TSO), 24, 29, 30, 137 transparency, 10, 24, 25, 30, 32, 36, 52, 95, 132, 134, 148, 183, 218, 224 U unbundling, 14, 21, 25, 27, 29–34, 37, 48, 50, 52, 223, 233 United Kingdom, 23, 133, 216 United Nations Framework Convention on Climate Change (UNFCCC), 3, 6, 79, 104, 221 United States, 6, 35 V vertically integrated companies, 51 virtual power plants (VPP), 151, 195 Vision for Offshore Wind Power Industry (2020), 152 Vision for Regional New Energy, 144 voluntary agreements, 131, 180, 185, 198, 223

246

INDEX

Voluntary Emissions Trading Plan, 96 vulnerable energy consumers, 38, 187 W Warsaw COP19, 98 waste-to-energy, 93, 145 water pollution, 75, 87 West Germany, 23 wholesale market, 43, 46

Y yardstick regulation, 43 Yokkaichi asthma, 87, 108

Z zero-emission, 99, 102, 103, 106 ˙ Zmijewski, Krzysztof, 6, 236 zoning, 154, 159, 234