Toward achieving carbon neutrality by 2050, the system was created in the current fiscal year after consideration by the Agency of Natural Resources and Energy (ANRE).
The primary purpose is to provide foreseeability in long-term revenues by securing capacity revenues equivalent to fixed costs (including large initial investments) for, in principle, 20 years for newly installed or replacement power sources: hydro, fossil, nuclear, geothermal, and biomass.
This time, bidding has been invited for a total of 4GW. In current circumstances, if fossil power sources of approximately 120GW were to be converted to decarbonization power sources, an average of some 6GW would have to be introduced annually. Starting on a small scale is in anticipation of innovation and other developments in the future.
At an April 2023 ministerial meeting on nuclear energy, a proposed Grand Design for Future Nuclear Policy and Guidelines for Action Toward Realization was put forward based on the basic policy aimed at implementing the country’s green transformation (GX), approved by the cabinet in February 2023. The grand design presents a framework for a “long-term decarbonization power source auction” as an example of the development of the nuclear business environment.
In July 2023—after initial discussions at the Subcommittee of the Electricity and Gas Industry Committee, under the Advisory Committee for Natural Resources and Energy of the Ministry of Economy, Trade and Industry (METI), and after passage of the GX Decarbonization Power Supply Bill—the Nuclear Energy Subcommittee of the same advisory committee agreed to hold further discussions on the system, having recognized that the issue of investments in safety measures for existing plants had not been thought through well.
As some people feel that past and current investments in nuclear safety measures work should also be subject to the system, attention is now focusing on how the new auction system will deal with that issue.
Various issues were presented at a meeting of the Subcommittee of the Electricity and Gas Industry Committee on January 22, including the most recent balance of electricity supply and demand and the ensuring of supply capacity toward the verification of power system reform.
It was noted that political backing was necessary regarding such things as the inclusion of nuclear power in the Long Term Decarbonization Power Source Auction.
In the auction, bids were accepted until January 30. A multi-price system is employed, with the winning bid for a power source becoming the contract price. Results will be released after three months or so.
OCCTO has opened a special website (Japanese only) to explain the system and key points, and is endeavoring to disseminate information on the long-term decarbonization power source auction.
