Japans Radical Incrementalism in Power Market Regulation and Renewable Energy

Major policy changes are occurring in Japans power sector, centrally reforms to the regulation of competition, and the management of the integration of new sources of renewable energy. The Japanese government is implementing a series of reforms designed to increase efficiency in the power sector, while attempting to manage the fiscal and regulatory issues that have emerged as a result of the introduction of large amounts of power generated from renewable energy sources primarily solar photovoltaics to the grid. As in other countries, these policy changes have important distributional effects, making them inherently political in nature.116,117 I argue in this chapter that the changes implemented in order to drive greater efficiency in the power sector, and promote decarbonization through the introduction of renewable energy, imply a transformation of the regulations governing Japans power sector. I also suggest that the negotiation of market redesign occurs through existing regulatory institutions, leading to important areas of continuity, as is the case across many national electricity markets.118 Japan is thus engaged in a process of what I have term radical incrementalism, defined as a substantial reordering of the policies used to achieve public policy goals, but with important areas of path dependence because of institutional constraints and the longevity of capital-intensive assets that are central to the power sector.