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History of Japan's Electric Power Industry

Electricity was first used in Japan on March 25, 1878 at the Institute of Technology in Toranomon, Tokyo when an arc lamp was switched on in commemoration of the opening of the Central Telegraph Office. In those days, electricity was still unfamiliar and uncommon not only in Japan but also in Europe and the United States. In 1886, Tokyo Electric Lighting, a private company, commenced operations as the nation’s first electric power company, and began supplying electricity to the public in the following year.

In the early days, use of electricity grew primarily for lighting because of its safety and cleanness, and gradually found broader applications as a power source to replace the steam engine. By 1896, the number of electric companies established throughout the nation reached a total of 33. The early 20th century marked the establishment of long-distance transmission technology. As larger thermal and hydro power plants were introduced, generation costs fell and electricity came into wider use throughout the country. Consequently, electricity became an indispensable energy source for people's lives and industry.

In the years that followed, the electricity utility business grew in tandem with the modernization of Japan and development of its industry. At the same time, the electric utility industry experienced a major restructuring that led to the dissolution of 700 electric companies, which merged to create five major electric companies after the First World War. During the Second World War, the electric utility industry was completely state-controlled and companies were integrated into Nihon Hatsusoden Co. (a nationwide power generating and transmitting state-owned company) and nine distribution companies.

After the end of the second World War in 1945, supply and demand for electricity remained very tight in Japan. A series of intense discussions were held on restructuring the electric utility industry as one of the measures for democratizing the economy. As a result, nine regional privately owned and managed General Electricity Companies— Hokkaido, Tohoku, Tokyo, Chubu, Hokuriku, Kansai, Chugoku, Shikoku and Kyushu Electric Power Companies — were established in 1951 and assumed the responsibility of supplying electricity to each region. This fundamental structure remains to this day, and with the return of Okinawa to Japan in 1972, Okinawa Electric Power Co. joined as a tenth member.

At the end of the 20th century, a trend toward deregulation and competition took hold throughout society, and the electric utility industry started to be liberalized. In December 1995, organizations such as the independent power producers (IPP) were allowed to provide electricity wholesale services and in March 2000, electricity retail supply for extra-high voltage users (demand exceeding 2MW) was liberalized. The scope of retail liberalization was then expanded in April 2004 to users of more than 500kW, and subsequently in April 2005 to users of more than 50kW. Thus, a Japanese model of liberalization based on fair competition and transparency while maintaining the vertical integration of generation, transmission and distribution to ensure a stable supply of electricity, was established.

With the Fukushima Daiichi Nuclear Power Station accident and subsequent tight demand and supply brought about by the Great East Japan Earthquake in March 2011 as a turning point, numerous discussions were held to maintain a stable supply and reduce energy costs, and in November 2013, the policy to implement three-phase reforms of the electric power system was adopted. As a result, full retail liberalization will finally start in April 2016.

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