"Japan Establishes 20-Year Revenue Guarantee Structure for Large-Scale Power Plants Including Nuclear"

[Asia Economy Reporter Jeong Hyunjin] On the 24th, Nihon Keizai Shimbun reported that the Japanese government will introduce a system that guarantees stable income for 20 years when constructing certain large-scale power plants, including nuclear power, to improve the power shortage situation.

According to the report, the Ministry of Economy, Trade and Industry of Japan plans to discuss this matter soon at a review meeting and reflect it in the 2023 plan. Recently, as the spread of renewable energy with low generation costs has caused a decline in profits from thermal power generation, new investments in large-scale power plants have stagnated. The purpose is to guarantee income for 20 years once these power plants start operation, making it easier to forecast the prospects of power generation projects with long investment recovery periods.

The targets are expected to be natural gas thermal power and nuclear power. Coal thermal power, which emits a large amount of carbon dioxide (CO2), will be excluded from support. However, investments to decarbonize operating power plants will also be supported. In particular, if facilities mix hydrogen or ammonia, which do not emit CO2, into the fuel, coal thermal power will also be included.

To guarantee the income of power plants, the Japanese government plans to utilize the capacity market introduced in 2020. In the capacity market, which was introduced to ensure stable power supply, the value of future generation capacity is traded rather than the amount of power produced. This process is conducted by the government-led Organization for Cross-regional Coordination of Transmission Operators (OCCTO). Previously, the income power plants earned varied depending on the auction results each year, but now a new bidding structure will be established to secure stable income.

According to Nihon Keizai Shimbun, the funding structure remains the same, where power companies pay the government agency annually, and ultimately the electricity consumers bear the cost. Nihon Keizai Shimbun stated, "Overseas, there are systems where newly established power plants can secure income over a long period, such as up to 15 years in the UK and up to 7 years in the US," and reported that the Japanese government has reasons related to improving power shortages for introducing this system.

This content was produced with the assistance of AI translation services.