A spatial equilibrium analysis of transmission charge reform in Japan's electric power industry

This paper examines impacts of the regulatory reform of transmission charge schemes in Japan's electric power market. The reform intends to promote intra- and inter-regionally competition between power suppliers with postage-stamp style charges irrespective of transmission distance. It leads to extensive uses of inter-regional links to cause congestions. Congestions segment the market into several regional markets to make the reform less successful. We develop a nine-region spatial equilibrium model to simulate the reform. We found that the reform would lead to significant increases of inter-regional transmission but to cause congestion only at one link. Other links would have abundant capacity.