*Please note that this newsletter is for informational purposes only and does not constitute legal advice. In addition, it is based on information as of its date of publication and does not reflect information after such date. In particular, please also note that preliminary reports in this newsletter may differ from current interpretations and practice depending on the nature of the report.
1. Introduction
As a nation with limited natural fossil fuel resources, Japan depends substantially on imported fuel particularly LNG, coal, and oil for its energy production, although it has promoted the expansion of renewable energy in recent years. In this respect, Japan faces significant challenges in realizing and maintaining a stable and secure energy supply particularly in light of recent geopolitical instability and supply disruptions. This issue is exacerbated by increasing energy demands attributable to the progress of digital transformation (DX) including the growing number of data centers, and is affected by green transformation (GX) measures, particularly the rise of renewable energy systems and concerns relating thereto.
Against this background, on July 17, 2026, the Bill for the Act for Partially Amending the Electricity Business Act (the “Bill”) was submitted to the Diet for consideration, and on that same day the Diet passed the Bill and enacted the Act to Partially Amend the Electricity Business Act (the “Amendment Act”).※1 The Bill originated from discussions on Japan’s energy, including energy supply and energy security, held by two advisory bodies serving the Ministry of Economy, Trade and Industry (“METI”): (a) the Subcommittee on Building the Infrastructure for Next-Generation Electricity and Gas Businesses and (b) the Working Group on Institutional Design Based on the Review of Electricity System Reform, the results of which were compiled into a report (the “Interim Report”) which served as the basis for the Bill.
The Amendment Act seeks to ensure energy stability and security by promoting the development of large-scale power sources and large-scale intra-regional and inter-regional transmission lines, creating an environment conducive to stable and sustainable development of Japan’s electric power industry, and introducing measures to improve structural integrity and safety of photovoltaic power generation facilities and other equipment. More specifically, the Amendment Act sets out the following five major amendments which are expected to have a significant impact on businesses operating in the Japanese power sector:
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a new requirement for Large-scale Power Generation Operators (defined in 2(1) below) to consult with affected general electricity transmission and distribution business operators (“TSOs”)※2 regarding the suspension or decommissioning of Large-scale Power Generation Facilities (defined in 2(1) below);
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the establishment of a new arrangement for financing large-scale power generation development projects certified by the Minister of Economy, Trade and Industry (the “Minister”) and projects for the development of intra-regional transmission lines and related facilities certified by the Minister, through loans from the Organization for Cross-regional Coordination of Transmission Operators (“OCCTO”)※3;
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the recognition of “continuous suspension of retail electricity operations for one year or longer without just cause” as an additional basis for revocation of retail electricity business registration;
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the establishment of authority for the Minister to designate and supervise medium- to long-term wholesale electricity exchanges that establish and operate medium- to long-term trading markets, and balancing reserve exchanges that operate balancing markets; and
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the establishment of a mandatory preconstruction conformity review and certification process for entities engaged in installation of photovoltaic power generation facilities.※4
In this newsletter, we present an overview of the Amendment Act’s five major amendments, provide insights relating to these amendments, and identify areas for further monitoring.
2. Overview of the Major Amendments
(1) Mandatory Consultation Regarding the Suspension or Decommissioning of Large-Scale Power Generation Facilities, etc.
(a) Establishment of a mandatory consultation obligation
Under this amendment, a power generation operator whose installation(s) produce 100,000 kilowatts of electricity or more (or the output volume specified by forthcoming METI ordinance) (“Large-scale Power Generation Operator”), when intending to suspend or decommission power generation installation(s) producing the kilowatt output specified by METI ordinance (“Large-scale Power Generation Facility”), must, in accordance with METI ordinance, consult with TSOs receiving electricity from such installation(s) by the date to be stipulated in a METI ordinance. In that consultation, the relevant parties are to discuss the date of suspension or decommissioning of the relevant installation(s) and other matters addressed in the relevant METI ordinance.※5
(b) Purpose for the amendment
According to the Interim Report, this amendment serves as a measure to ensure electricity supply capacity by enabling the national government, OCCTO, and affected TSOs to obtain information on plans to suspend or decommission Large-scale Power Generation Facilities sufficiently in advance of the event. The Amendment Act provides that details regarding implementation are to be set out by METI ordinance. According to the Interim Report, it was expected that a mechanism enabling the national government, OCCTO, and affected TSOs to access such information approximately ten (10) years prior to the actual electricity delivery would be considered. However, in consideration of the impact on the Large-scale Power Generation Operator, a working group is currently discussing a framework under which the METI ordinance would require such consultation to be conducted no later than twelve (12) months prior to the scheduled date of suspension or decommissioning. The early sharing of information regarding suspension or decommissioning of Large-scale Power Generation Facilities allows the government, OCCTO and affected TSOs to plan ahead and take appropriate steps to ensure power supply capacity from and after the relevant suspension or decommissioning of the Large-scale Power Generation Facility.
(c) Potential impact
As a consequence of this amendment, Large-scale Power Generation Operators contemplating suspension or decommissioning of Large-scale Power Generation Facilities in the future will need to plan ahead and consider the timing for the mandatory consultation in accordance with METI ordinance. Other consequences will become apparent once details of this amendment are specified by METI ordinance.
(2) New Certification System and Arrangement for Loan Financing for Large-scale Power Generation Development Projects and Large-scale Transmission Lines Development Projects
(a) Establishment of new certification system
This amendment mandates the creation of a system for certification by the Minister, for (i) plans for the development of large-scale power generation submitted by large-scale electricity generation utilities (“Power Generation Development Plans”) and (ii) plans for the development of large-scale intra-regional transmission lines and related facilities submitted by TSOs, etc. (“Grid Development Plans”). The certification system applies to power generation facilities with an output at or above a level to be specified by METI ordinance. While such output level is yet to be determined, it is likely that large-scale power generation facilities are contemplated based on the Interim Report’s mentioning that large-scale carbon-free power generation sources potentially will be eligible for financing※6. Similarly, regarding qualifying transmission lines and related facilities (e.g., substation facilities), only those whose voltage or output volume meets or exceeds the level to be specified by METI ordinance will be eligible for certification.※7 Although specific details are to be set out by METI ordinance, it is assumed that this system will apply to large-scale grid-related facilities※8.
The Amendment Act stipulates certain criteria for certification by the Minister under this system.※9 For Power Generation Development Plans, the relevant power generation facility must be capable of supplying electricity continuously and stably in light of relevant factors and must comply with other requirements to be specified by METI ordinance. For Grid Development Plans, the maintenance or renovation of the large-scale intra-regional transmission lines and related facilities to be carried out must increase the capacity of the relevant transmission lines by an amount to be specified by METI ordinance, and must satisfy other requirements to be specified by METI ordinance. For both Power Generation Development Plans and Grid Development Plans, the project implementation period, implementation structure, and other matters must be appropriate for ensuring the reliable execution of the relevant plan.
(b) Establishment of a new loan financing arrangement
Additionally, the Amendment Act authorizes and empowers OCCTO to provide loan financing for large-scale power generation development projects and large-scale intra-regional transmission lines and related facilities development projects for which certification has been granted by the Minister, utilizing the Fiscal Investment and Loan Program (i.e., a government-backed long-term financing system used to finance projects considered to support the public interest) and other sources of financing. Projects not receiving certification under this system are ineligible for such OCCTO loan financing.※10
The Amendment Act provides that the Minister may revoke any certification granted for a plan if the plan is not followed; therefore, entities responsible for projects for which certification has been granted for their plans are required to carry out their operations in accordance with such plans.※11
(c) Purpose for the amendment
According to the Interim Report, this new OCCTO loan financing system is intended to facilitate important projects addressing public needs, such as the need for stable power supply and the need for decarbonization of the power sector, as well as to contribute to long-term, large-scale investments in power generation and grid development.
(d) Working Group on Improving the Electric Power Business Environment
Although not addressed in the Amendment Act, it should be noted that the Working Group on Improving the Electric Power Business Environment has been established to discuss public financing for power generation and grid development. This working group is currently discussing matters relating to the amendments under the Amendment Act such as the definitions of “large-scale power generation operator” and “large-scale power generation facilities” which subsequently will be established by METI ordinance, as well as the OCCTO loan financing lending criteria. In this regard, interested power sector stakeholders including power generation operators and TSOs should closely monitor the discussions of this working group.
(3) Additional Basis for Revocation of Registration for Retail Electricity Suppliers
(a) Revocation due to prolonged suspension of retail electricity business
The Amendment Act stipulates that the Minister may revoke the registration of a retail electricity supplier if the supplier has suspended its retail electricity business for one year or longer without just cause.※12 The effect of such registration revocation is invalidation of the affected entity’s authority to engage in an Electricity Retail Business in Japan.
(b) Purpose for the amendment
Currently, there are over 700 entities registered as retail electricity suppliers in Japan (i.e., entities authorized to engage in an Electricity Retail Business in Japan) but approximately one-third of them have no record of engaging in electricity supply operations (“dormant suppliers”). Additionally, there are instances where dormant suppliers have engaged in fraudulent activities. To address this situation, the government intends to revoke registrations granted to operators that fail to engage in a retail electricity business for a year or longer without just cause. According to the Interim Report, the continuous suspension of retail electricity business operations and the failure to provide electricity for retail supply will be confirmed through supply plans, monthly reports, and other documents.
A question exists, however, as to whether retail electricity suppliers engaged solely in wholesale trading (and thus not engaged in selling or supplying electricity to end users) fall within the meaning of “suspension of retail electricity business” and if so, whether they will be deemed to have justifiable grounds for maintaining their registration. This may become a point of discussion in the future as volume and players in OTC wholesale trading in Japan’s power sector are expanding year by year, and may be clarified by administrative disposal criteria or other public announcement by METI.
(4) Diversification of Wholesale Electricity Exchanges
(a) New authority for the Minister to establish new wholesale electricity exchanges
The Amendment Act authorizes the Minister (i) to designate qualified entities to serve as wholesale electricity exchanges in Japan that operate medium- to long-term electricity markets, which are to be newly established, and balancing markets which are currently under operation,※13 and (ii) to exercise ongoing supervision and oversight over the exchanges through the Minister’s powers and authority including the authority to approve market rules and to appoint and dismiss key individuals within such designated entities.※14 Additionally, the Amendment Act stipulates that the designated markets will be subject to reporting requirements and on-site inspections.
(b) Purpose for the amendment
By this amendment, the government seeks to promote vitalization of medium- to long-term electricity trading which contributes to the formation of widely accessible, fair, and stable electricity price indices. In such environment it is expected that retail electricity suppliers will be able to stably procure supply capacity over the medium to long term, and predictability regarding power generation investments and fuel procurement by power generators will improve.
(5) Mandatory Prior Confirmation for Photovoltaic Power Facility Installation
(a) Establishment of new preconstruction conformity verification requirement
This amendment establishes a new requirement for entities engaged in the installation of photovoltaic power generation facilities to submit a certificate issued by a registered conformity verification organization to the Minister, prior to the start of construction. Under the certificate, the registered conformity verification organization verifies that the relevant support structures and other components conform to applicable technical standards. Details of this mandatory certification process will be addressed by METI ordinance.
Additionally, the Amendment Act calls for the establishment of measures requiring the cooperation of manufacturers, distributors of imported items, and construction companies in identifying the causes of, and determining ways to mitigate recurrence of, incidents from product defects or construction defects at photovoltaic power generation facilities, where such cooperation is needed.
(b) Purpose for the amendment
In response to concerns over the safety of support structures and other components of photovoltaic power generation facilities, many of which were rapidly developed after the expansion of renewable energy incentives, the government decided to implement mandatory preconstruction verification of conformity to technical standards for support structures and other components of photovoltaic power generation facilities by a third-party organization (a registered conformity verification organization).※15
Also, to aid in identifying the causes of, and ways to mitigate recurrence of, defect-related incidents at photovoltaic power generation facilities, the Amendment Act mandates that measures be established to secure the cooperation of manufacturers, distributors of imported items, and construction companies.
3. Conclusion
As mentioned above, the date of enforcement of the Amendment Act is to be announced by Cabinet Order and is expected to be in 2027. While the Amendment Act establishes the legal basis and authority for the amendments stipulated therein, details for implementing the amendments will be addressed by METI ordinances, etc. It is anticipated that (i) working groups within METI will discuss specifics relating to the amendments, such as the medium- to long-term trading market and financing for investments in power generation and the power grid, and advise on matters to be addressed in METI ordinances, etc., and (ii) in the future, METI will publish its draft ordinances, etc. for public comment, allowing interested parties to submit comments on the proposed ordinances, etc. for METI’s consideration. As these amendments will affect many stakeholders in the Japanese power sector, including power generators, retail electricity suppliers, TSOs, and wholesale electricity traders, relevant government announcements regarding this matter should be closely monitored.
Endnotes
*1
In Japan, once the Diet passes a bill and an act is enacted, it becomes law, is promulgated by the Emperor, and comes into force (i.e., takes legal effect) on a date specified in the act (in this case, on a date specified by order of the Cabinet within a period not exceeding nine months from the date of promulgation).
*2
General electricity transmission and distribution business operators are entities engaged in a General Electricity Transmission and Distribution Business (Ippan Sohaiden Jigyo) that operate and maintain electricity transmission and distribution networks and provide ancillary services such as supply-demand adjustment and frequency control in their region; and are referred to as Japan’s Transmission System Operators (TSOs).
*3
OCCTO is an organization created under Japan’s electricity reform framework that serves to coordinate transmission planning and system operations among Japan’s regional transmission and distribution operators to ensure stable and efficient power supply.
*5
Amendment Act, Article 27-28-2.
*6
In the Working Group referred to in 2.(2)(d) below, discussions are proceeding on the basis that the output level of power generation facilities subject to certification will be 500,000 kW or more.
*7
Amendment Act, Article 27-3-2.
*8
In the Working Group, discussions are proceeding on the basis that the transmission lines subject to certification will be those with a voltage of 170,000 V or higher, and the substation facilities subject to certification will be those with a capacity of 200,000 kVA or greater.
*9
Amendment Act, Article 27-3-2, Paragraph 3; Article 27-29-7, Paragraph 3.
*10
Amendment Act, Articles 27-3-2, 27-11-7, 27-29-7, and 28-40.
*11
Amendment Act, Article 27-3-3 and Article 28-29-8.
*12
Amendment Act, Article 2-9, paragraph 2.
*13
It is conceivable that Electric Power Reserve Exchange (EPRX), which currently operates the market platform for balancing markets, could receive this designation.
*14
Amendment Act, Articles 99-17, 99-19, 106, and 107.
*15
See METI publication Summary of Safety Issues and Directions for Response Concerning Power Generation Facilities, Including Photovoltaic Power Generation Facilities, March 12, Reiwa 8, p. 12.
This newsletter is given as general information for reference purposes only and therefore does not constitute our firm’s legal advice. Any opinion stated in this newsletter is a personal view of the author(s) and not our firm’s official view. Given the nature of this newsletter as general information, statutory provisions and source citations may have been intentionally omitted. For any specific matter or legal issue, please do not rely on this newsletter but make sure to consult a legal adviser. We would be delighted to answer your questions, if any.
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