Introduction

This time, I would like to consider self-dispatch, specifically, the evolution and current state of the self-dispatch system in the use of the power grid, as well as future prospects.

The self-dispatch system was introduced as part of the deregulation of the Electricity Business Act, and has become increasingly important in line with the subsequent development of renewable energy policies.
However, in recent times, actual usage that deviates from the purpose of the system has become apparent, and significant tightening of regulations will be implemented in February 2024.
Below, we will explain the evolution of this system, its impact on corporate activities, and future challenges.

Legal status of the self-transport system

The self-dispatch system is a form of "connection supply" as defined in Article 2, Paragraph 1, Item 5 of the Electricity Business Act (item (b) of the same article).
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Electricity Business Act
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Article 2 In this Act, the meanings of the terms set forth in the following items shall be as set forth in the respective items:
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5. Connection supply:
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(b) A person who receives electricity related to the generation or discharge of electricity at electric facilities for power generation, etc. (hereinafter referred to in this (b) as "electric facilities for non-electricity businesses") other than electric facilities for power generation, etc. (meaning electric facilities for power generation and electric facilities for storing electricity; the same applies hereinafter) used for an electricity business (hereinafter referred to as "electric facilities for non-electricity businesses" in this (b)) from another person who maintains and operates such electric facilities (including electric facilities for non-electricity businesses maintained and operated by a person who has a close relationship with such other person as specified by an Ordinance of the Ministry of Economy, Trade and Industry), simultaneously supplies to such other person, at a place other than the place where the electricity was received, the amount of electricity that such other person has requested in advance (limited to that which meets the demand of such other person or a person who has a close relationship with such other person as specified by an Ordinance of the Ministry of Economy, Trade and Industry).
(vi) "Transportation service" means transfer service and connection service.
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Self-consignment is a system that is established by interpreting "other person" as "self."
In that sense, it can be considered a kind of legal fiction.
This fictional system makes it possible for power generation companies to transmit electricity generated at their own power generation facilities to their own demand points in remote locations.

Changes in the system and legal background

Background to the introduction of the system

The self-dispatch system was introduced as part of the trend toward deregulation of the electricity industry in the 1990s.
Initially, the system was targeted at businesses with in-house power generation facilities, such as large factories, with the aim of making efficient use of the power grid.

Following the Great East Japan Earthquake in 2011, the importance of the self-wheeling system was reaffirmed against the backdrop of a tight electricity supply-demand balance.
During this period, the Ministry of Economy, Trade and Industry sought to clarify the operating rules for self-dispatch through the Electric Power System Council (now the Organization for Promotion of Cross-regional Coordination of Transmission Operators).

Link with renewable energy policy

As a measure to promote the spread of renewable energy, the Act on Special Measures Concerning Procurement of Electricity from Renewable Energy Sources by Electric Utilities (FIT Act) was enacted in 2012.
Under the FIT Act, renewable energy power generation companies generally used the feed-in tariff system, but self-wheeling was positioned as an alternative option.

Abuse of the system and increased regulation

Since around 2020, the use of self-wheeling to avoid renewable energy surcharges has increased, and cases that deviate from the purpose of the system have become apparent.
Specifically, the following methods were identified as problematic:

Rental self-dispatch : A method of renting power generation equipment from another party and conducting self-dispatch
Bulk power receiving and self-dispatch : A method in which the management association of an apartment complex etc. purchases electricity in bulk and distributes it to each unit.

These methods broaden the scope of "self" in the Electricity Business Act, and legal issues have been raised as to whether this is an excessive interpretation.

Regulatory and legal impacts in 2024

Overview of the amendment

On February 12, 2024, the Ministry of Economy, Trade and Industry revised the " Guidelines for Self-Consignment " and tightened the requirements for self-consignment.
The main changes are as follows:

Requirements for ownership of power generation equipment : Power generation equipment transferred or leased from a third party is not eligible for self-consignment.
Requirements for end-users of electricity : The supply of electricity to others who are not closely related within the demand location is not subject to self-dispatch.

The impact of law

As a result of this amendment, the previous self-dispatch system for rental and self-dispatch system for lump-sum receiving are no longer permitted in principle.
From a legal perspective, the interpretation of "self" has been tightened and the scope of application of Article 17 of the Electricity Business Act has been clarified.
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(Obligation to provide consignment, etc.)
Article 17 (1) A general electricity transmission and distribution utility must not refuse a wheeling service (in the case of a transfer service, limited to electricity to be used for a retail electricity business, general electricity transmission and distribution business, electricity distribution business, or specified electricity transmission and distribution business, or electricity pertaining to the connection service set forth in Article 2, paragraph 1, item 5 (b), as specified by an Ordinance of the Ministry of Economy, Trade and Industry; the same applies in the following Article, paragraph 1) in its service area without a justifiable reason.
2. A general electricity transmission and distribution utility must not refuse to provide an energy adjustment supply in its service area unless there is a risk that it would be required to secure excess supply capacity in order to provide such an adjustment supply or there is any other justifiable reason.
3. General electricity transmission and distribution businesses must not refuse to provide last resort supply or supply to remote islands, etc. without a justifiable reason.
4. When a general electricity transmission and distribution business operator is requested by a person who maintains and operates, or intends to maintain and operate, electrical facilities for power generation, etc. to electrically connect said electrical facilities for power generation, etc. to an electric line maintained and operated by said general electricity transmission and distribution business operator, it must not refuse said connection unless there is a risk that said electrical facilities for power generation, etc. may cause electrical or magnetic interference to the function of said electric line or there is any other justifiable reason.
5. A general electricity transmission and distribution utility must appropriately and promptly handle complaints and inquiries from the party to the last guaranteed supply or remote island supply (including a person who intends to receive a last guaranteed supply or remote island supply from said general electricity transmission and distribution utility, but excluding persons who are electric utilities) regarding the method of said general electricity transmission and distribution utility's business of last guaranteed supply or remote island supply, or the fees and other supply conditions related to said general electricity transmission and distribution utility's last guaranteed supply or remote island supply.
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Although this amendment was made in the form of administrative guidelines, it will essentially serve as an interpretation guideline for the Electricity Business Act, and therefore may have an impact on legal interpretation in the courts.

Impact on business activities and legal risks

Impact on renewable energy businesses

Renewable energy operators who were considering business models based on self-dispatch will likely be forced to reconsider their business schemes.
In particular, operators that use rental self-consignment systems may need to consider transferring ownership of their power generation facilities or changing their business structure in the future.
Furthermore, due to changes in the business scheme, it may become necessary to re-file notifications and obtain licenses and permits under the Electricity Business Act.

Impact on housing complex management associations, etc.

Apartment complexes and other buildings that have been using self-consignment bulk power receiving systems may need to change their power procurement method.
Legally, it may be necessary to review the contractual relationships between the management association and each owner, and to conclude new contracts with the power company.

Impact on power companies

For general electricity transmission and distribution companies, the risk of reduced revenue due to self-dispatch will be reduced, but it is likely that they will need to revise their transmission supply terms and conditions and review their self-dispatch review criteria.
In addition, applications for approval to amend the wheeling service terms and conditions pursuant to Article 18 of the Electricity Business Act and amendments to the wheeling service etc. business regulations pursuant to Article 23 of the same Act may be required.

Future legal challenges and prospects

Consistency with renewable energy policies

When tightening the self-dispatch system, we need to consider its impact on the spread of renewable energy.
In particular, compatibility with the FIT Act and the Act on Promoting the Use of Non-Fossil Energy Sources and the Effective Use of Fossil Energy Raw Materials by Energy Supply Companies (Advanced Energy Act) appears to be an issue.

Connection with electricity system reform

Regarding the tightening of the self-dispatch system, it seems necessary to clarify its relationship with the distribution business system and the aggregator system, which are being implemented as part of the electricity system reform.
In particular, we believe that consideration is needed regarding how electricity distribution companies should handle self-dispatch and who bears legal responsibility when an aggregator is involved.

Responding to new electricity trading formats

New forms of electricity trading are beginning to emerge, such as P2P electricity trading that utilizes blockchain technology.
It is expected that there will be a demand for the establishment of a legal framework regarding the relationship between these new technologies and the self-delivery system.

Harmony with international trends

Taking into account the trends in similar systems in Europe and the United States, as well as international energy policy trends, it is necessary to reconsider the structure of Japan's self-wheeling system.
In particular, issues will likely arise regarding consistency with EU directives and harmonization with international climate change measures.

summary

As mentioned above, the self-wheeling system has played an important role in the context of electricity liberalization and the spread of renewable energy.
However, the emergence of cases of abuse of the system has led to the strengthening of regulations in 2024.
This strengthening of regulations will tighten the interpretation of the Electricity Business Act and clarify the scope of "self," and is expected to have a significant impact on corporate activities.

Given the history of the situation, there is no doubt that the self-wheeling system will be an important system that plays a part in energy policy, and the shape of its legal framework will have a major impact on Japan's energy transition and the realization of a sustainable society.
I hope that both the public and private sectors will continue to make efforts to find the optimal form, rather than assuming that the current regulatory situation is the final form of self-delivery.