ABSTRACT
In the early days of the new millennium, representatives from the Federation of Electric Power Companies of Japan (FEPC) approached Liberal Democratic Party (LDP) members behind the scenes. They requested a hearing on a Ministry of Economy, Trade and Industry (METI)-sponsored bill that would force power companies to develop renewable energy sources for on-grid consumption at a time when rising electricity prices, difficulties in securing supply, and scandalous examples of failed liberalization attempts abroad were already dimming prospects of further reforms at home. The FEPC had the support of numerous groups, both within the business community and among consumers. These supporters were by no means resource poor, and their diversity seemed to assure that they would have legitimacy in the public eye, too. The LDP members were receptive, and the initiative to block the renewable energy bill began in earnest. Sometimes a political battle seems to tick all the right theoretical boxes for success,
yet still fails to win. The fight to block the renewable energy bill was just such an issue. Electric power companies and their allies disliked most renewable energy sources because they were well known to be costly, unreliable, and lacking in density and scale, meaning that many new generating sites would have to be found. Opponents of the bill were well connected, gave campaign contributions to both the government and the opposition, had the vocal support of energy-intensive corporations wanting lower prices and higher security, and had key support of well-established politicians and other allies within the ministries. Their issue was consistent with the public’s wish for higher disposable income, and had minimal organized opposition in Japan. In contrast, proponents of renewable energy in Japan, which was part of a global “green” movement of advocacy journalists, activist scholars, and alternative energy firms, began in the late 1980s as a fledgling technology but attracted only limited and vague support. Nevertheless, on June 7, 2002, despite organized resistance from the electric power industry, the Act on Special Measures Concerning the Use of New Energy by Operators of Electric Utilities (Act No. 62) passed. Ten years later, another opportunity to sideline a renewable energy initiative arose,
this time a bill forcing the electric power companies to purchase renewable energies at pre-determined rates known as the feed-in-tariff (FIT) for fixed periods of time in order to entice suppliers into the Japanese market. The costs to the utilities would then be passed along to ratepayers, thus raising what were already some of the highest electricity prices in the industrial world and further decreasing consumer welfare. Once
again, the electric power companies and their allies in business and the ministries objected-this time, publicly and vociferously. Nevertheless, on August 30, 2011, despite organized resistance by a range of incumbent political actors, another renewable energy bill passed into law. Why? Much has been written about political resource endowments and their influence (or
lack thereof) in political decision-making theory. In a sense, it is fairly well accepted that political resources manage to induce the support of economically depressed and fragmented local host communities for the siting, licensing, and construction of essential facilities such as hydroelectric dams, nuclear power plants, and high-transmission electric power towers (Lesbirel 1998; Aldrich 2008; also see Chapter 6). Unlike the execution of existing policies designed to induce top-down local compliance, however, the issue of who controls whom at the national policy-making level-the classic “who governs” debate surrounding all of Japanese political economy-is a much more complicated process. Previous scholarly attempts to identify exactly who governs the electric power and energy sectors-the politicians, the bureaucracy, or the private sector-have led some scholars to conclude that no one actor clearly dominates the others (c.f. Johnson 1978; Samuels 1987; Scalise 2009; Hymans 2011). The question therefore seems not to be who controls whom, since that varies over time, but how and perhaps when structural reform takes place. In this chapter, we discuss the history and drivers of change in Japanese post-war
energy market restructuring on both an economic and political level. The analysis reveals that many of the untested assumptions regarding alleged profit-maximizing, goal-oriented economic behavior of well-organized actors utilizing political resources to capture beneficial policies (rent seeking) in the decision-making process fail to explain puzzling market transformations adequately. Japan’s electric power sector has been plagued by rising electricity prices, declining operating profits, and mounting institutional and systemic obstacles in turning the tide for decades. Rather than ignoring these counter-intuitive market developments, the chapter builds upon the work of Goldstein and Keohane (1993), Jones (2001), Woll (2008), and other scholars suggesting that objective or material self-interest is subordinate to ideational roadmaps-sometimes called “policy images”—guiding actor preferences, decisions, and perceptions of fairness. We begin by analyzing one of the most salient casualties of these conflicting policy images: consumer welfare.
