Abe Announces $302 Billion Plan to Restructure Japan’s Electricity Industry

Japanese Prime Minister Shinzo Abe dealt a blow to the countries utility companies as he announced on Wednesday that he supports a new plan to invest 30 trillion yen ($302 billion) into Japan’s electricity industry to boost competition, and renewable energy installations. He also made no mention of whether or not nuclear power plants will be restarted anytime soon.

This plan to restructure the power generation business poses a threat to utilities, who had been hoping that nuclear power plants would be given the go ahead to restart.

Bloomberg notes that “Japan’s 10 regional power companies own more than 70 percent of the nation’s generation capacity and control transmission and distribution networks.” So talk of increased competition is worrying news for their investors.

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Abe explained that “for 60 years after the war (WWII), one giant power company in each region has dominated from power generation to transmission to retail. The times are changing. We are in the age where consumers themselves produce power.”

Share values for Japanese utility companies fell for the second day in a row on Thursday, after the announcement. Shares in Tokyo Electric Power Co., which owns the Fukushima Daihatsu nuclear power plant, fell 7.4% on Thursday, after falling 16% the day before. Shikoku Electric Power Co. Inc., Hokkaido Electric Power Co. Inc., Kansai Electric Power Co. Inc., Tohoku Electric Power Co. Inc. also fell for the second day in a row.

On the other hand, smaller energy companies such as Marubeni Corp. and Softbank Corp., who are planning to invest in renewable energy projects, are likely to benefit greatly from the new reforms.

By. Charles Kennedy of Oilprice.com