Keidanren released its policy proposal "Electricity Policy to Realize Society 5.0 with Carbon Neutral." The proposal describes the future vision of electricity system that will enable Japan to become carbon neutral by 2050 and the policy measures needed to build such system.

1. In the proposal, focusing on power sector that has established decarbonization technologies, we advocate achieving carbon neutrality of Japan's electricity system including networks by 2050, through combining decarbonized resources such as renewables, nuclear, and storage batteries. Carbon neutrality of society as a whole should also be pursued by increasing electricity's share of total energy demand.

2. Replacing power sources is essential to decarbonizing electricity at the point of generation. Since the initial investment burden of constructing new generation facilities is large, the government should improve the function of the capacity market which provides compensation for availability of future supply capacity, and utilize the feed-in premium (FIP) scheme (scheduled to be introduced in fiscal 2022) which provides additional payment to buffer market price volatility, as mechanisms for increasing predictability of investment returns.

3. In preparation for massive deployment of solar and wind both of which are variable power supply, we emphasize expanded use of electricity storage facilities such as pumped storage power plants and batteries, advocating consideration of systems that will help ensure business viability, including the handling of wheeling charges, as well as the promotion of storage battery technology development and regulatory reforms.

4. We urge the government to provide enabling conditions for utilizing small-scale distributed resources such as rooftop solar, electric vehicles, hydrogen production, and demand response, and carry out detailed design of a new wheeling charge system to support the installation of next-generation transmission and distribution grids.

5. For the composition of power sources in 2050, we ask the government to draw up multiple scenarios and conduct regular reviews based on technological trends. The government should also set the 2030 target, as before, by building up possible measures, taking into account the transition toward the 2050 goal.

6. This policy proposal follows the first proposal, "Rebuilding Japan's Electricity System," announced in April 2019. Since the first proposal's announcement, the Act for Establishing Energy Supply Resilience was passed in June 2020 and, most importantly, Prime Minister Suga announced his 2050 carbon neutrality goal in October 2020. This policy proposal was developed taking these events into account.

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