In 2005, Japan had 247.9 gigawatts (GW) of installed electricity generating capacity, the third largest in the world behind the United States and China. During 2006, Japan generated 1,007 billion kilowatthours (Bkwh) of electric power and consumed 974 Bkwh. Although Japan accounts for the most electricity consumption in OECD Asia, it has the lowest demand growth rate in the region. Of the country’s total electric power generation, roughly 60 percent came from conventional thermal sources, 29 percent came from nuclear sources, 9 percent from hydroelectric sources, and 2 percent from other renewables. By 2030, the EIA forecasts that Japan will consume 1,151 Bkwh of electricity.

Japan’s electricity industry is dominated by 10 privately-owned, integrated power companies that act as regional monopolies, the largest of which is the Tokyo Electric Power Company (TEPCO), which accounts for 32 percent of total power generation in the country. These companies together account for the majority of Japan’s electricity capacity and also control the country’s regional transmission and distribution infrastructure, leaving limited room for independent power producers (IPPs). Other significant operators in the electricity market are the Japan Atomic Power Company (JAPC), which operates four nuclear power plants and sells electricity to the local power company, and the Electric Power Development Company (known as J-Power), which operates 16 GW of hydroelectric and thermal power plants. J-Power, formerly a state-owned enterprise, was privatized in September 2004.

While Japan’s 10 regional power companies are privately owned and subject to some competition, historical regulation of the power sector has guaranteed effective monopolies for the companies. Japan has set out to liberalize and deregulate the electric power sector on a gradual basis.

In 2005, Japan had about 178 GW of conventional thermal electric generating capacity. The country has a large number of oil-fired power plants, although much of this capacity is primarily reserved as extra capacity to meet peak demand, as approximately only 11 percent of electricity produced in 2005 was from oil-generated. While the use of oil in the power sector has declined, natural gas use in the electric sector has risen substantially. Natural gas-fired power stations are increasing in Japan and roughly 24 percent of electricity is natural gas-fired. Coal remains an important fuel source and is used in a number of power-generating facilities. Coal-fired power generation accounts for approximately 25 percent of electricity in the country, although the Japanese government has encouraged the use of less polluting technologies. Nonetheless, coal is still widely used in power generation, as imports come from outside the Middle East and allow the country to diversify its sources of energy imports. Domestic coal production came to an end in 2002 and today Australia provides nearly 60 percent of coal imports in Japan. New, clean coal technologies are being pursued in the power sector, however, in efforts to meet environmental targets.

Japan currently has 55 operating nuclear reactors with a total installed generating capacity of around 50 GW, making it the third-largest nuclear power generator in the world behind the United States and France. The government’s nuclear energy plans stress maintaining or increasing the percentage of electric power that is nuclear-generated by 2030, which accounted for 29 percent of electric power in 2005. Industry reports indicate that in 2007 this share fell to 26 percent. Preliminary data shows that Japan produced 268 Bkwh of nuclear-generated electricity in 2007.

While Japan has promoted nuclear electricity over the years as a means of diversifying its energy sources and reducing carbon emissions, safety and reliability at many of the country’s reactors has been an issue in recent years. In August 2002, it emerged that maintenance inspection findings at some nuclear reactors owned by TEPCO had not been properly reported to government regulators. This led to the shutdown of all 17 of TEPCO's nuclear reactors over the following several months. Several new reactor projects, including some proposed by other utilities, were put on hold while the issue was resolved. TEPCO gradually brought these units back online by August 2004. However, the most serious problem in nuclear power generation of late occurred in July 2007, when the 6.8 magnitude Chuetsu Offfshore Earthquake hit, causing a shutdown of TEPCO’s Kashiwazaki-Kariwa nuclear power plant. As much as 8.21 GW of power generation capacity has been lost indefinitely as a result. Inspection and restoration work is ongoing at the plant but there are a variety of safety concerns that must still be addressed. These incidents have empowered a growing anti-nuclear lobby in Japan and TEPCO reportedly will only resume operations if it can obtain community and governmental approval. However, the country’s installed nuclear capacity is likely to increase in the long term according to industry reports, as nuclear power plays an important role in meeting the country’s environmental goals and electricity demand.

Japan had installed hydroelectric generating capacity of 22 GW in 2005, or about 9 percent of total capacity. While additional development of hydropower could boost the country’s energy security, it is not expected to account for much additional power capacity in coming years and has suffered from some drought conditions recently. Wind and solar power are more actively pursued in the country and installed capacity from these sources has increased in recent years, although they continue to account for a relatively small share of generation at this time.