Question 1

Does an energy company need a licence to operate in Japan?

Accepted Answer

There is no single licence for operating an energy business in Japan.The applicable regulatory requirements depend on the activities carried out by the company. Retail electricity supply requires registration as a Retail Electricity Business (小売電気事業). A company carrying out qualifying generation or electricity-storage activities is subject to the Generation Business notification regime (発電事業届出). Certain aggregation activities are subject to the separate Specified Wholesale Supply Business notification regime (特定卸供給事業届出).Transmission and distribution activities are governed by separate statutory regimes.Participation in JEPX or EPRX is also different from obtaining a licence or registration under the Electricity Business Act. These markets have their own membership, contractual, system and technical requirements.

Question 2

What should a foreign energy company consider before incorporating in Japan?

Accepted Answer

The proposed activities and operating structure should be considered before the Japanese company is established.In particular, the investor should determine:the activities to be carried out by the Japanese company and its role within the wider group or project structure;whether the company will own or operate generation, renewable energy or BESS assets in Japan;the intended route to market, including any wholesale trading, balancing-market participation, electricity retail, aggregation or third-party market-access arrangements;the proposed grid connection, balancing group and TSO arrangements;whether any Electricity Business Act registration or notification, OCCTO membership or other market-access procedure will be required;whether the proposed capitalisation and financial position are appropriate for the intended activities and any direct market participation; andwhether FEFTA screening or prior notification is required before the foreign investment is implemented.
For example, both JEPX and EPRX currently apply a JPY 10 million net-asset requirement for direct trading membership, while EPRX also requires qualified invoice issuer status. These points may affect the initial capitalisation and timing of the Japanese company.Considering these matters before incorporation helps align the corporate structure, capitalisation, ownership and regulatory timetable from the outset.

Question 3

Does FEFTA apply when a foreign investor establishes or acquires a Japanese energy company?

Accepted Answer

It can. An acquisition or subscription of shares in an unlisted Japanese company by a foreign investor can constitute an inward direct investment under the Foreign Exchange and Foreign Trade Act (“FEFTA”).Electricity-related businesses are included within Japan's designated business sectors. Certain electricity activities are also included within the more sensitive core business sectors. Whether prior notification is required depends on the activities of the Japanese company, the identity and characteristics of the investor, the form and percentage of the investment and the availability of any exemption.FEFTA should therefore be considered before the relevant share subscription, acquisition or other investment is implemented.Japan amended its foreign-investment screening regime in 2026. The relevant implementing rules come into force on 4 January 2027 and become fully applicable on 3 February 2027. The revised framework also brings certain indirect acquisitions within the screening regime, which can be relevant where a foreign investor acquires control of an overseas holding company that owns interests in a Japanese designated-sector company.The FEFTA analysis should therefore also be considered in international transactions where the Japanese energy assets are held indirectly.

Question 4

What should a foreign investor review when acquiring an existing energy project in Japan?

Accepted Answer

An acquisition of an existing renewable energy, power generation or BESS project should include a review of the project's regulatory position in addition to the usual corporate, contractual, financial and tax due diligence.The scope will depend in particular on whether the transaction is structured as an acquisition of the shares in the project company or as an acquisition of the business or assets.From a regulatory perspective, the due diligence will typically consider, as applicable:Electricity Business Act registrations and notifications;grid-connection status and relevant agreements;OCCTO membership and electricity-business codes;balancing group and TSO arrangements;JEPX, EPRX and other market-access arrangements;FIT/FIP accreditation;Capacity Market arrangements;electrical-safety and technical filings;environmental, land-use and other material project permits;material PPAs, aggregation, optimisation or other operating arrangements; andany procedures required as a result of the proposed transfer or change in ownership.For FIT/FIP projects, changes to the project or project operator can also require procedures relating to the accredited business plan. ANRE's current guidance specifically addresses procedures in connection with transfers of accredited projects.FEFTA should also be assessed before the acquisition is completed.LPA Administrative Scrivener Corporation can assist with the regulatory due diligence of energy projects. Where broader corporate, contractual, financing or tax due diligence is required, the review can be coordinated with the LPA network as part of the overall transaction.

Question 5

When is a Generation Business notification required?

Accepted Answer

A company that conducts a Generation Business (発電事業) under the Electricity Business Act must submit a notification before commencing that business.Under the current framework, the relevant generation or electricity-storage facilities must generally:have an output of at least 1,000 kW;use more than 50% of their output for electricity supplied for Retail Electricity Business, General Transmission and Distribution Business, Distribution Business or Specified Transmission and Distribution Business purposes; andbe expected to use more than 50% of the electricity generated or discharged for those purposes.
For facilities with output exceeding 100,000 kW, the applicable percentage threshold is reduced from 50% to 10%.Where the aggregate connection maximum power attributable to qualifying facilities exceeds 10,000 kW, the operator is considered to conduct a Generation Business and must make the applicable notification.Electricity-storage facilities are expressly included in this framework. A power plant or BESS therefore does not become subject to the Generation Business notification merely because a single facility exceeds 1 MW.

Question 6

Who is considered the Generation Business operator?

Accepted Answer

The entity required to make the Generation Business notification is not necessarily the legal owner of the generating facility.The relevant question is which entity maintains and operates the facility and has the authority to determine matters such as its operation and the destination of the electricity generated or discharged.This distinction can be important where a project uses a special-purpose company, leased facilities, outsourced operation and maintenance arrangements or other contractual structures under which ownership and operational control are divided between different parties.The project structure should therefore be reviewed before determining which entity is responsible for the Generation Business notification and the related OCCTO and electricity-business obligations.

Question 7

What happens if a generation or storage facility does not meet the Generation Business thresholds?

Accepted Answer

Falling outside the Generation Business regime does not necessarily mean that no Electricity Business Act notification is required.A person that is not itself an electricity business operator and connects certain generation or electricity-storage facilities to the grid may be required to submit a Specified Private Electrical Facility connection notification (特定自家用電気工作物接続届出).The current regime includes, among other facilities, qualifying generation and electricity-storage facilities with an output of at least 1,000 kW.Whether this notification applies depends on the characteristics of the facility, its grid connection and the regulatory status of the operator. For example, an operator that already falls within certain electricity-business categories is excluded from this notification regime.The applicable filing should therefore be checked even where a project does not meet the Generation Business thresholds.

Question 8

What technical and safety requirements apply to power generation and storage facilities?

Accepted Answer

The regulatory status of the company and the technical regulation of the facility are separate matters.Generation facilities and electricity-storage facilities may be subject to requirements under the Electricity Business Act concerning, depending on their type, voltage, output and configuration:compliance with applicable technical standards;preparation and filing of safety rules (保安規程);appointment of a Chief Electrical Engineer (主任技術者);construction-plan notification or approval procedures; andpre-use inspection, confirmation or other procedures before operation.
The precise requirements vary according to the technology and scale of the installation. Solar, wind, thermal generation and electricity-storage facilities are therefore not necessarily subject to the same procedures.These facility-level requirements must be considered separately from Generation Business notification, grid connection, FIT/FIP accreditation and other project permits.

Question 9

How does grid connection work for a power generation or storage project?

Accepted Answer

Grid connection is a separate workstream from Electricity Business Act registration or notification and should generally be considered at an early stage of the project.A project wishing to connect to the Japanese electricity network will normally deal with the relevant general transmission and distribution operator or distribution operator.The process typically includes:an optional preliminary consultation;a connection study (接続検討);a connection application;assessment of the technical works required;grid-connection consent;agreement on construction-cost contributions; andcompletion of the required connection works and contractual arrangements.
The connection study considers matters including the impact of the proposed project on the network and whether transmission or distribution facilities need to be constructed or reinforced.Grid availability, reinforcement requirements and construction schedules can have a significant impact on the timing and economics of an energy project.

Question 10

What permits and approvals may apply to a renewable energy project?

Accepted Answer

There is no single permit covering the development of a renewable energy project in Japan.The approvals required depend on the technology, scale and location of the project.In addition to Electricity Business Act requirements and grid connection, a solar, wind, hydro, geothermal or biomass project may need to consider, as applicable:environmental assessment;land-use and development approvals;agricultural-land conversion;forest-related procedures;building or construction requirements;prefectural or municipal ordinances;landscape, disaster-prevention or cultural-property requirements;community consultation and prior-notification procedures; andtechnology-specific technical and safety requirements.The permitting position should therefore be reviewed on a site-specific basis.This is particularly important when acquiring a development-stage project. The existence of land rights or a grid position does not necessarily mean that all of the permits required to construct and operate the project have been obtained.For larger projects, we generally recommend preparing a permitting matrix identifying each required approval, the responsible authority, the filing status, any applicable conditions and its relationship with the planned construction and commercial-operation timetable.

Question 11

What are FIT and FIP, and does every renewable energy project need accreditation?

Accepted Answer

The Feed-in Tariff (FIT) and Feed-in Premium (FIP) schemes are statutory support mechanisms for qualifying renewable energy projects in Japan.A project wishing to benefit from FIT or FIP must obtain the applicable Renewable Energy Business Plan accreditation (再生可能エネルギー発電事業計画認定). Renewable energy projects operating outside the FIT/FIP schemes, including merchant projects, do not require this accreditation solely because they generate renewable electricity.For projects seeking accreditation, the FIT/FIP process is separate from Electricity Business Act filings, grid connection, environmental procedures and land-related permits.Under the current rules, connection-consent documentation is generally required for accreditation applications. ANRE defines the relevant “connection consent” as including grid-connection approval and execution of the applicable construction-cost contribution agreement, subject to the specific rules applying to the project.ANRE currently indicates a standard processing period of approximately three months for most new accreditation applications, and approximately four months for biomass, assuming that the application is complete.FIT/FIP prices, auction requirements and eligibility conditions vary by technology, size and year. These should therefore be checked for the particular project.

Question 12

What are the Capacity Market and the Long-Term Decarbonization Auction?

Accepted Answer

Japan's Capacity Market (容量市場) is separate from the wholesale electricity market and the balancing market.Rather than paying for the electricity generated, the Capacity Market remunerates qualifying capacity that is available to contribute to future electricity supply. Generation, BESS and other qualifying resources may participate where the relevant requirements are satisfied.The Long-Term Decarbonization Auction (長期脱炭素電源オークション) forms part of the Capacity Market framework and is intended to support investment in new or upgraded decarbonised capacity through longer-term capacity arrangements.The current framework expressly includes electricity-storage projects among the resource categories for which project information and expected capacity can be registered.Participation involves separate Capacity Market registration, qualification and bidding procedures and, following a successful bid, the applicable capacity agreement and continuing obligations. OCCTO publishes separate manuals and documentation for each auction year.Capacity Market participation is therefore a potential revenue consideration for some projects.

Question 13

What regulatory requirements apply specifically to a BESS project?

Accepted Answer

There is no standalone BESS licence in Japan.A BESS project should generally be considered across several separate regulatory workstreams.First, the company maintaining and operating the battery may fall within the Generation Business regime. If it does not, another Electricity Business Act notification may apply to the facility depending on its size, grid connection and the status of the operator.Second, the storage installation itself may be subject to the technical and electrical-safety requirements applicable to electricity-storage facilities.Third, the project needs the appropriate grid and balancing arrangements for charging and discharging electricity.Finally, the requirements depend on how the battery is intended to earn revenue. A BESS may, for example, be used for:wholesale electricity trading;balancing-market services;Capacity Market participation;aggregation;supply arrangements with another electricity business; ora combination of these activities.Each activity has its own regulatory and market requirements.For this reason, the BESS regulatory analysis should distinguish between the status of the operator, the regulation of the physical facility and the commercial activities carried out using the battery.

Question 14

What is an electricity aggregator and what regulatory requirements apply?

Accepted Answer

“Aggregator” is a commercial term commonly used for a business that controls or combines generation, electricity-storage or demand-side resources so that they can participate collectively in electricity supply, demand response or electricity markets.Under the Electricity Business Act, certain aggregation activities fall within the Specified Wholesale Supply Business (特定卸供給事業) regime.The current framework generally becomes relevant where the supply capability subject to the aggregator's instructions exceeds 1,000 kW, subject to the detailed calculation rules and adjustments applying where the same company also carries out other electricity businesses.Where the regime applies, a notification must be submitted to METI at least 30 days before commencement of the business. ANRE currently recommends starting advance consultation on the draft notification approximately two months before the proposed commencement date.A Specified Wholesale Supply Business is also an electricity business for purposes of OCCTO membership.

Question 15

When is Retail Electricity Business registration required?

Accepted Answer

A company wishing to conduct the business of supplying electricity in response to general demand must obtain registration as a Retail Electricity Business (小売電気事業).The requirement therefore depends on the company's role in the supply structure rather than simply on whether it purchases, sells or trades electricity.The current registration application includes, among other matters, information concerning the applicant's operating structure, supply arrangements and complaint-handling system, together with a business plan (事業計画書).A registered Retail Electricity Business is also subject to continuing obligations after registration, including applicable reporting, notification and supply-planning requirements. Retail registration should therefore be considered at an early stage where the proposed Japanese business model involves supplying electricity directly to customers.

Question 16

What is OCCTO and when is membership required?

Accepted Answer

OCCTO is the Organization for Cross-regional Coordination of Transmission Operators (電力広域的運営推進機関).The Electricity Business Act requires the statutory electricity-business categories (e.g. Retail Electricity Businesses, Generation Businesses and Specified Wholesale Supply Businesses) to become OCCTO members.Where a company is not already a member and intends to become an electricity business, the provisional OCCTO membership application must be made before the corresponding METI application or notification.Once the underlying METI procedure has been completed, the OCCTO membership process is finalised.OCCTO membership should not be confused with JEPX or EPRX membership.

Question 17

What is a balancing group (BG)?

Accepted Answer

A balancing group, generally referred to as a BG, is an operational grouping used for scheduling electricity and settling imbalances between scheduled and actual generation or consumption.On the generation side, one or more generation or storage resources may be included within a generation BG (発電BG) under the relevant generation balancing arrangements with the regional transmission and distribution operator.The party responsible for the BG does not necessarily have to own each generating or storage facility included in that group.A developer, generator or BESS operator can therefore consider joining an existing third-party BG instead of establishing all of the balancing arrangements itself.The choice of BG structure can affect:the TSO contracts required for the project;responsibility for submitting generation and sales plans;exposure to imbalance charges;JEPX delivery arrangements;EPRX participation; andthe allocation of responsibilities between the project owner and any trader, aggregator or market-access provider.
The BG structure should therefore be considered as part of the project's overall route to market.

Question 18

What is JEPX and what is required to trade electricity directly on JEPX?

Accepted Answer

JEPX is the Japan Electric Power Exchange, Japan's principal wholesale electricity exchange.A company wishing to trade electricity directly on JEPX must become a JEPX trading member (取引会員). JEPX confirms that trading on the exchange requires trading-member status.Under the current membership rules, an applicant can qualify, among other routes, where it has or has a confirmed plan to enter into:a connection supply agreement (接続供給契約);a generation balancing supply agreement (発電量調整供給契約); ora demand-reduction adjustment supply agreement (需要抑制量調整供給契約)with the relevant general transmission and distribution operator.The rules also provide for a structure under which an eligible contract holder requests another party to act as the trading member. Under that route, the requesting party cannot itself be a JEPX trading member.Direct JEPX trading membership generally requires at least JPY 10 million in net assets.After approval, the member must also pay the applicable entrance and annual membership fees and deposit a JPY 1 million trading-member trust deposit (取引会員信認金) before commencing trading.The relevant delivery contract must also be registered for the areas in which the member trades. JEPX currently requires separate registration of the relevant connection supply or generation balancing supply arrangement used for delivery.

Question 19

What is EPRX and what is required to participate directly in the balancing market?

Accepted Answer

EPRX is the Electric Power Reserve Exchange, which operates Japan's supply and demand balancing market (需給調整市場).A company wishing to participate directly must first obtain EPRX trading-member qualification.Under the current requirements, the applicant must have:legal personality;net assets of at least JPY 10 million; andstatus as a qualified invoice issuer (適格請求書発行事業者).
Obtaining trading-member status is also only the first stage.The generation, BESS or demand-response resources to be used in the balancing market must complete the applicable pre-qualification process with the regional TSO. The applicable requirements differ according to the product and resource and can include performance, metering, communications, control and testing requirements.EPRX notes that the application, communications work, pre-qualification, testing and contracting process may take several months depending on the resource and technical configuration.

Question 20

Can a company participate in JEPX or EPRX through a third party instead of becoming a direct member?

Accepted Answer

Yes, depending on the market and the structure.A foreign company entering Japan does not necessarily need to establish its own JEPX membership, EPRX membership and balancing infrastructure from the outset.For JEPX, the membership rules expressly permit a route under which an eligible holder of the relevant TSO arrangement requests another party to act as the trading member. The requesting party cannot itself be a JEPX member under that particular route.For the balancing market, the EPRX trading member does not necessarily have to own the underlying generation, storage or demand-side resource. This permits participation structures involving aggregators and other market participants, subject to the applicable EPRX and TSO requirements.EPRX does not, however, permit the same resource to be used simultaneously for bids by several trading members. Where the resource is transferred from one trading member to another, the applicable change procedures must be completed.Depending on the business model, a project may therefore consider using an existing:balancing group;aggregator;electricity trader;Retail Electricity Business; orother market-access provider.The choice between direct and third-party market access is a commercial as well as regulatory decision. Using a third party may simplify initial market entry, but it does not remove any Electricity Business Act registration or notification that independently applies to the company's own activities.

Question 21

Are there minimum capital or financial requirements for entering the Japanese electricity market?

Accepted Answer

There is no single minimum share-capital requirement applicable to every energy company in Japan.The applicable financial requirements depend on the activities carried out and the chosen market-access structure.For example, under the current rules:direct JEPX trading membership generally requires at least JPY 10 million in net assets; anddirect EPRX trading membership requires at least JPY 10 million in net assets.JEPX also requires the applicable entrance and annual fees and the JPY 1 million trading-member trust deposit.Net assets are not the same as paid-in share capital.A company incorporated with JPY 10 million of capital, for example, will not necessarily continue to have JPY 10 million of net assets once incorporation expenses, operating costs or accumulated losses are reflected in its balance sheet.Other regulatory procedures may also involve an assessment of financial and operational capability without imposing the same fixed amount.

Question 22

Does a PPA require Retail Electricity Business registration?

Accepted Answer

Not automatically.A Power Purchase Agreement (PPA) is a contractual arrangement rather than a separate regulatory category under the Electricity Business Act.The regulatory analysis depends on the actual structure of the PPA and, in particular:which party generates the electricity;whether electricity is physically supplied through the public grid;which entity legally supplies electricity to the end customer;whether a registered Retail Electricity Business participates in the structure;who bears balancing responsibility; andwhich grid and market arrangements are used.
Where a company itself conducts the business of supplying electricity in response to general demand, Retail Electricity Business registration must be considered.By contrast, where the generator sells electricity wholesale and a registered Retail Electricity Business is responsible for supplying the end customer, the generator does not become a Retail Electricity Business merely because its electricity is ultimately delivered to that customer.The analysis can therefore differ between on-site PPAs, off-site physical PPAs and financial or virtual PPAs.The contractual structure should be reviewed together with the electricity flows and regulatory roles of the parties.

Energy Business in Japan

WHO THIS SERVICE IS FOR

MAIN REGULATORY AREAS

1. REGULATED ELECTRICITY ACTIVITIES

GENERATION AND BATTERY STORAGE (発電事業・蓄電用電気工作物)

ELECTRICITY AGGREGATION (特定卸供給事業)

RETAIL ELECTRICITY BUSINESS (小売電気事業)

JEPX AND EPRX MARKET ACCESS

OCCTO AND BALANCING GROUPS

RENEWABLE ENERGY AND CAPACITY MARKET

FOREIGN INVESTMENT AND FEFTA

MARKET-ENTRY PROCESS

①

BUSINESS MODEL AND REGULATORY ASSESSMENT

➁

ENTITY STRUCTURE AND FEFTA SCREENING

​③

OCCTO AND METI PROCEDURES

④