Nuclear power plant shutdown and alternative power plant installation scenarios - A nine-region spatial equilibrium analysis of the electric power market in Japan

After the Great East Japan Earthquake and the subsequent nuclear accident, nuclear power stations cannot be presumed perfectly safe any longer and can be hardly allowed to restart in Japan. We develop a nine-region spatial equilibrium model for Japan's power market and simulate two-part situations: (a) none of the nuclear power plants can operate any longer and (b) gas turbine combined cycle (GTCC) power plants are installed to cover the lost nuclear capacity. When all the nuclear power plants are shut down, the average power prices would rise by 1.5-3 yen/kWh. By replacing that lost capacity with GTCC power plants, we could compress the average price rise as high as 0.5-1.5 yen/kWh compared with the status quo. Their impact would differ by region on the basis of the share of nuclear power in their plant portfolios. After the nuclear power plant shutdown, regions with abundant nuclear capacity would not be able to afford to sell their power to other regions, which would cause less serious congestion at the inter-regional transmission links. The installation of GTCC power plants would make the plant portfolios more similar among regions and, thus, reduce inter-regional transmission further, which would very rarely cause congestion.