[Column] The Full Picture of the 2026 Amended Electricity Business Act and the Impact of New Decarbonization Rules on Corporate Practice

2026-07-30

✅ In a nutshell

💡 Under the amended Electricity Business Act enacted on July 17, 2026, lending using public funds for large-scale power sources and transmission networks, as well as strengthened safety regulations for solar power generation facilities, have been given statutory footing.
🏢 Following the amendment of the Energy Conservation Act, business operators above a certain scale will be progressively required to state targets regarding rooftop solar power generation facilities and to report on available installation capacity.
🌍 The GX-ETS (emissions trading scheme) enters full operation from FY2026, and covered companies will face their own carbon emission costs directly.
⚖️ From the perspective of a lawyer, this article explains practical measures for reconciling renewable energy adoption with risk hedging.

Table of Contents

Introduction

This article explains the major transformation of the electricity system in 2026, together with the amended Electricity Business Act and the new decarbonization rules.

The year 2026 is likely to mark a historic turning point for Japan’s energy policy and electricity system.
On July 17, 2026, the “Bill for Partial Amendment of the Electricity Business Act” was passed and enacted at a plenary session of the House of Councillors (METI).
In addition, from FY2026, new obligations under the amended Energy Conservation Act (Act on the Rational Use of Energy) and the full-scale operation of the GX-ETS (emissions trading scheme) are also on the horizon (METI). Many readers may feel uncertain about how these regulatory changes will affect their own management and day-to-day operations.

In my regular work providing legal support in the renewable energy field, I sense on a daily basis, through client consultations, that the shift toward decarbonization is accelerating.

In this article, drawing on a practitioner’s perspective, I explain in detail the full picture of the 2026 regulatory reforms and the steps companies should take in response.

Key Points of the 2026 Amended Electricity Business Act

The amended Electricity Business Act enacted on July 17, 2026 aims to secure a stable electricity supply and strengthen energy security (METI).
The amendment includes several important items directly affecting the operations of power generation companies and retail electricity providers (operators that sell electricity to households and businesses).
Below, I summarize the principal amendments that appear likely to have the greatest practical impact.

Use of Public Funds for Developing Large-Scale Power Sources and Transmission and Distribution Networks

The first is the expansion of lending operations by the Organization for Cross-regional Coordination of Transmission Operators (OCCTO).

To date, lending by OCCTO has centered on the development of interregional transmission lines and similar infrastructure.
Under the amended act, the Minister of Economy, Trade and Industry will certify development plans for large-scale power sources submitted by large-scale power generation companies, as well as development plans for intraregional transmission lines submitted by general transmission and distribution operators, and OCCTO will provide loans for the funds necessary for such development, drawing on the Fiscal Investment and Loan Program and similar sources (METI, Outline of the amended act (PDF)).
In addition, a mechanism will be established under which price-difference revenues arising from cross-regional electricity trading (the margin generated when electricity is bought and sold across supply areas) are paid into the national treasury and used, through OCCTO, for the development of interregional and intraregional transmission lines (METI).
The intended scope covers the development of large-scale power sources and transmission networks that will be necessary to accommodate future demand growth and to advance the decarbonization of electricity (METI).

Strengthened Safety Regulation of Solar Power Generation Facilities (Including Mega Solar)

The second is the strengthening of safety regulations for solar power generation facilities.

To prevent accidents caused by design deficiencies in solar power generation facilities, the amended act establishes a mechanism whereby supporting structures and related components become subject to pre-construction verification of conformity with technical standards by a third-party body (a registered conformity assessment body) (METI).
Measures will also be introduced enabling the authorities to require cooperation from manufacturers, importers and distributors, and construction contractors in cases such as product or workmanship defects, where the installer alone cannot reasonably identify the cause or prevent recurrence.
Given the succession of local disputes in recent years over large-scale solar installations on embankments and slopes, pre-construction conformity verification is likely to serve as a mechanism that also enhances project predictability for operators.

Prior Consultation on Suspension or Decommissioning of Large-Scale Power Sources

The amended act provides that, when a large-scale power generation company suspends or decommissions a large-scale power source, it must consult in advance with the relevant general transmission and distribution operator (METI).
This is understood to be a mechanism for avoiding a sudden decline in supply capacity and securing a stable electricity supply.

Supervision of Medium- to Long-Term Markets and the Balancing Market

In addition, a system has been established under which the Minister of Economy, Trade and Industry may designate and supervise the wholesale electricity exchanges that operate the medium- to long-term markets and the balancing market — which will become increasingly important — alongside the existing day-ahead market (METI).
Furthermore, to ensure the sound conduct of retail electricity business, suspension of operations for a certain period has been added to the grounds for revoking the registration of a retail electricity provider (METI).
I regard this as an important amendment in practical terms as well, from the standpoint of securing market transparency and reliability.

A Note on Timing of Enforcement

The amended act is to come into force within nine months of promulgation, save for certain provisions (METI).

Accordingly, not all provisions take effect immediately upon the act’s enactment in July 2026; it should be noted that the enforcement dates and the specifics of operation will be clarified through forthcoming Cabinet Orders and ministerial ordinances.

New Decarbonization Rules That Directly Affect Electricity Consumers

FY2026 will see the launch not only of the Electricity Business Act amendments but also of several new rules that directly change the behavior of corporate electricity consumers.
A defining feature of 2026, in my view, is that the practical burden falls not only on the generation side but also on the consumption side.

Rooftop Solar Requirements Under the Amended Energy Conservation Act

Under the amended Energy Conservation Act, medium- to long-term plans submitted from FY2026 onward must include qualitative targets regarding the installation of rooftop solar power generation facilities (Agency for Natural Resources and Energy).
Moreover, from FY2027, a system is scheduled to begin requiring business operators consuming energy above a certain scale to report matters such as the available capacity for installing solar power generation facilities on building rooftops.
The system is designed not as a “mandatory installation” requirement but rather to promote renewable energy adoption through the statement of targets and reporting of available capacity. However, because the mechanism entails external disclosure, it is in substance a system that puts each company’s renewable energy policy itself under scrutiny.

Full-Scale Introduction of the Emissions Trading Scheme (GX-ETS)

Japan will also see the launch of a full-fledged emissions trading scheme.

Following a trial phase from FY2023, the GX-ETS moves into full-scale operation from FY2026 (METI).
Covered entities are business operators whose direct CO2 emissions average 100,000 tons or more over the preceding three fiscal years.
This threshold was set with a view to capturing emission sources of a scale comparable to those covered under schemes in other countries.
Business operators are also required to determine for themselves, each fiscal year, whether they fall within the scope of the scheme.
In the sense that emissions previously treated as an “aspirational target” will now materialize directly as a financial cost to the company, this is a regulatory change that bears directly on management decision-making.

Practical Measures for Companies and the Outlook Ahead

Viewing these regulatory changes as a whole, a structure emerges in which the state leads the development of large-scale power source and grid infrastructure, while strongly requiring each company to make its own autonomous decarbonization efforts.

I summarize the practical measures companies should take from two broad perspectives.

Considering Self-Consumption Solar Power and Storage Batteries

Taking into account the target-setting requirements under the Energy Conservation Act and the increase in carbon costs under the emissions trading scheme, the installation of self-consumption solar power generation facilities and storage batteries can be regarded as an effective defense against carbon costs.

Moreover, in light of the strengthened safety regulation of solar power generation facilities under the amended Electricity Business Act, interest in rooftop solar — which carries lower environmental impact and lower risk of local disputes — is likely to grow further.

Where installation via a PPA (Power Purchase Agreement) is under consideration, the design of risk allocation over the contract term (termination clauses, electricity price revision clauses, ownership of the equipment, and so forth) frequently has a decisive impact on the ultimate economic outcome. The importance of legal review before contract execution is therefore likely to increase still further.

Rebuilding Legal and Compliance Structures

Compliance with the various laws and regulations will also demand more rigorous handling than before.

When newly installing or repowering (upgrading or expanding) solar power generation facilities, the procedures under the amended Electricity Business Act must be reliably built into the project plan.

In responding to the emissions trading scheme, because business operators are required to determine their own applicability each fiscal year, I consider it essential to establish internal data collection and management systems at an early stage (METI).

In particular, calculating Scope 1 emissions (direct emissions by the company itself) requires the cross-sectional consolidation of energy usage data at the site level, and building governance structures spanning the finance, environmental, and legal functions tends to be the practical bottleneck.

Conclusion

The amended Electricity Business Act, the amended Energy Conservation Act, and the emissions trading scheme — all taking effect in succession in 2026 — are likely to bring extremely significant change to Japan’s energy market.

That said, because the amended Electricity Business Act is to come into force within nine months of promulgation while the Energy Conservation Act amendments and the emissions trading scheme will apply in stages from FY2026 onward, preparation that takes account of these differing timelines will be important.

Drawing on my experience as a lawyer supporting business restructuring and environmental compliance for a range of companies, I would say it is important not to view this regulatory tightening simply as a cost increase, but rather to make risks visible at an early stage and convert them into a source of competitive strength.

Renewable energy adoption is likely to function increasingly as an “invisible asset” under the emissions trading scheme, going beyond the short-term benefit of reduced electricity costs.

Our firm continuously provides legal advice on the latest regulatory developments and on renewable energy business matters, and we would be pleased to hear from you should you require assistance.