JAPAN Law and Practice Contributed by: Rintaro Hirano, Yutaro Fujimoto, Yurika Masakane and Yutaro Kato, Nagashima Ohno & Tsunematsu
• spot market trading; • forward market trading; • intraday market trading; and • OTC trading.
mum trading unit is 30 minutes and 50 kWh, and orders are continuously executed in strict price and time priority. OTC trading This is usually employed for trading a small amount of electricity that does not satisfy the thresholds for spot or intraday trading. New Electricity Markets In addition to the above, several new electricity markets have opened with the aim of meeting the needs of new entrants after full liberalisation of the retail sector. The base-load market began in July 2019 as a wholesale market of electricity generated by a nuclear power plant, a traditional large-scale hydropower plant, a coal-fired power plant or a geothermal power plant (also known as “base-load electricity”) to electricity retailers. The major utilities and J-Power are required to offer base-load electricity to the base-load mar- ket at no more than the amount calculated by a prescribed formula, to secure retailers’ access to base-load electricity for a price that is not unduly higher than their intra-group price. The capacity market held its first auction in July 2020. While electricity companies trade in kWh in the wholesale JEPX market, the capacity market auctions the future value of generation capacity in kW. The capacity market is expect- ed to improve power producers’ predictability to recover certain fixed costs in the generation business in which such fixed costs have been difficult to recover from the wholesale JEPX Mar- ket (ie, “stranded costs”). If a generator places a successful bid at a capacity market auction it may receive a certain amount of fixed income from OCCTO for four years after the auction, which is funded by a capacity surcharge that OCCTO levies from retailers.
In general, there are no price regulations on wholesale electricity prices. However, METI has placed a ceiling on the imbalance fee, which in effect functions as a price cap on the JEPX mar- ket price. Moreover, in order to keep competi- tion on an equal footing between the major utility retailers and other retailers, wholesale trading of electricity by the major utilities is monitored so that the price cannot be manipulated or unduly inflated. Market Trading on the JEPX Spot market trading This is trading of electricity supplied on the next day after the trade date, where the minimum trading unit is 30 minutes and 50 kWh and the trading price is determined through a “blind and single price auction”. Under this auction, whole- sale market participants submit a bid for pur- chasing or selling electricity and the trading price is fixed at the crossing point of all purchasing bids and selling bids. Forward market trading This is the trading of electricity supplied for a certain period, starting on a day that is three or more days from the trade date, where traded time periods are one week, one month and one year, and orders are continuously executed in strict price and time priority. An order entered into the system at an earlier time must be exe- cuted in full before an order at the same price entered at a later time is executed. Intraday market trading This is trading of electricity supplied on a day when spot trading is closed, where the mini-
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