JAPAN Law and Practice Contributed by: Rintaro Hirano, Yutaro Fujimoto, Yurika Masakane and Yutaro Kato, Nagashima Ohno & Tsunematsu
Power futures markets In September 2019, a futures market was com- menced by Tokyo Commodity Exchange, Inc (TOCOM) which allows buyers to hedge the volatility risk of the JEPX spot market trading price. The European Energy Exchange (EEX) also launched a Japanese futures market in May 2020. After the sharp price spike in 2020, the trading volume of Japan power futures is grow- ing sharply and steadily. The futures markets provide hedging on the physical power market, price indexing of domestic electricity in Japa- nese yen, and clearing counterparty credit risk. In order to further promote the power futures markets, METI has discussed, through its work- ing group on stimulation of power futures in Japan, taking various other measures such as strengthening the linkage between physical and futures markets, expanding market participants such as financial institutions, disseminating know-how and establishing best practices for power futures trading and improving surveillance to ensure transparent and fair trading. Balancing market In 2021 a balancing market (also referred to as a “real-time market”) was established. This market enables the TSOs to procure control reserves by auction, which will help them make supply- demand adjustments and maintain frequency control in their region in a more economically efficient manner. This also allows generators and demand response aggregators to make profits by making use of their balancing functions. Control reserves sold in the balancing market are classified into five types by response time and duration. The balancing market initially started handling a type of control reserve in the low- speed range. Then, gradually, other types of control reserves were added to this market and in April 2024, the balancing market finally began
handling all five types of control reserves. The balancing market was previously operated by the TSOs, but since April 2024, has been oper- ated by the Electric Power Reserve Exchange (EPRX), a general incorporated association established by the TSOs. Since the balancing market has several criti- cal issues such as a shortage of seller bids and high-price bids, there have been discussions regarding whether the balancing market should be integrated into the JEPX spot market (see 1.7 Announcements Regarding New Policies ). Non-fossil fuel energy certificates trading market As a measure to achieve the non-fossil energy source target, the non-fossil fuel energy certifi- cates trading market was established in May 2018. In this market, each non-fossil fuel ener- gy certificate (“NFC”) represents an amount of non-fossil fuel energy and has a corresponding CO₂ emissions reduction value under the Act on Promotion of Global Warming Countermeasures (Act No 117 of 1998, as amended). At the time of writing, NFCs are traded in two markets: the Market for the Achievement of the Targets of the Promotion Act and the Market for the Trading of Renewable Energy Values. The Market for the Achievement of the Targets of the Promotion Act deals with NFCs outside the FIT regime (“non-FIT NFCs”) and the purchasers are basically limited to retail electricity suppli- ers. Against the background that retail electricity suppliers are obliged under the Promotion Act to ensure that 44% or more of their electricity supply comes from non-fossil fuel energy by 2030, the non-FIT NFCs and this market are expected to encourage retail electricity suppli- ers to achieve that target.
135 CHAMBERS.COM
Powered by FlippingBook