Contributed By Nagashima Ohno & Tsunematsu
In Japan, an electricity retailer procures electricity by way of entering into a power purchase agreement with an electricity generator or through an electricity wholesale market, and JEPX is the electricity wholesale market in Japan. Trades available in JEPX as wholesale of electricity are (i) spot market trading, (ii) forward market trading, (iii) intraday market trading and (iv) OTC trading. At the date of writing, there is no futures market in Japan.
Spot market trading is trading of electricity supplied on the next day after a trade date, where the minimum trading unit is 30 minutes and 0.5 MW, and the trading price is determined through a 'blind and single-price auction'. Under a blind and single-price auction, wholesale market participants submit a bid for purchasing or selling electricity by 10am on the trade date and the trading price is fixed at the highest price at which all demanded electricity will be cleared.
Forward market trading is trading of electricity supplied for a certain period starting on a day that is two or more days from a 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 executed in full before an order at the same price entered at a later time is executed).
Intraday market trading is trading of electricity supplied on a day for which the spot trading is closed, where the minimum trading unit is 30 minutes and 0.5 MW, and orders are continuously executed in strict price and time priority.
OTC trading is usually employed for trading a small amount of electricity that does not satisfy the thresholds for spot or intraday trading.
In addition to the above, the base-load market began in July 2019, which is a wholesale market of electricity generated by a nuclear power plant, a traditional large-scale hydro power plant, a coal-fired power plant or a geothermal power plant (also known as 'base-load electricity') to electricity retailers. Major Utilities (except for The Okinawa Electric Power Company) and J-Power are required to offer base-load electricity to the base-load market by no less than a certain amount calculated by a prescribed formula to secure retailers’ access to base-load electricity.
In principle, there are no price regulations on electricity wholesale. However, in order to secure competition on an equal footing between Major Utility retailers and other retailers, wholesale trading of electricity generated by Major Utilities is monitored and scrutinised so that their price will not be unduly expensive.