As more renewables are brought online, the nation’s power trading is adjusting to reflect the new market dynamics. And one of the biggest changes in the next 10 months or so will occur in the supply-demand adjustment trading segment, also known as the “balancing market”.
Japan’s full liberalization of the power market in 2016 allowed a variety of new players to trade and sell electricity. This drew interest to the electricity wholesale market, or spot trading, and several years later two exchanges launched for futures contracts, as well as a new platform for power capacity auctions.
Amid all the changes, the “balancing system” is one electricity marketplace that has received little attention. This system is used by power firms to buy additional volumes in case electricity demand surges above what’s expected, or the opposite. This ensures that power supply always matches demand, keeping the grid stable and preventing blackouts or wasted energy.
As the role of variable energy sources like solar and wind generation has increased, so has the demand for flexibility and speed of response to balance the market. This is what drives the changes to Japan’s power supply-demand adjustment market that should be fully in place by fiscal year 2024.
METI recently provided more details about how the new balancing market will look.