How Likely is Japan’s Electricity Price Spike Repeat Itself?

August 30, 2021|Electricity

Photo by M. B. M. on Unsplash

On Jan. 13, 2021 a power crunch sent Japan’s wholesale electricity price to a record ¥154.57/ kWh. The 2,400% jump in price in the course of a month was partly due to events outside Japan and the weather. These externalities were not, however, the only factors.

The extreme price move had immediate consequences as several power retail firms went bankrupt. The longer-term impact is likely to be even more powerful, both good and bad.

Most interestingly, however, the event and its aftermath raised the question of whether the price spike was a one-off event. In the last two months, both METI and the power grid oversight body, OCCTO, warned that Japan faces another power crunch this coming winter. Will the extreme price spike in electricity follow?

A recap of January

In December 2020 and January 2021, the JEPX system price reached several peaks above ¥100/ kWh, culminating in an unheard of 24-hour-average price of ¥154.57. Even the baseload contracts for January were selling at close to ¥100.

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