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EEX Japanese Electricity Futures Market Celebrates Second Anniversary

By Bob Takai, Executive Advisor, EEX Group

Two years and two months have passed since EEX launched its clearing services for Japanese electricity futures contracts in May 2020. Both the trading volume and the number of participants have grown steadily and we have established our position as a leading benchmark for electricity futures in Japan. I would like to take this opportunity to thank the electric power industry, the commodity futures industry, and the Ministry of Economy, Trade and Industry for their support.

In our first month of operation, we only matched 2 trades for 6 lots, equivalent to 12 GWh. In June of this year, the number of contracts and volume (i.e. the amount of electricity) increased to 273 trades for 1,380 lots, a total of 932 GWh. In June, our cumulative volume since launch reached 10 TWh (10,000 GWh).

The number of trading participants initially stood at a mere 3 companies, but as of the end of June this year, 41 companies had joined the market. Out of these, 21 are Japanese companies and 20 are foreign companies.

This alone would indicate that the Exchange’s electricity futures market has been a great success, but in fact it is still in its infancy when compared to the German power market that launched 20 years ago. In Japan, the spot physical electricity market (Japan Electric Power Exchange, or JEPX) trades 25 to 30 times more electricity than the futures market. On the contrary, in Germany the futures market is actually 10 times larger than the spot market.

The number of market participants follows a similar trend: There are currently 21 Japanese-affiliated companies trading on EEX, though there are more than 600 power retailers in Japan. This means that only 1 out of 30 companies use our futures market to manage risk, a far cry from the more than 300 companies in Europe that participate in futures trading on a daily basis.

In Europe, natural gas supplies from Russia have been severely curtailed for political reasons related to the war, causing the market price to soar. Even if we are able to manage power needs over this summer, there are concerns that if a long and cold winter hits, gas storage will run out and electricity prices will experience unprecedented volatility.

For Japan, the energy crisis unfolding in Europe is not just another “firestorm on the other side of the river” as we say here, but rather a firestorm that will propagate throughout the global LNG market. The energy-security environment is changing rapidly for Japan, a country with no energy resources that is moving away from nuclear power, Russia and carbon emissions.

EEX is determined to play its role in this important field and to continue to make every effort to bring our services as close as possible to the European standards. We look forward to your continued support and collaboration.



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