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EEX/TOCOM Japan Power Summit Report

In the midst of the so-called yearly “Japan Power Week,” which sees power specialists gather in Tokyo to attend a range of events and seminars, the European Energy Exchange (EEX) and the Tokyo Commodity Exchange (TOCOM) jointly held for the first time a “Japan Power Summit'' on October 18 as the main event. Both exchanges offer Japanese electricity futures, since 2019 for TOCOM and since 2020 for EEX. Around 300 industry professionals (about 150 firms) with various backgrounds from both Japan and overseas participated to the event, which was also retransmitted live on-line in both English and Japanese.

The Summit was opened by TOCOM CEO Ishizaki and EEX COO Köhler and featured a number of keynote speeches, including from the regulator METI, Tokyo University and JERA. Two panel discussions debated the Japanese power market’s current status and future development, one was viewed from the perspective of Japanese’s players and the other from overseas players. A number of issues and topics related to the futures and physical markets were debated, covering areas such as the history of the electricity market deregulation, the need to hedge as well as the hurdles to hedging (such as the current hedge accounting rules), the need to increase the overall number of market participants as well as liquidity (through the introduction of spark spreads and options as examples), as well as the regulatory environment. During the exchanges’ presentations, JPX/TSE focused on their recently launched carbon credit market, and EEX-owned LACIMA discussed its energy risk management tools.

While various comments and views were shared during the summit, most (if not all) speakers and participants were positive about the further development of the Japanese power futures market, one panelist forecasting a trading volume expanding from the current level of just a few percent of the spot market size to a level approximately equal to it (i.e. 100%) by 2026. It was also noted that the volume traded on some European futures market represent several times over the size of the physical market, so there is a lot of potential for the Japanese futures market to grow.

During the reception that followed, Tohoku Electric Managing Director Hijikata made the following comments before making a toast to the further development of the Japanese power market: “It is important that as many participants as possible take part in the price-setting process in accordance with their own views. As a result, fair prices can be determined, without any bias due to rules or other restrictions. (…) The fact that participants take part in the price-setting process in accordance with their own views on prices and the market is the basis to create a vialble market, and this is the reason why markets must be free.”

Participants had a chance to network with many industry peers at the reception drawing a close to a successful 8-hour summit.



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