On September 14, the OCCTO announced that the contract price of the capacity market in 2024 was 14,137 yen / kW / year in all areas. Since the price was almost the same as the maximum price (= 14,138 yen / kW), the new electric powers were shocked and confused, so that they are encouraging the Minister of the Environment to review the system.
Why did they get such a high price? There are two main reasons.
First of all, the bid volume of nuclear power was sluggish at 7.04 million kW, which caused the supply curve to shift significantly to the left.
Due to political background, the Minister of Economy, Trade and Industry strongly instructed electric power companies to curb the bids for nuclear power, which is not expected to operate immediately before the auction. For this reason, the bid targets for nuclear power were first narrowed down to the nine currently in operation (4 in Kansai, 1 in Shikoku, and 1 in Kyushu). Next, of these nine units, Ikata No. 3 which received a provisional disposition decision (January 17, 2020) to suspend operation by the Hiroshima High Court and Sendai No. 1 which will celebrate 40 years after the start of commercial operation in 2024 are excluded, and the results , It is estimated that they were limited to only 7 units.
It can be said that the biggest reason for this high-priced contract is that the bids for nuclear power, which were supposed to be low-priced bids such as zero-yen bids, were restricted.
Next, as a result, the old thermal power that bid high prices became the marginal power source, and the contract price was decided.
These thermal power sources are low-efficiency oil and LNG thermal power plants that should have stopped in 2024. In order to add these power supplies to the supply capacity, it will be necessary to prepare for startup within 2023. It is probable that the bidding side had no choice but to reflect these repair costs, labor costs, etc. in the bidding price.
In addition, these aging facilities are paid only at a discount of up to 48% from the contract price (so-called transitional measure coefficient), so bidders had to bid at a high price that took this discount into consideration in advance. ..
These marginal power sources may not be able to cover the startup cost even at 14,137 yen / kW / year, and they will aim for medium- to long-term cost recovery by means such as aiming to continue contracts in the capacity market after 2025.
What is interesting about the bid results this time is that the amount of bids was about 3 million kW more than the amount procured on the demand curve. This shows that the power supply that actually bid for 14,137 yen was at least 3 million kW. It is reasonable to think that a major operator bid for a large amount of power at this price.
It can be understood that not only the capacity market but also the current wholesale electricity market and the supply and demand adjustment market under consideration are structurally flawed.
Both sellers and buyers feel a strong risk that the power supply price will be decided four years prior at the annual auction, and that the contract price will fluctuate up and down due to the factors described here. Electricity market design is not yet sophisticated, so we should expect the turmoil and institutional review to continue in the next few years.