Target Procurement Volume Increases for Next Capacity Market Auction (FY2029)

The Organization for Cross Regional Coordination of Transmission Operators (OCCTO) drafted a demand curve for the capacity market auction for FY2025 (targeting actual supply in FY2029) at an expert meeting. The target procurement volume for bids was set at 189.97 GW, and the indicative price (NetCONE), necessary to encourage new installations, at JPY 10,075 per kW. A timeline was also presented for holding the Long-Term Decarbonized Power Source Auction (LTDA) for FY2025 in January 2026.

Key Updates on Procurement Volume and Pricing

The target procurement volume was calculated based on the FY2025 supply plan. It increased by 3.81 GW from the previous year, due to factors such as an increase in the maximum 3-day average power (H3) and additional amounts to respond to extreme weather conditions. The NetCONE, reflecting updated economic indicators including inflation, rose by 200 yen from the previous fiscal year. The price cap, set at 1.5 times the NetCONE, is JPY 15,112.5 per kW. The draft will be submitted to a government council for approval and officially announced in July.

Auction Participation Terms and Next Steps

At the same meeting, a draft of the auction guidelines and terms was presented. In the FY2025 main auction, participation will be allowed for “zero premium projects,” such as offshore wind projects that bid JPY 3 per kWh in the government tender. Additionally, for command-based assets, priority awards will be based on their performance in effectiveness tests.

As with last year, registration for the LTDA will start in October ahead of bidding in January 2026. The auction guidelines and terms will be open for public comment starting in July, after discussions at the government council.

Target Procurement Volume Increases for Next Capacity Market Auction (FY2029)

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The total contracted amount in the capacity market has been rising in recent years, reaching a record high in the FY2024 auction (Approximately JPY 1.85 trillion (up 41% year-on-year). With a planned increase in procurement volume for the next auction FY2025, the contracted volume is expected to expand further.

Shulman Advisory has extensive experience advising clients in the Japanese power market including market entry strategies and market regulation consulting for capacity markets and other power markets. If you are interested in learning more about our services, please contact us at info@shulman-advisory.com.

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