Japanese power agency the organisation for cross-regional co-ordination of transmission operator (Occto) plans to hold the country's second power capacity auction in October, aiming to secure reliable power supplies during the April 2025-March 2026 fiscal year.
The Occto aims to procure 176,991MW of power generation capacity for 2025-26 through the single price auction to be held during 1-14 October. The capacity is 11.8pc above average of the 2025-26 peak demand forecast for the top three days in the country's nine areas, excluding Okinawa. The auction could seek around 98pc of targeted capacity volumes this year, and the remaining 2pc during 2024-25 to adjust balances.
The net cost of new entry (net CONE) was set at ¥9,372/kW, which indicates the ceiling price at ¥14,058/kW. A total of 176,045MW of capacity would be procured at a contract price of ¥14,058/kW, while 181,657MW would be secured at zero.
The demand curve was derived from estimated costs to build and operate a 1,400MW combined-cycle gas turbine generation unit for 40 years. The costs included ¥120,000/kW for construction, ¥600 mn/yr for personal expenses, ¥1,560/kW for grid connection and ¥30,861/kW for repairs in deterioration, amid expected inflation rate of 0.34pc over the operating period.
Bidders can offer existing or planned generation capacity of hydro, thermal, nuclear and renewable power sources, which should have stable operations during 2025-26, with a minimum capacity of 1MW. Bidders are also allowed to offer more than 1MW of less stable hydro and renewable supplies in the different categories.
The 2025-26 auction system was partially revised from the 2024-25 auction, prohibiting the reciprocal bidding to collect any deduction for relatively old power plants. The previous tender resulted in a higher contract price reflecting the reciprocal bidding made by a few power generators in the single price auction system that allows all winners to issue the same contract price.
The 2025-26 auction rules set a 20pc deduction from a contract price for inefficient coal-fired power plants with less than 42pc thermal efficiency, at more than 50pc utilisation ratio. Power generators will also receive less money, if bidding for old power plants or at lower bids prices, below a contract price by a certain ratio.
The mechanism is designed to promote investment in power generation plants, by securing capacity and funding in advance, especially amid growing instability in renewable power sources. The Occto will collect money from the country's registered power retailers and transmission firms and pay winning companies during 2025-26.
