Japan’s Spot Power Prices Fall to 6-Year Low on Cheaper Fuel

  • 24-hour average electricity spot price fell to 5.541 yen/kWh
  • Crude oil in May is trading at the lowest level in 12 years

Japan’s spot power prices fell to a 6-year low amid the weakest oil price for this time of year since 2004 and low seasonal demand.

The 24-hour average day-ahead electricity spot price for delivery on May 14 dropped to 5.541 yen per kilowatt hour, the lowest since March 2010, according to data from the Japan Electric Power Exchange.

“Crude prices have been the main driver of power price movements on the exchange,” Michael Jones, a Singapore-based gas and power analyst at Wood Mackenzie Ltd., said by e-mail. “Marginal power prices are set by the highest cost plant, which historically has been crude or fuel oil running through steam-turbine power plants.”

Brent crude, the global benchmark, has slumped more than 50 percent over the past two years and is trading at the lowest in the month of May in the last 12 years. Japan’s power demand traditionally drops in April-June and September-November when households use heaters and air conditioners less amid mild temperatures.

Costs are also falling along with liquefied natural gas prices. The price for spot LNG cargoes that arrived in Japan during April fell to $5.8 per British thermal units, the lowest in data going back to 2014, according to the Ministry of Economy, Trade and Industry.

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