TOKYO (Reuters) - Electricity prices in Japan are hitting the lowest price possible, effectively zero, with increasing regularity as the coronavirus pandemic slows industrial activity, while renewable energy supplies such as solar increase as summer approaches.
Day-ahead prices on the Japan Electric Power Exchange (JEPX) touched a low of 0.01 yen ($0.0001) per kilowatt hour (kWh) for the first time in February but since the government declared a state of emergency in April they have traded at that level for several hours on an increasing number of days during normal business hours.
Graphic - Japan spot power prices since April: here
The coronavirus pandemic has killed nearly 300,000 people globally while governments have put billions of people under lockdown, which has devastated economies as factories idle and services stop.
Japan has seen relatively fewer deaths and infections than other major economies, but the economy is expected to have fallen into recession in the first quarter and an even deeper slump in the current quarter as steelmakers, automakers and other manufacturers halt activity due to collapsing demand.
Household spending plummeted in March and service-sector activity shrank at a record pace in April.
“The impact on electricity demand in the industrial and commercial sector and especially in the commercial segment will be apparent for sure this year,” Takashi Morimoto, president of Kansai Electric Power Inc, told an earnings conference on Tuesday, referring the financial year that started on April 1.
Electricity market specialists said that the slump in demand is coinciding with increasing supplies of solar power being offered on JEPX as summer approaches and capacity factors rise, especially in western Japan.
A Reuters survey of JEPX trading records going back to 2005 when the exchange started operations showed that this year was the first time prices had reached the lowest possible level.
A price of 0.1 yen effectively means power is worth nothing, not being able to go lower due to the exchange’s trading mechanisms, an official told Reuters by phone.
That contrasts with other markets such as Germany, where prices often fall into negative territory, when renewable supplies surge during periods of lower demand.
Reporting by Aaron Sheldrick; Additional reporting by Yuka Obayashi; Editing by Kim Coghill