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A revisiting of 2021 Japanese electricity spot market dysfunction event: How it happened and what can we learn from it?

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  • Li, Hong-Zhou
  • Bu, Lin-Lan
  • Kopsakangas-Savolainen, Maria
  • Goto, Mika

Abstract

In January 2021, despite the absence of natural disasters, Japan's electricity spot market experienced a significant dysfunction lasting more than 40 days. During this period, prices surged from 10 JPY/kWh to 251 JPY/kWh, an unprecedented event in Japan's electricity market's history. Research indicates that this incident is causally linked to the design of relevant institutions, which not only failed to provide effective hedging mechanisms but also exacerbated the negative impact of exogenous factors on the electricity spot market. Specifically, the primary causes include an imperfect pricing mechanism for unbalanced power, inadequate systems for information collection and disclosure, potential cross-subsidies within incumbent power companies, and impractical market risk diversification mechanisms.

Suggested Citation

  • Li, Hong-Zhou & Bu, Lin-Lan & Kopsakangas-Savolainen, Maria & Goto, Mika, 2025. "A revisiting of 2021 Japanese electricity spot market dysfunction event: How it happened and what can we learn from it?," Energy Policy, Elsevier, vol. 206(C).
    • Handle: RePEc:eee:enepol:v:206:y:2025:i:c:s030142152500309x
    DOI: 10.1016/j.enpol.2025.114802
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