Gas-fired power plants dominate Japan’s first capacity auction for ‘clean’ sources

Japan has held its first capacity auction to secure long-term capacity contracts for low-emission power plants. Projects with a total installed capacity of 9.8 GW were successful, with natural gas-fired power plants accounting for the largest share of the winning technologies. They will have to switch to “clean” fuels within 10 years of being commissioned.

Japan is using capacity auctions to secure progress towards its national decarbonisation targets in advance. The announced system is focused primarily on renewable energy, nuclear power plants, battery storage and facilities that burn biomass, hydrogen or ammonia.

For a transitional period, however, capacity payments may also be made to natural gas-fired power plants. The condition is a commitment to switch to “clean” fuels, such as green hydrogen or ammonia, within 10 years of commissioning.

The results of the first capacity auction, as reported by international publication Argus, show that gas-fired power plants dominated the first auction. Of the total 9.8 GW of secured dispatchable capacity, nearly 6 GW came from natural gas-fired power plants.

They secured funding through capacity payments worth $1.3 billion over a 20-year period. However, during operation, the plants will have to return 90% of their profits from electricity sales on the wholesale market or from providing ancillary services.

“The winning gas-fired power plant projects must be commissioned within six years and immediately begin a gradual transition to clean fuels, which must be completed within 10 years of commissioning,” Argus reported.

Argus added that the other successful projects include 1.1 GW of battery storage, 1.3 GW of nuclear power plants, 770 MW of ammonia co-firing plants, 55 MW of hydrogen co-firing plants, 199 MW of biomass power plants and 577 MW of hydropower plants.