| Author Name | KANEMOTO Yoshitsugu (National Graduate Institute for Policy Studies) |
|---|---|
| Creation Date/NO. | October 2026 26-P-021 |
| Research Project | Design and System Analyses of the Electricity Market and its implications for Japan |
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Abstract
Japan’s electricity market has made significant progress toward liberalization through the Fifth Electricity System Reform, which was implemented after the Great East Japan Earthquake. However, this has also highlighted the challenges involved in designing electricity markets. One such challenge is the shortage of sell bids and price spikes in the balancing market. To resolve these short-term market issues, a co-optimized market is being developed in Japan. U.S. ISOs perform co-optimization of energy and ancillary services, and “three-part offers” have been introduced to account for the startup costs and minimum output restrictions of thermal power plants. The U.S. ISO market system has functioned effectively for over 20 years. Furthermore, the U.S. market system is continuously being refined, and its performance has improved significantly over time. However, understanding of the details of the U.S. ISO market system design and operation remain limited in Japan. This paper provides an overview of how the U.S. market clearing engine has evolved based on publicly available materials.
