COLUMN 03 — Policy Comparison
Main Auction vs Long-Duration Decarbonized Power Auction
— The Critical Differences Battery Operators Must Know
While both fall under the "capacity market" framework, the Main Auction and LDA have fundamentally different design philosophies. We organize the criteria for deciding which to participate in.
In a Nutshell
Main Auction = "A system to receive annual maintenance costs for existing power sources"
→ 1-year contract, single-price, existing and new OK, win rate over 96%
LDA = "A system to receive construction + fixed costs for new sources over 20 years"
→ 20-year contract, multi-price, new only, win rate 20%
The Main Auction is a market where all power sources participate to secure "next year's power supply capacity." The LDA is a market that guarantees "20-year investment recovery" only for new decarbonized power sources. While both fall under the capacity market umbrella, their participation purposes and risk characteristics are entirely different.
7 Differences at a Glance
| Comparison Item | Main Auction | LDA |
|---|
| Contract Period | 1 year (annual) | 20 years in principle |
| Auction Format | Single-price
(last winner's price applies to all) | Multi-price
(each bidder's price becomes their contract) |
| Eligible Sources | All sources, existing and new | New construction, replacement, renovation only |
| Min. Battery Capacity | 1,000kW | 30,000kW (from 2nd round) |
| Revenue from Other Markets | No restrictions (keep 100%) | Obligation to refund ~90%
(3 tiers: 95%/90%/85%) |
| Battery Win Rate | Over 96% | 20-24% |
| Contract Price Level | 3,109-14,812 yen/kW (1st-5th rounds) | 58,000-68,000 yen/kW/year (decarbonized avg.) |
Source: Agency for Natural Resources and Energy "About the Capacity Market" (Feb 5, 2025) / OCCTO contract results
Main Auction Contract Price History — A Roller Coaster
| Round | Delivery Year | Avg. Price | Total Value | Notes |
|---|
| 1st | FY2024 | 14,137 yen/kW | — | Nationwide uniform. Near demand curve cap, criticized |
| 2nd | FY2025 | 3,495 yen/kW | — | Plunged to ~1/4 of previous round |
| 3rd | FY2026 | 5,226 yen/kW | — | Area-based market segmentation occurred |
| 4th | FY2027 | 7,847 yen/kW | — | Shifted to upward trend |
| 5th | FY2028 | 11,134 yen/kW | approx. 1.85 trillion yen | Record high |
Source: OCCTO contract results for each round
In the 5th round, significant area-based disparities emerged. The Hokkaido, Tohoku, and Tokyo areas cleared at the price cap of 14,812 yen/kW, while Kyushu was 13,177 yen, Chubu 10,280 yen, and Hokuriku/Kansai/Chugoku/Shikoku 8,785 yen. The battery installation area directly determines Capacity Market revenue.
Practical Differences for Battery Operators
Batteries Suited for the Main Auction
- Existing batteries (LDA only accepts new construction)
- Small projects under 30MW (below LDA minimum bid capacity)
- Full merchant operators with market trading expertise
- Award rate over 96% with nearly all volume awarded -- can retain 100% of other market revenue but bears annual price fluctuation risk
Batteries Suited for the LDA
- New large-scale batteries (30MW or more)
- Projects requiring project finance structuring
- For infrastructure funds and institutional investors prioritizing long-term stable income
- Award rate is a highly competitive 20-24%. IRR converges to approx. 3.2% "bond-like returns" from capacity payments alone, but 20-year fixed income makes DSCR structuring easier
Participation Decision Framework
Q1: Existing or new?
→ Existing → Main Auction only (LDA not eligible)
Q2: Is the capacity 30MW or more?
→ Under 30MW → Main Auction only (doesn't meet LDA requirements)
Q3: Is project finance needed?
→ Yes → Prioritize LDA (20-year fixed income is decisive for lending decisions)
Q4: Can you bear market price volatility risk?
→ Yes (+ have market operations capability) → Main Auction + 3-market full merchant
→ Want to limit risk → LDA
Can You Participate in Both?
Sources that win the LDA do not participate in the Main Auction (as they provide supply capacity under the LDA capacity contract). However, if unsuccessful in the LDA, it is possible to participate in the Main Auction again.
Additionally, trading in JEPX and balancing markets by LDA-winning sources is permitted, but the majority (approximately 90%) of that revenue is subject to refund to OCCTO.
Summary — Not "Which is Better" but "Which Fits Your Company"
The Main Auction vs LDA is not a question of "which is more advantageous" — the optimal choice changes based on business phase, scale, and risk tolerance.
However, the common truth is that regardless of which you participate in, "location" is everything. Whether you can secure a suitable site with low grid connection costs is the biggest variable in profitability.
Related Columns
→ What is the LDA? — Explaining the 20-Year Fixed Revenue Mechanism
→ 3 Revenue Sources for Batteries — JEPX, Balancing Market, Capacity Market
→ Why Grid Connection Costs Vary by 10x
→ 30MW+ vs 2MW — Complete Business Model Comparison
Sources & References:
- Agency for Natural Resources and Energy, "On Capacity Market" (February 5, 2025) https://www.meti.go.jp/shingikai/enecho/denryoku_gas/denryoku_gas/seido_kento/pdf/099_03_03.pdf
- OCCTO Main Auction 5th Round Clearing Results (January 29, 2025)
- OCCTO LDA 1st and 2nd Round Clearing Results (April 2024, April 2025)
- KPMG Decarbonized Power Auction Analysis https://kpmg.com/jp/ja/home/insights/2024/10/decarbonized-power-auction.html
- enegaeru.com LDA Analysis https://www.enegaeru.com/long-term-decarbonizationpowersourceauction