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The reason is the same; the route to earnings is different. Abroad, prices moved after batteries grew; in Japan, the state cut the ceiling before the batteries arrived.

Here are the three markets that moved earlier, set beside Japan on one measure: the volume of connected batteries as a percentage of that region's peak demand.

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Battery volume (as a share of peak demand) at the point where balancing prices began to moveSouth Australia (around 2020)approx. 9%Britain (2023)approx. 8%Texas, USA (2025)approx. 12%Japan (2026)0.4%← this is where the state cut the ceiling from ¥19.51 to ¥15 to ¥10Overseas figures are approximations based on analyst estimates. Japan = 640 MW connected ÷ 147.84 GW national peak demand
Fig. 1 — Abroad, balancing prices moved only after batteries reached a few percent to a tenth of peak demand. In Japan, the state cut the ceiling first, at 0.4%. Sources: EPRX; Agency for Natural Resources and Energy; OCCTO. Overseas figures are approximations drawn from Modo Energy and AEMO materials.

Abroad: batteries grew, then prices moved

In South Australia, large batteries began operating in 2017, and once they came to supply the balancing market, prices settled by 2020 (AEMO). In Britain, one-second product prices pinned to the cap in 2021, the auction filled in December 2022, and prices fell in 2023 (Modo Energy). In Texas, balancing prices began falling from the summer of 2022. In South Australia and Britain, prices moved once batteries had accumulated to a few percent of peak demand; the mix of earnings then shifted to arbitrage and seats, and battery volumes kept growing (48-16).

Japan: the ceiling came down before the batteries arrived

Japan has 640 MW of connected batteries (end-December 2025). That is 0.4% of national winter peak demand of 147.84 GW (FY2024; the annual peak was about 160.84 GW in August 2024). Against a few percent to a tenth abroad, it is one or two orders of magnitude smaller. The ceiling came down to ¥10 all the same. The background is that a small number of batteries were bidding high. Trades clearing near the cap (above ¥14) were 3.4% by volume but 16.8% of cost, and 68–90% of bids above ¥14 came from batteries (9 May to 3 July 2026, Agency for Natural Resources and Energy). Average clearing prices for primary control reserve (¥/ΔkW per 30 min) in FY2025 were ¥2.05–3.39 for thermal and ¥8.82–13.52 for batteries (EPRX). The state presented this analysis and then cut the ceiling.

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Share of trades clearing near the cap (above ¥14), May–July 2026Share of volume3.4%Share of cost16.8%Batteries' share within that68–90% (range by product and period)Source: Agency for Natural Resources and Energy, 4th Stable Electricity Supply WG, Material 6 (14 July 2026)
Fig. 2 — High bids near the cap were small in volume but large in cost, and most of them came from batteries. Source: Agency for Natural Resources and Energy, 4th Stable Electricity Supply WG, Material 6, 14 July 2026 (9 May to 3 July 2026).

So Japan is on a different route

Abroad the order was: batteries grew, then prices moved in the market. In Japan, regulation cut the ceiling before that. To the three differences seen in 47-4 (the ceiling bites first, prices are set finely in 30-minute blocks, and there is a floor outside the market) we add two here. Japan is split into nine areas and runs at two frequencies east and west, so balancing power is bought area by area. The east–west link rises to 3 GW in FY2027 and the Tohoku–Tokyo link to 10.28 GW, but area differences will remain. And the 20-year auction refunds roughly 90% of market earnings — a different type from Australia's floor-and-ceiling scheme (Italy's 15-year fixed scheme also returns 80% of balancing profits, but the base and the rate differ from Japan's).

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Differences in market designJapanAustraliaBritainTexasPrice ceiling¥10 (price cap)High capInformal capHigh prices toleratedTrading interval30 min5 min4-hour blocks5 minFloor outside the marketYes (headroom, pumped storage)NoNoNoSeat fee (capacity market)YesNo (floor-and-ceiling type)YesNoType of fixed revenue20 years, 90% refundedFloor and ceilingCapacity market, 15 yearsNoneSimultaneous optimisationEarly 2030sPartialNoFrom December 2025
Fig. 3 — Differences in market design. Japan has a lower ceiling, but in exchange it has a floor outside the market and fixed revenue. Sources: EPRX; Agency for Natural Resources and Energy; NESO; AEMO; ERCOT; CAISO; Terna.

Can you copy the overseas playbook and make money in Japan? The reason batteries are needed is the same, so batteries will grow. The route to earnings is different, so the answer is not to apply overseas revenue curves as they are, but to build on Japanese measures: area, connection year, seat fee, fixed revenue and arbitrage.

How an investor should read this
Japan reads as a market that has begun down the same road by a different route, with a lower ceiling and fewer batteries. The price ceiling was set by regulation first. The volume comes next. What matters in Japan is three things: ① the area (how free the seats are, and the day–night price gap), ② the connection year (before or after the interconnectors widen), and ③ fixed revenue (tolling, seat fees). The single biggest difference is not to apply overseas revenue curves as they are.
The questions in this series
I. Why the grid ran without batteries in the past
  1. 48-2The grid used to run fine without batteries, didn't it?
  2. 48-3What disappears from a grid with fewer spinning machines?
  3. 48-4Why "ten seconds"?
  4. 48-5Does more renewables mean more balancing power is needed?
II. Why thermal, nuclear and pumped storage are not enough
  1. 48-6Can't thermal just do the balancing?
  2. 48-7If nuclear grows, do we stop needing batteries?
  3. 48-8Wouldn't more pumped storage be enough?
  4. 48-9Where does the balancing power that the market failed to buy come from?
III. Where demand and the generation mix are heading
  1. 48-10Why do data centres point to batteries?
  2. 48-11What happens to solar from here?
  3. 48-12Thermal volume, nuclear operation, demand — what next?
  4. 48-13How much battery capacity is actually coming?
IV. The money, and what the state really wants
  1. 48-14Does the government actually want more batteries?
  2. 48-15What does battery storage resemble as an infrastructure investment?
  3. 48-16They say the earnings will thin out. Is that true?
  4. 48-17Can you copy the overseas playbook and make money in Japan? (this article)
  5. 48-18How much battery storage will Japan ultimately need?
  6. 48-19Is a battery the same wherever you put it?
The one question beyond the 1848-20 What do you pay, and what comes back?The answer differs by project, so we have built a calculator whose dials are made only from published figures. You can move unit price, clearing rate, seat fee, arbitrage spread and construction cost yourself.

Sources

Supervised by
Shinya Nakashima(Representative Director, Science X Inc.; Ph.D. in Engineering)

Works on the development, sale and technical due diligence of grid-scale battery storage plants. This column is written and supervised on the basis of hands-on transaction and evaluation practice.