Japan's electricity prices spiked by over 25% at the start of this week, driven by soaring costs of liquefied natural gas (LNG) and coal. The nationwide power price climbed to $0.19 (31.15 Japanese yen) per kilowatt-hour (kWh) on Monday, according to data from Japan Electric Power Exchange cited by Bloomberg.
The surge comes as Japan, a major LNG importer, has shifted from gas-fired generation to coal this summer due to elevated LNG prices. This shift began with the outbreak of the war in the Middle East, as many Asian countries turned to coal for affordability and availability reasons.
LNG prices in Asia hit a four-year high, with the average spot price for December deliveries assessed at $29.30 per million British thermal units (MMBtu) last week. This marks the highest spot LNG price for Asia since December 2022, up from $26.50 per MMBtu the previous week. The tight supply through the Strait of Hormuz and competition with Europe for winter supplies have intensified the price pressure.
Coal prices have also risen due to increased demand in Asia and reduced supply from Indonesia, the top thermal coal exporter. The global benchmark for coal prices, the Newcastle futures, have jumped by 30% compared to pre-war levels. Additionally, scheduled maintenance at some power-generating facilities ahead of winter has contributed to the rise in Japan's power prices.