Japan Power Prices Soar Amid Heatwave and Middle Eastern Disruptions

Japan's electricity prices have surged to their highest level since January 2023 due to an intense heatwave and supply disruptions from the Middle East. The day-ahead power price in Japan has jumped to $0.16 (25.18 Japanese yen) per kilowatt-hour (kWh), a 20% increase in just one week.

The heatwave is expected to intensify later this week, with temperatures peaking on Wednesday, according to weather forecasts. However, the oil and gas supply disruption in the Middle East has raised Japan's fuel costs, with LNG prices doubling from before the Iran war began.

As a result, Japan has been burning more coal and less gas for power generation since the war started, following the lead of other Asian countries that have made the switch due to affordability and availability concerns. The price of spot LNG deliveries into northeast Asia soared to a five-month high at the end of last week amid the renewed hostilities in the Middle East.