Japan's Power Prices Skyrocket Amid Heatwave and Gas Supply Disruptions

Japan's electricity prices have surged to their highest level since January 2023, rising by 20% in one week. The day-ahead power price has jumped to $0.16 (25.18 Japanese yen) per kilowatt-hour (kWh), according to data from the Japan Electric Power Exchange cited by Bloomberg.

The heatwave in Japan is expected to intensify later this week, with temperatures peaking on Wednesday, and high consumption is driving up prices. The disruption of gas supplies from the Middle East has also raised Japan's fuel costs, as LNG prices have doubled since the Iran war began and Qatar's LNG supply was trapped behind the Strait of Hormuz.

Japan has been burning more coal and less gas for power generation since the conflict in the Middle East started. The price of spot LNG deliveries into northeast Asia soared to a five-month high at the end of last week, reaching an estimated $22.50 per million British thermal units (MMBtu) for October delivery.