Proposed Price Cap Details
The European Union has rolled out its proposed price cap of €275/Mwh for derivatives on prompt month TTF prices. The proposal will be debated on Thursday and is expected to be unpopular. If approved the price cap will be available from Jan 1, 2023, to Jan 1 2024.
When Cap Will be Applied
The proposed cap will only be implemented if contract prices surpass a currently unspecified price level and the difference between the price cap and global LNG prices is more than €55/Mwh for ten consecutive days.
Price Cap Goal
Ultimately, the price cap is expected to serve as a "mechanism of last resort" to tackle excessive domestic natural prices.
Japan is reportedly shifting its focus to ensuring natural gas supplies for next winter as large inventories and lower demand has lessened the impact a lack of Russian supplies will have this winter.
Nuclear and Coal
Nuclear and coal generation are expected to be a part of their solution. Earlier this year, Fumio Kishida announced the restart of seven reactors by 2Q23 with nuclear capacity expected to generate 20% of the nation's electricity by 2030. Also, a plan is in place to extend the lifespan of nucellar reactors past 60 years, with a final decision expected by the end of this year. Furthermore, JERA is expected to bring a 1.07 GW coal facility into operation this year.
Securing LNG Supplies
Additional demand for LNG is expected in upcoming winters as the Chinese economy returns from COVID challenges. The Japanese government will also supply an $875 million loan to JERA to help them secure LNG supplies in upcoming winters. If private companies are unable to purchase LNG, then the Japan Oil, Gas, and Metals corp is authorized to do so.