Japan Additional Capacity Auction Complete Guide: Mechanism, Eligibility, Clearing, and Obligations

I. What Is the Additional Capacity Market?

The Additional Capacity Market (追加オークション, Additional Auction) is a supplementary procurement mechanism within Japan's capacity market framework, operated by the Organization for Cross-regional Coordination of Transmission Operators (OCCTO). Unlike the Main Auction (メインオークション, T-4), which is held four years in advance, the Additional Auction targets specific years where capacity shortfalls emerge and is typically held approximately one year before the target delivery year.

The FY2026 Additional Auction (target delivery year: FY2027) is conducted under rules published by OCCTO in February 2026 ("追加オークション制度詳細"), which serves as the primary reference for this article.

II. Purpose of the Additional Auction

The Additional Auction is triggered under the following circumstances:

• The Main Auction's cleared capacity falls below the minimum point of the demand curve
• Post-Main Auction capacity reductions occur due to plant retirements or deratings
• OCCTO determines that additional procurement is necessary to ensure supply reliability

For FY2027, the Additional Auction was triggered because the Main Auction (T-4, held in FY2023) did not secure sufficient capacity.

III. Eligibility and Eligible Resources

3.1 Eligible Resource Types

Resource Type	Key Characteristics
Existing Resources	Already grid-connected generation (thermal, hydro, nuclear, etc.)
New Resources	Newly constructed or expanded generation facilities
Demand-Side Resources (DR)	Demand response resources
Battery Storage (BESS)	Grid-scale battery energy storage systems
Renewable Energy	Solar, wind, etc. (must meet reliability requirements)
Stable Resources	High-reliability resources (nuclear, large hydro, etc.)

3.2 Eligibility Requirements

1. Operator Registration: Complete OCCTO's "Capacity Market Operator Information Registration" to obtain an operator ID (Mar 2–6, 2026)
2. Resource Registration: Complete "Resource Information Registration," submitting technical specifications, grid connection point, and capacity (Mar 2–13, 2026)
3. Expected Capacity Registration: Calculate and submit "Expected Capacity" (Capacity Value) (Apr 7–24, 2026)
4. Auction Confirmation: After OCCTO announces the auction decision (~Apr 22, 2026), confirm eligibility
5. Eligibility Notice: Receive OCCTO's "Eligibility Notice" before bidding (Jun 2, 2026)

3.3 Expected Capacity Calculation

Resource Type	Calculation Basis	Notes
Thermal	Installed Capacity × Availability Factor (AF)	Deducts planned and forced outages
Hydro	Statistical analysis of historical output	Based on wet/dry year distribution
Solar PV	Historical output during shortage periods	Typically summer daytime average
Wind	Historical output during shortage periods	Region and season-specific
BESS	Installed Capacity × Round-trip Efficiency × Available Hours	Minimum continuous discharge requirement: at least once per day, ≥3 consecutive hours (BESS ≥1,000 kW meeting this standard must participate as a stable power source)
DR Resources	Statistical analysis of curtailable load	Based on historical curtailment performance

IV. Auction Mechanism and Clearing

4.1 Demand Curve

The Additional Auction uses a "Demand Curve" for clearing rather than a fixed procurement volume. The demand curve slopes downward, with capacity (MW) on the horizontal axis and the capacity contract price (¥/kW/year) on the vertical axis.

• Upper bound: Corresponds to "minimum required capacity"; contract price equals the price cap (¥14,000/kW/year)
• Lower bound: Corresponds to "target capacity"; contract price approaches zero
• Shape: Reflects the marginal social cost of capacity shortfalls

4.2 Bidding Process

During the bid acceptance period (June 3–15, 2026), participants submit sealed bids containing:

• Bid Volume (MW): The capacity amount requested for clearing
• Bid Price (¥/kW/year): The desired capacity contract price
• Calculation Parameters (June 16–22, 2026): Technical parameters for final expected capacity calculation

4.3 Clearing Mechanism (Uniform Price Auction)

1. OCCTO ranks all bids by price from lowest to highest (forming the supply curve)
2. The intersection of the supply curve and demand curve determines the Clearing Price
3. All resources bidding at or below the clearing price are cleared, and all receive the same clearing price
4. If total supply exceeds the minimum point of the demand curve (target capacity), the auction may result in no clearing

V. Capacity Agreement and Performance Obligations

5.1 Capacity Agreement

Cleared resources enter into a "Capacity Agreement" with OCCTO for a one-year term (the delivery year). Key terms include: cleared capacity (MW), capacity contract amount (clearing price × cleared capacity), performance obligation period (assessment period), and non-performance penalty calculation methodology.

5.2 Requirements (リクワイアメント)

The core obligation is to provide the cleared capacity during OCCTO-designated "supply shortage periods" (assessment periods).

Resource Type	Key Obligation	Assessment Metric
Thermal	Maintain availability; ensure dispatchability during assessment	Availability Factor (AF)
Hydro	Maintain availability; ensure water availability	AF + reservoir level
BESS	Maintain charge/discharge capability; ensure adequate SOC	AF + State of Charge (SOC)
DR Resources	Complete curtailment within specified time after dispatch signal	Curtailment achievement rate

5.2a Special Obligations for Dispatch Command Resources

BESS participating as a "dispatch command resource" (発動指令電源, i.e., expected capacity ≥1,000 kW but discharge duration <3 hours) and DR resources are subject to the following additional obligations:

• Annual dispatch limit: Maximum 12 dispatches per year, each lasting 3 consecutive hours
• Daily limit: Maximum 1 dispatch per day
• Dispatch window: Weekdays (Monday–Friday) 09:00–20:00 (no dispatch on Saturdays, Sundays, or public holidays)
• Advance notice: The TSO (general transmission and distribution operator) will issue the dispatch command no later than 3 hours before the required supply start time. Example: if discharge must begin at 12:00, the TSO issues the command by 09:00 at the latest
• SOC management: BESS operators must ensure sufficient SOC before 09:00 on each weekday to be ready for potential dispatch commands

Sources: OCCTO “Capacity Market Additional Auction” (February 2026) p.72; “Capacity Market Main Auction Detailed Rules” (July 2023) p.77

5.3 Assessment

OCCTO conducts annual assessments of capacity agreement holders. Assessment periods typically cover summer (July–September) and winter (December–February) peak demand periods. Assessment outcomes: Compliant (no violation), Partial Non-performance (penalty calculated pro-rata), Full Non-performance (full penalty applies).

5.4 Penalties

Penalty = Non-performed Capacity (MW) × Non-performance Duration (h) × Penalty Rate (¥/kW/h)

Penalty rates vary by resource type and severity of non-performance, typically set at several multiples of the capacity contract price to ensure effective deterrence.

VI. FY2026 Additional Auction Schedule

Period	Phase	Description
Mar 2–6, 2026	Operator Registration	Obtain operator ID
Mar 2–13, 2026	Resource Registration	Submit technical specifications
Apr 7–24, 2026	Expected Capacity Registration	Submit capacity values
~Apr 22, 2026	Auction Decision Announcement	OCCTO announces go/no-go
Jun 2, 2026	Eligibility Notice Issuance	Confirm eligible resources
Jun 3–15, 2026	Bid Acceptance	Sealed bidding
Jun 16–22, 2026	Parameter Registration	Final expected capacity confirmation
~Late Jul 2026	Clearing Results Publication	Announce cleared resources and price

VII. Strategic Implications for BESS Developers

1. Additional Revenue Opportunity: BESS already participating in the Main Auction (T-4) can evaluate additional participation in the Additional Auction for incremental capacity contract revenue
2. Expected Capacity Calculation: OCCTO requires at least once per day, ≥3 consecutive hours of continuous discharge (BESS ≥1,000 kW meeting this standard must participate as a stable power source)
3. Performance Obligation Management: Maintain adequate SOC during assessment periods to avoid penalty risk
4. EPRX Coordination: BESS simultaneously participating in the capacity market and EPRX balancing market must carefully manage obligation period overlaps