World’s biggest power traders flock to Japan’s $136b market

Bloomberg

Some of the world’s biggest energy traders are looking to get ahead in Japan’s nascent power market.
From Royal Dutch Shell to German utility RWE, companies are hiring, reassigning staff and building relationships with Japanese firms to profit in the $136 billion market. After building markets in Europe and the US, they have their sights on the third-biggest economy, which is taking shape the way European trading did 20 years ago.
While western markets are increasingly dominated by renewable energy and shrinking profit margins, the potential for price volatility and arbitrage in Japan are a trader’s dream: It has four distinct seasons, a growing supply of intermittent renewables, an uncertain future for its massive nuclear fleet and two separate grids, not to mention a heavy reliance on imports of natural gas, which many of the new entrants already trade.
“I’m confident Japan will be the next big market,” said Steffen Riediger, a director at European Energy Exchange AG, which launched a service to clear futures trades in May. “We’re looking at a market that is developing fast.”
European companies are adopting various strategies. Swedish utility Vattenfall AB plans to hire a futures trader for its German trading office, while RWE has established a subsidiary in Tokyo. From there, the German company plans to be active in the physical and financial trading. RWE has been talking to regulators and exchanges since the market fully liberalised in 2016, said Peter Krembel, chief commercial officer at RWE’s trading unit.