BESS and the Japan Power Market The Current State of Play at LTDA Auction Round 3

I. Introduction

Japan’s Ministry of Economy, Trade, and Industry (METI) and the Organization for Cross-regional Coordination of Transmission Operators (OCCTO)’s third round of the Long-Term Decarbonization Power Source Auction (the LTDA, or Round 3) recently concluded, with the results published by OCCTO on May 13, 2026. The Round 3 results come at a time of continued evolution for Japan’s power market and battery energy storage systems’ (BESS) role therein. Since the second round LTDA auction process commenced in late 2024 and results were published in April 2025, several material developments in the LTDA scheme and greater Japan BESS market have occurred. Material changes to the Round 3 auction guidelines were implemented in late 2025, but in spite of such changes Round 3 has produced storage category awards above the original procurement caps. Outside the LTDA scheme, METI has put forward consequential amendments to the balancing market's price cap regime, reflecting policy changes in the merchant energy market affecting non-LTDA BESS projects. Further, co-location of BESS alongside renewable energy assets (and, increasingly, alongside power-consuming assets such as data centers) is also emerging in Japan as a new commercial opportunity for developers.

This GT Alert provides an overview of the Japanese BESS market and the varied forms of commercial opportunities therein, arranged across the following topics:

• an overview of the current state of the LTDA auction process (Part II), including a review of Round 2 results (Part II.A), a summary of the design of the Round 3 auction scheme (Part II.B), a summary of the newly announced Round 3 results published on May 13, 2026 (Part II.C) and key takeaways from the Round 3 results (Part II.D);
• a review of the current Japan power market revenue stack as it pertains to BESS, including recent regulatory changes to the balancing market (Part III);
• a discussion of the emergence of co-located BESS with renewables and power-consuming assets in Japan (Part IV); and
• some key takeaways for stakeholders evaluating the Japan BESS opportunity (Part V).
  
  

  II. LTDA Auction: Current Status and Updates

  A. Overview of the LTDA Scheme and Second Round Results

The LTDA, launched in July 2023 by OCCTO, provides stable, long-term revenue support for newly developed decarbonized power sources, including standalone BESS, through 20-year capacity reserve agreements (CRAs) with OCCTO.^[1] Successful bidders receive fixed annual capacity payments (JPY/kW/year), adjusted for the consumer price index, in exchange for providing committed capacity to the grid. The auction is price-competitive, with winning bids selected primarily on the basis of the lowest bid price up to the procured volume.^[2]

A key structural feature of the LTDA CRA is the 90% profit return mechanism: winning bidders are obligated to pay OCCTO approximately 90% of net profits earned from other market transactions (including Japanese Electric Power Exchange wholesale trading and environmental attribute sales) during the CRA term. While this arrangement assures lenders of the long-term capacity payment revenue stream, it significantly limits the upside available from merchant market participation, creating tension for developers seeking to optimize total project IRR.

Round 2 results (April 2025). On April 28, 2025, OCCTO announced the results of the second LTDA (the Round 2 Auction), awarding 6.3 GW on a derated basis across 38 projects, representing approximately 47% of the 13.6 GW of total bid capacity submitted. Of this, approximately 1.4 GW was awarded to 27 BESS projects, representing roughly 22% of the total awarded capacity and a ~25% increase in awarded BESS capacity compared to Round 1. BESS was the most oversubscribed technology category in Round 2, with only approximately 20% of submitted BESS bid capacity ultimately awarded. Nuclear power plants (including major facilities operated by Japan Atomic Power Company, Hokkaido Electric Power, and TEPCO) claimed approximately half of the total awarded capacity under a new category established for the financing of nuclear safety upgrades. LNG-fired power plants accounted for an additional 21% of awarded capacity.^[3]

Of the 27 awarded BESS contracts, 21 were for three-to-six-hour duration assets, and six were for six-hour-or-longer duration assets. Prominent winners included CHC and Stonepeak’s joint venture, which secured five BESS projects totaling 348 MW of gross capacity (building on its four-project, 131 MW win in Round 1),^[4] and Bison Energy (backed by i Squared Capital's HEXA Renewables), which won three projects including a 150 MW six-hour-plus asset in Fukushima, the largest single BESS contract awarded to date.^[5] International capital continues to play a prominent role in the Japan BESS market, a trend consistent with Round 1 outcomes.

B. Summary of Key Changes for LTDA Round 3

OCCTO published the final Round 3 solicitation outline (the FY2025-26 Auction) on Sept. 3, 2025,^[6] with the bid submission window running from Jan. 27 to Feb. 3, 2026. OCCTO announced the results on May 13, 2026 (discussed in detail in Section II.C below). The following table summarizes the key parameters and results across the three auction rounds:

Table 1: LTDA Auction Comparison: Rounds 1 through 3

An important change for Round 3 is the elimination of the three-to-six-hour duration bracket for BESS, with the minimum continuous operation requirement increasing to six hours. This raises the capital cost and site requirements for qualifying projects. In parallel, the BESS and pumped hydro combined allocation has been reduced from 1.5 GW in Round 2 to 0.8 GW in Round 3, intensifying competition further.

Round 3 also introduces new eligible asset categories (Long Duration Energy Storage (LDES) and existing thermal power plants with Carbon Capture and Storage (CCS) for the first time. A cost overrun compensation mechanism will be introduced for large projects above 300 MW. OPEX for hydrogen, ammonia, and CCS projects will be indexed to the CPI on an annual basis (with CAPEX indexed only once). The 30% single-country manufacturing cap, applicable to lithium-ion BESS since Round 2, is proposed to be extended to non-lithium-ion BESS in Round 3.

METI and OCCTO were considering reforms to the 90% profit return mechanism, including a potential transition to a fixed-fee structure with OCCTO support triggered only upon significant cost or revenue fluctuations. This reform, if implemented, would have material implications for the revenue optimization strategies available to BESS operators and the bankability profile of LTDA projects. However, this reform was not implemented in Round 3.^[7]

C. Round 3 Auction Results (May 13, 2026)

On May 13, 2026, OCCTO published the results of the Round 3 auction. The headline figure is a marked shift from the dynamic of Rounds 1 and 2: the decarbonization power source category, for the first time, was undersubscribed. Against a target of 5,000 MW, only 4,261 MW was awarded across the decarbonization category (representing approximately 85% of the procurement target), with a total contracted capacity payment value of JPY 474.8 billion per annum across 20 years (on a three-year market price average basis). The separately solicited LNG-fired thermal category was fully subscribed at 3,038 MW (against a target of 2,929 MW), bringing the total awarded capacity across all categories to 7,299 MW.^[8]

Storage categories awarded above original procurement caps. The original Round 3 design contemplated two separate procurement caps (募集上限) for the storage categories: a 400 MW cap for the “Li-ion BESS + non-new pumped hydro” category, and a 400 MW cap for the new “non-Li-ion BESS + new pumped hydro + Long Duration Energy Storage (LDES)” category, for a combined target of 800 MW across the storage categories. Where the overall decarbonization procurement target is undersubscribed, OCCTO’s rules allow awards above each category cap, up to a maximum of twice the cap. The relative underperformance of bidding in other decarbonization categories triggered this rule, with the result that total awards in the storage categories reached approximately 1,705 MW, comprising 819 MW awarded under the Li-ion BESS/non-new pumped hydro category, and a further 886 MW awarded under the non-Li-ion BESS/new pumped hydro/LDES category. Of this total, OCCTO data indicates that BESS-only awards (across both categories) totalled approximately 575 MW, with the balance allocated to pumped hydro and LDES projects. While the total storage allocation in Round 3 is broadly comparable to Round 2’s combined 1,400 MW BESS + 360 MW pumped hydro (approximately 1,760 MW), the BESS-only awarded capacity in Round 3 is materially lower than in Rounds 1 and 2, a development consistent with the policy shift towards longer-duration assets, LDES, and pumped hydro.^[9]

A more favorable competitive dynamic for BESS bidders. Whereas Round 2 saw only approximately 20% of BESS bid capacity ultimately awarded, in Round 3 approximately 46% of BESS bid capacity was awarded (against 1,251 MW of BESS bids). The competitive landscape in Round 3 was therefore less constrained than expected at the start of the auction process, an outcome that reflects, in part, the cooling effect on bidding intensity caused by the more demanding eligibility requirements (the 6-hour minimum duration, the supply chain compliance regime, and the continued application of the 90% profit return mechanism), combined with the broader undersubscription across other decarbonization technologies. Across all categories the auction received bids totaling approximately 10,856 MW, of which 7,299 MW (67%) were ultimately awarded.

Other awarded categories. The breakdown of awarded decarbonization capacity in Round 3 includes: decarbonized thermal (comprising new-build hydrogen mono-firing and ammonia co-firing modifications to existing plants) at approximately 517 MW (slightly above the 500 MW category target); existing nuclear safety upgrade investments at approximately 558 MW (below the 1,500 MW category-specific procurement cap); and approximately 1,482 MW awarded to other decarbonized sources, comprising principally new-build nuclear and replacement nuclear (approximately 1,381 MW) and biomass mono-firing (approximately 101 MW). Across the auction (decarbonization sources plus LNG-only thermal), approximately 97% of awarded capacity is for new construction or replacement projects, with only approximately 3% allocated to the modification of existing thermal generation. Geographically, the largest awarded capacities were in the Tohoku (1,966 MW), Tokyo (1,822 MW), Kyushu (1,211 MW), and Hokkaido (1,016 MW) areas.

Continued international developer participation. Consistent with the pattern observed in Rounds 1 and 2, Round 3 saw substantial international developer success. The OCCTO awarded projects list of May 13, 2026, confirms that Stonepeak Kingdom Holdings (the Stonepeak-backed platform) secured three new BESS projects: Kingdom-3 (95.6 MW non-Li-ion BESS), Kingdom-6 (45.9 MW non-Li-ion BESS), and Kingdom-1 (32.8 MW Li-ion BESS), for an aggregate of approximately 174 MW. With these wins, the Kingdom platform now holds 12 LTDA contracts totaling approximately 653 MW across the three auction rounds, placing it among the leading international BESS platforms in the Japan LTDA market. Notably, CHC Japan secured two Li-ion BESS projects (the Masuda City Battery Storage Facility and the Shintomi-cho Battery Storage Facility) for approximately 112 MW. Hexa Energy Services (the i Squared Capital-backed HEXA Renewables platform that also secured Round 2 awards including the 150 MW Fukushima project) won two non-Li-ion BESS projects in Round 3 (HC25 Chugoku-1 and HC25 Tohoku-2) for approximately 91 MW combined. Other international developers, including HD Renewable Energy (which secured approximately 300 MW across five projects in Round 2 through its various special-purpose company bidders), continue to play a role in the Japan BESS market. The full list of awarded bidders is available from OCCTO’s May 13, 2026, awarded projects publication.^[10]

90% profit return mechanism continues to apply. Notwithstanding the active METI/OCCTO consideration during the consultation period of reforms to the 90% profit return mechanism (including a possible fixed-fee alternative structure), the Round 3 results confirm that the approximately 90% profit return mechanism continues to apply on its existing terms to all projects awarded under the Round 3 auction. The OCCTO Round 3 results publication of May 13, 2026, expressly reiterates that other-market revenues are subject to a return of approximately 90% under the Round 3 CRA structure. Reform of this mechanism, if any, would therefore apply only to subsequent rounds, and not retroactively to Round 3 projects.

D. Key Takeaways and Implications for Prospective Developers

The evolution of the LTDA from Round 1 to Round 3 reflects a policy shift toward promoting long-duration storage. Several implications stand out for prospective BESS developers:

• The six-hour minimum is now a hard threshold for LTDA eligibility in Round 3. Developers with projects designed around three-to-four-hour duration profiles may need to reassess their configurations and economics, given the higher capital requirements of longer-duration systems.
• The competitive picture has shifted. While Round 2 saw only 20% of BESS bid capacity awarded, Round 3 produced a saw approximately 46% of BESS bid capacity awarded, reflecting overall undersubscription across the decarbonization category and the operation of the over-cap allocation rules. Developers should not, however, assume this will persist into future rounds: as competition increases and other decarbonization categories mature, BESS success rates may revert toward Round 1/Round 2 levels.
• The 90% profit return mechanism has been confirmed to apply to all Round 3 projects (notwithstanding METI/OCCTO consideration of reforms during the Round 3 consultation period). The mechanism continues to limit merchant upside under LTDA, reinforcing the importance of evaluating the full revenue stack holistically rather than treating the LTDA as an isolated revenue source. Reform of the profit return structure, if any, would apply prospectively only.
• Manufacturing supply chain compliance (single-country cap) may add complexity to equipment procurement and due diligence, particularly for developers relying on Chinese-manufactured battery systems.
• The LTDA supply commencement deadline for Round 3 winners is expected to be March 31, 2031. Developers should consider modeling realistic construction and commissioning timelines against this deadline, given the penalties for late delivery under the CRA.

III.  One Weapon in a Diverse Arsenal: The Current Japanese Power Market Revenue Stack

A. The BESS Revenue Stack: An Updated Overview

BESS projects in Japan have access to a multi-layered revenue stack spanning the long-term capacity market (LTDA), the single-year capacity market, the balancing/supply-demand adjustment market, the JEPX wholesale spot market, and the FIP co-location framework. The table below provides an updated summary of these revenue streams:

Table 2: Japan BESS Power Market Revenue Stack: Current Status (May 2026)

B. Considerations in LTDA Participation

Developers and lenders alike should resist the temptation to evaluate the LTDA capacity payment as the sole viable revenue source for bankable BESS projects. The 20-year CRA with OCCTO provides a bankability anchor (particularly for non-recourse project finance); however, such revenue anchor currently comes with the 90% profit clawback provision, which curtails the net merchant revenue available to the project company and potential equity upside. Holistic revenue optimization, including active participation in balancing and wholesale markets, may be critical to achieving target IRRs, and therefore developers should consider whether participation in the LTDA is the most viable commercial pathway for their BESS projects, considering the 90% profit clawback.

Project operators outside the LTDA scheme, including fully merchant BESS and co-located hybrid assets, should consider modeling the revenue stack across all available market mechanisms. The ability to stack revenues across multiple market mechanisms is an increasingly important driver of Japan BESS investment decisions.

C. Recent Changes to the Balancing Market: METI's Proposed Price Cap Reductions

The balancing market (Supply-Demand Adjustment Market, or SDAM) has historically been a high-value revenue component for fast-response BESS in Japan, with premium products (Primary reserve, Secondary-1 reserve, and composite products) commanding higher capacity payments than slower-response products (Secondary-2, Tertiary-1).

In late October 2025, METI presented an initial proposal to its System Review Working Group to reduce the price cap for premium balancing products (Primary, Secondary-1, and composite products) from JPY 19.51 to JPY 7.21 per delta-kW per 30-minute interval, a reduction of approximately 63%. This proposal was met with industry opposition at the October and December 2025 Working Group meetings, with participants raising concerns over the impact on project financing, business continuity for BESS operators, and the risk of participation withholding if spot market prices exceed the proposed cap.^[11]

Following that consultation and industry pushback, METI scaled back its initial proposal. At the 110th Working Group meeting on Jan. 23, 2026, METI formally put forward a revised proposal to reduce the cap from JPY 19.51 to JPY 15 per delta-kW per 30-minute interval (a reduction of approximately 23%), effective from the commencement of day-ahead trading (currently scheduled to begin with the March 13, 2026, market session). The revised proposal includes a staged further reduction mechanism: if competitive conditions in the market do not improve following the initial reduction, the cap would be further lowered in stages to JPY 10, and then potentially to JPY 7.21, per delta-kW per 30-minute interval. This maintains JPY 7.21 as the floor level of the reduction trajectory but treats it as a contingent outcome rather than an immediate policy target.

The revised proposal, while more favorable to BESS operators than the initial October proposal, still represents a policy shift. Market participants continue to monitor whether the staged reduction mechanism will be triggered, the pace at which METI will conduct its competitive condition reviews, and whether transitional protections or grandfathering provisions will be considered. Taken together with Round 3’s six-hour minimum for LTDA eligibility, the balancing market cap reduction trajectory shows that METI and OCCTO seek to moderate the fast-response arbitrage premium available to short-duration BESS, while cushioning the pace of adjustment in response to industry financing concerns.

IV. The Next Frontier? Integrated BESS and Renewables Co-location Systems in Japan

A. Current Market Status: Co-located Renewable/BESS Systems

The co-location of BESS with renewable energy generation assets (most commonly solar PV) is an established segment of the Japan BESS market. Co-located BESS enables solar operators to shift curtailed or off-peak generation to higher-value dispatch windows, improve imbalance cost management under the FIP scheme, and mitigate the revenue impact of curtailment, a growing concern as renewable penetration increases.

METI has actively promoted FIP conversion combined with BESS co-location as a policy objective. In August 2025, METI streamlined the dual regulatory procedures required (the FIP conversion procedure and the FIP amendment approval procedure for battery installation), reducing the administrative burden on operators. METI has set an interim target of increasing the FIP conversion ratio to 25% of the combined FIT/FIP portfolio.^[12]

Recent co-location transactions include the joint project between Osaka Gas and Sonnedix, which is constructing a 30MW/125MWh BESS at Sonnedix's 38.7MW solar PV plant in Oita City, Kyushu (construction commenced October 2025; scheduled COD: November 2026). The project uses Tesla Megapack units integrated by Toshiba Energy Systems & Solutions, with Osaka Gas managing route-to-market trading and optimization. As part of the BESS retrofit, the solar plant is also being transitioned from the FIT scheme to the FIP scheme, and the project was refinanced on a non-recourse basis by MUFG for JPY 21.4 billion in connection with the BESS addition.^[13]

For co-located assets, the revenue stack broadly comprises: (i) the FIP premium on generated and stored energy dispatched at market-responsive times; (ii) wholesale JEPX revenues from time-shifted solar output; (iii) balancing market revenues where the asset’s technical specifications permit participation; and (iv) environmental value/non-fossil certificate sales. Unlike standalone BESS under the LTDA, co-located FIP assets are not subject to the 90% profit return mechanism with OCCTO, a potentially significant advantage from a returns optimization perspective, albeit without the security of a 20-year CRA.

B. Co-location with Ultimate Power Consumers: Data Centers and Commercial Real Estate

An emerging and as yet nascent frontier in Japan’s BESS market involves co-location of BESS with power-consuming assets, most notably data centers and large commercial facilities. Japan’s data center market is undergoing expansion driven by AI workloads: according to Wood Mackenzie, data center power consumption in Japan could more than triple from 19 TWh in 2024 to between 57 TWh and 66 TWh by 2034, accounting for up to 60% of Japan's total demand growth over that period.^[14]

Hyperscale campuses have driven average facility power capacity above 40 MW, with grid connection queues stretching from several years in less-constrained regional markets to up to a decade or more in central Tokyo. This infrastructure bottleneck creates a structural incentive for data center operators to explore on-site BESS as a means of smoothing grid demand, securing power reliability, and meeting corporate carbon-neutral commitments. Geographic mismatches further complicate the picture: according to Japan’s 2025 Energy White Paper, approximately 90% of Japanese data centers are clustered in the Tokyo and Osaka regions, while large-scale renewable energy resources are concentrated in Hokkaido and Kyushu, creating a fundamental transmission mismatch that BESS co-location can help address at the local level.^[15]

Early-stage activity is emerging in the BESS-plus-data-center space: in February 2026, PowerX and Internet Initiative Japan (IIJ) signed a Memorandum of Understanding to explore the development of containerized data centers integrated with BESS, under which BESS would store power at off-peak rates for use by AI computing infrastructure within the containers, with surplus energy re-dispatched to the grid during high-demand periods.^[16] In May 2025, NTT launched a new energy storage plant services division within its smart energy subsidiary, NTT Anode Energy, specifically targeting the construction and operation of BESS on behalf of enterprise customers, drawing on an existing 340 MWh portfolio across 23 locations in Japan.^[17]

While the regulatory framework for BESS assets integrated directly with power-consuming assets (as opposed to co-location with generation assets) remains in development, the Public-Private Advisory Council on Watt-Bit Collaboration (a joint initiative of METI and the Ministry of Internal Affairs and Communications (MIC) convened in March 2025 with participants from utilities, grid operators, data center operators, and academics) signals active policymaker engagement with the opportunity of integrating electricity and digital infrastructure investment.^[18]

From a revenue structuring perspective, a BESS asset co-located with a data center or similar large consumer could potentially access: (i) a contracted tolling or energy supply arrangement with the anchor consumer, providing long-term revenue visibility; (ii) residual capacity market participation during periods when the anchor consumer’s demand is lower than the BESS rated output; and (iii) wholesale and balancing market revenues from surplus BESS capacity. Structuring and regulatory complexity, including grid tariff treatment, metering, and OCCTO notification requirements, may require legal and regulatory analysis on a project-specific basis.

V. Conclusions

Japan’s BESS market is undergoing a period of structural maturation, and stakeholders are now navigating an increasingly multi-dimensional commercial landscape. Several key conclusions emerge from the foregoing analysis.

A diverse and evolving set of commercial opportunities. The investment case for BESS in Japan is no longer defined solely by the LTDA. Stakeholders now have access to (and are increasingly expected to optimize across) a multi-layered revenue stack encompassing LTDA and single-year capacity markets, balancing and wholesale markets, FIP co-location frameworks, and emerging contracted arrangements with power-consuming anchor tenants. Developers with the sophistication to model and optimize across these revenue layers will be best positioned to generate competitive IRRs.

A holistic approach to the revenue stack is essential. The 90% profit return provision in LTDA CRAs, combined with proposed reductions to balancing market price caps, underscores the importance of not evaluating the LTDA in isolation. Prospective developers should consider modeling their projects’ consolidated revenue potential, including balancing market, JEPX, non-fossil value, and any co-location or contracted revenues, and may wish to  identify structures that optimize net returns. Lender stakeholders may increasingly be asked to assess the bankability of BESS projects that do not rely primarily on LTDA contracts or other long-term contracted revenue as their primary credit support, including fully merchant and co-located hybrid projects.

METI and OCCTO will continue to update the BESS regulatory regime in parallel. The simultaneous evolution of the LTDA framework (moving toward long-duration BESS and supply chain compliance requirements) and the balancing market (the JPY 19.51 to JPY 15 price cap reduction, with potential staged further reductions) shows that METI and OCCTO seek to balance the procurement of stable, long-duration grid capacity with the imperative to manage energy costs for consumers and to avoid subsidizing arbitrage strategies. The fact that the 90% profit return mechanism remained in place for Round 3 (notwithstanding active consideration of a fixed-fee alternative) may indicate that policy reform tends to be measured and incremental rather than rapid. Developers may see further annual revisions to LTDA guidelines and should remain attentive to METI consultations on balancing market structure and on the future of the profit return mechanism.

Round 3 results vindicate the long-term opportunity. The Round 3 results published on May 13, 2026, confirm that, notwithstanding the more demanding eligibility regime (the six-hour minimum duration, the supply chain compliance regime, and the continued application of the 90% profit return mechanism), BESS and other long-duration storage technologies remain a meaningful participation category in the LTDA. The undersubscription across other decarbonization categories enabled over-cap allocation of approximately 1,705 MW to the storage categories, well above the 800 MW original procurement target, although the BESS-only component of this allocation (approximately 575 MW) is materially lower than in prior rounds, with pumped hydro and LDES taking a larger share of the storage allocation. The continuing growth of renewable penetration, grid curtailment, data center power demand, and Japan’s 2030 decarbonization targets may point to a substantial and durable need for energy storage investment. Developers willing to invest in the technical, regulatory, and financing complexity of this market (and to engage with it as the multi-faceted opportunity it has become) may find it rewarding.

[1]OCCTO, Capacity Market Long-Term Decarbonization Power Source Auction Solicitation Outline (FY2025) (Sept. 3, 2025). For the FY2023 Solicitation Outline, see OCCTO, Long-Term Decarbonization Power Source Auction Solicitation Outline (Bidding Year: FY2023) (Sept. 13, 2023).

[2]Agency for Natural Resources and Energy (ANRE), Long-Term Decarbonization Power Source Auction Guidelines (July 11, 2023).

[3]Japan Energy Hub, Nuclear claims half, BESS nearly quarter of 6.3GW in Japan's second long-term decarbonization auction (April 28, 2025).

[4]Stonepeak, Energy Storage Platform Backed by Stonepeak and CHC Awarded Five Projects in Japan Long-term Decarbonization Auction (April 29, 2025). Greenberg Traurig advised Stonepeak and CHC on this transaction: see GT Press Release (May 21, 2025).

[5]Japan Energy Hub, Bison Energy wins three BESS in Japan's 2nd LTDA, including 150MW 6-hour-plus Fukushima project (May 9, 2025).

[6]OCCTO, Capacity Market Long-Term Decarbonization Power Source Auction Solicitation Outline (Bidding Year: FY2025) (Sept. 3, 2025) (Japanese). For public consultation supplementary materials see OCCTO Supplementary Explanation Materials (Sept. 3, 2025) (Japanese).

[7]OCCTO, Capacity Market Long-Term Decarbonization Power Source Auction Solicitation Outline (Bidding Year: FY2025) (Sept. 3, 2025), pp. 45–52 (Japanese) (discussing reform of the profit return mechanism and fixed-fee alternative under consideration). See also ANRE/METI, Long-Term Decarbonization Power Source Auction Guidelines, July 11, 2023 (setting out the existing 90% profit return framework).

[8]OCCTO, Capacity Market Long-Term Decarbonization Power Source Auction Contract Results (Bidding Year: FY2025) (May 13, 2026) (Japanese); for the list of awarded projects see OCCTO, Awarded Projects List (Bidding Year: FY2025) (May 13, 2026) (Japanese).

[9]For the procurement caps established under the Round 3 solicitation, see OCCTO, Capacity Market Long-Term Decarbonization Power Source Auction Solicitation Outline (Bidding Year: FY2025) (Sept. 3, 2025) (Japanese), setting out separate 400 MW procurement caps for each of the two storage categories (Li-ion BESS + non-new pumped hydro; and non-Li-ion BESS + new pumped hydro + LDES), with the maximum award per category capped at twice the relevant procurement cap. For the awarded volumes (including the breakdown between the two storage categories), see OCCTO, Capacity Market Long-Term Decarbonization Power Source Auction Contract Results (Bidding Year: FY2025) (May 13, 2026) (Japanese), pages 10-11 (over-cap allocation rationale) and page 14 (awarded volumes by category and applied/awarded ratios).

[10]OCCTO, Capacity Market Long-Term Decarbonization Power Source Auction Contract Results (Bidding Year: FY2025), Appendix: Awarded Projects List (May 13, 2026) (Japanese), itemising each awarded project by applicant entity, project name, technology type, and awarded capacity (kW). The Stonepeak Kingdom Holdings projects appear as items 13 (Kingdom-3), 14 (Kingdom-6), and 15 (Kingdom-1) of the decarbonization power sources awarded list; CHC Japan projects appear as items 6 (Masuda City Battery Storage Facility) and 7 (Shintomi-cho Battery Storage Facility); and Hexa Energy Services projects appear as items 9 (HC25 Chugoku-1) and 10 (HC25 Tohoku-2).

[11]See ANRE/METI, Balancing Market: 108th System Review Working Group (Document 4) (Oct. 29, 2025) (Japanese) (initial JPY 7.21 proposal); ANRE/METI, Balancing Market: 109th System Review Working Group (Document 6) (Dec. 12, 2025) (Japanese) (revised analysis presenting JPY 15 as comparator level); ANRE/METI, Balancing Market: 110th System Review Working Group (Document 4) (Jan. 23, 2026) (Japanese) (formal revised proposal: JPY 15, with staged reductions to JPY 10 / JPY 7.21 if competitive conditions do not improve). See also Greenberg Traurig LLP, METI Proposes Price Cap Reductions in Japan's Balancing Market: Implications for Battery Energy Storage Systems (January 2026) (PDF) (covering the initial October 2025 proposal; issued prior to the January 2026 revision to JPY 15).

[12]ANRE/METI, press release on revisions to FIT/FIP procedures to facilitate BESS co-location (August 2025). See ANRE, Renewable Energy Policy Overview.

[13]Sonnedix Japan, Sonnedix Japan Announces First BESS Project (November 2025); Energy-Storage.News, Osaka Gas and Sonnedix prepare Japan's 'largest renewable battery storage facility' (Nov. 5, 2025).

[14]Wood Mackenzie, Japan's data centre gold rush: the battle to power a data-driven future (Aug. 26, 2025).

[15]Wood Mackenzie, Japan's data centre gold rush: the battle to power a data-driven future (Aug. 26, 2025) (source for data centre power demand projections and demand growth share). The ~90% Tokyo-Osaka corridor concentration figure is sourced from Japan’s 2025 Energy White Paper as cited by the Mitsubishi Research Institute; see also Walter James, ‘AI Data Centre Development in Japan and Clean Energy Transition,’ Energy Tracker Asia (Aug. 13, 2025) (citing Mitsubishi Research Institute analysis based on the 2025 Energy White Paper). Grid connection queue duration figures reflect reports from NTT Global Data Centers executives as reported in Data Center Knowledge (September 2025): in central Tokyo, power connection wait times have been cited at 5-10 years; the draft text uses a conservative minimum figure.

[16]PowerX, Inc., PowerX and IIJ Begin Joint Exploration of Battery Storage and Containerized Data Center Solutions (Feb. 13, 2026); Internet Initiative Japan, PowerX and IIJ Begin Joint Exploration of Battery Storage and Containerized Data Center Solutions (Feb. 13, 2026).

[17]Data Center Dynamics, NTT launches energy storage division (May 30, 2025); Energy-Storage.News, Japanese telecoms giant NTT launches energy storage business, brings online three BESS projects (May 27, 2025). NTT Anode Energy announced on May 23, 2025, that it would construct and operate energy storage systems on behalf of enterprise customers, drawing on its existing 340 MWh BESS portfolio across 23 locations in Japan.

[18]METI and Ministry of Internal Affairs and Communications (MIC), Public-Private Advisory Council on Watt-Bit Collaboration to Launch (March 18, 2025, press release; first meeting held March 21, 2025). The Watt-Bit Collaboration (“watt-bit renkei”) advisory council is a joint METI/MIC public-private body convened to address the simultaneous development of electricity and telecommunications infrastructure (“watt" and "bit”) needed to support the rapid expansion of data centers in Japan, as part of the GX2040 Vision framework. The council’s mandate is to facilitate discussions on data center development from an electricity and telecommunications infrastructure perspective, with participants from the public and private sectors including utilities, grid operators, data center operators, academics, and industry representatives.