Aalborg, 8 October 2021
After two years of hard work, Yggdrasil Commodities is now ready to announce an expansion of the company’s activities in the Japanese electricity market.
Japan has the most liberalized electricity market in Asia, and the country’s energy consumption is one of the largest in the world. The annual energy consumption amounts to 963 TWh corresponding to a third of the European electricity market.
Yggdrasil Commodities’ growth strategy is to keep adding new markets to the portfolio one at a time and focusing on risk management at the same time. During the current start-up phase in the Japanese market, Yggdrasil Commodities trades only relatively lower volumes to understand the market dynamics.
Market size and geographical location in relation to existing markets are important criteria for potential new markets of Yggdrasil. Japan was a match for both.
“Market size is of course important as we allocate quite a few resources to a new market before we see a return of our investment. Therefore, the market must be sizable to have a feasible return on our initial investment”, says Lars Weber, Business Developer at Yggdrasil Commodities.
Regarding the criterion for geographical location Lars Weber explains: “It is crucial for us to operate in markets that are far apart. In that way, we avoid all our market prices being affected by the same weather systems. For instance, if an unexpected thunderstorm hits an area instead of a forecasted sunny day, it means less production of electricity from the solar panels in that region. This causes the price to go up unexpectedly with a potential loss for us. To spread the risk, we need weather independent markets in our portfolio.”
A difficult entry
It is no secret that Japan in many ways has been a difficult market to enter. As Business Developer, Lars Weber has been responsible for the entire process of entering the Japanese energy market. He explains:
“By far, the biggest challenge has been the Japanese language. Not all natives speak English comfortably and thus, it has practically been impossible to communicate directly with the people in charge. Even guidelines and information about market details are only available in Japanese, and it has been necessary to communicate through a third party. It has really complicated things for our entrance process.”
A time difference of seven or eight hours between Japan and Denmark has been an additional challenge. Consequently, Lars Weber has often had his first cup of coffee in the office long before most people are awake, he tells.
Finally, there is a big cultural difference between the two countries. “Some of our Japanese contacts have found it difficult to understand why we do not use a fax machine”, he finishes with a smile.
Regarding the prospects for the Japanese market, Yggdrasil Commodities continues to trade conservatively in the short term but expects to see increased earnings over the next 12-24 months.
