Japan’s Cross-regional Transmission Operators (OCCTO) Develop New Method to Cut Mandatory Tertiary Reserve (Category 2) by 22%
November 17, 2025
At a meeting of the Subcommittee on Supply–Demand Adjustment Markets held on November 13, Japan’s Organization for Cross-regional Coordination of Transmission Operators (OCCTO) proposed a new methodology that could reduce the required amount of Tertiary Reserve Category 2 in the supply–demand adjustment market by approximately 22%.
Limitations of the Current Method
The existing approach, known as the “Reliability Level Forecast”, creates two types of requirement tables (high reliability / low reliability) using historical forecast error data for renewable energy generation. The required reserve is calculated using these tables based on the next day’s solar irradiation and forecast reliability classification.
New Method: Confidence Interval Forecasting
The newly proposed method—Confidence Interval Forecasting—was developed by the New Energy and Industrial Technology Development Organization (NEDO). It directly estimates the potential downside risk (i.e., the reserve required) for solar PV output, based on predicted lower ranges of solar irradiation.
This method benefits from improvements in forecast accuracy but also carries a risk of forecast bias.
Full-scale application of confidence interval forecasts could reduce the Category 2 reserve requirement in some timeframes; however, on a monthly or annual basis, requirements may increase compared with the current method. As a result, OCCTO proposed a hybrid method combining both approaches.
Hybrid Calculation Method
Under this hybrid approach:
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The current reliability-level forecast sets the upper limit of required reserve.
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For each timeframe, the reserve requirement is determined as the lower value between:
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the existing reliability-level forecast
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the confidence interval forecast
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This ensures both reduced reserve requirements and protection against underestimation.
Test Results: Up to 22% Reduction
Using actual 2023 data from the Chubu region, OCCTO found that the new method reduced reserve requirements in all months, with an overall annual reduction of approximately 22%, equivalent to about 878 GW of Tertiary Reserve Category 2.
However, in some periods, the estimated requirement fell below the actual need, leading to shortfalls. Post-verification confirmed that most of these shortfalls could be compensated through contracts for surplus capacity, and OCCTO stated that the new method does not compromise supply stability.
Further Verification Needed
Because the test was conducted using data from only one region, OCCTO notes that further study is required. The organization plans to transition from the current reliability forecast method to the hybrid method combining reliability level and confidence interval forecasts, and will continue to collaborate with transmission and distribution companies to verify results using real-world operational data.
