BESS Operation Outsourcing in Japan (運用代行): How Foreign Investors Choose an Aggregator and Operation Partner

Overview

If you have read the headlines, Japan looks like the next great battery storage market. The government's Long-Term Decarbonization Auction (LTDA) awarded roughly 1.3 GW of battery storage in its FY2024 round and around 1.25 GW across 19 projects in the FY2025 round, with 20-year fixed capacity contracts attached. (Energy-Storage.News, pv magazine) International developers and infrastructure funds are moving in.

But there is a gap between owning a battery in Japan and earning money from it. The asset has to be registered correctly, plugged into multiple markets, and traded every single day in 30-minute settlement intervals. Almost no foreign owner does this directly. They outsource the day-to-day commercial operation to a local partner.

In Japan this is called 運用代行 (un'yō daikō) — operation outsourcing, or operation-by-proxy. This article explains what it is, why foreign owners need it, the licensing and market-entry complexity that makes a local partner non-negotiable, and how to evaluate one. It is written for the people who actually sign the contract: infrastructure fund principals, IPP development teams, and asset managers.

What "operation outsourcing" (運用代行) actually covers

Owning a grid-scale battery is a real estate-like position: you hold a physical asset that produces a revenue stream. Operating it is closer to running a small trading desk. Operation outsourcing is the contract under which a specialized partner takes over that trading-desk function on your behalf.

A full-scope operation partner typically handles:

Market registration and membership. Getting the asset onto the Japan Electric Power Exchange (JEPX) and registered with OCCTO (the Organization for Cross-regional Coordination of Transmission Operators), and slotting it into a balancing group so imbalance is managed.
Day-ahead and intraday trading. Bidding the battery into the JEPX wholesale spot market, which clears in 48 half-hourly slots for the next day. (Wood Mackenzie)
Balancing market participation. Offering capacity into the supply-demand adjustment market (需給調整市場) for frequency regulation and reserves.
Dispatch and scheduling. Deciding when to charge and discharge to capture value across markets without violating grid or warranty constraints.
Imbalance management and settlement. Absorbing or minimizing the penalty exposure that comes from deviating from declared schedules.
Reporting. Giving the owner and lenders the operational and financial visibility they need.

This is distinct from physical O&M (operations and maintenance) — the people who maintain the hardware, monitor state of health, and respond to faults on site. Some partners offer both commercial operation and physical O&M; many specialize in one. When you hear "BESS O&M providers" in Japan, be clear which layer is being discussed. The revenue comes from the commercial operation layer; the protection of the asset comes from the physical O&M layer. You need both covered, by whoever you trust for each.

Why foreign owners cannot easily do this in-house

There are three structural reasons a foreign IPP or fund almost always needs a local operating partner, at least at entry.

1. The aggregator license is a Japanese regulatory object

To aggregate distributed resources and sell their output and flexibility into the wholesale and balancing markets, an operator works under the Specified Wholesale Electricity Business (特定卸供給事業) category, introduced under the 2022 amendment to the Electricity Business Act. It runs on a notification (not a discretionary license) basis: the operator must obtain OCCTO membership, then notify METI at least 30 days before starting, during which METI assesses whether supply-capacity and cybersecurity measures are adequate. (Chambers, Shulman Advisory) As of May 2025 there were around 105 Specified Wholesale Electricity Business notifiers. (Shulman Advisory)

Separately, since 2022 a BESS over 10 MW is legally classified as a power generation business (発電事業), which is exactly what unlocks the ability to stack revenue across wholesale, ancillary services, and the capacity market. (Borderless) Getting these registrations right — and keeping them compliant — is process-heavy, conducted in Japanese, and tied to Japanese counterparties.

2. Market entry is operationally complex, not just legally

Even after registration, participation is demanding. Balancing-market products are being restructured on a moving timeline: the tertiary-2 reserve product (三次調整力②) moved from a 3-hour to a 30-minute bidding unit in FY2025, and the weekly-traded primary-through-tertiary-1 products move to day-ahead, 30-minute trading from FY2026. (METI/ANRE) Bidding logic, IT system connections to OCCTO, and balancing-group arrangements all have to keep pace. This is full-time operational work in the local language, not something a foreign desk picks up on the side.

3. The market is not a single jackpot — it requires active stacking

Be honest about the economics. The supply-demand adjustment market is no longer the easy money it briefly appeared to be. After bid volumes outstripped procurement and pushed up costs in early 2024, the TSOs and OCCTO introduced procurement-volume reductions from May–June 2024, and as a result the high-unit-price clearings for batteries and thermal in the tertiary-2 product fell. (Nikkei BP, OCCTO) On the LTDA side, contracted batteries must return 90% of additional merchant profits to OCCTO, capping the upside on subsidized assets. (National Law Review) And appetite is cooling at the margin: battery bid capacity into the LTDA more than halved year on year, from nearly 7 GW in FY2024 to about 2.73 GW in FY2025. (pv magazine)

The takeaway is not "don't invest." It is that returns now come from disciplined revenue stacking — JEPX wholesale plus balancing plus capacity, optimized day by day — rather than from one rich market. (IEEFA) That makes the quality of your operating partner a direct driver of returns, not a back-office detail.

Tolling vs aggregation: two different risk transfers

When you engage a partner, you are choosing a commercial structure as much as a service. The market broadly offers three positions: a long-term LTDA capacity contract, a tolling arrangement, and a merchant/aggregation arrangement, with tolling sitting in between. (Wood Mackenzie) For an owner choosing how to be operated, the practical decision is tolling vs aggregation.

Tolling. A counterparty (often an offtaker or trading house) pays you a largely fixed fee for the right to dispatch your battery. They take the market risk and the market upside; you take a predictable, contracted cash flow. This is attractive for lenders and for funds that want bond-like stability. The trade-offs: you cap your upside, you depend on the credit and competence of the toller, and a strong toller will price the risk they absorb into your fee.

Aggregation (merchant operation). The partner operates your battery in the open markets on your behalf and you keep the market revenue, net of fees. You retain the upside from good optimization and bear the downside from poor markets or poor execution. This is where operator skill matters most — the difference between a top-quartile and a mediocre dispatch strategy shows up directly in your P&L.

Neither is "better." Tolling suits owners who prioritize certainty and financeability; aggregation suits owners who believe in the upside and trust their operator to capture it. Many owners blend the two over an asset's life — more contracted early for financing, more merchant later. The point is to decide deliberately, and to make sure the partner you pick can credibly deliver the model you chose.

How to evaluate an operation partner: five criteria

Use these five lenses. They are ordered roughly by how often they separate a real partner from a slide deck.

1. Track record — do they actually run a battery?

This is the single most revealing question, and the easiest to verify. There is a meaningful difference between a partner who models battery dispatch and one who has a commercial battery dispatching into live Japanese markets today, absorbing real imbalance penalties and real price volatility. Ask directly: Do you operate your own grid-connected storage asset in commercial service right now? Is it trading on JEPX? Is it participating in the balancing market? A partner who runs their own asset has already solved the registration, IT-connection, balancing-group, and settlement problems on their own capital and reputation — before touching yours. A partner who only operates other people's assets, or none, is learning on your project.

2. Technical capability — dispatch, forecasting, and systems

In a revenue-stacking market, the optimization engine is the product. Probe how they decide charge/discharge across simultaneous JEPX, balancing, and capacity obligations; how they forecast prices and demand; how they handle the FY2025–FY2026 shift to 30-minute and day-ahead balancing products; and how their systems connect to OCCTO. Ask what degradation and warranty limits they respect, because over-cycling for short-term revenue can destroy asset value. Request evidence, not adjectives.

3. Licensing and compliance status

Confirm the partner holds — or will hold for your asset — the correct registrations: Specified Wholesale Electricity Business notification, OCCTO membership, JEPX trading access, and the right balancing-group setup. Ask how they keep current as the rules move, since the balancing market is being actively reformed through FY2026. (METI/ANRE) A partner who cannot speak fluently about their own regulatory standing is a red flag.

4. Fee model — base plus success, and whose interests it aligns

Most credible operation contracts combine a base fee (covering the fixed cost of running your asset) with a success/performance fee (a share of revenue or of out-performance against a benchmark). What you are buying is alignment: a heavily base-weighted fee pays the operator whether or not your battery earns; a success-weighted fee rewards them for the same outcome you want. Examine the benchmark carefully — "share of revenue" and "share of upside above a floor" create very different incentives. Make sure the structure fits whether you chose tolling or aggregation. And insist on transparent reporting so you can actually see what the success fee is being earned against.

5. Bankability and reporting

Your lenders will diligence the operator as closely as the asset. Itochu and Gore Street launched Japan's first dedicated BESS investment fund precisely because operational track record now underpins financeability. (Gore Street Capital) A partner who can produce lender-grade reporting, clear settlement reconciliation, and a defensible operating history will lower your cost of capital. One who cannot will become a financing obstacle.

A reasonable bias: prefer a partner that operates its own plant

Weighing these criteria neutrally, one pattern tends to hold: a partner that owns and operates its own battery in commercial service is generally more credible than one that only advises or only operates third-party assets. Not because of branding, but because of incentives. When a partner has put its own capital into a live, market-connected asset, it has already absorbed the registration friction, the IT integration, the imbalance penalties, and the real volatility of Japanese power prices — on its own balance sheet. That experience is hard to fake and directly transferable to your project. It is a sensible default, not an absolute rule: a strong pure-service operator with a deep verifiable track record can be excellent too. But "do you run your own plant?" remains the fastest way to separate operators who have lived the market from those who have only modeled it.

About us

Lehman Holding operates its own grid-connected battery storage: a 2 MW / 8.1 MWh commercial BESS in Saitama, in live commercial service, trading on JEPX and participating in Japan's supply-demand adjustment market (需給調整市場). We have worked through the registration, market-connection, and daily-operation realities described above on our own asset and our own capital — which is exactly the experience we bring to operating partners' batteries.

If you are a foreign developer, IPP, or infrastructure fund evaluating how to operate a Japanese battery asset — and weighing tolling against aggregation, or choosing between operation partners — get in touch for a candid, no-pitch conversation about your project. We are happy to walk through the trade-offs honestly, including the ones that argue against acting now.

This article uses publicly available market data and publicly disclosed facts about our operations. It is general information, not investment, legal, or tax advice; confirm current regulations and market rules before making decisions, as Japan's electricity market is reforming quickly through FY2026.

Sources: