On-site physical corporate PPA

In an on-site physical PPA, a PPA provider develops, owns, and operates a power plant on an offtaker’s consumption site. In addition to providing the space for the power plant to be built on, the offtaker pays the provider an agreed upon typically fixed price in exchange for typically long-term power and renewable energy certificate supply. The offtaker sources consumption not covered by the PPA through a separate retail contract or other means.

Key advantages and disadvantages

On-site physical PPA vs. other models

Model	Physical (on-site)	Physical (off-site)	Physical (hybrid on-/off-site)	Virtual	Self-wheeling
Offtaker receives	Power + RECs	Power + RECs	Power + RECs	RECs only	Power + RECs
REC type	J-Credit, Green Power Certificate, or I-REC	Non-fossil certificate	See on-site and off-site information	Non-fossil certificate	J-Credit, Green Power Certificate, or I-REC
Retailer required as a PPA party	No	Yes	Yes	No	No
Renewable power promotion surcharge	No	Yes	Off-site portion	Indirectly (when procuring power)	No
Wheeling charges	No	Yes	Off-site portion	Indirectly (when procuring power)	Yes
Limiting factors	Availability of suitable space at consumption site	Availability of suitable land and grid connection	Availability of suitable space at consumption site and grid connection	Availability of suitable land and grid connection	Availability of suitable land, grid connection, and power plant ownership

Key stakeholders' roles and responsibilities

PPA provider

Power plant development and ownership: Planning, securing financing for, and constructing the power plant; owning the power generation equipment.

Power plant O&M: Day-to-day operations and maintenance of the power plant.

Power and REC sale: Sale of the power and renewable energy certificates generated at the power plant to the offtaker.

Offtaker

Land provision: Giving the PPA provider access to a space where a power plant can be built (e.g., rooftop).

Fixed fee payment: Paying the agreed upon price (generally fixed JPY per kWh) to the PPA provider for the supplied power and renewable energy certificates.

Power plant considerations

Location: Most commonly, on-site PPAs involve building power plants on factory and other building rooftop’s. Occasionally, the power plants are installed on unused land adjacent to the consumption center. More recently, solar carports installed over the consumption center’s parking lot have been increasing in popularity as well (e.g., Solar Frontier installed 3.8MW worth at Miyazaki University).

Technology: Due to space constraints mentioned above, currently, solar generation is the only viable option for on-site PPAs.

Output: With the amount of space available for building a power plant typically being the main constraint, on-site PPAs tend to be relatively small. The power generated at each consumption site rarely exceeds the site’s total consumption. While there are examples of larger-scale deals, they are few and far between, and either include one PPA covering multiple smaller consumption sites (such as the furniture giant Nitori’s 80MW PPA covering 180 consumption centers) or rooftop power plants on large-scale warehouses and factories (such as Sumisho Airbag System’s 2MW PPA). Most on-site PPAs tracked by Japan Energy Hub are under 1MW.

Financial structure considerations

Long-term fixed price: An on-site PPA generally allows an offtaker to secure long-term power supply (15 to 30 years) at a fixed price per kWh and a PPA provider to secure stable long-term revenue.

Exempt from paying renewable power promotion surcharge: Power supplied through an on-site PPA is not subject to the renewable power promotion surcharge, which is otherwise around 3.5 yen per kWh.

Exempt from paying wheeling charges: Since the power supplied through an on-site PPA is produced directly at a consumption site, it does not need to go through the power grid. Because of that, no wheeling charges need to be paid.

No imbalance risk: Due to all of the power from an on-site PPA being consumed directly without passing through the grid, on-site PPA providers do not need to submit generation forecasts and face imbalance penalties.

Other considerations

Type of renewable energy certificate: Unlike with off-site and virtual PPAs, non-fossil certificates are not issued for power generated at a consumption site through an on-site PPA. Instead, J-Credits, Green Power Certificates, or I-RECs can be issued.

“100% renewable” plans: As mentioned above, generally, on-site PPAs in Japan provide less power than the total consumption of the facility they are deployed at. Because of that, some on-site PPA providers also offer “100% renewable” plans where renewable energy certificates covering the difference between the facility’s total consumption and the power procured through an on-site PPA are supplied from other sources.

Dealing with excess power: In the rare cases where the on-site PPA’s power plant’s production is expected to exceed on-site consumption, the PPA provider and offtaker have multiple options including curtailing production, delivering the power to the offtaker’s other facilities or selling it to other offtakers (resulting in a hybrid on-/off-site PPA and requiring the involvement of a power retailer), or using batteries to store the power for later use.

Building a private line: In cases where an offtaker has unused land relatively close but not directly at the consumption site or the PPA provider is able to secure such land through other means, building a private power line to connect the land with the consumption center is an option. While in this scenario the generation does not happen on-site per se, the structure of the PPA is more similar to and has similar advantages to an on-site PPA rather than an off-site or virtual PPA. For example, Shizen Energy’s deal with DYNAX utilizes this model.

Japan's largest disclosed on-site physical PPAs

Click on each PPA to see more details.

Japan's most recent disclosed on-site physical PPAs