Self-wheeling
In self-wheeling (sometimes referred to as self-consignment), a consumer owns a power plant away from its consumption site and uses the power grid to deliver that power to the consumption site. The scheme comes with considerable restrictions in terms of power plant ownership and the consumption of the generated power.
Key advantages and disadvantages
- Power plant size is not restricted by the amount of space available at the consumption site
- Generated power is exempt from the payment of the renewable power promotion surcharge
- Restrictive rules about power generation and consumption
- Facilities where the generated power and renewable energy credits will be used must be decided in advance
- Consumer needs to take on imbalance risk
Self-wheeling vs. PPAs
| 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
Consumer
Power plant development and ownership: Planning, securing financing and land 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.
Balancing: Forecasting of generation and payment of imbalance penalties.
Service providers
While technically the power consumer is also the power plant owner, the consumer generally outsources functions such as the power plant development and operations and generation forecasting to third-party service providers.
Power plant considerations
Location: Power plants used for self-wheeling are located away from the consumption site. Since the generated power is physically delivered to the consumption site, both the power plant and the consumption site tend to be in the same T&D area. The use of interconnection capacity is required if the power plant and consumption site are located in different T&D areas.
Technology: With limited exceptions, all of the self-wheeling in Japan is using solar generation.
Output: Depends on the consumption volume of the company that is self-wheeling and the land the company has available to use for building power plants.
Financial structure considerations
Power plant development and O&M: The consumer is responsible for all of the costs associated with building, operating, and maintaining a power plant, either by doing so directly or by paying a third-party to do so on its behalf.
Exempt from paying renewable power promotion surcharge: Self-wheeled power is not subject to the renewable power promotion surcharge, which is otherwise around 3.5 yen per kWh.
Wheeling charges: Since the self-wheeled power is delivered from the power plant to the consumption site through the grid, it is subject to wheeling charges. The wheeling charges vary depending on the involved T&D area(s).
Imbalance risk: Because the power is supplied to the power grid, the company engaged in self-wheeling needs to assume imbalance risk. That said, the risk and related forecasting is generally outsourced to a third-party.
Other considerations
Generation and consumption restrictions: The government has tightened the rules regarding self-wheeling to avoid contracts that are practically off-site PPAs to be structured as self-wheeling to avoid the payment of the renewable power promotion surcharge. It has also tightened the rules about how the self-wheeled power can be consumed, making the consumption of such power by the self-wheeling company’s tenants (in the case of shopping malls or office buildings for example) impossible.
Securing additional power: Consumers have multiple options when it comes to securing power to cover the consumption not covered by self-wheeling. In general, the consumer needs an additional retail contract. Sometimes the consumer might also sign PPAs or add on-site generation capacity.
