No.3087
PPA (Power Purchase Agreement) Scheme–Used Renewable Energy Implementation Service Market in Japan: Key Research Findings 2022
Market of Renewable Energy Implementation Services using PPA Schemes that Power Consumers Directly Buy Electricity from Renewable Energy Sources Including Photovoltaic Power Projected to Grow to 70 Billion yen by FY2030
Yano Research Institute (the President, Takashi Mizukoshi) carried out a survey on the domestic market of renewable energy implementation services using PPA (Power Purchase Agreement) schemes and forecasted the PPA service market size in FY2030.
Market Overview
Power Purchase Agreement (PPA) is a renewable energy deployment scheme in which electricity consumers (users) such as companies and households conclude long-term (usually 10-25 years) contracts with power producers to directly purchase electricity generated from renewable energy sources. In the Japanese domestic renewable energy power generation market, the PPA scheme was not promoted until recently, because the purchase price under the FIT (Feed-in Tariff) system had long been preferential. However, as the purchase price under the FIT system has decreased over the years, and the maintenance and management costs of photovoltaic power generation facilities have fallen, power consumers have come to judge that it is more beneficial to consume the generated power in-house to retain the environmental value and reduce CO2 emissions rather than sell the power under the FIT. The cases of using PPA schemes have started being observed since around FY2017-2018.
By FY2020, the demand for PPA schemes fully rose, and has rapidly expanded the PPA service market since then. During that time, various subsidy systems have been established by Ministry of the Environment and METI, which have also boosted the market. Furthermore, as the existing electricity rates have entered the skyrocketing phase after FY2021, which have led the photovoltaic power generation fees to become relatively lower, causing the PPA services to be beneficial for consumers even taking into account of paying service expenses plus equipment cost.
Noteworthy Topics
Companies Entering PPA Service Market
Business tasks that PPA service businesses provide consist of “EPC (Engineering, Procurement, and Construction)” including designing, engineering, and construction, “Services” that include possession of the facility, and electricity supply as well as settlement, and “O&M (Operation & Maintenance)”. The main tasks to offer under the PPA contract are “Services (possession of the facility, and electricity supply as well as settlement)”, and are available at more than 50 companies in Japan. Of a series of work in PPA services, EPC and O&M are often outsourced to professional businesses.
There have been companies entering PPA service business one after another, such as energy companies, trading firms, financial institutions, renewable energy companies, EPC, real estate companies, etc.
Future Outlook
Against a backdrop of establishment of various subsidy systems and rise of existing electricity rates, the PPA service market, calculated by totaling the sales of PPA services provided by PPA service providers to consumers by fiscal year, is projected to expand considerably from 3,800 million yen in FY2021 to 9,400 million yen in FY2022. The market size is projected to reach 35,000 million yen by FY2025 and 70,000 million yen by FY2030.
Research Outline
2.Research Object： PPA Service providers, Businesses that deployed PPA services
3.Research Methogology： Face-to-face interviews (online included) by expert researchers, survey via telephone, and literature research
About PPA Services
Power Purchase Agreement (PPA) is a renewable energy deployment scheme in which electricity consumers (users) such as companies and households conclude long-term (usually 10-25 years) contracts with power producers to directly purchase electricity generated from renewable energy sources. At a PPA scheme, a power producer and a power consumer directly enters into a contract to newly build and operate a facility to generate renewable energy (currently mainly photovoltaic power generation system) on or outside the consumer’s premises, which makes the consumer being able to contribute in reducing CO2 emissions, thereby to directly take part in solving an environmental problem. As a method to reduce CO2 emissions, the new scheme for building renewable energy generation facilities is highly reputed for “Additionality”.
The PPA is a scheme on the assumption that a power generator builds, owns, and maintains a renewable energy generation facility, allowing a power consumer to directly buy the electricity from that power generator. Instead of existing electricity rates, the power generator can earn fixed unit-price service fees (including environmental values) from PPA services according to the volume of power that the consumer uses. For electricity consumers, they can both obtain electricity at lower unit prices than the existing rates that they have been paid and the environmental values, while they do not need to build, own, or maintain a renewable energy facility, but only to provide the premises for the facility.
What is Onsite PPA?
In an onsite PPA scheme, a power generator builds a facility to generate renewable energy including a photovoltaic generation system, etc. at the rooftop or on the premises of the base where a power consumer uses electricity. The consumer only provides its premises and directly connects an on-site network between the facility and other buildings within the premises, thereby being able to directly consume the renewable energy for private use onsite.
What is Offsite PPA?
In an offsite PPA scheme, electricity is sent to a consumer on self-consigned power transmission from a renewable energy facility built outside the premises of the base of the consumer. The scheme is used when the consumer to be sent the electricity and the place of where a power generation facility belong to the same business or the group, or when the power is transmitted through self-consignment by forming an association between a power generation plant owned by other company and a consumer. Under offsite PPA, a power generator sells the renewable energy to a consumer via an electricity retailer, so that the consumer is required to pay the consignment rate and the commission fee to the power retailer in addition to the cost for electricity itself.
What is Virtual PPA?
A virtual PPA is the scheme which a consumer buys only environmental value from a renewable energy producer through a power retailer, and buys electricity from a power wholesaler. Because the consumer does not have to directly use the power from power producers, and even though direct power supply from a specific renewable energy generation facility is difficult, the virtual PPA scheme allows the consumer to use that renewable energy.
＜Products and Services in the Market＞
Onsite PPA scheme, Offsite PPA scheme, Virtual PPA scheme
Published Report
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