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1、Renewable ElectricityProcurement GuidebookEnglish EditionJanuary 2023 Contents Renewable Energy Institute publishes“Renewable Electricity Procurement Guidebook”for corporate energy users in Japan since January 2018 and revises it with the latest information every year.The 2023 edition details major

2、procurement methods of renewable electricity from On-site Generation to Corporate PPAs,Green Products and Renewable Energy Certificates with the latest examples and information on cost and availability.Key topics such as Non-fossil Certificates are also discussed.This English edition focuses on elec

3、tricity procurement methods(Chapter 3 of the Japanese edition)for global corporations operating business in Japan.Acknowledgements We would like to express our sincere gratitude to everyone who cooperated in compiling this guidebook.Author Masaya Ishida,Senior Manager,Renewable Energy Institute Disc

4、laimer Although we have taken all possible measures to ensure the accuracy of the information contained in this report,Renewable Energy Institute shall not be liable for any damage caused to users by the use of the information contained herein.About Renewable Energy Institute Renewable Energy Instit

5、ute is a non-profit think tank which aims to build a sustainable,rich society based on renewable energy.It was established in August 2011,in the aftermath of the Fukushima Daiichi Nuclear Power Plant accident,by its founder Mr.Masayoshi Son,Chairman&CEO of SoftBank Group Corp.,with his own resources

6、.Table of Content Renewable Electricity Procurement Methods.1 1 On-site Generation.3 Self-consumption of Solar Power.3 Solar Generation Cost Declining.5 From Self-generation to On-site PPA.6 Utilizing Surplus Electricity by Self-wheeling or Off-site PPA.7 2.Corporate PPA(Power Purchase Agreement).8

7、On-site PPA and Off-site PPA.8 Physical PPA for Electricity and Certificates.9 Cost Reductions for Physical PPA.11 Virtual PPA only for Certificates.13 3 Green Products.16 Electricity applied to FIT(FIT electricity).17 FIT Non-Fossil Certificates with Tracking.20 Electricity not applied to FIT(Non-F

8、IT electricity).21 Electricity generated from Hydro.23 Electricity through Regional Cooperation.24 Notes on Non-fossil Certificates(NFCs).25 4 Renewable Energy Certificates.27 Green Electricity Certificates mainly by Biomass.28 J-Credits mainly by Residential Solar.29 5 Key Considerations in Procure

9、ment.32 Calculating CO2 Emissions from Certificates.32 Prioritizing Generation Method or CO2 Emissions.33 6 Requirements for Renewable Electricity.35 Evaluation Criteria for Additionality.35 Rating Method of Renewable Electricity.36 1 Renewable Electricity Procurement Methods There are four major me

10、thods to procure renewable electricity.In addition to installing their own facilities to generate and consume electricity,consumers can purchase renewable electricity sold by retailers,or certificates for the environmental value(e.g.,no CO2 emissions)of renewable electricity.In recent years,more and

11、 more corporates are adopting corporate PPAs(Power Purchase Agreements),in which they purchase renewable electricity from new generation facilities under long-term contracts.Procurement Methods of Renewble Electricity For corporates consuming large amounts of electricity,it is difficult to procure t

12、he necessary amount by only one method.While combining multiple methods,it is necessary to select renewable electricity based on key selection criteria(e.g.,environmental impact).The cost of solar and wind power generation has declined,making it possible to procure renewable electricity at lower cos

13、ts than before.The benefits of on-site power generation and consumption have increased,and the cost of renewable electricity supplied by retailers has also declined.The feed-in tariff(FIT)program has been revised since FY2022 to shift to a feed-in premium(FIP),which is linked to the wholesale market

14、 price.As FIP expands,it will also become easier for corporates to enter into corporate PPAs to purchase renewable electricity at lower prices on a long-term basis.Method Feature Advantages and Disadvantages On-site Generation Construct generation facilities and consume generated electricity.Initial

15、 investment required,low-cost operation.Environmental impact identified accurately.Responsible for construction and operation.Corporate PPA Purchase renewable electricity by long-term contract.Fix electricity cost for a long time.Environmental impact identified accurately.Risks of long-term contract

16、 with developers.Green Product Purchase renewable electricity from retailers.Short-term procurement based on the budget.Generation sites not usually identified.Higher prices compared with regular tariffs.Certificate Purchase environmental values by certificates.Increase renewable electricity indepen

17、dently.Generation sites usually identified.Additional cost for electricity procurement.2 In terms of additionality,which is effective in reducing CO2 emissions by adding new facilities replacing fossil fuel power plants,it is preferable to select either on-site generation and consumption,or corporat

18、e PPAs.These two methods also have the advantage of fixing the cost of procuring renewable electricity over the long term.As the cost of solar power generation has decreased,corporates are now in a position to both reduce CO2 emissions and costs through on-site power generation and consumption.In ad

19、dition,an increasing number of developers and retailers are able to offer corporate PPAs for long-term fixed-price contracts for renewable electricity.However,the amount of electricity that can be supplied by on-site generation is limited,and corporate PPAs require finding new projects that meet the

20、ir procurement conditions.Corporates can increase the amount of renewable electricity by maximizing on-site generation and corporate PPAs,while purchasing the shortfall from retailers.If that is still not enough,additional certificates would be purchased to make up for the shortfall.Based on the abo

21、ve approach,it is appropriate to increase the amount of renewable electricity by balancing additionality,procurement volume,and cost.Making Renewable Electricity Procurement Plan 3 1 On-site Generation One efficient way to procure renewable electricity is to build and operate your own generation fac

22、ilities and consume the generated power on your own sites.Using land and buildings you own can keep construction costs low.The grid network of the electric power company is not used,and there are no wheeling fees(network tariffs)or renewable surcharges.However,it requires expertise in the constructi

23、on and operation of power generation facilities.There is a risk of failure or accident,which could result in generating less amount of electricity than expected.To avoid such risks,an increasing number of corporates are adopting a new contract method(on-site PPA)in which the construction and operati

24、on of the power generation facilities are outsourced to developers.Self-consumption of Solar Power Solar power generation is the most common method of on-site power generation and consumption in Japan.This is because it is easier to construct and operate power generation facilities than other renewa

25、ble energy sources.Until recently,the cost of solar power has been higher than the cost of regular electricity tariffs,but the cost of solar panels has been declining significantly.One of the best examples of self-generation and self-consumption is the projects by IKEA Japan,a major furniture retail

26、er.IKEA Japan has been generating solar power on the rooftops of its large stores across Japan,including IKEA Nagakute,which opened in Aichi Prefecture in October 2017.IKEA Nagakute,the largest solar-powered IKEA store in Japan,can supply up to 1,300 kW of electricity.The amount of electricity gener

27、ated annually is equivalent to the electricity consumption of 360 standard households.In addition to using solar-generated electricity for lighting in the store,it will also be supplied to electric forklifts used to transport merchandise.IKEA has installed battery chargers on the rooftop parking lot

28、 to provide free solar-generated electricity to consumers electric vehicles.4 Roof-top Solar at IKEA Nagakute Source:IKEA Japan The manufacturing industries are also becoming active in on-site solar power generation and consumption.Tokyo Steel,a major electric furnace steel manufacturer has installe

29、d solar power generation equipment on the roofs of four of its plants in Japan in 2021 to consume the generated electricity.Roof-top Solar at Tokyo Steel Tahara Plant Source:Sumitomo Mitsui Finance and Leasing et al.5 Of the four locations,the Tahara Plant in Aichi Prefecture has the largest scale o

30、f solar power generation.More than 20,000 solar panels have been installed on the roof of a building in the plant.With an output of 6.4 MW,it is one of the largest solar power generation facilities for on-site consumption in Japan.Steelmaking using electric furnaces consumes a large amount of electr

31、icity.Although the percentage of electricity supplied by solar power generation is small,the benefits of reducing electricity procurement costs and CO2 emissions over the long term are significant.Solar Generation Cost Declining According to RTS Corporation,a leading research institute on solar powe

32、r generation,the cost of large-scale solar(output of 1MW or higher)fell to JPY8.3/kWh in FY2021.The cost for medium and small-scale solar is also around JPY10-11/kWh.Furthermore,the cost is expected to fall to around JPY6/kWh in FY2030,regardless of the size of the project.Trends of Solar Power Gene

33、ration Cost(in Japan)LCOE:Levelized Cost of Electricity Source:RTS Corporation In contrast,electricity tariffs for corporates through retailers have been significantly higher due to the impact of soaring fossil fuel prices since early 2022.According to data compiled by the Agency for Natural Resourc

34、es and Energy,as of August 2022,electricity rates(including fuel surcharges and renewable energy surcharges)for industrial users rose to about JPY23.5/kWh on average nationwide.Since then,electricity rates have continued to rise as fuel costs have increased.They will continue to be affected by fossi

35、l fuel price fluctuations.6 Self-consumption of solar-generated electricity is a sure way to reduce costs rather than purchasing regular electricity.In case the rooftop of a building can be used for solar power generation,the cost can be kept low because there is no need to purchase or lease land or

36、 to develop the land.From Self-generation to On-site PPA On-site PPAs(Power Purchase Agreements)are gaining attention as a new way to consume solar-generated electricity on site.Corporates provide rooftops of their buildings or a portion of their property to developers for installing solar power gen

37、eration equipment.Developers undertake the installation,operation,and maintenance of the equipment,and supplies the generated electricity to the buildings on the site.Corporates do not need to make an initial investment and only need to purchase the electricity.Corporate consumers will acquire envir

38、onmental attributes along with the electricity.The price is fixed throughout the contract period.Since there are no transmission and distribution network tariffs or renewable energy surcharges,electricity is available at a lower price than conventional electricity rates.Contract Scheme of On-site PP

39、A applicable also for self-employed line Furthermore,it is common to contract to take back the power generation equipment free of charge at the end of the contract period.After that point,the electricity can be used only for operation and maintenance costs,further reducing costs.Many corporates are

40、adopting on-site PPAs because they are less time-consuming and less risky than on-site power generation and consumption.Aeon Group,one of Japans major consumer product retailers,is moving forward with deploying on-site PPAs at its stores throughout Japan.Aeon previously used to install its own solar

41、 power generation equipment on store rooftops and is switching to on-site PPAs since 2020.7 On-site PPA at Aeon Town Konan Source:Aeon On-site PPA is a type of corporate PPA in which consumers purchase renewable electricity under long-term contracts and has been adopted by many corporates.If you own

42、 a building with a large rooftop,such as a shopping mall,factory,or distribution center,this is a cost-effective way to procure renewable electricity.Utilizing Surplus Electricity by Self-wheeling or Off-site PPA For on-site solar power generation and consumption,there are cases all the power genera

43、ted during the day cannot be consumed,leaving a surplus.Sony Group,a giant electronics and entertainment company,has installed solar power generation equipment on the rooftops of its factories and warehouses,and is also working to flexibly distribute surplus power to neighboring business sites throu

44、gh a system called self-wheeling.Sony is supplying electricity generated by solar power on the roof of a warehouse in Shizuoka Prefecture to a factory in the same prefecture by self-wheeling using the grid network.This allows the use of renewable electricity generated in-house without any excess.Alt

45、hough additional costs are required for the use of the grid network(around JPY4/kWh for high voltage)and for supply and demand adjustment,there is the advantage of exempting renewable energy surcharges(JPY3.45/kWh in FY2022).8 2.Corporate PPA(Power Purchase Agreement)As the cost of generating renewa

46、ble electricity,especially solar,has declined,more corporates are adopting corporate PPAs(Power Purchase Agreements),in which electricity from newly constructed power generation facilities is purchased under long-term contracts.Under a corporate PPA,consumers purchase the generated electricity and e

47、nvironmental attributes from developers at a fixed price.For developers,this will be a new source of revenue to replace the feed-in tariff(FIT),and for corporates,it will have the advantage of securing renewable electricity with additionality over the long term.The transition to Feed-in-Premium(FIP)

48、began in FY2022,replacing FIT.Developers can use FIP to reduce the cost of corporate PPA.With lower generation costs and the expansion of FIP,more and more corporates are expected to enter into corporate PPAs.On-site PPA and Off-site PPA There are two types of corporate PPAs:on-Site PPAs and off-Sit

49、e PPAs.On-site PPA can be applied if the generation facility can be built on or adjacent to the consumers premises.On-site PPA is a procurement method similar to on-site power generation and consumption but differs in that it outsources the entire process from installation to operation and maintenan

50、ce of the power generation facility to the developer.Contract Scheme of On-site PPA applicable for self-employed line The consumer only needs to provide a site(such as the roof of a building or a vacant lot)on which to build the power generation facility,and no investments are required.Although it d

51、epends on the size of the power generation facility and the length of the contract,the average unit price for on-site PPAs for solar power generation is around JPY10/kWh in 2022.This is significantly lower than regular electricity rates.The standard contract term of on-site PPA is 15 to 20 years.9 O

52、ff-site PPA is for the construction of generation facilities in locations far from where electricity is used.The contract is more complicated than on-site PPA because the generated electricity must be supplied to the consumer through the grid network.In addition,there are two types of off-site PPAs:

53、one is called Physical PPA,in which the consumer purchases both electricity and environmental attributes as a set.The other is Virtual PPA,in which the consumer purchases only environmental attributes.In the U.S.,where corporate PPAs are popular,virtual PPAs are the most common type of PPA,but in Ja

54、pan,physical PPAs are currently the most common.Physical PPA for Electricity and Certificates In many countries,consumers and developers can directly make physical PPAs,but in Japan,under the Electricity Business Act,only retailers are allowed to sell electricity to consumers via the grid network.Th

55、erefore,in principle,retailers must be involved in physical PPAs.Normally,the contract is made between developer,retailer,and consumer.Contract Scheme of Physical PPA in Japan In physical PPAs,as in on-site PPAs,the consumer pays a fixed price for the electricity and its environmental attributes by

56、certificates.In addition,grid network tariffs,retailer fees and renewable energy surcharges are added.The cost for the consumer is higher than on-site PPA.Comparing with regular electricity rates,the unit price of physical PPA is now at the same or lower level.The price of fossil fuels has soared si

57、nce the fall of 2021,resulting in a significant increase in the regular electricity rates mainly by thermal power generation.The national average electricity rate for industry in August 2022 was about JPY23.5/kWh(including fuel surcharges and renewable energy surcharges).Compared to one year ago,the

58、 rate was about JPY7/kWh higher.Since then,electricity rates have continued to rise due to increased fuel costs.10 In contrast,the unit price of physical PPA from solar power generation is at the standard level of about JPY18-20/kWh(including wheeling tariffs and renewable energy surcharges).Althoug

59、h it depends on the future price of fossil fuels,physical PPAs are more economical in addition to reducing CO2 emissions,considering the benefits of fixing the procurement cost of electricity under a long-term contract.However,it is difficult to predict what level regular electricity rates will rema

60、in at in the future.In determining the economics of a long-term contract with an physical PPA,a comparison can be made based on the range of price fluctuations in recent electricity rates.Since the spring of 2021,electricity rates have continued to rise due to the roaring prices of fossil fuels.They

61、 are already quite high and may peak in the first half of 2023.Given the recent low level of electricity prices in 2020,it can be assumed that future electricity rates will be within the 3-4 year range of fluctuation after 2020.Check the unit prices of the electricity rates currently contracted(incl

62、uding fuel surcharges)for the most recent 3-4 years and assume that the midpoint between the highest and lowest prices is the average unit price over the long term.Comparing that average unit price with the price of physical PPA,it can be judged that the cost can be controlled in the long term if th

63、e price of the physical PPA is less than or equal to the average unit price of the most recent electricity bill.Even if the price of physical PPA is higher,the benefits of long-term reduction of CO2 emissions are significant.Seven&i Group,a leading consumer product retailer,has been active in physic

64、al PPAs to increase the amount of renewable electricity with additionality.The company signed its first physical PPA in 2021 with NTT Group for a 20-year contract to procure electricity used in the Groups stores,including 7-Eleven.NTT Group built two solar power plants exclusively for Seven&i in Chi

65、ba Prefecture and supply the generated electricity along with its environmental attributes.The total scale of power generation amounts to 3.1 MW.In addition,the contract is to supply 100%renewable electricity by supplementing any shortfall in demand from the physical PPA with electricity that has be

66、en granted FIT Non-Fossil Certificates with tracking.Seven&i Group has also made a solar-powered physical PPA in the Hokuriku region with the Hokuriku Electric Power Group.The Hokuriku Electric Power Group built a 6.2 MW solar power plant in the coastal industrial area of Fukui Prefecture to supply

67、solar-generated electricity to approximately 300 stores of 7-Eleven in three prefectures in the Hokuriku region.11 In the past few years,the use of renewable electricity has been expanding throughout the supply chain(from procurement of raw materials and parts to production,consumption,and disposal

68、of products),mainly in the manufacturing industries.Apple is a good example and similar efforts are also underway in the Japanese manufacturing industries.Physical PPAs can be effectively used to promote renewable electricity in the supply chain.Tokai Rika Corporation,a manufacturer of automotive se

69、curity systems and other products,has made a physical PPA with 12 suppliers of parts to procure renewable electricity in its supply chain on a long-term basis.For individual parts suppliers,this is more efficient and cost effective than procuring renewable electricity on their own.Cost Reductions fo

70、r Physical PPA For reducing the cost of physical PPA,consumers can utilize the self-wheeling”program.Consumers are able to transfer surplus power generated in-house to other business locations via the grid network by self-wheeling.The program can be used within the company or among group companies.I

71、n November 2021,the self-wheeling program was revised so that consumers can use the program with developers.The premise is that consumers and developers form an association and establish a close relationship,and then consumers purchase renewable electricity from developers by newly constructed gener

72、ation facilities on a long-term basis.It can be applied to physical PPAs,but generation facilities certified under FIT or FIP are not eligible.By self-wheeling,consumers can make contracts directly with developers without involving retailers.Moreover,the purchased electricity is not subject to renew

73、able energy surcharges.Although the supply-demand adjustment of electricity associated with self-wheeling is required,the cost will be lower than regular physical PPA,even if it is outsourced to a specialized service provider.In order to apply self-wheeling,consumers can also lease generation facili

74、ties from developers to supply electricity from the leased generation facilities to their own or group companies business locations.Strictly speaking,this is not a physical PPA,but it has the same benefits.12 Contract Scheme of Physical PPA with Self-wheeling Aeon Mall,an Aeon Group company that ope

75、rates large-scale commercial facilities,procures electricity for its stores through leased solar generation facilities.The company began supplying electricity by self-wheeling to 31 stores nationwide in September 2022 from 740 small-scale solar power generation facilities built by developers in vari

76、ous location.All of them are low-voltage solar power generation facilities with an output of less than 50 kW,totaling approximately 65 MW.Other than self-wheeling,the cost of physical PPA can be reduced by utilizing the FIP,which began in FY2022.Under the conventional FIT,the government purchases th

77、e electricity generated and recovers most of the purchase cost through renewable energy surcharges added to the electricity tariffs for every consumer.In exchange for a long-term guarantee of the purchase price,the government retains the environmental attributes associated with the renewable electri

78、city and sells it to retailers and consumers as FIT Non-Fossil Certificates.Under FIP,on the other hand,developers are responsible for selling the power.The government then grants a premium to the developers based on the difference between the price certified under the FIP and the average wholesale

79、market price.The income of the developers fluctuates,but in return,they can retain the environmental attributes and sell them to retailers and consumers.By applying the FIP,developers can offer both electricity and environmental attributes to consumers through physical PPAs.In addition,the price of

80、physical PPA can be reduced to consider the revenue from the premium by FIP.Currently,physical PPAs in Japan are limited to solar power at low generation costs,but if FIP is applied to other renewable energy sources,such as wind power,it could also drive physical PPAs.13 Contract Scheme of Physical

81、PPA with Feed-in Premium Virtual PPA only for Certificates Of the two types of off-site PPAs,virtual PPA separates the electricity and environmental attributes,and the consumer purchases only the environmental attributes by certificates.With continuing the existing electricity contract with retailer

82、s,the environmental attributes can be purchased from developers on a long-term basis and to use as renewable electricity.The major advantage is that the electricity contract does not need to be changed.On the other hand,the developer earns income by selling the generated electricity to the wholesale

83、 market.Since the transaction price of electricity fluctuates in the market,a contract in which the consumer and the developer settle the amount of the fluctuation is common in virtual PPAs.The objective is to ensure the recovery of the initial investment by allowing the developer to secure a certai

84、n level of income,but the consumer bears the risk of price fluctuations.Contract Scheme of Virtual PPA 14 In the past,virtual PPAs also required the involvement of retailer in Japan,but the rule has changed since FY2022,allowing consumers and developers to make virtual PPAs directly.The new rule is

85、applicable to generation facilities that started operation after April 2022 and have not been certified under FIT.In addition,generation facilities completing the FIT program are also eligible for direct virtual PPAs.The combination of virtual PPA and FIP also allows for a fixed price contract betwe

86、en the customer and the developer without differential adjustment.Premium by FIP is calculated by the fixed price applied to each generation facility and the average price in the wholesale market.The premium increases when the market price is lower and vice versa.It makes up the difference between t

87、he fixed price and the market price in the virtual PPA,which has the effect of stabilizing the income of developers.By combining the premium with electricity sales revenue from the wholesale market,developers can absorb much of the fluctuation in market prices.However,the premium fluctuates on a mon

88、thly basis and does not fully compensate for the fluctuations.If the virtual PPA is contracted without a difference adjustment,the developer bears the risk of fluctuating revenues,but the addition of the premium reduces the risk to a small amount.Contract Scheme of Physical PPA with Feed-in Premium

89、Sony Group aims to procure 100%of its electricity from renewable energy sources by 2030 and signed the Japans first virtual PPA combining FIP.The virtual PPA provides environmental attributes(Non-FIT Non-Fossil Certificates)from the developer under a long-term contract starting in November 2022.The

90、developer operates a solar power generation facility certified under the FIP and sells the generated electricity to the wholesale market.The size of the facility is approximately 2MW,and the contract term is approximately 20 years.15 In this virtual PPA,Sony Group adopted a method to adjust the trad

91、ing price of the environmental attributes including the premium of FIP.The developer earns income based on the amount of electricity generated based on the fixed price set in the virtual PPA,regardless of fluctuations in the trading price in the wholesale market or the premium of FIP.There is anothe

92、r way for consumers to enter virtual PPAs at a fixed price without using FIP.This is a virtual PPA contracted by Sumitomo Mitsui Banking Corporation(SMBC)with retailer TEPCO Energy Partners.TEPCO provides SMBC with the environmental attributes of the newly built solar power plant in combination with

93、 regular electricity.From the perspective of the consumer,SMBC,this is a virtual PPA in which the environmental attributes of a dedicated solar power plant is provided under a long-term contract.The environmental attributes can be purchased at a fixed price while the existing electricity contract wi

94、th TEPCO continues.On the other hand,the developer can supply electricity and environmental attributes to TEPCO at a fixed price and receive a stable income over the long term.The contract between the developer and TEPCO is a physical PPA.The consumer and the developer can make a long-term contract

95、without the risk of price fluctuation by involving the retailer.The key issue for both consumers and developers in virtual PPAs is how to deal with fluctuations in the transaction price in the wholesale market.Several options are possible,including incorporating differential adjustment,which is stan

96、dard in virtual PPAs,or applying FIP and contracting at a fixed price,or purchasing environmental attributes at a fixed price by involving a retailer.Some of the electricity contracts with retailers set unit prices that fluctuate in line with the wholesale market price.In this case,the difference ad

97、justment in virtual PPAs can absorb the market price fluctuation.Consumers will be able to purchase electricity and environmental attributes at a fixed cost in total.The combination of a market priced electricity contract and a virtual PPA with differential adjustment is an effective way to stabiliz

98、e costs for consumers.As virtual PPAs increase,various forms of contracts will emerge.There is also a growing possibility that retailers and financial institutions will offer services to consumers to hedge the risk of price fluctuations in virtual PPAs.Such services have already begun in the United

99、States.16 3 Green Products As more corporates seek renewable electricity,the number of green electricity products sold by retailers has increased.While this is a convenient way to procure renewable electricity,there are pros and cons depending on the type of electricity offered in each product.In FY

100、2021,renewables accounted for 20.3%of the nations total electricity generation(1,033 TWh).Looking at the breakdown,solar power accounted for the largest share at 8.3%.This was followed by hydropower at 7.5%,bioenergy at 3.2%,wind at 0.9%,and geothermal at 0.3%.Electricity Generation by Source in Jap

101、an(%,FY2021)Source:Renewable Energy Institute (Based on the statistics by Ministry of Economy,Trade and Industry)Nearly 90%of the electricity generated by solar and wind is under the Feed-in Tariff(FIT)system,and only a little over 10%is not under FIT.The majority of hydro comes from large power pla

102、nts that have been in operation for a long time.Given this situation,renewable electricity products sold by retailers can be divided into three types.Each type differs in terms of additionality(CO2 reductions due to new generation facilities)and environmental impact.1 Electricity applied to FIT(FIT

103、electricity)2 Electricity not applied to FIT(Non-FIT electricity)3 Electricity mainly from hydro 17 There are some points to note in the renewable electricity products sold by retailers.Check whether the fuel surcharges are added to the electricity rates.The fuel surcharges are calculated monthly ba

104、sed on the import price of fossil fuels(coal,oil,natural gas)used for thermal power generation by regional utilities and can be added to electricity rates.Many retailers other than the regional utilities also incorporate the fuel surcharges into their electricity rates.Although fuel costs are not or

105、iginally required for electricity generated from renewable energy sources(with the exception of bioenergy),the fuel surcharges are often added,and the rates fluctuate monthly depending on the import price of fossil fuels.The risk of fluctuations in fossil fuel import prices will continue being affec

106、ted by other countries around the world.For stabilizing the procurement cost of electricity,it is necessary to select green products that do not include the fuel surcharges.Electricity applied to FIT(FIT electricity)The amount of electricity covered by the FIT in FY2021 reached 114 TWh.The electrici

107、ty purchased under the FIT(FIT electricity)does not emit CO2 when generated,but CO2 emissions are not considered zero.The electricity subject to the FIT is positioned as the average electricity for the country as a whole.Since the electricity subject to the renewable surcharges includes thermal and

108、nuclear power generation,the rule is that CO2 emissions from electricity purchased under the FIT are calculated based on the previous years average for the entire country,including thermal and nuclear(the average for FY2021 is 0.435kg/kWh).In addition to the domestic Law Concerning the Promotion of

109、the Measures to Cope with Global Warming,international projects such as CDP and RE100 do not recognize FIT electricity as renewable electricity with zero CO2 emissions.Since FIT electricity does not actually emit CO2,there is a system under which the government retains the environmental attributes a

110、nd trades it on the market as FIT Non-Fossil Certificates(NFCs).When electricity is combined with FIT NFCs,it can be used as renewable electricity with zero CO2 emissions.A number of retailers are offering 100%renewable electricity products that combine FIT electricity and NFCs.The minimum price for

111、 FIT NFCs has been reduced from JPY1.3/kWh to 0.3/kWh since the November 2021 auction.The total price including FIT NFCs is currently close to the regular electricity rates.18 FIT NFCs were traded on the Non-Fossil Value Trading Market of the Japan Electric Power Exchange(JEPX)since FY2017 four time

112、s a year.After November 2021,they are traded on the newly established Renewable Energy Value Trading Market on JEPX.With the transition to the new market,in addition to retailers,corporate consumers and brokers are able to purchase FIT NFCs.With the reduction of the minimum price,FIT NFCs have becom

113、e more accessible as a means of procuring electricity from renewable energy sources.In the two consecutive auctions in FY2022(August and November),a record high of approximately 3.3 TWh was traded.Even so,this is only about 6%of the amount of certificates issued(about 57.7 TWh in the November auctio

114、n),so there is sufficient supply to meet demand.In FY2022,the certificates can be purchased at the lowest price of JPY0.3/kWh.However,the minimum price is scheduled to be raised to JPY0.4/kWh in FY2023.The amount of FIT NFCs issued(FIT electricity generated between January and December 2021)that con

115、sumers can apply to their electricity in FY2021 has increased to 112TWh.All of this amount was sold in four auctions from August 2021 to May 2022(FIT NFCs for FY2022 are sold in four auctions from August 2022 to May 2023).FIT electricity,which is the source of the FIT NFCs,is supplied by renewable e

116、nergy generation facilities that have been certified by the government.There are five types of renewable energy that are eligible for the certification:solar,wind,small and medium-sized hydropower,geothermal,and bioenergy(biomass).For bioenergy,the type of fuel is specified,but a wide range of fuels

117、 from biological origins are currently allowed.It is advisable to check each fuel,since there is a possibility of using a type of fuel that is unacceptable from the sustainability perspectives.There are another type of NFCs Non-FIT NFCs derived from non-fossil energy sources that are not subject to

118、FIT,and the trading began in FY2020.In addition to large hydro power plants with an output of 30MW or more,graduated-FIT by residential solar power plants that have completed their FIT purchase period are also eligible for Non-FIT NFCs.Furthermore,nuclear power generation are eligible for Non-FIT NF

119、Cs.Non-FIT NFCs are divided into two categories:renewable”and non-renewable”.Non-FIT NFCs(non-renewable)cannot be used for procuring renewable electricity.Most of the Non-FIT NFCs(non-renewable)are from nuclear power,and the rest are from the heat of incineration of waste plastic.19 Overview of Non-

120、fossil Certificates(NFCs)Type FIT NFC Non-FIT NFC(renewable)Non-FIT NFC(non-renewable)Facility Applied to FIT Not applied to FIT Energy Source Solar,Wind,Small Hydro,Geothermal,Biomass Large Hydro,Post-FIT Solar,Other Renewables Nuclear,Waste Plastic Issuer Government Generator Purchaser Retailer,Co

121、nsumer,Broker Retailer,Consumer(only for virtual PPA)Retailer Purchasing Method Auction by trading market Auction by trading market,Bilateral trading Floor Price JPY 0.3/kWh(plan to raise to JPY 0.4/kWh in FY2023)JPY 0.6/kWh Ceiling Price JPY 4.0/kWh JPY 1.3/kWh Trading Price by Auction Multi-priced

122、 Single-priced Issuance Amount 112TWh(FY2021)approx.95TWh(FY2021)approx.65TWh(FY2021)A big problem remains with NFCs,regardless of energy type.When retailers and consumers purchase NFCs,they cannot choose the method of electricity generation,such as solar or wind.They do not know the location and th

123、e operation start date of the generating facilities.If the generating facilities cannot be identified,the electricity will not be considered renewable internationally.RE100,an international initiative to promote the use of 100%renewable electricity by corporates,does not recognize NFCs without envir

124、onmental attributes as a means of procuring renewable electricity.To solve this problem,Ministry of Economy,Trade and Industry(METI)started a demonstration experiment to add attribute information to identify(track)power generation facilities for FIT NFCs,in the February 2019 auction.From the Novembe

125、r 2021 auction,the scope was expanded so that attribute information can be added to all FIT NFCs.20 FIT Non-Fossil Certificates with Tracking The tracking function of NFCs was transferred to JEPX in FY2022,and the system was changed to conduct both bidding and tracking.Along with the transfer of ope

126、rations,the management system for NFCs was restructured so that bidding and tracking can be executed in the same system from the August 2022 auction.Two functions have been added to the new system:the first allows businesses and consumers to view all NFCs they hold in the account of the management s

127、ystem.The second new function is the procedure for cancelling NFCs.Once cancelled in the system,NFCs can be used as certificates for electricity from renewable energy sources.The certificate can be provided with the name of the consumer exercising the rights to the NFCs,including tracking informatio

128、n of key environmental attributes.Non-Fossil Certificates with Tracking Source:Ministry of Economy,Trade and Industry English notes(red)added by Renewable Energy Institute There are nine items of tracking information that can be added to NFCs.In addition to the energy source,the location and the ope

129、ration start date of the power generation facilities are included to verify environmental impact and additionality.21 Nevertheless,there is significant room for improvement in the current tracking of NFCs.Tracking information is not included at the time retailers or consumers purchase them but needs

130、 to be added after the purchase.It is not always possible for consumers to purchase NFCs with tracking information that meets their desired conditions.Renewable energy certificates used in Europe,North America,and other major countries around the world include tracking information when they are issu

131、ed.Consumers can purchase certificates based on the tracking information.While NFCs are traded at the same price regardless of the energy source and other attributes,overseas certificates are priced higher for the sources with lower environmental impact and newer operation start date.The system shou

132、ld be changed so that NFCs can be traded in the same way as overseas certificates,including tracking information at the time of issuance.It is desirable that retailers and consumers can purchase certificates that meet their requirements based on tracking information.METI is considering changing the

133、system to include tracking information at the time of issuance of NFCs.When developers register the generation facilities for NFCs,they are required to provide details of the facilities.If such information is included in the NFCs,consumers will be able to purchase the certificate after confirming th

134、e environmental impact and sustainability of the fuel in advance.Electricity not applied to FIT(Non-FIT electricity)There are many renewable power generation facilities operating for a long time.If they have been in operation for more than 20 years,they are not eligible for FIT.Recently,the number o

135、f“graduated-FIT”facilities completing the FIT purchase period is increasing.As the cost of solar and wind power generation declines,more facilities will not require the FIT program.Feed-in-Premium(FIP),the new system replacing FIT started in April 2022 and certifies new non-FIT renewable power gener

136、ation facilities.The number of different types of non-FIT electricity will increase,including new and old facilities.One of the green products is supplying electricity from newly constructed solar power generation facilities that are not subject to FIT.A typical example is TEPCO Energy Partners Sunl

137、ight Premium”.Corporates with electricity contracts of 1MW or larger are eligible to switch a portion of their electricity to Sunlight Premium.It is marketed to consumers who seek renewable electricity with additionality.22 The price of Sunlight Premium is not disclosed but considered to add an opti

138、onal fee to regular electricity rates.Sega Sammy Holdings,major game console manufacturer,is the first user of Sunlight Premium and began using it at the headquarters in Tokyo in December 2021.TEPCO Energy Partners plans to bring the number of new solar power facilities to more than 300MW in five ye

139、ars.Similar products are also sold by Tokyo Gas and Osaka Gas.Surplus electricity after self-consumption from graduated-FIT residential solar power facilities can be supplied as renewable electricity.The residential solar power purchase program began in November 2009,before the FIT was launched.It w

140、as then transitioned to FIT,and solar power generation facilities that completed the 10-year purchase period became graduated-FIT after November 2019.Once they are no longer subject to FIT,they can be sold as renewable electricity with environmental attributes.A cumulative total of 8.6GW of resident

141、ial solar power generation facilities will be graduated-FIT from November 2019 to the end of 2025.If the 8.6GW of solar facilities continue to operate,the surplus electricity purchased by retailers is expected to amount to about 9TWh per year.This is equivalent to about 1%of the nations electricity

142、sales.In many cases,retailers purchase electricity from graduated-FIT facilities at about JPY 8 to 10 per kWh.Although it takes time and effort to purchase electricity from residences,it is possible to sell it at the same price or lower than regular electricity,even including that cost.Residential s

143、olar power has a small environmental impact.However,since it has been in operation for more than 10 years,it is not suitable for corporates that value the additionality provided by new power generation facilities.Saitama Prefecture aggregates surplus electricity from residential solar power generati

144、on facilities that have graduated to FIT in the prefecture and sells Saitama CO2 Offset Power to corporates in the prefecture.Saitama Prefecture ranks second in Japan in the number of residential solar power generation facilities installed and has many graduated-FIT facilities.TEPCO Energy Partners

145、purchases the surplus power and sells it to businesses.In addition,FIT electricity generated by large scale solar power plants operated by Saitama Prefectures Bureau of Sewerage and other facilities are added to the Saitama Prefecture CO2 Offset Power,combining FIT electricity with tracked NFCs to s

146、upply electricity from renewable energy source.Graduated-FIT and FIT electricity are available for consumers to choose from.Both are suitable for purchase by corporates that place importance on regional characteristics,as they can locally produce and consume electricity from renewable energy sources

147、.23 A similar product was launched in Yokohama City in November 2021.This product combines electricity from biomass power generation at a waste incineration plant operated by the City of Yokohama with electricity from graduated-FIT residential solar power generation in the city.Electricity supplied

148、by non-FIT and graduated-FIT power generation facilities became eligible for Non-FIT NFCs from the electricity generated in FY2020(graduated-FIT residential solar power from November 2019).Generators can no longer transfer the environmental attributes of electricity from renewables to retailers with

149、out issuing Non-FIT NFCs.Retailers are also not allowed to sell electricity from renewable energy sources without Non-FIT NFCs.Non-FIT NFCs can be traded on the market or traded between developers and retailers bilaterally.Non-FIT NFCs traded in the market do not come with tracking information to id

150、entify the generating facility.Like FIT NFCs,it is possible to add tracking information after trading in the market.If Non-FIT NFCs are traded bilaterally,the generating facilities can be identified based on the information in the contract.For this reason,the international initiative RE100 recognize

151、s Non-FIT NFCs traded bilaterally as a means of procuring renewable electricity.Graduated-FIT residential solar is also eligible for RE100 because it is limited to bilateral trade between residentials and retailers.RE100 is calling on the Japanese government to improve the system so that all FIT and

152、 Non-FIT NFCs can be tracked.The environmental attributes of renewable electricity are managed through a country-wide tracking system in many foreign countries.All the NFCs should be given attribute information and managed by a tracking system so that corporates can use renewable electricity and cer

153、tificates complied with international standards.Electricity generated from Hydro The regional utilities are selling 100%renewable electricity products mainly from hydro power generation.TEPCO Energy Partners was the first to sell“Aqua Premium”,a 100%hydroelectric power product for corporates in Apri

154、l 2017.There are more than 100 hydro power plants for Aqua Premium,with a generating capacity of more than 2GW.In FY2021,50%of the electricity sold came from large hydro power plants with an output of 30MW or higher,and the remaining 50%was supplied from small and medium-sized hydro power plants wit

155、h an output of lower than 30MW.24 Eligible hydro power plants do not include generation facilities under the FIT.The CO2 emission of the electricity provided by Aqua Premium is zero.However,since it includes electricity from many large hydro power plants in operation for a long time,it is difficult

156、for corporates that value environmental impact and additionality to use this product.Some of the products sold by regional utilities combine electricity from hydro and geothermal power plants.Kyushu Electric Powers Renewable Eco Kiwami,selling since November 2021,allows consumers to choose either sm

157、all hydro or geothermal.This product is designed to meet the needs of corporates that shy away from large hydro with a large environmental impact.The number of products by hydro power generation is on the decline.Entering 2022,Tohoku Electric Power,Hokuriku Electric Power and Shikoku Electric Power

158、are switching to new products with 100%renewable electricity mixing various renewables.There are products from hydro power plants operated by local governments.The products are sold through regional utilities as 100%locally produced and consumed renewable electricity.A typical example is Aqua de Pow

159、er Kanagawa,which Kanagawa Prefecture launched in April 2020 with TEPCO Energy Partners.Electricity from 11 hydro power plants operated by the local government is supplied to businesses in the prefecture.By selling electricity at regular electricity rates plus an optional fee for environmental attri

160、butes,a portion of the revenue are used for environmental measures in the prefecture.The optional fee for the product by Kanagawa Prefecture is not disclosed while hydro products by other prefectures set fixed fees.The lowest is JPY1.0/kWh and the highest is JPY4.4/kWh for Nagano Prefectures Shinshu

161、 Green Denki.Purchasing electricity from hydro power plants operated by local governments has the benefit of contributing to the local community.A portion of the fees is provided to the local government.Even if the optional fee is high,it is expected to have the effect of returning the cost of purch

162、asing electricity to the local community.From an environmental impact perspective,local hydro products include many small and medium-sized plants with an output of lower than 30,000 kW.Electricity through Regional Cooperation 25 Some of the 100%renewable electricity products are supplied through reg

163、ional cooperations between local governments.Electricity generated in areas with abundant renewable energy sources is sold to consumers in large cities for utilizing local renewable energy nationwide.The City of Yokohama in Kanagawa Prefecture,the second largest city in Japan,signed a partnership ag

164、reement with 13 local governments in Tohoku region to procure electricity from renewable energy sources.The purpose of the agreement is to supply 100%renewable electricity generated in Tohoku,a region rich in solar and wind resources,to the citizens,businesses and public facilities of Yokohama City.

165、The first project was a wind power plant in Aomori Prefecture,which was adopted by the Yokohama Shinkin Bank,a regional financial institution,and 5 other corporates.Among them is Okawa Printing,which was founded in Yokohama City in 1881 and has about 40 employees.Okawa Printing operates its printing

166、 business using 100%of its electricity from renewable energy sources,including its on-site solar power generation.In addition,a wind power plant operating in Aizu-Wakamatsu City,Fukushima Prefecture,began supplying electricity to seven businesses in the City of Yokohama in August 2021.The annual ele

167、ctricity supply is expected to amount to 7 GWh.A portion of the revenue will be paid to Aizu-Wakamatsu City as a fund for regional revitalization,amounting to about JPY 1 million per year.Similar inter-regional cooperation is also being carried out by the Setagaya Ward in Tokyo and Kawaba Village in

168、 Gunma Prefecture under an agreement.The electricity from a woody biomass power plant built with investment from Kawaba Village is provided to the residents of Setagaya Ward through a retailer.In this biomass power plant,the heat generated is also used for cultivating agricultural crops.This is an e

169、xample of how electricity from renewable energy can be used to promote local development.Renewable electricity supplied between regions may be applied to FIT.When combined with NFCs,it can be used as electricity from renewables with zero CO2 emissions.Notes on Non-fossil Certificates(NFCs)26 Corpora

170、te energy users should be careful when purchasing 100%renewable electricity and CO2 free electricity.The governments Electricity and Gas Market Surveillance Commission has formulated Guidelines for Electricity Retail Business to regulate the business activities of retailers.In response to the start

171、of trading of Non-FIT NFCs in FY2020,the method of labeling and promotion of electricity has also been revised.With regard to electricity from renewable energy,retailers need to change their labeling and promotion methods depending on the type of NFCs and the type of electricity combined.Only when N

172、FCs designated as renewable energy(both FIT and Non-FIT)are combined with electricity from renewable sources can be labeled and sold as Renewable Energy”.When non-renewable electricity and NFCs designated as renewable energy are combined,they must be labeled as Substantially Renewable”.Corporate ene

173、rgy users that wish to purchase both electricity and certificates from renewable energy must select electricity labeled as Renewable Energy”.There is one more thing to be aware of when it comes to NFCs,and that is when you choose a Zero CO2 Emission electricity products.Among the NFCs,there are Non-

174、FIT NFCs(non-renewable)which is mainly based on nuclear power.Electricity combined with this certificate will have zero CO2 emissions,but it cannot be used as renewable electricity.If a corporate energy user purchases electricity labeled as Zero CO2 Emission,there is a possibility that the environme

175、ntal attributes of nuclear power is used for reducing CO2 emissions to zero.Nuclear power does not emit CO2,but it does emit radioactive waste.We need to be aware of this point before purchasing zero CO2 emission electricity.27 4 Renewable Energy Certificates One option for corporates to procure ren

176、ewable electricity is purchasing certificates for the environmental attributes derived from renewable energy.By purchasing certificates separately from electricity contracts,corporates can claim using electricity from renewable energy sources.There are three types of certificates for renewable elect

177、ricity in Japan.There are Green Electricity Certificates and J-Credits(Renewable Energy)that corporates can purchase.In addition,FIT NFCs have been available for corporates since November 2021.The advantage of this option is that there is no need to change the existing electricity contract.However,i

178、n terms of additionality mitigating climate change,it has less impact than self-generation and corporate PPAs.Certificates for Corporate Energy Users Brand Green Electricity Certificate J-Credit(renewable generation)FIT NFC Issuer Registered Issuer Government Government Fuel Solar,Wind,Hydro,Geother

179、mal,Bio Solar,Wind,Hydro,Geothermal,Bio Solar,Wind,Hydro,Geothermal,Bio Facility Certified by Japan Quality Assurance Certified by the Government Committee on J-Credit Certified as a Feed-in Tariff(FIT)project by the Government Purchasing Method From issuer Auction by the government or from J-Credit

180、 owner/broker Auction by trading market Issuance Amount 436GWh(FY2021)1.3TWh(FY2021)112TWh(FY2021)Price JPY 2-4/kWh for volume purchase ave.JPY 1.5/kWh(Apr 2022 auction)JPY 0.3-4.0/kWh(Floor price to JPY 0.4/kWh in FY2023)Cancellation Anytime Anytime Same fiscal year 28 Green Electricity Certificate

181、s mainly by Biomass Green Electricity Certificate(GEC)was launched in 2000.Many corporates are using GECs as a means of procuring electricity from renewable energy sources.There are five types of power generation facilities that are eligible:solar,wind,hydro,geothermal and bio energy.As of the end o

182、f September 2022,there were 319 power generation facilities certified for GECs,with a total output of approximately 530 MW.By type of renewable energy,bioenergy,solar and wind power account for the majority.Since certificates can be purchased by specifying the power generation facilities,it is easy

183、to confirm the environmental impact.As of October 11,2022,37 suppliers were registered selling GECs.The amount of certificates issued in FY2021 was 436 GWh,a significant decrease from 609 GWh in FY2020.The decrease in solar certificates was particularly significant.Bioenergy certificates accounted f

184、or about 90%of GECs issued in FY2021.Most of the remainder was solar power,with few certificates for wind power.In principle,power generation facilities eligible for GECs are limited to on-site generation facilities including the graduated-FIT facilities.Facilities subject to FIT are not eligible.It

185、 is considered that off-site generation facilities that have issued GECs before FY2020,when the Non-FIT NFCs started,are allowed to continue issuing GECs.The price of GECs varies by supplier.Some suppliers publicly announce the price,while others determine the price by quotation.In the case of quota

186、tions,the larger the amount of certificates purchased,the lower the price generally becomes.For large purchasers,JPY 2-4 per kWh is standard.By purchasing GECs,corporates can claim using renewable electricity.Depending on the amount of certificates purchased,the amount of CO2 emissions reported to t

187、he government and other authorities can be reduced.The national average of CO2 emissions of electricity sold by retailers in the previous year can be deducted for the amount of Certificates purchased.If the certificates are to be used to reduce CO2 emissions reported under the Law(the Law Concerning

188、 the Promotion of the Measures to Cope with Global Warming),they must be certified under the Green Energy CO2 Reduction Equivalent Certification System operated by the government.“Green Heat Certificates”,which can be issued for heat generated from renewable energy,can be applied in the same way for

189、 reporting under the Law.29 Facilities eligible for GECs are certified by the Japan Quality Assurance Organization(JQA),a third-party certification organization,based on guidelines by Ministry of Economy,Trade and Industry.Power generation methods include co-firing of bioenergy and fossil fuels,and

190、mixed fuels of waste cooking oil and kerosene.In the case of co-firing,the ratio of bioenergy to fossil fuel is evaluated,and in case the ratio is low,the project will not be certified.All types of generation facilities are required to submit documents and verifiable information that assess the impa

191、ct of the facilities on the surrounding environment.Hydro power generation is limited to cases where power generation facilities are newly constructed on rivers or added to existing facilities.In the case of adding power generation facilities to dams and weirs,the environmental impact assessment of

192、the dam or weir and the status of local consensus are required for the approval.Many of the power generation facilities certified for GECs have been in operation for a long term.In particular,facilities using bioenergy may have been in operation for more than 20 years.Additionality of promoting inve

193、stment in renewable energy is one of the requirements.For issuing GECs,additionality is recognized not only when the power generation facilities are constructed,but also when it contributes to continuing the operation of the existing facilities(e.g.,procurement of biofuel).Therefore,power generation

194、 facilities in operation for more than 20 years can still be certified.Corporates need to confirm the operation start date of the facilities for each GEC if they want to judge the additionality strictly by the operation time.J-Credits mainly by Residential Solar“J-Credits issued by the government al

195、so allows trading of the environmental attributes of renewable electricity.generation facilities.There are two types of J-Credits depending on the method used to reduce CO2 emissions:J-Credits(renewable generation)and J-Credits(energy conservation and others).Only J-Credits(renewable generation)can

196、be used by corporates to procure renewable electricity.Five types of renewable electricity generation methods are covered:solar,wind,hydro,geothermal,and bioenergy.In many cases,local governments and third-party organizations issue J-Credits(renewable energy)by consolidating the environmental attrib

197、utes of self-consumed electricity from residential solar facilities in each region.Residential solar power generation has the benefit of small environmental impact.30 In J-Credits(renewable generation),the amount of self-consumed electricity is calculated by the generation amount and the dispatched

198、amount to the grid,then converted to CO2 reductions.Corporates can be considered to have procured renewable electricity in proportion to the amount of purchased J-Credits(renewable generation),which can be used to reduce CO2 emissions.When converting to the amount of electricity,the calculation is b

199、ased on the average CO2 emission factor of the countrys total electricity for the year in which the electricity is generated.When using J-Credits(renewable generation)to reduce CO2 emissions,it is necessary to apply to the J-Credit system secretariat for cancelling the credits.Upon completion of the

200、 cancellation procedure,Renewable Energy Calculation Notice will be issued.In addition to reporting under the Law Concerning the Promotion of the Measures to Cope with Global Warming,it can also be used for CDP and RE100 reporting.However,the Tokyo Metropolitan Governments Obligation to Reduce Total

201、 Greenhouse Gas Emissions and Emissions Trading System(Cap&Trade System)for large-scale business operators does not allow reductions in CO2 emissions through J-Credits.Residential solar facilities after the feed-in tariff purchase period(“graduated-FIT”)are also eligible for J-Credits(renewable gene

202、ration)if additional capital investment is made,such as the installation of batteries(limited to cases where additional equipment is installed after May 27,2018).The portion of the electricity consumed on-site from the graduated-FIT solar facilities can be issued as J-Credits(renewable generation).T

203、he environmental attributes of the self-consumed residential solar electricity by the graduated-FIT facilities are also eligible for GECs.To prevent duplicate issuance of the environmental attributes of the same electricity,the J-Credit system secretariat checks for duplication based on the list of

204、issued GECs and excludes them from the certification.Including this point,it is difficult to position GECs and J-Credits.The government needs to take the lead in reconstructing the system.There are three ways to purchase J-Credits:through brokers called J-Credit Providers(offset providers),directly

205、from J-Credit holders,or through auctions conducted by the J-Credit system secretariat.As of November 2022,six suppliers had registered as J-Credit Providers.The auctions by the secretariat are usually conducted twice a year.31 The amount of J-Credits(renewable generation)certified in FY2021 expande

206、d to 1.3TWh,a significant increase from 1.0TWh in FY2020.The increase in graduated-FIT residential solar power facilities is thought to be the main factor.In the April 2022 auction,the average transaction price was JPY3,278/ton,equivalent to JPY 1.5 per kWh.The price of J-Credits(renewable generatio

207、n)is lower than the standard price of GECs(around JPY2-4/kWh).The average transaction price continues to rise from 2021 to 2022.It is higher than the minimum price for FIT NFCs(JPY 0.3/kWh).For purchasing NFCs,corporates must become a member of the Japan Electricity Power Exchange,which requires an

208、admission fee and annual membership fee.J-Credits(renewable generation)may be cheaper when purchasing small amounts.J-Credits require projects implemented on or after April 1,2013 to be registered.The maximum period for which credits can be issued is eight years.The period can be extended for anothe

209、r eight years by submitting a Notification of Changes to Project Plan.When applying for a project,it is necessary to submit a written plan including the location of the power generation facility,the name and model number of the manufacturer of the equipment to be used,the capacity,and the operation

210、start date.The plan has been reviewed and must be approved by the certification committee before the registration of the project.After the project is registered,monitoring must be conducted,and reports submitted on an average cycle of one to two years.J-Credits can be issued if the report on CO2 red

211、uctions from on-site consumption of renewable electricity is approved by the certification committee.32 5 Key Considerations in Procurement Calculating CO2 Emissions from Certificates There are two methods of calculating CO2 emissions associated with the use of electricity when reporting to the nati

212、onal and local governments.One is to calculate based on the CO2 emissions factor of the electricity(CO2 emissions per kWh of electricity)sold by the retailer in each fiscal year,and the other is to apply a product-specific CO2 emissions factor.Product-specific CO2 emissions factors can be applied to

213、 electricity combined with NFCs.Retailers shall calculate the CO2 emissions factor by subtracting the average CO2 emissions factor for the entire country in the previous year(0.435kg/kWh,FY2021)from the CO2 emissions factor of the electricity sold(the emissions factor cannot be negative).With this c

214、alculation method,the CO2 emissions factor for products combining FIT electricity(the national average CO2 emissions factor is applied)and FIT NFCs will be zero.There is a point to be noted here.In the case of NFCs,the year in which the electricity to be covered by the certificate was generated(Janu

215、ary to December)and the year in which the electricity was supplied(April to March of the following year)must match.This applies not only to FIT NFCs but also to Non-FIT NFCs.With GECs and J-Credits,corporate energy users can choose the year to use them to report CO2 emissions.GECs and J-Credits are

216、more flexible than NFCs when it comes to reporting CO2 emissions.However,it is important to avoid using certificates issued many years ago.It is recommended to use them within two years from the issuance.There is a concern common to using certificates.It is in case of using electricity generated mai

217、nly by thermal or nuclear power and combining certificates from renewable energy sources.From the perspective of climate change,the use of certificates in combination with electricity generated mainly from coal-fired power,which emits a large amount of CO2 is concerned.CDP,which evaluates corporates

218、 climate change efforts,recognizes electricity combined with NFCs as renewable energy.However,it asks corporates to use electricity with low CO2 emissions by the following three recommended conditions.For meeting these recommended conditions,electricity with a high CO2 emissions factor,mainly from c

219、oal-fired power plants,should not be selected.1.Procure renewable electricity as much as possible(e.g.,FIT electricity).33 2.Procure electricity with a low CO2 emissions factor in case renewable electricity cannot be purchased.3.Procure electricity with a CO2 emission factor at least equal to or low

220、er than the national average.Prioritizing Generation Method or CO2 Emissions There are two ways for corporate energy users in increasing renewable electricity:one is to procure electricity from renewable energy sources that have a low environmental impact based on how they are generated.Regardless o

221、f whether the FIT system is applied or not,choose electricity from renewable energy sources that do not actually emit CO2.The other approach is procuring renewable electricity that can be used to reduce CO2 emissions.Corporates that are obligated to report their CO2 emissions to the government and o

222、ther entities must report CO2 emissions based on the calculation method stipulated by each system.In this regard,FIT electricity must be procured with a combination of certificates.Whether choosing electricity from renewable energy sources that do not actually emit CO2 or electricity that can be use

223、d to reduce CO2 emissions through institutional means is left to the policy of individual corporate energy users.This will differentiate the value of using FIT electricity and certificates.Patagonia,an outdoor goods manufacturer,has a clear policy regarding CO2 emissions associated with the use of r

224、enewable electricity.The company has been promoting environmentally friendly business practices.For reducing CO2 emissions to mitigate climate change,they purchase FIT electricity in Japan to increase the amount of electricity from new power generation facilities replacing electricity generated from

225、 thermal power plants.Patagonia is not concerned about CO2 emissions only for reporting.Patagonia gives priority to purchasing electricity from solar-sharing systems,which combine solar power with crop production.For solar-sharing projects on abandoned agricultural lands in Japan,crop production is

226、mandatory.By restarting crop production,CO2 can be absorbed and the benefits of reducing CO2 emissions are larger.From April 2020,new rules are applied to electricity sold by retailers.If they sell CO2 free electricity,it must come with NFCs.Even if electricity is generated from renewable energy sou

227、rces,it cannot be claimed to have environmental attributes without NFCs.34 In line with the new rules,the Electricity and Gas Market Surveillance Commission,a government agency,has revised its Guidelines for Retail Business of Electricity”.It requires retailers to disclose the energy mix of the elec

228、tricity and the types of NFCs on the websites.It also requires the same disclosure for specific products such as 100%renewable or zero CO2 emissions.However,both disclosures are only recommended and are not mandatory.It is the responsibility of retailers to provide concrete and easy-to-understand in

229、formation on the characteristics of the electricity sold to consumers.Corporate energy users should avoid purchasing electricity from retailers that do not disclose the energy mix and the types of NFCs.When purchasing 100%renewable or zero CO2 emissions products,it is advisable to confirm the detail

230、s of the energy source and the type of NFCs with the retailer.The label NFCs(renewable)does not indicate whether it is FIT or Non-FIT,or the source of the environmental attributes by solar,hydro,or bio energy.With trackable NFCs,consumers can identify the specific power plant,the environmental impac

231、t and additionality.The Electricity and Gas Market Surveillance Commission has revised its guidelines for electricity retail again in September 2022 in response to a significant increase in the fuel surcharges added to electricity rates.It recommends that retailers explain the fuel surcharges to con

232、sumers in an easy-to-understand manner.Many electricity products sold by retailers use a calculation method for adding the fuel surcharges based on the recent fossil fuel import prices.Since 100%renewable energy products may apply the same level of fuel surcharges,consumers should confirm it before

233、purchasing.35 6 Requirements for Renewable Electricity In procuring renewable electricity,many corporates are focusing on environmental impact,sustainability of the energy source,additionality in terms of climate change mitigation,and contribution to the local community.The objectives are not only r

234、educing CO2 emissions,but also increasing renewable energy socially valuable.A typical example is the renewable electricity evaluation method introduced by office equipment manufacturer Ricoh in March 2021.When purchasing renewable electricity,Ricoh gives a score in each of nine categories,including

235、 price,additionality,environmental impact of the energy source,and contribution to the local community.Among energy sources,especially for biomass,Ricoh checks whether it is domestically produced or imported,burned exclusively or mixed with coal,and whether it has been certified by a third party.RE1

236、00,an international initiative for corporates around the world to use 100%renewable electricity,stipulates specific requirements for renewable electricity procured by the members.It requires members to take sustainability and additionality into account.Recently,an increasing number of corporates hav

237、e been requesting suppliers(supply chain)to use renewable electricity meeting certain requirements.Failure to procure renewable electricity meeting the requirements may result in discontinuing the existing business.It has become important for corporates to confirm the requirements for renewable elec

238、tricity for maintaining and expanding their business.Evaluation Criteria for Additionality From the perspective of mitigating climate change,the number of corporates emphasizing additionality is expanding in Japan.The construction of new(additional)power generation facilities with renewable energy s

239、ources has the effect of replacing electricity by fossil fuels and reducing CO2 emissions.However,the criteria for judging additionality are not standardized both in Japan and globally.There are three main criteria for evaluating additionality.The basic criteria is#1 below,but it is not wrong to sup

240、port a wide range of renewable electricity through an expanded interpretation such as#2 and#3.36 1.Purchasing renewable electricity from newly constructed generation facilities(including on-site generation and consumption).2.Purchasing electricity/certificates from renewable electricity generation f

241、acilities in operation for a short period to support developers recovering investment and promoting new projects.3.Purchasing electricity/certificates from renewable electricity generation facilities in operation to support developers continuing the operation.In terms of reducing CO2 emissions,#1 ab

242、ove is the most effective.In addition to on-site generation and consumption,corporate PPA(Power Purchase Agreement)for new facilities is applicable.The next effective case in terms of CO2 reductions is#2.Based on the standard payback period for power generation facilities(15 years),the requirement o

243、f power generation facilities within 15 years of operation is popular in the US.RE100 specifically stated additionality in its Technical Criteria revised in October 2022.On-site generation and corporate PPA(#1 above)are recommended,and purchased electricity and certificates should be limited to powe

244、r generation facilities in operation for less than 15 years(#2 above).In Japan today,even if only the additionality#1 is sought,the number of eligible electricity is limited.It is realistic to refer to the requirements of RE100 and consider additionality,including#2,while comprehensively selecting e

245、lectricity with better conditions with other selection criteria(environmental impact,sustainability,and local contribution).On the other hand,#3 above does not have the effect of reducing CO2 emissions.It can prevent increasing emissions by continuing the existing facilities.If the profitability of

246、the facility becomes very low due to increased operation and maintenance costs,the supplier may stop the operation.To prevent such a situation,providing funds to the supplier through the purchase of electricity and certificates is effective.Rating Method of Renewable Electricity Regarding environmen

247、tal impact and sustainability of energy sources,which are important in selecting renewable electricity,it is desirable to evaluate power generation method.For solar and wind power,the location of the power generation facilities,for hydro,the impact on river water quality,and for biomass,the benefits

248、 such as forest conservation,should be considered.37 Including the additionality and local contributions,the benefits of using renewable electricity will be enhanced.As for procurement methods,on-site generation and corporate PPAs(on-site and off-site PPAs)should be highly evaluated,with emphasis th

249、at consumers can proactively contribute to the expansion of renewable energy deployment.Below is an example for evaluating renewable electricity.The selection of the evaluating points depends on the policies of individual corporates.Example of Rating Renewable Electricity CriteriaSourcePointNoteOn-s

250、ite Generation incl.On-site PPA+4no impact on grid capacityOff-site PPA+3long-term carbon reductionsGreen Products from RE facilities+1ex.Green TariffsGreen Products with Certificates0Unbundled Certificates0Solar(rooftop,industrial zone)+2Solar(flat land,pond）+1Solar(sloping land)0safety concernsOn-

251、shore wind(industrial zone)+2On-shore wind(other locations)+1/0due to environmental impactOff-shore Wind+1Small hydro(river maintenance release)+2low impact on water flowSmall hydro(othre sources)+1Large hydro0output over 30MWGeothermal(binary)+2low impact on energy sourceGeothermal(flash)+1Biomass(

252、local waste)+1Biogas(local waste)+1Biomass and Biogass(other sources)0New facilities+4Facilities within 15 years+2Facilities over 15 years(renewed within 15 years)+1core equipments renewedFacilities over 15 years0Supplier invested by local government+1ex.10%or higher shareIncome donated to local gov

253、ernment+1a share of income donatedAdditional industry promotion+1ex.agricultural productionunder solar panels onabandoned landProcurementOption(+4 to 0)EnvironmentalImpact andSustainablity(+2 to 0)Additionality(+4 to 0)Local Benefits(+3 to 0)multiple pointsallowedcarbon emissions by fuelsinforenewable-ei.orgwww.renewable-ei.org/enRenewable Electricity Procurement GuidebookEnglish EditionRenewable Energy Institute11F KDX Toranomon 1-Chome Bldg.,1-10-5 Toranomon,Minato-ku,Tokyo 105-0001TEL：03-6866-1020January 2023