JANUARY 2020 RENEWABLE ENERGY MARKET BRIEFING JAPAN
Authors: Kae Takase, Senior Manager, CDP-Japan Masaya Ishida, Senior Manager, Renewable Energy Institute (REI), Japan Shailesh Telang, Technical Manager, Renewable Energy, CDP RE100 RENEWABLE ENERGY MARKET BRIEFING JAPAN CHAPTER 01 CONTENTS ELECTRICITY 01 SECTOR LANDSCAPE Japan’s electricity journey started in 1887 Japan generated 18% of its electricity from 01 ELECTRICITY SECTOR LANDSCAPE 03 when Tokyo Electric Lighting, Japan’s renewable energy sources, including 8% first electric power company, started hydropower, mainly from large hydropower (>100 MW). However, coal and natural gas supplying electricity to the public. 1.1 Institutional structure of the electricity market 05 still contribute heavily to the overall electricity Japan is now the fifth largest consumer mix, with a 34% and 36% share respectively. of electricity with a consumption per 1.2 Market Liberalization Status 06 After the Fukushima nuclear accident in capita of 7,819 kWh (2014, World Bank). March 2011, Japanese nuclear power plants stopped their operations until new safety 1.3 Power grid availability and network 07 Japan has experienced substantial growth regulations were adopted. As of April 4th, in electricity consumption over the last five 2019, nine nuclear power plants with 9.1GW2 of decades.. After the implementation of a capacity are under operation compared to 55 02 RENEWABLE ELECTRICITY MARKET LANDSCAPE 09 feed-in tariff (FiT) scheme for renewables in nuclear power plants prior to the accident. 2012, there has been a significant increase in installed renewable energy capacity. The In order to reduce power sector greenhouse gas 03 RENEWABLE ELECTRICITY SOURCING OPTIONS 11 FiT scheme accelerated capital investment (GHG) emissions and achieve energy security in renewables, with installed capacity for the country, Japan adopted a new Strategic growing by 41,480 MW1 from the launch of 3 3.1 Onsite generation: 12 Energy Plan in 2010. The plan sets the country’s the scheme until the end of March 2018. energy policy until 2030 with objectives to double
3.2 Green electricity products: 13
3.3 Energy Attribute Certificates: 15 FIGURE 1: % ELECTRICITY GENERATION BY SOURCES IN JAPAN (FY2018)
3.3.1 Green Energy Certificates (GEC) 16 Natural Gas Wind Petroleum & Waste Solar 1.10 3.3.2 J-credits (renewable source) 17 Renewables Geothermal Nuclear 6.30 Bioenergy 3.3.3 Non-Fossil Fuel Certificates (NFC) 18 36.3 Coal 6 Hydropower
3.4 Comparison of renewable electricity sourcing options 19 0.20
3.5 Renewable Electricity Uses Claims 20 2.80 18.1 3.5.1 Compliance with RE100 criteria 20
04 RENEWABLE ELECTRICITY SOURCING BARRIERS 24 7.80 6 05 OPPORTUNITIES AND RECOMMENDATIONS 27 33.6
[Renewable Energy Institute, Japan]
1 https://www.jepic.or.jp/pub/pdf/epijJepic2019.pdf 2 Japan Nuclear Safety Institute 3 In October 2003, the Government formulated the First Energy Plan, and it publicized the Second Plan in March 2007 and the Third Plan in June 2010.
2 3 4 RE100 RENEWABLEENERGYMARKETBRIEFINGJAPAN
INSTALLED ELECTRICITY GENERATION CAPACITY (BY FUEL, GW) 0.0 50.0 100.0 150.0 200.0 250.0 300.0 350.0 IUE 2: FIGURE expanding renewable energy in the grid mix. mix. grid the in energy renewable expanding for and resources fossil and power nuclear on dependency reducing for policies the outlined plan The 2014. April in 2030 for Plan’ Energy ‘Strategic 4th the established Japan of Government the 2011, March in accident nuclear Fukushima to the response In sector. industrial the in productivity energy improve and emissions, CO2 reduce self-sufficiency, energy 1 1 1 1 1 GW) FUEL, (BY CAPACITY GENERATION ELECTRICITY INSTALLED 1 0 Thermal Nuclear Hydropower 1 1 Renewables &others 1
Includes generationcapacityfromgeneralutilities,IPPs,andself-generation,butexcludes plantsunder1000kW. 1 1 1 1 1 1 1 1 0 1 1 1 1 1 1 1 1 1 1 1 0 1 1 1 energy sources such as wind energy. energy. wind as such sources energy renewable other covering years 20 for support with 2012 in launched was tariffs high with scheme aFiT Subsequently, years. 10 for installations PV solar to support 2009 in launched was scheme AFiT years. five past the over sources, energy solar from particularly non-fossil fuel-based electricity generation, in growth asignificant been has there but market electricity the dominate still fuels Fossil 1 1 1
[EDMC/The InstituteofEnergyEconomics,Japan,2019] 1 1 1 1 000 001 00 00 00 00 00 00 00 00 010 011 01 01 01 01 01 01
ELECTRICITY GENERATION BY SOURCES (TWH) 0.0 200.0 400.0 600.0 800.0 IUE 3: FIGURE 4 ceased in 2005 in ceased which 2000 in started process liberalization agradual until utilities, regional 10 of monopoly a was market electricity Japanese The MARKET OF ELECTRICITY THE STRUCTURE 1.1 INSTITUTIONAL the establishment of the Electricity Market Market Electricity of the establishment the 2015); (OCCTO) April (in Operators Transmission Organization for Cross-regional Coordination of the of establishment the include reforms The respectively. 2020 April in and 2016 April 2015, April in phases three in (1964) Act Business Electricity the in regulations the amending via reforms market electricity the reinitiated
were regulated sohadto purchase electricityfrom oneofthe10regional utilities dependingonwhere you live. followed by deregulating high-voltage customers to choosesuppliersin2004and2005.Until2016, low-voltage customers The deregulation process started in2000, first by enablingextra-high voltage consumers to choose electricsuppliers, 2010 ELECTRICITY GENERATION BY SOURCES (TWH/YEAR, INCLUDING NON-UTILITY GENERATION) GENERATION) INCLUDING NON-UTILITY (TWH/YEAR, SOURCES BY GENERATION ELECTRICITY 4 . The Government of Japan Japan of Government . The 2011 [Agency forNaturalResourcesandEnergy,MinistryofEconomy,Trade,Industry,Government ofJapan] 2012 2013 Coal Nuclear Natural Gas Energy Department under ANRE/METI. Renewable and Conservation Energy the by governed are schemes support other and scheme aFiT including policy energy Trade and Industry (METI). Renewable Economy, of Ministry the within (ANRE), Energy and Resources Natural of Agency the by overseen is market and policy Electricity 2020. April in implemented to be set also is verticals transmission and generation power of separation The 2016). April (in sales retail electricity of liberalization full of implementation the and 2016; April in (EGC) and Gas Market Surveillance Commission Electricity to the renamed was which 2015), (in September Commission Surveillance 2014 PV Hydro Oil, etc. 2015 2016 Biomass Geothermal Wind CHAPTER 01 2017 5 RE100 RENEWABLE ENERGY MARKET BRIEFING JAPAN CHAPTER 01
FIGURE 4: OVERVIEW OF JAPANESE ELECTRICITY MARKET STAKEHOLDERS FIGURE 5: HISTORY AND PLAN FOR DEREGULATION OF THE JAPANESE ELECTRICITY MARKET
ELECTRICITY AND GAS MARKET SURVEILLANCE COMMISSION (directly under the Minister of METI) APRIL 2015 SEPT 2015 APRIL 2016 APRIL 2017 APRIL 2020 OCCTO EGC FULL OPEN LEGAL UNBUNDLING AGENCY FOR NATURAL RESOURCES AND ENERGY (ANRE), ESTABLISHED ESTABLISHED LIBERALIZATION PROCUREMENT OF RETAIL OF BALANCING REGULATED RETAIL MINISTRY OF ECONOMY, TRADE AND INDUSTRY (METI) MARKET POWER TARIFF CAN Renewable energy policy: Energy Conservation and Renewable Energy Department BE ABOLISHED Market structure: Electricity and Gas Industry Department
OCCTO Organization for Cross-regional Coordination of Transmission Operators 1.3 POWER GRID AVAILABILITY AND NETWORK
* Japan’s power grids have no international OCCTO has been working to manage existing 10 UTILITIES’ HOLDING COMPANIES connections. There are 10 general electric interconnection lines between utilities. utilities which build, operate and manage their However, these interconnection lines have transmission lines independently. Interchange limited capacity, even after the application of 10 UTILITIES’* 10 UTILITIES’ 10 UTILITIES’ of electricity between nine transmission areas a better power grid management process. In (the Okinawa islands are excluded) occurs GENERATION COMPANIES TRANSMISSION COMPANY RETAIL COMPANIES addition, the local power grids in areas where only for limited purposes and situations. renewable resources are abundant are likely to OTHER OTHER have limited transmission capacity available. INDEPENDENT POWER PRODUCERS POWER RETAIL COMPANIES
*For Okinawa Electric Company, unbundling of the transmission company is not mandatory, and will not happen. FIGURE 6: JAPAN ELECTRIC POWER EXCHANGE (JEPX)
The role of the Electricity and Gas Market transmission and distribution from generation COMPETITION IN WHOLESALE MARKET Surveillance Commission (EGC) is to strengthen and retail is expected to be legalized and some and monitor the energy market reform and of the dominant, vertically integrated electric the role of the Organization for Cross-regional utilities5 are expected to be broken up. JAPAN ELECTRIC POWER EXCHANGE Coordination of Transmission Operators The regulated retail tariff was planned to be (OCCTO) is to facilitate better use and planning abolished in 2020. The purpose of regulating of cross-regional electricity transmission prices is to protect consumers in less competitive operations. OCCTO is a membership areas from unreasonably high prices compared organization for electricity generation, with those in competitive areas. However, due POWER GENERATION POWER GENERATION transmission and distribution, as well as POWER GENERATION to the status of competition in the electricity (EX-IPP, J-POWER ETC) (NEWCOMERS) retail companies. market, it is likely to be postponed6. GENERATION MINISTER OF
COORDINATE ECONOMY, TRADE Currently, the power system has three AND INDUSTRY 1.2 MARKET sectors: generation, transmission and distribution (regional monopoly under ELECTRICITY MARKET LIBERALIZATION STATUS SURVEILLANCE license/concession) and retail. SURVEILLANCE TRANSMISSION , DISTRIBUTION & GRID CONTROL SURVEILLANCE The liberalization of the retail sector was UTILITIES COORDINATE COMMISSION completed in April 2016 and since then, all According to METI, deregulation of the electricity consumers including household electricity market has the three key aims of: customers can choose their power retail 1) securing stable energy supply; 2) cutting MARKETING ELECTRIC RETAIL ELECTRIC RETAIL company for the delivery of electricity. electricity prices; and 3) expanding business RETAIL & SALES COMPANIES EX-PPS COMPANIES (NEWCOMERS) Following the open procurement of balancing opportunities for operators and the range of ORGANIZATION FOR power in April 2017, a number of new market choices for consumers. The liberalization of COORDINATE CROSS-REGIONAL COORDINATION OF the market will allow increased competition entrants obtained retail licenses for the power TRANSMISSION business. From 2020 onwards, unbundling of from many new market entrants. OPERATORS (OCCTO) CUSTOMERS COORDINATE
5 Tokyo Electric Company has already unbundled its generation department, transmission & distribution department, and retail department in 2016. COMPETITION IN RETAIL MARKET 6 http://www.emsc.meti.go.jp/english/info/public/pdf/180122.pdf
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FIGURE 7: JAPAN’S ELECTRICITY MARKET DEREGULATION PROCESS RENEWABLE ELECTRICITY
TRANSMISSION NO CHOICE CUSTOMERS GENERATION RETAIL & DISTRIBUTION REGULATED PRICES (Extra-high voltage, BEFORE high-voltage, low-voltage) 10 UTILITIES MARKET LANDSCAPE
DEREGULATION 02
Deregulated since 2000 Japan has set long-term targets for A FiT for rooftop solar PV was introduced in 2009. A further FiT for all types of renewable EXTRA-HIGH VOLTAGE 2030 for self-sufficiency, electricity prices and greenhouse gas emissions. energy sources for 20 years was introduced CONSUMERS in 2012, right after the Fukushima nuclear The Government plans to leverage TRANSMISSION accident in 2011. The FiT scheme, coupled GENERATION RETAIL Deregulated since 2004/2005 renewable energy sources such as solar, & DISTRIBUTION with the fact that rooftop solar PV plants 10 UTILITIES wind, hydropower, geothermal, and have a short lead time for construction, has HIGH VOLTAGE CONSUMERS biomass to reduce its reliance on nuclear stimulated rooftop solar PV implementation11. process) Wheeling power. Electricity retailers are required Since 2005, the annual growth rate of the CURRENT STATUS 1995~ price Deregulated since 2016 to have 44% or more of their sales (showing deregulation (showing RETAILERS renewable energy market has been 5%, until it GENERATION (IPPS) from non-fossil fuel sources by 2030. jumped to 29%12 after the introduction of the LOW VOLTAGE CONSUMERS The Government of Japan supports renewable FiT in 2012. This sharp rise demonstrates the energy market development. In the 1980s, it strong support that the FiT provided in further rolled out a loan scheme with low interest rates expanding renewables in Japan. Renewable for households to install rooftop solar heating electricity penetration is increasing significantly systems. It was very successful, with more each year and the market is changing to facilitate TRANSMISSION access to renewable electricity for all consumers. GENERATION RETAIL than 2.7 million households implementing solar & DISTRIBUTION heating systems under this scheme8. In 1992, However, Japan’s overall 2030 renewable energy 2020:LEGAL UNBUNDLING WITH CHOICES CUSTOMERS electric utilities started their voluntary net- target is relatively low at 22-24% of generation. UNREGULATED PRICES* (Extra-high voltage, high-voltage, low-voltage) metering scheme for rooftop PV, and in 1994, An auction scheme started in 2017 for large scale a subsidy was introduced to top-up the initial Wheeling solar PV and in 2018 for biomass (liquid and GENERATION investment. The subsidy significantly contributed FINALIZED PLANNED price timber woods, separately). The auction for solar
DEREGULATION IN 2020 RETAILERS (IPPS) to the introduction of rooftop PV in Japan PV started with a minimum size of over 2MW but ended in 2006 after renewable portfolio for plants but expanded to include plants over standards (RPS) were implemented in 2003, 500kW in 2019. The latest auction resulted in a * Regulated prices should remain until surveillance authority considers enough competition exists, for regulation not to be needed. requiring utilities to procure a fixed percentage minimum price of 10.5 yen/kWh, which is much Regulated prices were due to be abolished by 2020, but the authority is likely to extend this until the end of the year. 9 of renewables . The RPS scheme set an less than the FiT price for the same scale solar obligatory renewable energy target for electricity retailers of 1.6% of total electricity sales in 201410. As per the Electricity Business Act, existing METI is seeking to implement a more flexible power plants e.g. nuclear and coal-fired power grid operation policy (called “connect-and- plants are given priority in Japan (“first- manage”) to utilize existing transmission lines come basis”). The grid connectivity rule limits better and increase grid capacity to connect opportunities for renewable energy producers. renewables. TEPCO has started a pilot project The key issue faced by renewable energy for the connect-and-manage in Chiba, but producers in Japan is inadequate transmission most of other 10 utilities are reluctant to infrastructure to accommodate the growing implement connect-and-manage operations. renewable energy capacity and the high cost associated with grid connectivity. METI sets the “connectable amount” for each of the utilities, which further translates into generation limits 8 (Source: METI, History and Future of Renewable Energy, 2018.2.01, https://www.enecho.meti.go.jp/about/special/tokushu/ on renewable energy producers leading to saiene/saienerekishi.html) curtailment. In October 2018, the first curtailment 9 (Source: Japan For Sustainability, History of Solar PV in Japan, 2008.7.01, https://www.japanfs.org/ja/news/archives/news_ of solar power plants took place in Japan7. id027197.html) 10 (Source: METI, RPS Website, https://www.rps.go.jp/) 11 https://www.enecho.meti.go.jp/about/special/tokushu/saiene/saienerekishi.html 12 http://www.emsc.meti.go.jp/english/info/public/pdf/180122.pdf 7 https://www.renewable-ei.org/en/activities/column/REupdate/20190409.php
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FIGURE 8: TARIFF LEVEL IN 2019
45 RENEWABLE ELECTRICITY
40 SOURCING OPTIONS 35 03
30 The demand for renewable electricity Companies in Japan have the following options to source renewable electricity: h 25 is growing among corporate consumers (Industrial and commercial), as 1. Onsite generation;
YEN/KW 20 they have started recognizing the 2. Green electricity products (which can benefits of renewable electricity 15 include contracts similar to PPAs); consumption from an environmental Energy Attribute Certificates. and economic standpoint. 3. 10 Corporates in Japan are proactive in adopting 5 renewables, as shown by the growing number of Japanese companies joining the RE100 initiative and committing to source 100% renewable
0 ALL W electricity for their global operations. All these W LE WA TE 00KW 1000KW 1000KW BI MA 000KW 000KW 0000KW 0000KW R T
REG LAR member companies are actively exploring ER 00KW T AN 00KW 10K W N RE NEW 00K W 00K W 1000K W RE LA EMENT RE LA EMENT renewable electricity sourcing options in Japan. 1000K W F RE FL ATING 000K W RE LA EMENT ALL RE LA EMENT E LE T AN 00KW 000K W F RE IM LANTE 1 000K W LE T AN 10K W F LE T AN 1 000K W LE T AN 1 000K W Y BI MA FR M Y BI MA FR M LE T AN 10K W R T 10 000K W R T LE T AN F RTAILMENT FA ILITY RTAILMENT FA ILITY 10 W W W GENERAL WA TE T ER 10 W N TR TI N MATERIAL REG LA R 1 000K W 1 000K W T INNE W 000K W TILI E E I TING FA ILIT Y TILI E E I TING FA ILIT Y TILI E E I TING FA ILIT Y REG LA R 1 000 W T INNE W LE T AN REG LA R E N ERGR N FA ILITY REG LA R MET ANE FERMENTATI N GA TILI E E I TING FA ILIT Y LI F EL FR M AGRI LT RAL LI F EL FR M AGRI LT RAL LI I F EL FR M AGRI LT RAL A P N A A A FIGURE 9: RENEWABLE ENERGY ATTRIBUTES FOR ONSITE RENEWABLE ENERGY GENERATION IN JAPAN
PV, which was 14 yen/kWh. For the biomass Policies have been focused on the supply-side power auction, the minimum price bid was of renewables, but along with deregulation, 23.9 yen/kWh for liquid biomass and 19.6 yen/ retailers were enabled to set green tariffs and BUNDLED kWh for timber wood biomass. However, since create green electricity products. The eligibility OWN-USE RENEWABLE the minimum price set by the Government of each of the sourcing options are continually ELECTRICITY (which was not disclosed before the auction) determined by the government. The introduction was 20.6, no liquid biomass met the minimum of the Non-Fossil Fuel Certificates (NFC) scheme price criteria. There is a plan to expand the has enabled the purchase of FiT supported target to large scale biomass and fixed renewable electricity. The Agency for Natural foundation offshore wind power from 2020.13 Resources and Energy (ANRE), under METI, is the supervisory authority for renewable policy. ONSITE RENEWABLE TABLE 1: RESULT OF THE AUCTION SCHEME FOR RENEWABLE ELECTRICITY ELECTRICITY UNDER FIT ATTRIBUTE 2017.11 2018.9 2018.12 2019.9 2018.12 2018.12 TAKEN AWAY VIA NFC SOURCES Solar PV Solar PV Solar PV Solar PV Biomass Biomass
SCALE/CONDITION >2MW >2MW >2MW >500kW Liquid Timber and woods SELL CAPACITY OPENED FOR AUCTION (MW) 500 250 197 300 30 180
MAXIMUM PRICE SET (YEN/KWH) 21 15.5 15.5 14 20.6 20.6 RENEWABLE MINIMUM PRICE OFFERED (YEN/KWH) 17.2 16.47 14.25 10.5 23.9 19.6 ELECTRICITY NON-FIT ATTRIBUTE REMAINS Source: GIO, ‘Result of FIT Auction’ (https://nyusatsu.teitanso.or.jp/) WITH THE GENERATOR (POST 2020, ANTICIPATED 13 (Source: METI, History and Future of Renewable Energy TO BE CAPTURED VIA NFC) https://www.enecho.meti.go.jp/about/special/tokushu/saiene/saienerekishi.html
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FIGURE 10: LIST OF EMISSIONS FACTORS BY ELECTRIC POWER COMPANY IN FY2017, FOR THE REPORTING IN 201914 3.1 ONSITE GENERATION CASE STUDY 2: AEON Consumers in Japan can invest in captive In 2019, Japanese retailer AEON signed EMISSION FACTORS EMISSION FACTORS renewable energy assets and source electricity REGISTRATION # NAME OF RETAIL COMPANIES (BEFORE EACS ADJUSTED) (T-CO2/KWH) (AFTER EACS ADJUSTED) (T-CO2/KWH) directly. Renewable electricity from an onsite its first on-site PPA contract with a third renewable energy developer can be purchased party company. The company installed 1 A0062 Ricoh Japan 0.00052 Menu A 0.000000 directly, because it is beyond the boundary MW of solar PV on an AEON store in Menu B 0.000370 of Electricity Business law. However, METI K nan and sells the generated electricity Menu C (residual) 0.000499 advises developers to align their services with to AEON for consumption by the store. retailer’s average 0.000494 the Electricity Retailers’ Guidelines, which AEON did not pay for installation and it licensed retailers are obliged to abide by, does not pay operation and maintenance for consumer protection. The entirety of the costs – all charges are included in the A0170 Daiwa House 0.000583 Menu A 0.000000 electricity generated from onsite power plants, electricity bill AEON pays to the 3rd Menu B 0.000268 or just the surplus not used by the consumer party company. AEON is planning to Menu C (residual) 0.000571 company, can be sold to the grid. In the case expand this model to other stores. retailer’s average 0.000571 of self-consumption, the attributes remain with the generator. They can be unbundled as Green Off-grid onsite projects are becoming A0136 Panasonic 0.000458 Menu A 0.000000 Energy Certificates (GEC) or J-credits, and the popular as the costs of renewable facilities retailer’s average 0.000708 buyer of the certificates and/or credits can claim and FiT prices decrease. Self-consumers the renewable energy use by using the attribute. don’t need energy attribute certificates to A0226 Next Energy & Resources 0.00051 0.000000 If the generated electricity is sold to the grid make use claims, however, it is possible to under the FiT scheme, the attribute is taken issue GEC or J-credits for self-consumption. Note: This is only available online in Japanese. away, and the retailers need to buy the NFCs If GEC or J-credits are issued for energy back on behalf of the consumers at the NFC that is self-consumed, a company can auction. If the electricity is sold to the utility only claim credit for renewable energy outside of the FiT scheme, or if there is a Currently, many industrial rooftop solar energy bilateral electricity contract with the third- producers sell their electricity to the utility 3.2 GREEN A company operating and consuming party consumer, it is important to include because the FiT is attractive. However, when they electricity in Japan wishing to procure environmental attributes with the electricity do so, the environmental attributes associated ELECTRICITY PRODUCTS renewable electricity can do it purchase contract. Currently, it is possible to through the following steps: with the renewable electricity are taken away Electricity retailers in Japan can offer green unbundle environmental attributes and issue and the retailers need to buy NFCs back from the electricity products. Since the 2016 electricity GEC or J-credits for the sold electricity outside Japan Electric Power Exchange (JEPX) auction. market reforms, Japan has seen a surge of STEP 1 of the FiT scheme. However, it is anticipated new companies becoming certified power FIND RETAILERS WITH GREEN ELECTRICITY PRODUCTS that all grid connected renewable energy power Between 2018 and 2019, the FiT for solar retailers. A good example of a green electricity The Government of Japan annually projects will be, in principle, issuing NFCs post PV over 10kW decreased significantly from product is Aqua Premium, an electricity rate publishes the list of emission factors for 2020 for renewable electricity generation. 18 yen/kWh to 14 yen/kWh, settling lower plan offered by TEPCO. Electricity is generated electricity power companies, and this than high-voltage electricity prices (16.7 by TEPCO’s hydro power plants and is then information can be used to trace the retailers yen/kWh in April 2019). This price drop attributed to Aqua Premium customers through who offer ‘zero carbon’ electricity. triggered an increase in self-consumption. CASE STUDY 1: INGKA GROUP accounting. The hydro power plants under this scheme are not covered under the FiT scheme. STEP 2 The IKEA store in Nagakute, Aichi SEARCH FOR THE WEBSITE OR CONTACT THE RETAILER Prefecture installed a 1.3 MW rooftop Only licensed electricity retailers can sell By searching online or contacting the solar PV plant in 2017 to help power its electricity, but it is possible to constitute a retailer directly, consumers can explore operations. Ingka Group has a policy to contract by placing a licensed retailer as a which type of renewable energy source invest in projects that have a payback ‘middleman’ between the renewable energy has been used to supply electricity period of less than 10 years, and a solar generators and consumers. Green electricity for green electricity products. PV system best meets this requirement. products also include onsite renewable facilities The electricity generated amounts owned by third parties on the condition that the Type 1: Electricity products with non-FiT to 25% of the store’s total electricity consumer pays for the electricity through an renewables using a bilateral contract consumption and the store retains electricity tariff. It is also possible to categorize When a bilateral contract is signed between the environmental attributes from the the fee as a leasing fee if the facility is within the an electricity generator and a retailer, the generated electricity. consumer’s premises and does not use the grid.
14 source: Ministry of Environment, https://ghg-santeikohyo.env.go.jp/files/calc/h31_coefficient_rev.pdf
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TABLE 2: SUMMARY OF TYPES OF GREEN ELECTRICITY PRODUCTS CASE STUDY 5: SONY CORPORATION CASE STUDY 6: NEXT ENERGY & RESOURCES (RE100 PLAN) OPTIONS UNDER Sony is currently installing 1.7 MW of RENEWABLE INSTRUMENT ARRANGEMENT RE100 TECHNICAL solar PV on the rooftop of its warehouse ATTRIBUTE STATUS TO USE Electricity retail company Next CRITERIA FOR CLAIMING in Shizuoka. The surplus electricity will Energy & Resources has started to be transferred to Sony’s production offer a green electricity product Until 2020: GECs, J-credits factory in Shizuoka using the grid which they call the “RE100 plan”. Renewable electricity (renewables) After 2020: Contract with supplier transmission network operated by This product includes GECs attached TYPE 1: PRODUCT WITH Bilateral, NON-FIT RENEWABLES attribute is bundled In principle, EACs of all can be used to claim TEPCO. Sony will pay TEPCO for the to energy sourced mainly from FiT- nonFIT WITH BILATERAL CONTRACT with electricity grid electricity will be renewable electricity uses. electricity wheeling charges. Elsewhere, backed renewables. The generation under NFC scheme Sony has entered into a renewable from the FiT backed renewables electricity supply contract with TEPCO has previously been stripped of its under its Aqua Premium plan started in renewable attributes when the NFCs TYPE 2: PRODUCTS WITH Renewable electricity Contract with supplier Bilateral, March 2017. In 2018, Sony reported to FIT RENEWABLES WITH attribute is bundled NFCs can be used to claim were turned over to the government FIT CDP that it had consumed 2.1GWh of BILATERAL CONTRACT with electricity renewable electricity uses. in exchange for FiT support but by Aqua Premium electricity. attaching GECs from other renewable generation Next Energy & Resources TYPE 3: PRODUCTS WITH No renewable Contract with supplier offers a green electricity product. ANONYMOUS ELECTRICITY JEPX NFCs, GEC, J-credits electricity can be used to claim WITH UNBUNDLED (anonymous) (renewable) hydro power plants owned by TEPCO attribute renewable electricity uses. CERTIFICATES under contract with the customers15. the environmental attributes of electricity Note: Consumers can make credible renewable energy use claims using NFCs with the robust tracking system. Type 2: Electricity products with FiT generated from renewable energy sources. renewables using a bilateral contract Each EAC provides proof that a certain amount When contracts are made between power of renewable electricity (usually in 1 MWh, generators and retailers under the FiT scheme, but 1kWh in all of Japanese EAC schemes) consumers of that electricity cannot claim has been produced and either injected to and issue GECs or J-credits (renewables), but for the attributes unless retailers buy NFCs the grid or consumed by the generation CASE STUDY 3: SEKISUI HOUSE METI intends to capture all attributes injected and cancel it on behalf of the consumer. In entity (own use). Most of the EAC schemes into the grid to be as NFCs from April 2020. this case, attributes of the electricity under globally comply with the Greenhouse Gas Sekisui House has helped to create contract should be covered by NFCs to claim Protocol Scope 2 Guidance and are recognized Example: Aqua Premium by TEPCO is an “zero-emission” houses by installing for renewable consumption. Consumers should electricity market instruments to document electricity product provided by TEPCO to the solar PV panels on rooftops. obtain a contract with the retailer using the electricity consumption from renewable energy large-scale customers with contracts above Before Japan’s FiT scheme for equivalent tariff option. A third-party verification sources and to report reduced greenhouse 500kW. RE100 member Sony is procuring household rooftop solar began of the green product scheme is recommended gas emissions (scope 2 emissions). renewable electricity using this product. TEPCO expiring in November 2019, other to secure renewable energy uses claims. electricity retailers could purchase had third-party verification of this products in In Japan, there are three EAC schemes in excess electricity from the generators 2018, to align with RE100 criteria. Electricity and Type 3: Electricity products with anonymous principle, but the Government is planning to at a low rate of 7-9 yen/kWh. attributes are exclusively allocated from the large electricity using unbundled certificates integrate all EACs for grid injected renewables Now, Sekisui House is offering 11 (NFCs, GECs, J-credits (renewable) into NFCs starting in April 2020. There is no yen/kWh to homeowners for excess It is not possible to identify the sources of electricity via bundled bilateral CASE STUDY 4: MARUI GROUP electricity purchased through the grid, but it contract (physical electricity plus is possible to match certificates (NFCs, GECs, CASE STUDY 7: KANSAI ELECTRIC renewable energy attributes). Marui Group has started to procure J-credits (renewable) and claim the electricity (RENEWABLE ECO PLAN) Homeowners are able to change electricity from 2 MW wind energy as renewable. In that case, according to RE100’s contracts if they can get a better price generators located in Aomori Prefecture. technical criteria, third-party verification Kansai Electric (KEPCO) offers from other retailers. The electricity will power Marui Group’s of the transaction is recommended. the ‘Renewable ECO plan’ which is operations in Shinjuku, Tokyo. The electricity generated mainly from wind generator used to sell electricity KEPCO owned facilities. The physical to the utility through a FiT, but the electricity is matched with NFCs at 2 retailer retains the renewable attributes 3.3 ENERGY ATTRIBUTE contract expired in September 2018. yen/kWh for low voltage customers and equivalent to the physical electricity delivered. CERTIFICATES Now, the electricity retailer is providing at a bilaterally negotiated rate for high The retailer has the possibility to sell its attributes An Energy Attribute Certificate (EAC) is a a blockchain-enabled renewable voltage customers. but must then claim the products that emit energy tracking system to enable Marui certificate that provides information about equivalent emissions as anonymous electricity. Group to make claims about its use of Currently, non-FiT renewable generation renewable electricity. facilities can unbundle environmental attributes 15 http://www.tepco.co.jp/ep/eco/plan/corporate/index-j.html
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FIGURE 11: CERTIFICATION PROCESS FOR GREEN ENERGY CERTIFICATES FIGURE 12: J-CREDIT SCHEME
CONTRACT FOR GREEN POWER APPLY FOR PROJECT REGISTRATION CORPORATE CUSTOMER INTERMEDIARY RE GENERATOR GOVERNMENT PROJECT PARTICIPANTS RECEIVE GREEN REPORT ON GREEN CREDITS ENERGY CERTIFICATES POWER GENERATION
RULE MAKING PROJECT CREDIT CERTIFICATION ACCEPTANCE OF GREEN POWER GENERATION LOCAL UTILITY STEERING COMMITTEE CERTIFICATION COMMITTEE CREDITS
ISSUANCE OF GREEN APPLICATION FOR GREEN POWER CERTIFICATE POWER CERTIFICATE
CERTIFICATION BY GREEN ENERGY CERTIFICATION CENTER, JAPAN USERS OF CREDITS (UNDER JAPAN QUALITY ASSURANCE ORGANIZATION) (INCLUDING VOLUNTARY BUYERS)
designed at the committee set by METI. At 3.3.2 J-CREDITS (RENEWABLE SOURCE) CASE STUDY 8: TEPCO (ELECTRICITY the same time, the Green Energy Certification CASE STUDY 4: UNILEVER In April 2017, the METI transformed its MENU WITH ENVIRONMENTAL ATTRIBUTES) Center was established as an individual and Unilever purchases Green Energy offset-credit scheme, the ‘J-credit system’, neutral body in charge of certifying green TEPCO Energy Partners, a retail Certificates sourced from biomass, in a way that can provide businesses with electricity generated in power plants as company, offers an electricity menu wind, hydro, and solar PV to cover all offsetting credits or RECs (Renewable meeting the renewable energy criteria. where they add Green Electricity electricity consumed within Japan. Energy Certificates). The J-Credits issued Certificates to electricity generated Electricity customers in Japan can purchase Unilever products have a logo to certify for renewable energy generation convey from facilities mainly owned by renewable electricity by paying a premium that the production process is all information about direct energy generation TEPCO. The contract is for large price in exchange for Green Energy Certificates. powered by renewable electricity. emissions occurring during the production. scale customers over 500kW, and The mechanism of Green Energy Certifications Consumers of renewable energy-based the price is determined bilaterally. divides generated renewable energy into two J-Credits can choose whether to retire them as components: the physical electricity and a an offsetting credit or as an Energy Attribute Green Energy Certificate, representing the The Green Electricity Certificate is a private Certificate. J-Credits are tracked from their environmental attribute. The electricity is either scheme, but it was established with the purpose production to their retirement within ‘J-Credit clear plan for the two other EAC schemes, sold to the distribution utility at an agreed cost of supporting renewable energy deployment. 17 Scheme Registry’, an electronic registry for the namely Green Energy Certificates and J-credits or used by the generation entity, while the Additionality criteria is defined in their management and recording of the J-Credits. (renewable sources), but it is likely that these Green Energy Certificate can be cancelled on standards, to ensure they contribute to the This system avoids double-counting attributes. two EAC schemes will cover self-consumed (not behalf of the consuming entity. The trading of building of new facilities or sustain a facility. grid injected) electricity’s attributes or work as The GECs are fairly transparent, although all the GECs is not allowed, they need to be retained or Companies can buy J-credits by contacting green electricity certification/label schemes. information available is in Japanese. They contain cancelled by entity that consumes the electricity. the J-credits providers listed on the facility-level information, and the organization website18, contacting the owners of the If companies wish to buy certificates, they that purchased GECs are fully disclosed. As credits listed on the website, or joining the 3.3.1 GREEN ENERGY CERTIFICATES (GEC) can contact issuers, such as Japan Natural the GECs are verified manually, the amount auctions19 for METI-owned certificates. Energy Company Limited. In 2018, 328 The Green Power Certificate scheme was of issuance is small, and the cost is high. facilities were registered under the GEC introduced in 2000 by the Japan Natural Energy scheme: their total capacity was 350 MW, Company Ltd and was the first energy attribute and they issued 256 GWh of certificates16. certification scheme in Japan. In 2008, the Green Electricity Certificates Guidelines were
17 https://www.jqa.jp/service_list/environment/service/greenenergy/file/flow/power_standard.pdf 18 https://japancredit.go.jp/market/offset/ 16 https://www.jqa.jp/service_list/environment/service/greenenergy/file/list_cert/power_chart201906.pdf 19 https://japancredit.go.jp/tender/
16 17 RE100 RENEWABLE ENERGY MARKET BRIEFING JAPAN CHAPTER 03
FIGURE 13: RESULT OF A SEARCH FOR THE RENEWABLE PROJECTS FOR THE BILATERAL PURCHASE FIGURE 14: NON-FOSSIL FUEL CERTIFICATE (NFC) SCHEME OF JAPAN FOR FIT BASED RENEWABLE ELECTRICITY21
TRADING FLOW REMARKS POSSIBLE TO USE FOR MINIMUM MAXIMUM CONTACT PROJECT ENERGY SCHEME PROJECT# PLACE SECTOR OVERVIEW TYPE IN MWH IN GJ LOW CARBON SOCIETY UNIT OF UNIT OF INFORMATION OWNER SAVED ACTION PLAN? SALE SALE OF CREDIT OWNER • Electricity is traded WHOLESALE in normal wholesale ELECTRICITY ELECTRICITY electricity market. FLOW (FIT) MARKET Emissions PV Oita Oita House- reduction Oita J-credit P11 installation 2,968 - - YES 10 371 prefecture prefecture hold by prefecture on rooftops renewables • GIO aggregates generation NON-FOSSIL data of non-fossil NON FOSSIL GENERATOR PURCHASER MARKET RETAILER CUSTOMER generations (FIT). VALUE • FIT Non-Fossil Certificates Emissions are collectively PV JEPX Utsunomiya Tochigi House- reduction Utsunomiya traded at JEPX. J-credit P29 installation 475 - - YES 1 4 GIO city prefecture hold by city on rooftops renewables • Non JEPX-based, independent system. FIT ADDITIONAL Non-Fossil Certificate is Yamagata Emissions CERTIFICATION required for participation. PV prefecture Yamagata Yamagata House- reduction OF TRACKING J-credit P41 installation 4029 - - YES 50 2,095 Department REQUEST • GIO collects, manages prefecture prefecture hold by INFORMATION on rooftops of INFORMATION ADDITIONAL and tracks generation renewables Environment PLATFORM CERTIFICATION information. SYSTEM WITH NON-FOSSIL • Administration charge Note: This table is only available online in Japanese. If there is a MWh figure, it means that the project is producing renewable sourced J-credits. is imposed.
The J-credits scheme is run by the Government power plants connected to the grid and Renewable non-FiT NFC will cover existing Renewable Energy Attribute and has strict standards for verification. Verifiers selling power to utilities at feed-in-tariff (NFC large hydro, rooftop PV after 10 years of FiT Tracking System for NFCs check to ensure the facility is not registered in FiT)20. The Green Investment Promotion support for surplus electricity generated, In February 2019, a demonstration experiment another EAC scheme to avoid double-counting. Organization (GIO) is appointed as a clearing and newly built renewables which were was conducted to track renewable energy METI owns the renewable energy attributes organization, which adjusts costs between developed without FiT support. General non- attributes in the form of NFCs using an in exchange for initial support money being regions so that the unit price of renewable FiT NFC would mainly be covering nuclear electronic tracking system developed by Nihon provided by METI to the households to install energy charges is uniform throughout the power. The METI plans to not set a lower Unisys Limited. Retailers will be able to track the solar panels. Since the cost of the secretariat country, in addition to issuing of NFCs. price for non-FiT NFCs, and the revenue renewable energy attributes from the generator is being covered under the national budget, the can go directly to the renewable generation Consumers can buy renewable electricity from to the consumer using this new system. price of J-credits is generally lower than GECs. plants. It is still possible for the retailers Load-Serving Entities (LSE) (i.e. electricity to sign contracts with specific generation retailers) who purchase NFCs at the Japan The tracking system will be able to track the facilities and electricity consumers. This is Electric Power Exchange (JEPX) and can claim following information: equipment ID, power 3.3.3 NON-FOSSIL FUEL very similar to a power purchase agreement renewable energy use. Consumers do not get generation equipment category, name of installer, CERTIFICATES NFCs directly, rather, the LSE retires the NFCs (PPA), but with the retailers as a facilitator. power generation output (kW), certification Non-fossil fuel certificates (NFCs) were on the consumer’s behalf and conveys them to Although the NFCs in general only contain date, start of operation or scheduled date, introduced to monitor electricity retailers’ the consumer. The LSE trades NFCs through information about the energy source and location and purchase amount (kWh). achievements of their non-fossil electricity the accounts at JEPX. The Government’s policy whether the electricity is FiT-supported or not, ratio which is set to be 44% or more by 2030. allows the LSEs to notify their adjusted emission consumers now have the choice to buy green Currently, electricity retailers are obliged to factors with NFCs to final users. If some NFCs electricity using NFC with specified source. 3.4 COMPARISON OF RENEWABLE purchase or acquire NFCs only and from 2020, are left unsold after the last auction of the Recently, the Government has introduced a ELECTRICITY SOURCING OPTIONS the METI is planning to set a mandatory non- year, they lose their validity, which means the tracking scheme for NFCs as a pilot project. Japan has fragmented renewable energy fossil ratio for retailers. This ratio will gradually NFCs cannot be carried over to the next year. attribute certificates schemes. In addition, direct increase to match the 2030 target ambition. The Government decided to integrate all The Government is also designing two types EACs of grid electricity into the NFC scheme bilateral purchases of renewable electricity The NFCs are currently being issued for of NFCs for non-FiT: the Renewable non- by April 2020. There will be three types of (PPAs) between the consumers and generators the renewable electricity generated from FiT NFC and the General non-FiT NFC. The NFCs, which are summarized in table 3. are only possible if retailers are positioned in
21 Source: METI, “Direction for Increasing Value of Non-Fossil Value Trading Market”, Working Group on System Study, Electricity 20 FiT supported generation facility is strictly managed and overseen by Green Investment Promotion Organization (GIO), and Gas Industry Subcommittee, Electricity and Gas Industry committee, 25th Advisory Committee for Natural Resources and which is appointed by Government to manage tariff revenue and payment and avoid double issuance. Energy; October 22, 2018), English Translation by the Renewable Energy Institute
18 19 RE100 RENEWABLE ENERGY MARKET BRIEFING JAPAN CHAPTER 03
TABLE 3: CHARACTERISTICS OF THREE TYPES OF NFC TABLE 4: COMPARISON OF EXISTING RENEWABLE ELECTRICITY CERTIFICATE SCHEMES
GREEN ENERGY J-CREDIT NFC-NON-FIT RENEWABLE NFC (RENEWABLES) NFC (ANONYMOUS) DETAILS NFC-FIT CERTIFICATE (GEC) (RENEWABLE SOURCE) (FROM FY2019 ONWARDS)
FIT supported renewables Not FIT supported Non-FIT supported SOURCES OF ELECTRICITY (ex. Solar, Wind, small medium renewables (ex. (ex. Large hydro, Generation facility Generation facility Generation facility Generation facility hydro, biomass, geothermal) Large hydro, others) others, nuclear) accredited by Japan accredited by J-Credit TYPE/ELIGIBILITY certified as FiT facility accredited by the Quality Assurance Scheme Certification SELLING ENTITY OF by the Government Government GIO Generation company Generation company Organization (JQA) Committee THE CERTIFICATES
BUYING ENTITY OF Electric Retailers Electric Retailers Electric Retailers THE CERTIFICATES Solar, Solar, Solar, Solar, Wind Hydro, Wind Hydro, Wind Hydro, Wind Hydro, TECHNOLOGY Geo-thermal, Geo-thermal, Geo-thermal, Geo-thermal, MINIMUM PRICE 1.3 JPY/kWh None None Bioenergy Bioenergy Bioenergy Bioenergy
MAXIMUM PRICE 4.0 JPY/kWh 4.0 JPY/kWh 4.0 JPY/kWh
OWN USE/GRID ELECTRICITY Mainly Own use24 Mainly Own use25 Grid connected Grid connected Via JEPX (single Via JEPX market Via JEPX (single price), METHODS OF PURCHASE price), or bilateral (multi-price auction) or bilateral contract contract
Source: METI 22 1) Bilateral Purchase from transaction Via auction or PURCHASING METHOD Via auction between, or if the generator itself has a electricity requires the defining of renewable issuing body 2) Tender by J-Credit bilateral contract retailer license23. “attributes” of generation, which gives data on Secretariat the condition of production. Attributes include Under the current regulatory scenario, the tri-party anything that identifies the generation source and contract between the renewable energy generator, all non-power outputs, including the fuel type, retailer and consumer can be categorized as a location, greenhouse gas (GHG) emissions and green electricity product, which leaves only three Only during the fiscal Only during the fiscal the other environmental and social impacts and options for companies to source renewables in CANCELLATION Anytime (No vintage) Anytime (No vintage) year as the year of year as the year of benefits resulting from the electricity generation. Japan – onsite self-generation, green electricity generation (Jan-Dec) generation (Jan-Dec) products (renewable electricity menu from RE100 believes that the ability to demonstrate retailers, which include PPA types of contracts) and and claim use or delivery of renewable electricity unbundled energy attribute certificates (EACs). on a shared electricity distribution network Vary by tender, multi- Vary by tender, (grid) requires the support of contractual and/or Depends on the price Vary by bilateral price (lowest price set The existing renewable electricity certificate single price/contract tracking instruments that meet specific criteria to PRICES DISCOVERY band determined negotiation or at 1.3 yen/kWh, highest schemes are compared in the table below. (Highest price set be credible. The requirements are the following: by issuing body via tender price set at 4.0 yen/ at 4.0 yen/kWh) kWh for the time being) 3.5 RENEWABLE 3.5.1 COMPLIANCE WITH RE100 CRITERIA ELECTRICITY USES CLAIMS Green Energy Certificate (GEC): This scheme Retailers (Retailers Retailers (Retailers RE100 provides a set of criteria regarding has been in operation since 2001, when Japan Corporates, local Corporates, local can buy NFCs on can buy NFCs on BUYERS renewable electricity sources and purchasing Natural Energy Company Ltd. started to issue governments, etc. governments, etc. behalf of the corporate behalf of the corporate mechanisms which must be met in order to make GECs. The Green Energy Certification Center customers) customers) credible renewable electricity usage and delivery was established in 2008 to set the criteria claims. Making claims around the use of renewable for GEC certification and manage the
24 GEC is the oldest EACs scheme in Japan and predates the regulation for renewable energy ratios. In 2003, when the Renewable Portfolio Standard (RPS) was introduced, most of renewable electricity was purchased at higher price for the achievement of RPS, therefore most of GECs was issued only for the 22 https://www.meti.go.jp/shingikai/enecho/denryoku_gas/denryoku_gas/seido_kento/pdf/032_04_03.pdf own use of electricity at the generation sites. 23 If the generation company obtains a retail license and operate as a retailer, it needs to match the demand and supply for each 30 25 Most J-credits (renewable source) are issued from own use of rooftop PV. Since it receives subsidies from the Government for the upfront cost, minute period or pay additional fees. EACs for the supported PV (for own use) is owned by the Government.
20 21 RE100 RENEWABLE ENERGY MARKET BRIEFING JAPAN CHAPTER 03
TABLE 4: COMPARISON OF EXISTING RENEWABLE ELECTRICITY CERTIFICATE SCHEMES FIGURE 15: RENEWABLE ENERGY TRACKING SYSTEM FOR NFCS
NFC - WITHOUT TRACKING SYSTEM NFC - WITH TRACKING SYSTEM CRITERIA EXPLANATION POWER GENERATION COMPANY POWER GENERATION COMPANY
WIND SOLAR GEO-THERMAL WIND SOLAR GEO-THERMAL CREDIBLE Static data (e.g. fuel type, location, date of first operation, etc.) should be GENERATION third-party verified. DATA NFC NFC NFC Dynamic data (quantity of generation) is best when metered using a “revenue-grade meter” and independently used as the basis for determining the quantity of attributes and certificate issuance.
? NFC NFC NFC
ATTRIBUTE Making a credible renewable electricity usage claim requires ownership of all AGGREGATION environmental and social attributes associated with the generation that can be owned, NFC NFC NFC and that none of these attributes have been sold off, transferred, or claimed elsewhere.
EXCLUSIVE Exclusive ownership of renewable electricity generation attributes consists of legal OWNERSHIP enforceability, tracking (exclusive issuance, trading, and retirement), and exclusive sales (NO DOUBLE and delivery. Claims must be substantiated by attributes that have been reliably tracked COUNTING) RETAIL ELECTRICITY SUPPLIER RETAIL ELECTRICITY SUPPLIER from a generator to a consumer. OF ATTRIBUTES
EXCLUSIVE This requires that all renewable electricity instruments or instruments representing certification scheme of GECs as a third-party Energy Attribute Certificates, and the buyer can CLAIMS individual generation attributes have been retired by or on behalf of the same entity organization. The criteria are provided below: choose whether to retire them as an offsetting (NO DOUBLE and that there are no other usage claims being made on the generation or attributes, credit or as an Energy Attribute Certificate. CLAIMING) 1. The quantity of renewable electricity generated for example, by the electricity supplier to meet a renewable electricity delivery target The J-Credit scheme meets RE100 criteria. ON ATTRIBUTES from certified facilities is verified according or in marketing that renewable electricity is being delivered to customers. to the descriptions of the certification rules. NFC: NFCs cannot be used as unbundled attribute certificates, as voluntary buyers cannot purchase 2. Renewable electricity is certified by certificates directly from JEPX. Indeed, only independent and neutral organizations. Attributes (and certificates) must be sourced and purchased from within the same electricity retailers can buy certificates and retire GEOGRAPHIC MARKET defined geographic region that constitutes a “market” for the purpose of transacting 3. Public understanding and awareness them. The customers get electricity as well as LIMITATIONS and claiming attributes. of green power is enhanced NFCs if they purchase a green electricity product OF CLAIMS using NFCs from the retailers. However, consumers Green Energy Certificates meet the RE100 criteria. can make credible renewable energy use claims J-Credit: The J-Credit scheme is administrated by using NFCs with the robust tracking system, the Japanese government which gives credibility to which is currently being tested as a pilot project VINTAGE Certificate shall be able to communicate vintage related information the system. Technically, J-Credit follows ISO14064- by METI. The NFC scheme meets RE100 criteria. LIMITATIONS (date of generation). 2 as a guidance and only ISO 14065 accredited entities can become examining authorities for To make a credible renewable electricity claim, the vintage of the attributes (and J-Credit verification. J-credits are tradable through certificates) – that is, when the generation occurred – must be reasonably close to auctions or negotiated transactions. The J-credit the reporting year of the electricity consumption to which it is applied. tracking system helps restrict double-counting of attributes. J-Credits act as an offset as well as
22 23 RE100 RENEWABLE ENERGY MARKET BRIEFING JAPAN CHAPTER 04
after the US and Indonesia, but cannot use large hydro power plants. The purpose of it all, as the majority is located under the prioritizing the baseload is to supply low- ground of national parks, protected by the cost electricity consistently, but the marginal RENEWABLE ELECTRICITY Natural Park Acts which strictly regulate cost is actually higher than renewables. new economic development in the parks. By April 2020, 9 regional utilities (except for Okinawa, which covers several southern 04 SOURCING BARRIERS islands of Okinawa) are required to unbundle INSTITUTIONAL BARRIERS transmission and distribution business units Many renewable energy development projects from generation and retail accordingly as per are on hold, waiting for permission to connect There are numerous barriers when and cost of the building process affect the the revised Electricity Business Act. ‘Legal to the regional grid operated by the utility. generation costs of solar and other renewable Unbundling’ must be executed to separate it comes to sourcing renewable There is enough capacity physically in the energies. According to REI, the average transmission and distribution business units electricity in Japan including grid for new power plants, but the current capital expenditure of a utility-scale solar as an independent company. However, the technology, resources, institution, operation rule allocates the capacity to the power plant is JPY200,000/kW (approx. ownership remains within the holding company policy, economy and society. The existing power plants, which includes all the USD1,800/kW) in 2018-19 including 63,000/ and the grid operation functions will not be nuclear sites, either in operation or halted. key issue is a less ambitious national kW for construction and 60,000/kW for solar independent. Furthermore, seven of the nine The Government is currently introducing renewable energy target (22-24% panels. It is expected to decrease to one third, regional utilities, except for Tokyo and Chubu a new operation rule called “Connect and RE by 2030). Thanks to the Feed- JPY68,000 including 26,000 for construction Electric Power, will maintain their generation Manage” to allocate empty capacity to new in-Tariff (FiT) scheme, the share of and 15,000 for solar panels in 2030. and retail businesses directly within the power plants, but the regional utilities have renewable electricity has increased same holding company that supervises their A technological barrier is the lack of so far been slow to apply the new rule. transmission and distribution subsidiaries. from 10% in 2012 to 18% in 2018. information technologies available for grid Another institutional barrier is the lack of Tokyo and Chubu will have pure holding operations. As observed in leading countries in According to the Renewable Energy Institute standard certification and tracking systems companies on top of all separated generation, terms of renewable energy integration to the (REI), a Tokyo-based thinktank focusing on of renewable electricity, like the Guarantees transmission, retail companies. Maintaining grid, such as Spain, precise prediction of output renewable energy and climate change, the of Origin in Europe, Renewable Energy generation and retail business units in the same from variable renewables is key to integrating percentage of renewable electricity in Japan´s Certificates in North America and International company creates a competition issue, as the renewable electricity to the grid. Analyzing electricity mix could increase to more than RECs in other countries and regions. Currently regional utilities are still dominating the market. previous output and demand combined with 40% by 2030 if major existing barriers were there are three kinds of certificates for weather information enables grid operator to A significant benefit of an electricity system resolved by the Government and regional renewable electricity in Japan, but the criteria precisely predict output of variable renewables based on renewable energy is its flexibility utilities. For now, the low national target and tracking mechanisms are different, in each region. It reduces unnecessary and resilience with several distributed facilities does not incentivize the regional utilities to and only the J-Credit scheme provides an curtailment of solar and wind. So far, the in each region. Unbundling distribution integrate renewable electricity into the grid online tracking system. The Government has Japanese grid operators (regional utilities) network operation from transmission, as in network, which explains their lack of pace. At started a pilot project to implement a national have not established such advanced prediction many countries in Europe, is desirable for the same time, the traditional industries such tracking system for Non-Fossil Certificates by systems using information technologies. locally managing electricity demand and as the steel sector are not active in the energy collecting information of renewable electricity supply, independent from the transmission transition from fossil fuels to renewables. Some regulatory barriers restrict the use supplied through the grid network. It will network. For now, the unbundling of Setting a higher national target can send of existing resources and prevent the cover electricity from FiT power plants, and transmission and distribution is not planned a strong signal which could further help development of solar, wind and geothermal whether government will continue the system by the Government, and the unbundling remove the existing barriers faced by various power plants. Japan has abundant resources for non-FiT has not yet been decided. of generation and retail businesses for fair stakeholders including utilities, industries, of solar, and wind exists on abandoned competition is not considered either. local governments and communities. agricultural land, but the Agricultural Land Law strictly prohibits using the land for POLICY BARRIERS purposes other than crop production. Only The Government is still embracing coal and ECONOMIC BARRIERS TECHNOLOGY AND RESOURCE BARRIERS 26 “Solar Sharing” is allowed, which consists nuclear power, as shown by the national 2030 So far, renewable electricity is mostly limited to One of the major reasons for the high cost of installing solar panels above the ground targets of 26% production from coal and 20- large hydro power plants operated by regional of generating renewables in Japan is the with elongated poles, allowing for the 22% from nuclear. A typical policy barrier is utilities and FiT-certified renewables. In the inefficiency of the building process of the ability to cultivate crops underneath. As for the dispatching rule of electricity to the power very near future, PPAs through retailers will power plants due to a lack of expertise in the geothermal energy, Japan owns the third grid. The highest priority goes to “baseload” become cost-competitive, as the generation renewable energy sector. In turn, the length vastest geothermal resource in the world power supply powered by coal, nuclear and costs of solar and wind are expected to decline
26 https://www.mdpi.com/2076-3298/6/6/65/htm
24 25 RE100 RENEWABLE ENERGY MARKET BRIEFING JAPAN CHAPTER 05
with lower FiT prices. The FiT system for SOCIAL BARRIERS large-scale solar and wind will be replaced by Recently, several local governments have auctions with a Feed-In-Premium mechanism, introduced new rules restricting large-scale OPPORTUNITIES AND to be introduced in 2021. Utilities sell hydro- solar power plants for environmental and based renewable electricity at a premium scenery reasons. Obtaining consensus and price, usually adding around JPY4/kWh on permission from the local communities top of regular tariffs, which are typically at RECOMMENDATIONS will also be an issue, due to historic 05 JPY14 for industrial use (as of October 2019, opposition to onshore wind projects when the JPY is almost equivalent to US cent). Large the turbines are close to residential areas. corporate customers can receive a volume The fishery industry may also oppose Japan has untapped potential in various 2. Access to electricity grid transmission discount including hydro-based products, offshore wind farms, and hot spring owners and distribution network should be non- whereas medium- and small-sized companies renewable energy sources; solar, onshore may oppose geothermal power plants. discriminatory for energy generators are often required to pay the premium. and offshore wind, hydro, geothermal, from different sources to allow for further The current national energy policy neither biomass and biogas, and ocean For FiT-certified renewable electricity, retailers development of the renewable electricity incentivizes nor highlights the need to increase resources including wave and tide. purchase Non-Fossil Certificates (NFCs) to sell market in Japan. This process should be renewable energy to transition towards carbon-free electricity. Currently, NFCs from However, the Japanese government has so far set managed transparently and fairly to ensure a low-carbon society. The situation will FiT-certified electricity are sold at JPY1.3/kWh a modest national target of 22-24% for renewables efficient use of the grid. Corporate electricity gradually change as many corporations and as a minimum. Retailers usually sell electricity by 2030, while the share of renewable electricity users can collaborate to aggregate renewable several local governments including Tokyo with NFCs at a higher-than-average price. The generation already reached 18% in 2018. When electricity demand and demonstrate the Metropolitan have set ambitious emission other certificates are available for retailers considering projects under development, the requirement for clean energy to regulator reduction targets and have highlighted the and corporate users for around JPY1.0/kWh total capacity of renewable energy has surpassed and utilities to help advocate for this change. importance of improving energy efficiency for J-Credits and around JPY3.0-4.0/kWh for the 2030 target. If the barriers such as grid and increasing renewable energy use to 3. The cost-competitiveness of onsite Green Electricity Certificates. The amount of connection were resolved, Japan could achieve reach this target. Non-state actors have an generation by solar and wind has been J-Credits and Green Electricity Certificates the target of non-fossil share of 44% in 2030 important role to mobilize society in Japan. greatly improved. Tri-party (generator- are limited and will not be enough for many without relying on nuclear power generation retailer- consumer) contracts are becoming corporate users to reach the 100% goal. (unrealistic 20-22% target from 6% in 2018). economically realistic as the generation cost From November 2019 onwards, retailers In the meantime, generation costs of solar and wind of solar and wind gets closer to the price will sell electricity from household solar will decline, following the same trend as seen in many of fossil energy. There is a need to spread with NFCs. It may be sold at a regular price other countries where the market is expanding and awareness about such arrangements so that without premium, as retailers can buy the the competition drives cost reduction. Bloomberg more customers can take advantage and help solar electricity from household at a lower NEF estimates solar will be cheaper than coal, which drive down the cost of renewable electricity. price than the wholesale market. From April is currently the lowest-cost power supply in Japan, 4. Corporate consumers have a strong interest 2020 onwards, NFCs will also be available for in the middle of 2020s, with wind energy following in buying renewable electricity, which large hydro and other Non-FiT renewables, suit to be cheaper than gas in the early 2020s. leads to the creation and support of new collectively ‘Non-FiT NFCs’. Non-FiT NFCs Corporate energy users will be able to procure renewable energy capacity. Renewable can be traded by auction or direct transaction low-cost renewable electricity before 2030, as electricity products should be developed between generators and retailers. The prices suppliers will provide renewable electricity products with “additionality” in mind. New renewable are expected to be lower than JPY1/kWh. at competitive prices. With more renewable energy electricity capacity, when developed in concert The question remains as to whether regional and a higher energy efficiency, Japan can reduce with local governments and stakeholders utilities will supply NFCs from large hydro GHG emissions dramatically towards zero by 2050. can provide additional social benefits. power plants or continue selling hydro-based products at a premium price; and also, how fast RECOMMENDATIONS 5. Currently, a few sectors of consumers non-FIT renewables will increase due to the can enter into a bilateral contract with a 1. A nationwide renewable electricity tracking new FiT rule which will be introduced in 2021. generator through retailers. However, the system should be adopted in Japan for high-wheeling cost makes such contracts all renewable electricity being generated unviable. It is recommended to explore and consumed. RE100 Technical criteria opportunities to reduce the wheeling costs recommends that renewable electricity use and create a pilot project by the regulator claims must be substantiated by attributes creating awareness about this provision. that have been reliably tracked from a generator to a consumer. Attribute tracking 6. The floor price of the Energy Attribute systems provide exclusive issuance, trading, Certificate (NFCs) need to be lower than the and retirement of attributes to markets for present level. There is also a suggestion to renewable electricity to support credible use the revenue associated with the NFCs for claims. The most sophisticated mechanism the purpose of improving local economy. for tracking energy attribute certificates is an electronic attribute “tracking system”.
26 27 Led by The Climate Group in partnership with CDP, RE100 is The Climate Group’s mission is to accelerate climate action a collaborative initiative bringing together the world’s most to achieve a world of no more than 1.5°C of global warming influential businesses committed to 100% renewable power. and greater prosperity for all. We do this by bringing together Renewables are a smart business decision, providing greater powerful networks of business and governments that shift control over energy costs while helping companies to deliver global markets and policies. We focus on the greatest global on emission reduction goals. RE100 members, including opportunities for change, take innovation and solutions to Global Fortune 500 companies, have a total revenue of over scale, and build ambition and pace. We are an international US$5.4 trillion and operate in a diverse range of sectors – non-profit organization, founded in 2004, with offices in from information technology to automobile manufacturing. London, New Delhi and New York. We are proud to be part of Together, they send a powerful signal to policymakers and the We Mean Business coalition. investors to accelerate the transition to a clean economy. Visit www.theclimategroup.org and Visit and follow on Twitter. RE100.org #RE100 follow @ClimateGroup
CDP is an international non-profit that drives companies in addition to the over 920 cities, states and regions who and governments to reduce their greenhouse gas emissions, disclosed, making CDP’s platform one of the richest sources safeguard water resources and protect forests. Voted number of information globally on how companies and governments one climate research provider by investors and working are driving environmental change. CDP, formerly Carbon with institutional investors with assets of US$96 trillion, we Disclosure Project, is a founding member of the We Mean leverage investor and buyer power to motivate companies Business Coalition. Visit cdp.net or follow us @CDP to find out to disclose and manage their environmental impacts. Over more. 8,400 companies with over 50% of global market capitalization Visit cdp.net follow us @CDP to find out more. disclosed environmental data through CDP in 2019. This is
Renewable Energy Institute (REI) is a non-profit think tank energy in Japan. Participants attend meetings and conferences which aims to build a sustainable, rich society based on focusing on renewable energy procurement for learning and renewable energy. It was established in August 2011, in the networking in the corporate community. Collaboration with the aftermath of the Fukushima Daiichi Nuclear Power Plant Renewable Energy Buyers Alliance in the US, the RE-Source accident, by its founder Mr. Masayoshi Son, Chairman & CEO Platform in Europe, CDP Worldwide-Japan and WWF Japan of SoftBank Corp., with his own resources. REI launched the expands the network globally and locally. Renewable Energy Users Network (RE-Users) in April 2018 Visit www.renewable-ei.org/en to support corporate energy users for procuring renewable
challenge climate change poses to society, its members are This report was produced in association with JCLP, committed to integrating decarbonization measures into their Regional Delivery Partner for RE100 in Japan. core business models. Members share this common goal and Japan Climate Leaders’ Partnership (JCLP) is a coalition proactively communicate with policy makers, other businesses of companies in Japan (127 as of November 2019) that and civil society. The coalition has a unique focus on policy aims to create a zero-carbon society, built on the idea that engagement to accelerate decarbonization in the country. Since decarbonization is essential to economic development. It was April 2017, JCLP has been the regional delivery partner for The set up in 2009 to encourage the business sector to develop Climate Group’s RE100, EP100 and EV100 initiatives in Japan. a sense of urgency on climate action. Recognizing the key Visit www.japan-clp.jp/en