Many companies are working to reduce emissions in order to achieve their GHG reduction targets for 2030. Reduction methods include curbing energy consumption through measures such as upgrading air conditioning systems and transitioning to electric vehicles, but the introduction of renewable energy (hereinafter referred to as renewable energy) is progressing as a measure with a high return on investment.
There are various methods for procuring renewable energy, including carbon-free plans from retail electricity providers, non-fossil fuel certificates, on-site PPAs, physical PPAs, and virtual PPAs, making it difficult to choose the optimal method for your company.
This article introduces the renewable energy procurement environment and explains the characteristics of different procurement methods.
Changes in the renewable energy procurement environment
To select the most suitable method for your company, it is essential to understand the external environment surrounding renewable energy.
Key themes to watch include the increase in electricity demand due to the rise in data centers and the growing demand for renewable energy. The 7th Strategic Energy Plan (draft), presented by the Ministry of Economy, Trade and Industry in December 2024, also lists the following as important changes in the external environment:
According to the "Demand Forecast for the Nation and by Supply Area" (FY2024) published by the Organization for Cross-regional Coordination of Transmission Operators in January 2024, while electricity demand had been on a downward trend due to population decline and energy conservation, the effects of energy conservation will continue, but economic growth andDue to increased demand resulting from the construction and expansion of data centers and semiconductor factories, electricity demand is expected to increase, and is projected to continue rising through fiscal year 2033."doing"”
(source:Ministry of Economy, Trade and Industry: Draft Energy Basic Plan ）
According to the "National and Supply Area Demand Forecast" published in January 2025 by the Organization for Cross-regional Coordination of Transmission Operators, the increase in data centers and other facilities is projected to drive demand to reach 7.15 million kW in 2034, more than 12 times the level in 2025.
Power demand forecasting by data centers and other facilities.
Overseas, the IEA (International Energy Agency) predicts that electricity demand from data centers and AI will more than double between 2022 and 2026, making this a topic with significant impact.
Forecast of increased global electricity demand due to data centers, AI, and other factors.
(source:IEA Electricity 2024 – Analysis and forecast to 2026）
Companies that own data centers include Google and Microsoft. These companies are expanding their renewable energy businesses to meet increasing electricity demands.
Google has set a goal of running all of its facilities on carbon-free energy by 2030 and is promoting the adoption of PPAs and other initiatives to achieve this goal.
Furthermore, Japanese companies such as SoftBank, LINE, and Yahoo are also advancing their business operations using renewable energy.
Leading companies in renewable energy adoption are focusing on the pursuit of "24/7 carbon-free" and "additionality."
"24/7 carbon-free" is the concept of sourcing all energy from renewable sources at all times (24 hours, 7 days a week). The United Nations is leading this initiative.24/7 Carbon-free Energy CompactThey established an organization called "Renewable Energy Networks," and more than 100 organizations around the world, mainly in Europe and North America, including Google, Microsoft, and Stanford University, are aiming to achieve "100% real-time renewable energy at all times" for the world's power grid.
Furthermore, "additionality" is the concept of contributing to the increase of renewable energy by constructing new power generation facilities, and it is expected to have the effect of creating new renewable energy sources that did not exist before and promoting their introduction throughout society. In October 2022, RE100 revised its technical requirements and established this additionality as one of its criteria, requiring that electricity purchased from renewable energy sources be procured from power sources that have been in operation for 15 years or less from the start date. (Source:RE100 technical requirements(Japanese version, December 2023)
Having explained the significant changes in the external environment, we will now move on to explaining methods for procuring renewable energy.
Characteristics of different procurement methods
When considering procurement methods, it is necessary to understand whether additionality exists, the cost, and the amount of renewable energy that can be procured. In addition, the "24/7 Carbon-free Energy Compact" and,RE100When considering endorsement of "[the project]", it is also necessary to confirm technical requirements and other details.
For example, on-site PPAs (a system where power generation equipment is installed free of charge on the customer's premises, and the customer purchases and uses the electricity generated there) tend to be additional and inexpensive, but the amount that can be procured depends on factors such as the roof area.
The characteristics of each procurement method are summarized below.
| Procurement methods | Whether or not additionality exists | Cost (relative evaluation of procurement methods) | Amount of renewable energy that can be procured |
| Carbon-free plans for retail electricity providers | Depending on the plan, it's possible.“ | Low price trend | Easy to satisfy |
| Non-fossil fuel certificate (FIT non-fossil fuel certificate) | Depending on the power generation facility in question, it may be possible.“ | In areas where a reasonable amount of FIT (Feed-in Tariff) power supply is available, prices tend to be lower. | Easy to satisfy |
| On-site PPA | can be | Low price trend | Because it depends on factors such as the roof area where solar power generation equipment can be installed, it is difficult to meet the desired procurement quantity. |
| Physical PPA (A system in which consumers enter into direct contracts with retail electricity providers and purchase electricity for long periods.) | can be | Tendency to increase | Compared to on-site PPAs, it is easier to meet the desired procurement volume. |
| Virtual PPA (A contractual arrangement in which consumers indirectly procure electricity derived from renewable energy sources.) | can be | Tendency to increase | Easy to satisfy |
Points to consider when deciding on implementation
Each procurement method has its own advantages and disadvantages, so relying too heavily on a particular method can lead to procurement risks. For example, if a company relies on purchasing non-fossil fuel certificates annually, even if the current costs are low, it will face procurement risks when the supply of FIT power sources, which have additionality, decreases or when demand increases. On the other hand, relying too heavily on long-term fixed-rate procurement through PPAs makes it difficult to respond flexibly to changes in business strategy, such as relocating business sites. It is important to understand the characteristics of each procurement method, formulate a procurement strategy that takes into account your company's business model, and promote balanced renewable energy procurement.
summary
This time,
- Trends surrounding renewable energy are changing due to factors such as increased electricity demand from data centers, growing interest in 24/7 carbon-free solutions, and additionality.
- In light of these changes, it is becoming increasingly important to have a balanced approach to renewable energy procurement, based on a thorough understanding of the characteristics of each procurement method.
I explained it.
booost technologies supports the creation and implementation of GHG reduction roadmaps that take into account the characteristics of business models and renewable energy procurement methods. If you are interested in renewable energy procurement, please feel free to contact us using the information below.