This article is based on the Ministry of the Environment’s 2022 guidance on “Off-site Corporate PPA” and provides a clear explanation of how off-site PPAs work, how their pricing is structured, the risks involved, and how they can be implemented in Japan. DeepWind’s additional insights are included to make the content accessible even to non-experts.
(The official source is listed at the end of this article.)

If you want to learn more about PPAs and the increasingly popular corporate PPAs, check out this article.
👉 What Is a Corporate PPA? Japan Market Guide with Price, Structure & Case Studies

Contents

1. What Is an Off-site PPA?

Off-site Corporate PPAs are long-term contracts in which companies procure renewable electricity generated outside their premises at a pre-agreed price and duration.

As the name suggests, the power plant is not located on the company’s property. Instead, electricity generated at a remote site is delivered through the power grid. This enables companies to access large-scale renewable energy even without available land.

Why is it attracting attention?

Protection against price volatility through long-term fixed pricing
Guaranteed access to renewable “environmental value” (non-fossil certificates)
Aligns with global sustainability requirements like RE100, SBTi, and TCFD

These factors are driving adoption among Japanese companies.

2. Difference from On-site PPA

On-site PPAs involve installing solar panels or other renewable assets directly on company premises. Off-site PPAs, on the other hand, source electricity from remote locations. This creates differences in the available project scale and cost structure.

Comparison: On-site PPA vs Off-site PPA

Aspect	On-site PPA	Off-site PPA
Location of assets	On company premises	Remote site (solar, wind, etc.)
Available volume	Limited by site space	Can use large-scale external assets
Contract counterparty	Generator	Generator (and often a retail supplier)
Wheeling charges	Not required	Required
Imbalance exposure	Limited	Exists
Impact of relocation/closure	High impact	Lower impact

3. Physical PPA vs Virtual PPA

Off-site PPAs can be categorized into two main types depending on how electricity is handled.

Comparison: Physical vs Virtual Off-site PPA

Item	Physical Off-site PPA	Virtual Off-site PPA
Treatment of electricity	Physically delivered via the grid	Sold on the market; price difference settled
Environmental value	Transferred with electricity	Transferred separately
Wheeling charges	Required	Not required
Simultaneous balancing	Required	Not required
Typical use	Common structure in Japan	Widespread overseas; possible in Japan

In simple terms:

Physical PPA: You buy the actual electricity
Virtual PPA: You buy price stability + environmental value while power is sold on the market

4. Cost Structure of Off-site PPAs

The final cost paid by the offtaker consists of three main components:

Three key components

Generation cost (PPA price)
Includes construction and operation of the renewable asset.
Wheeling charges
Equivalent to a “toll fee” for using the power grid.
Balancing cost (Imbalance)
Costs incurred when actual generation differs from forecast due to weather or variability.

Key point: In Japan, wheeling charges and imbalance costs significantly affect the final price, so a low PPA price does not always mean low procurement cost.

5. Key Risks in Off-site PPAs

The Ministry of the Environment outlines several risks associated with off-site PPAs, including:

Representative risks

Market price fluctuations
Weather-driven generation volatility
Equipment issues or construction delays
Imbalance (generation vs forecast mismatch)
Closure or downsizing of the offtaker’s facilities
Regulatory changes
Counterparty credit risk

Risk mitigation measures

Price adjustment clauses
Use of environmental value for compensation
Entrusting balancing to a retail electricity provider
Insurance against under-delivery
Credit assessment
Clearly defined termination/change clauses

In short: because the contract is long-term, proper risk controls must be built into the agreement.

6. Implementation Models in Japan

Japan allows two types of off-site PPA arrangements:

● Direct Off-site PPA

Direct contract between generator and offtaker
Since 2021, joint associations (kyōdō kumiai) enable contracting without a “closely related entity” requirement

This essentially means the offtaker buys electricity directly from the generator.

● Indirect Off-site PPA (Mainstream in Japan)

A retail electricity supplier sits between the generator and the offtaker
Practically implemented via a “three-party master agreement + two-party individual contract”

Because retail suppliers handle balancing and market settlement, this model is currently the most feasible in Japan.

7. Difference from Self-Wheeling (Jiko Takusō)

Self-wheeling is a mechanism for sharing electricity within the same company group or a joint association. It is designed for self-consumption.

Off-site PPAs, meanwhile, are commercial long-term power purchase contracts with an independent generator. Because the purpose and structure differ, they should be clearly distinguished.

Comparison: Self-wheeling vs Off-site PPA

Aspect	Self-wheeling	Off-site PPA
Legal position	Internal power sharing within the same group or association	Long-term commercial PPA between generator and offtaker
Parties involved	Same corporate group or joint association	Generator and offtaker (often + retail supplier)
Purpose	Self-consumption	Renewable procurement + environmental value
Environmental value	Varies by scheme	Transferred with electricity
Cost structure	Mainly wheeling charges	PPA price + wheeling charges + imbalance

8. DeepWind Insights

1) A low PPA price does not guarantee low procurement cost

Because wheeling charges and imbalance costs can be large, the PPA price alone can be misleading.

2) Indirect PPAs are likely to remain the mainstream model in Japan

Given the role of retail suppliers in balancing and settlement, three-party structures are the most practical.

3) FIP-based renewable projects will likely become more common PPA partners

Because FIP and PPAs are compatible, many new renewable assets will rely on this combination.

4) Self-wheeling and PPAs serve different purposes

Even though the legal framework is becoming more flexible, companies needing reliable environmental value transfer should consider PPAs.

Conclusion

Off-site Corporate PPAs allow companies to procure renewable electricity and environmental value at long-term stable prices. In Japan, Physical PPAs with retail suppliers are the predominant model. Because the total cost includes not only the PPA price but also wheeling charges and imbalance costs, companies must evaluate the full cost structure rather than focusing solely on the contract price.

Understanding the differences between self-wheeling and PPAs is essential to selecting the most appropriate renewable procurement strategy. By considering risks, pricing dynamics, and contract structures, companies can effectively incorporate off-site PPAs into their decarbonization plans.

If you want to know comprehensivIe overview of PPAs and Corporate PPAs, including basic concepts, contract schemes, institutional frameworks in Japan, recent case studies, and key challenges and prospects for the future, check out this article.
👉 What Is a Corporate PPA? Japan Market Guide with Price, Structure & Case Studies

Reference

This article is based on the following official document:
Ministry of the Environment, “Off-site Corporate PPA” (Revised March 2022)