🇯🇵 日本語で読む（Read this article in Japanese）
How do companies like tech giants and manufacturers actually buy renewable electricity at scale? In most cases, the answer is a corporate PPA — a Power Purchase Agreement: a long-term contract to buy power (and its clean-energy value) directly from a wind or solar project.
This guide explains what a corporate PPA is, the main types (physical, virtual, on-site, off-site), why companies use them, the key risks, and how renewable PPA sourcing works in practice — including the growing corporate PPA market in Japan.
Note: This article is a general explanation based on public information as of 2026. Market rules and prices vary by country and change over time. Please check official sources for the latest details.
Table of contents
What is a corporate PPA?
A Power Purchase Agreement (PPA) is a long-term contract — typically 10 to 20 years — under which a buyer agrees to purchase electricity from a specific power project at a pre-agreed price. When the buyer is a company (rather than a utility), it is called a corporate PPA.
For renewable energy, the contract usually covers two things: the electricity itself and the environmental attributes (renewable energy certificates that prove the power is clean). This combination lets a company credibly claim that its operations run on renewable electricity — a key requirement for initiatives such as RE100 and for reducing Scope 2 emissions in GHG accounting.
Corporate PPAs matter because they do more than procure power: a long-term purchase commitment gives developers the stable revenue they need to finance new wind and solar projects. This “additionality” — causing new renewable capacity to be built — is why PPAs are considered one of the highest-impact ways for companies to source clean power.
Types of renewable PPAs
On-site vs off-site PPA
The first distinction is where the power is generated. In an on-site PPA, the developer installs generation (typically rooftop or ground-mounted solar) at the buyer’s own facility and sells the power directly — no grid transmission involved. In an off-site PPA, the project is located elsewhere, and the electricity is delivered through the grid. Off-site deals can be much larger, since they are not limited by the buyer’s roof space or land.
Physical vs virtual (financial) PPA
The second distinction is how the power is delivered. In a physical PPA, the buyer actually receives the electricity (directly or via a retailer). In a virtual PPA (VPPA), also called a financial PPA, no physical power changes hands: the buyer and the project settle the difference between the agreed fixed price and the market price, while the buyer receives the renewable energy certificates. VPPAs are popular because they work across locations and do not disturb existing electricity supply contracts.
| Type | How it works | Best suited for |
|---|---|---|
| On-site PPA | Generation installed at the buyer’s site; power consumed directly | Factories and warehouses with roof/land space; no upfront capex |
| Off-site physical PPA | Power delivered from a remote project via the grid | Large buyers wanting volume beyond their own sites |
| Virtual PPA (VPPA) | Financial settlement of price difference + certificates; no physical delivery | Multi-site companies; buyers keeping existing supply contracts |
Why companies sign PPAs
- Long-term price stability: a fixed or indexed price for 10–20 years hedges against volatile electricity markets.
- Credible decarbonization: PPAs (especially those enabling new projects) are viewed as a high-quality way to cut Scope 2 emissions and meet RE100 or science-based targets.
- Additionality: the contract helps finance new renewable capacity, rather than just buying certificates from existing plants.
- No upfront investment: in most models the developer owns and operates the asset; the buyer pays only for power.
- ESG and disclosure value: renewable sourcing strengthens ESG disclosure and responses to customer and investor requests, including CDP.
Key risks and how to manage them
PPAs are long-term commitments, so due diligence matters. The main risks are:
- Market price risk: if market prices fall well below the contract price, the deal can become expensive in hindsight (especially for VPPAs). Mitigation: careful price benchmarking, shorter tenors, or collar structures.
- Volume/shape risk: wind and solar output varies; generation may not match the buyer’s consumption profile hour by hour. Mitigation: proportional sharing clauses, storage, or portfolio contracting.
- Counterparty and project risk: the project may be delayed, underperform, or the developer may default. Mitigation: developer track record checks, completion guarantees, and credit support.
- Accounting and regulatory treatment: VPPAs may be treated as derivatives under some accounting standards, and market rules differ by country. Mitigation: involve accounting and legal advisors early.
How renewable PPA sourcing works in practice
A typical corporate renewable sourcing process looks like this:
Volume, timeline, RE100/SBT
On-site / physical / virtual
Compare projects & prices
Certificates, reporting
Key decisions along the way include how much of your load to cover with PPAs versus other options (green tariffs from retailers, unbundled certificates), how to handle the hourly mismatch between generation and consumption, and how the certificates will be counted in your GHG inventory.
Corporate PPAs in Japan
Japan’s corporate PPA market has grown rapidly since around 2021, driven by RE100 members, rising expectations on suppliers, and the end of cheap feed-in-tariff certificates. Both on-site PPAs (rooftop solar at factories and logistics centers, with no upfront cost to the host) and off-site PPAs (including aggregated deals combining multiple small solar sites) are now common, and virtual PPA structures have also been enabled by regulatory changes.
Japan-specific points to note: non-fossil certificates (非化石証書) are the main environmental attribute instrument; grid constraints and curtailment in some regions affect project economics; and METI has been expanding rules to make corporate sourcing easier. For the wider policy context, see Japan’s energy policy pages by METI/ANRE (English).
Summary
- A corporate PPA is a long-term contract to buy power — and its clean-energy certificates — from a specific renewable project.
- Main types: on-site vs off-site (where the power is made) and physical vs virtual (how it is delivered).
- Companies use PPAs for price stability, credible Scope 2 reduction, and additionality — helping new projects get built.
- Manage the key risks: market price, volume/shape, counterparty, and accounting treatment.
- Japan’s market is expanding fast, with on-site solar PPAs and non-fossil certificates as distinctive features.
MORE IN ENGLISH
Continue with the English guides
greenote’s English edition covers ESG, sustainability disclosure and corporate decarbonization in six long-form guides.
Start with the decarbonization guide or Scope 3.
Sources
The links below are official public resources confirmed as of 2026. Market rules and figures change — please check the latest official information.
US EPA | Green Power Markets／
RE100 (Climate Group)／
IRENA | International Renewable Energy Agency／
METI / Agency for Natural Resources and Energy (English)
FAQ
Q. What is a corporate PPA in renewable energy?
A. It is a long-term contract (typically 10–20 years) in which a company agrees to buy electricity — and usually the associated renewable energy certificates — from a specific wind or solar project at a pre-agreed price. It provides price stability for the buyer and stable revenue that helps developers finance new projects.
Q. What is the difference between a physical PPA and a virtual PPA?
A. In a physical PPA, the buyer actually receives the electricity through the grid or on site. In a virtual PPA (VPPA), no power is delivered: the parties financially settle the difference between the contract price and the market price, and the buyer receives the certificates. VPPAs work well for companies with many sites or existing supply contracts.
Q. Do PPAs reduce a company’s emissions?
A. Yes — renewable electricity purchased through PPAs, with its certificates, reduces market-based Scope 2 emissions in GHG accounting. PPAs that enable new projects (“additionality”) are generally viewed as a higher-impact form of renewable procurement than buying unbundled certificates alone.
Q. Are corporate PPAs available in Japan?
A. Yes. Japan’s corporate PPA market has expanded quickly since around 2021, including on-site rooftop solar PPAs with no upfront cost, off-site deals, and virtual PPA structures enabled by regulatory changes. Non-fossil certificates serve as the main environmental attribute instrument.