“Tackling the Challenges
of Carbon Neutrality” Daiwa House Industry was quick off the mark in its Environment and Energy Business, and has sprinted toward securing a dominant position in the off-site PPA business.

It was the summer of 2023 and Hidenori Yashiki was bathed in a bright light as he ascended to a podium, having been selected as one recipient of the Daiwa House Award.

The reasoning behind this honor was for his “establishment of an off-site PPA scheme, and its commercialization.”

Yashiki was simultaneously delighted and confused. “It was more than just myself that brought about this success.” He knew that the moment came about only with the team efforts of the sales and technical staff, and everyone else at the division and business sites. Furthermore, in retrospect, there were his seniors who had worked with little fanfare from the days when environmental energy had been a less than popular subject for the public at large. The origin of all this was the concept of the “21st century challenges of wind, sun, and water,” as set forth by Nobuo Ishibashi, our founder. It was owing to those who came before us having cleared a path forward that we were able to welcome this day.

So how did we arrive to the point of making PPA into a business? Let’s take a comparative look at the histories of Germany, a leading country in terms of renewable energy, and Japan, which is playing catch up.

The year 1991 marked the start of “FIT” in Germany. This system obligates “power companies” to purchase the electricity generated by renewable energy sources. In 2009, the “FIP” system was introduced so that electricity could be sold directly to “consumers and markets” and a certain premium (subsidy) added to the price of electricity sold.

Japan at long last commenced the FIT system in 2012, the year following the Great East Japan Earthquake. A decade later, in 2022, the country introduced FIP.

So, what about the Daiwa House Group? We needed to catch up with the more advanced countries, and early on ramped up full-scale efforts with our establishment of the Environment and Energy Business Division in 2009. The entire Group worked to commercialize and market our products, and we branched out into the development of fluorescent light reflectors that reduce electricity use, energy storage systems, the “DREAM Solar” solar power plants, and “DREAM Wind” wind power plants.

When Yashiki joined Daiwa House Industry in 2013, it was at a time when the company was beginning to accelerate the engine of its renewable energy business. Yashiki had previously worked on the research and development of solar cell modules, and at the time, Japanese manufacturers were struggling under the pressure exerted by overseas-based companies. Under such conditions we wanted to break away from the development side and challenge ourselves in the field of promoting solar power generation to the world. Considering this, Yashiki sought out a place in Daiwa House Industry where he could thrive.

After joining the company, Yashiki was engaged in mega solar proposals, and built up the power generation business “IPP” scheme from zero. He also established a scheme to lease photovoltaic equipment, formulated business rules, and prepared contracts. Without any inhouse experience, he got these projects off the ground with the help of a leasing company and our internal administrative department.

In the meantime, the flow of time remained unstoppable. With the decline of FIT purchase prices, signs of FIT’s demise were beginning to emerge. Daiwa House Industry, which had grown its power generation business by utilizing FIT, would lose a major revenue stream. That was when removing ourselves from FIT became an urgent issue, and arising in its place was “PPA.”

The primary attributes of Daiwa House Industry lie in its overwhelming development strengths and its ability to offer total coordination for all aspects of off-site PPA. We search for wide-open land, negotiate with the landowner, and conclude leasing agreements. There we will build mega solar power generation plants to generate and deliver electricity. We can do everything in-house, from assigning retail electricity providers at the end of the line to setting things up for the consumer. The key players in the search for land are the sales representatives of the Environment and Energy Department, who are located throughout Japan. Even as appropriate land available for large-scale development decreases, these representatives will search out a steady stream of candidate sites utilizing their ability to gather land-related information based on extensive regional knowledge.

Ever confident in our high-quality power plant construction

Yashiki oversees negotiations with retail electricity providers. Over a year and a half, we built a cooperative framework with major electricity companies, gas companies and others throughout Japan. In addition, we prepare for the construction of power plants even before finding consumers, and in approximately two years, have made more than 700MW of connection examinations (confirming the possibility of connection to power transmission and distribution networks) with retail electric power companies. The results of this have been well considered, and we are now recognized as a cooperating partner. Moreover, under the 7th Medium-Term Management Plan, every year we conduct connection examinations for each of several hundred MW, and also set ambitious goals of dramatically increasing the cumulative amount of electricity generated.

Companies’ renewable energy needs have also been rising. We’ve been seeking out consumer companies that are aiming for carbon neutrality and reaching RE100, and as of today in 2024 have increased the number of companies in our portfolio to several dozen. The key to the off-site PPA business is an exit strategy that depicts “when,” “where,” and “at what price” electricity will be sold. When will a certain consumer require electricity? Which retail electricity provider will we use to deliver? Even if the power generation plant is in Tokyo, negotiations might not be limited to TEPCO or Tokyo Gas. Or it may be that at the current time what we need most is Hokkaido Electric Power Company, or maybe Okinawa Electric Power Company. In Yashiki’s office, there are dedicated staff that deal with specific major power companies in each area, and information is shared closely throughout the department. This organizational framework enables the best match between a retail energy provider and consumer. Teamwork is critical to not let an opportunity to reach an exit agreement slip away.

Our team members are a close-knit group. Having looked ahead to see the future potential of the Environment and Energy Business, many of the young members in the department are volunteers, and that is an attitude that meshes well with Yashiki, who had once jumped into a new position as a mid-career hire. Yashiki spoke of his great expectations, saying, “In the start-up phase of a new business, we need people like these men and women who have a forward-looking outlook in their approach, absorb a variety of daily experiences, and work to achieve personal growth.”

Let’s now look at Daiwa House Industry from the perspective of a consumer company and retail electricity provider.

The consumer, Nichirei Corporation, is engaged in the development of processed foods, marine products, and other businesses. The retail electricity provider is Chubu Electric Power Miraiz Co., Inc., which delivers retail electricity and gas services as a sales company of Chubu Electric Power Group.

We heard from Kei Yoshida of Nichirei about why they deployed our off-site PPA. “Nichirei Group has set its sights on achieving carbon neutrality by 2050, and leading up to that we have established a goal of cutting CO2 emissions by 50% in fiscal 2030 compared to fiscal 2015 levels. As one element of this we were considering the procurement of renewable energy, and that’s when we received a proposal from Daiwa House Industry. Although we consulted with other companies, at the time most of them were still stumbling in the dark, and they told us that they would need a lengthy period of preparation. The period presented by Daiwa House Industry, on the other hand, was half that of those other companies. It was this consideration for speed, something we valued highly, that was the decisive factor. We have great confidence they will continue to be attentive to our needs and activities, and to be at our side as we march forward.”

The two proposed power generation sites were Tsu City, Mie Prefecture (approximately 1.3MW) and Mitoyo City, Kagawa Prefecture (approximately 1.1MW). Immediately after the proposal, they set about to collaborating with major power producer groups in the Chubu and Shikoku areas, and agreements were concluded in an expedited manner. This will result in a roughly 790-ton CO2 reduction in Mie, and about 600 tons of such emissions in Kagawa.

The first collaborative off-site PPA partner for Chubu Electric Power Miraiz was Daiwa House Industry. Both Takanori Miyabe and Yuki Kobayashi had words of praise for Daiwa House Industry, saying, “If the power generation companies are not reliable, we cannot recommend them to our consumers with confidence. Daiwa House Industry has a wealth of expertise and experience in FIT, so we can leave the design and construction to them with peace of mind, and it’s reassuring that they will attend to and accompany our customers to the site. In addition, if trouble occurs on the power plant side, there is a risk of diminished credibility and corporate value of the consumer, but Daiwa House Industry is in strict compliance with laws and regulations, and that gives us an even further sense of security.” We also asked about our strengths, as seen from the perspective of a power generation company that’s a member of the Chubu Electric Power Group. Miyabe explained, “They can find, negotiate, and build power plants on available land. We’re very grateful to have a partner that excels in areas where we are lacking.”

Currently, only a small number of people are responsible for the practical work of promoting the PPA business, and not many employees, either within the Environment and Energy Department or throughout the company, equate their own future with that of PPA. However, this chance came about precisely because we read “far ahead to the future.” The head of the department declared as our goal for the future that “if you talk about off-site power plants, then you’re talking about Daiwa House.” Before that we have the huge goal of becoming “a top player in the renewable energy world.”

Yashiki recalled the robot anime he had watched in his youth. In a future world, all energy would be provided by solar power. The longing he felt when he saw that has brought him to where he is today. He would like to tell his younger self that “what you wanted to do, you’ve accomplished.” However, “you are only part way to realizing your dreams.” There is every possibility of becoming a top player in the renewable energy world. We are now standing in a place where our dreams are within reach.