Amazon.com will partner with Japanese trading house Mitsubishi Corp. to build solar power stations in Japan and procure renewable energy from them to supply electricity to its data centers for ten years, Nikkei has learned.
In a rare move for companies in Japan, Amazon will directly contract with power generation operators. This contract -- a corporate power purchase agreement, or PPA -- enables Amazon to procure stable electricity from exclusive renewable energy power stations for the long term, without buying it from electric companies.
It is believed that this type of power sourcing is less vulnerable to price fluctuations. Although the renewable power is expected to be more expensive than traditional sources, it will add to the overall renewable energy supply, and the environmentally friendly approach is expected to resonate with consumers and data center customers.
West Holdings, a solar power company, is developing the power stations and will build 450 of them in the Tokyo Metropolitan area and Tohoku region. Mitsubishi will collect electricity generated there and supply it to Amazon's data centers, logistics centers and offices through electricity sales companies in which Mitsubishi has a stake.
Individual property owners will also invest in the solar power facilities. West Holdings will charge them for installation, but they will recoup their investments in 10 years with electricity sales to Amazon. Mitsubishi will be responsible for creating the system for aggregating electricity, and will collect a portion of the electricity sales as commissions.
The total electricity generated will be 22,000 kilowatts which is equivalent to the electricity consumed in 5,600 houses. The power stations will start operations by 2023. In Japan, Seven & i Holdings, a Japanese diversified retail group, signed a PPA contract with an NTT-owned energy company to procure renewable energy to supply electricity to 40 convenience stores.
In Japan, renewable electricity is mostly sold to power companies under a feed-in tariff rather than directly sold to businesses. According to the Renewable Energy Institute, there are only about 20 PPA contracts in Japan. The Amazon project is currently the largest of its kind in Japan.
Amazon aims to make 100% of the electricity used for its corporate activities renewable by 2025. The retail and tech giant is using corporate PPAs around the world as a means to procure large amounts of electricity reliably. The Japanese government is also looking to encourage the widespread use of PPA by reducing or exempting transmission costs.