Scenario Analysis of the Solar Power
Generation Business

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Detailed Scenario Analysis (by Process)
Risk Severity Assessment
Risks and opportunities in the Environment and Energy Business (Solar Power Generation)
Only items that were assessed as “Large” in terms of impact from a long-term perspective from 2030 to 2041 on the business related to risks
and opportunities have been listed.
Business Impact

ItemRisk

Sub category

Opportunity

RiskIndicator

The introduction of a carbon price for electricity will increase the cost ofCarbon price

Expendituregenerating electricity from fossil fuels.

N/A

Consumers will be more likely to choose renewable energy sources that are
more competitive in carbon pricing.

Transition Risk

Recycling regulations
Subsidy policy forrenewable energy, etc.

Revenue,
expenditure
Revenue

Changes in the energymix (including energy

Revenuedemand trends)
Spread of renewableenergy and energysaving technologies

Revenue,assetsPhysical Risk

More severe abnormal Revenue,
weather

expenditureAll
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Laws and regulations regarding the collection and recycling of solar panels

Panel recycling and hazardous material recycling technologies and services

may have a financial impact and may tarnish our medium- to long-term

will be developed ahead of competitors and introduced to, and ultimately

reputation.

expand, the market.

The profitability of a business operated under the FIT program may

A stricter CO2 emission reduction policy will be adopted, and the FIT program

deteriorate if grid parity is not achieved before the program ends.

will provide opportunities for business expansion for a long time to come.

Due to changes in the energy mix, the number of renewable energy power

Japan has stipulated that the share of non-fossil electricity in electricity sales

generation companies will increase, and the competitive environment will

should be 44% by 2030, and opportunities for renewable energy generation

become increasingly severe. Sales prices may fall.

will expand.

Competition with other companies may intensify due to declines in the value

Business opportunities for solar and biomass power generation will expand asof equipment and power generation costs of power generation facilities as a

the use of renewable energy increases.

result of the spread of renewable energy technologies.
Damage to employees and power plants caused by torrential rains, floods,

Developing resilient equipment by accumulating knowledge may lead to newand typhoons will result in shutdowns, lower operating rates, and additional

opportunities by providing it to the outside world.

investment to restore facilities. In addition, insurance premiums and othercosts will increase for assets located in high-risk areas, which may affect thePL/BS.

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Definition of Scenario Groups
The Reason for the Scenario Selection
We used the Sustainable Development Scenario (“well below 2°C” scenario including 1.5℃) and the New Policy Scenario (4°Cscenario) published by the International Energy Agency (IEA), which are widely used in various assessments.

Projected Changes in Global Average Surface Temperature(Differences from the 1986–2005 Average)
Under the 4°C (2.7–4.0°C) Scenario
4°C Scenario:
If climate change measures are notstrengthened, the temperature will increaseby 3.2 to 5.4°C above pre-industrial levels
2°C or above (2.7–4°C) Scenario:
If climate change measures are notstrengthened, the temperature will increaseby 2.7 to 4°C above pre-industrial levels

2°C Scenario:
If strict measures are taken, the temperature
will increase by 0.9 to 2.3°C above preindustrial levels

2030

2050

Before 2030, similar temperature changes will occur underthe 2°C and 4°C scenarios. After 2030, the difference
between the scenarios will increaseAll
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3The scenario analysis in TCFD recommendations
suggests the selection of multiple temperature range
scenarios, including one with 2°C or lower

Future Society under the 4°C Scenario underthe 4°C Scenario
Renewable energy generation such as solar power will expand as a result, but there are concerns about the impact of physicalrisks from severe disasters

Government

CitySuburb

Power price will fall slightly

Urban area

Will not introduce acarbon tax
Will set a GHG
emissions reduction
target but limit
regulations
Will generate renewableenergy, going with theflow

Power generation costwill decrease

Renewable energy will be generated

Panel factory

CO2
Power price will
fall slightly

Factory

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CO2

CO2Factories will not go decarbonized,
emitting large volumes of CO2

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Solar panels will be damagedby typhoons and otherabnormal weather eventsSeaFuture Society under the “well below 2°C” Scenario including 1.5°C
Solar power and other renewable energy generation will be strongly promoted, leading to the realization of a decarbonized society
in all aspects

Government

CitySuburb
Eco CarPower generation and DR integrated
with supply and demand using storage
batteries will make great progress

Power price will rise
New productdevelopment

Power generation equipment
price will fall (massproduction effect)

Urban area

Power generation
cost will rise due tocarbon pricing, etc.

Demand for solar
panel recycling willgrow

Will introduce a
carbon tax,
strengthen a GHG
emissions reduction
policy, and tighten
recycling
regulations

Subsidy$$$

Renewable energy will be generated
Panel Factory

Power pricewill rise

Solar panels will bedamaged by typhoons
and other abnormalweather events

CO2Factory

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Demand for low-energy
products will increasesignificantly

New productdevelopment

5Sea

Business Impact Assessment
In order to evaluate the impact of climate change on the environment and energy business (solar power generation), which is thesubject of our scenario analysis, we projected various parameters as estimates up to 2030. As a result, we assumed under the4°C scenario that non-life insurance costs would increase by approximately ¥400 million as costs of physical risks. Furthermore,
we estimated the impact in 2041, after the end of the Feed-in Tariff (FIT) program, and found that the business will continue to be
profitable even if the purchase price drops to ¥7/kWh (Agency for Natural Resources and Energy, “Price Target”: Fundamental
Review of FIT Program and Renewable Energy Policy Reconstruction, April 2019).
We assumed under the “well below 2°C” Scenario including 1.5℃ that non-life insurance costs would increase by approximately¥300 million as a cost burden due to physical risks. Although the purchase price will be affected after the end of the FIT program,the estimated impact in 2041 shows that the business continues to be profitable. The results of analysis under the “well below
2°C” Scenario including 1.5℃ show a high expectation for profit growth through the capture of opportunities due to expected
increases in non-fossil value and opportunities in the renewable energy business, including solar power generation.

The impact of both physical and transition risks on the overall portfolio of Tokyo Century Group was limited in this scenario
analysis. Based on the results of these scenario analyses, however, we will continue to strive for sustainable growth bystrengthening our resilience to climate change and taking advantage of business opportunities.

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Definition of Countermeasures
As a result of the scenario analysis, the following countermeasures have been defined to mitigate risks and capture opportunities
from climate change.

Corresponding
Item
Environment
andEnergyBusinessSolar Power
Generation

Profitability
improvement
Countermeasuresagainst asales decline after
FIT ends

Capturing newopportunities

Corresponding Item
Increasing profitability by improving facility efficiency- Strengthening asset management (AM)- Maximizing power generation efficiency through accumulated asset management expertise
Expanding into non-FIT businesses- Developing new businesses such as corporate power purchase agreement (PPA), self-wheelingmodel, and virtual power plant (VPP)
Considering renewable energy businesses other than solar power generation- Expanding business into renewable energy businesses other than solar (e.g., hydro, biomass, windpower)- Entering the VPP business, supply and demand adjustment market, capacity market, etc., using
storage batteries- Expanding business by investing in companies that provide new technologies and business models- Discovering new needs through the use of reused solar panels, for example, by entering therecycling business

The scenario analysis related to the environment and energy business (solar power generation), considered to be significantly affected by climatechange, found no significant impact on the current business strategy. Other business activities are also affected by climate change, but wecurrently believe that risks in individual business activities have a limited impact on the overall performance of the Group.
Going forward, we plan to prepare a scenario analysis from the perspectives of both risks and opportunities, prioritize businesses with a significant
business impact, and consider specific policies while monitoring the impact of climate change on our business as a whole.
Toward realizing a decarbonized society, we will work on businesses related to new environment-related technologies along with customers inpursuit of their growth to reduce climate-related risks and will contribute to the creation of an environmentally sound, sustainable economy andsociety.
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