Shikoku Electric Power Incorporated : E(Environment)

Business Management that Increases Sustainability

E	Responding to Environmental Issues
Environmental

Our Group is devoted to preserving the planet, the community, and ensuring a bright future for all.

For this reason, we actively pursue climate change measures and environmental conservation activities, and work continuously to reduce our environmental footprint.

Initiatives towards Climate Change Problems

We strive to grasp changes in social needs and risk factors and reflects these in business management from the ESG perspective in order to increase the effectiveness of efforts aimed at the sustainable creation of corporate value. As part of that, we expressed our support for the recommendations of the TCFD* in September 2019, and will enhance our climate change-related information disclosures to fulfill our responsibility to explain such matters to stakeholders.

• Abbreviation for the Task Force on Climate-related Financial Disclosures. The Financial Stability Board (FSB), which is comprised of financial authorities from major countries, was established in December 2015 in response to a request provided by G20 Finance Ministers and Central Bank Governors. In June 2017, the TCFD issued recommendations on the disclosure of information concerning climate-related risks and opportunities.

Governance

Addressing the problem of climate change constitutes an important management issue. The Sustainability Promotion Council, the Environmental Strategy Committee (chaired by the General Manager of the General Planning Division), and the Carbon Neutrality Promotion Committee (chaired by the President) are taking the lead in promoting measures taken against climate change.

Items positioned as particularly important within the deliberation process of each committee are submitted to higher-ranking committees for discussion (including the Board of Directors). The results of those discussions are reflected upon the management plans for each fiscal year to improve and enhance the initiatives being undertaken.

Governance and promotion framework for measures against climate change

Shikoku Electric Power

Shikoku Electric

Power Transmission

Higher-ranking committees such as the Board of Directors

& Distribution

Items positioned as particularly important

Co., Inc.

Carbon Neutrality Promotion Committee

Sustainability Promotion Council

(Operated by the Company and Shikoku Electric Power Transmission &

Distribution Co., Inc.)

Deliberation / Adjustment

Deliberation / Adjustment

Coordination

Important issues

Environmental

Environment

Deliberation / Adjustment

Strategy

Committee

Committee

Indicators / targets and

Matters related to

information disclosure

policies on initiatives

ReportIntegratedGroupPowerElectricShikoku BookDataRelated-EnvironmentalGroupYondenand

related to measures taken

aimed at carbon neutrality

against climate change

disclosureinformationofEnhancement

Companywide plan drafting (P) [Reection of risk management]

Corporate

Planning

Department

Inspection (C) / Revision (A)

Companywide plan dissemination

Concentration of activities

Divisions,

Formulation of

Inspection (C) / Revision (A)

Branch Ofces,

Power Stations,

detailed plans (P)

etc.

Implementation (D)

Internal

Internal audit (C)

Audit Division

Environmental	Deliberations that are focused on setting targets for measures against climate change, on assessing
Strategy Committee	and managing the status of the achievement of said targets, and on enhancing information disclosure
Carbon Neutrality	Deliberations that are focused on policies concerning various initiatives (in terms of supply and
Promotion Committee	demand) with the aim of achieving carbon neutrality in 2050		See pages 15-16

Shikoku Electric Power Group INTEGRATED REPORT 2022 46

Business Management that Increases Sustainability

Responding to Environmental Issues

Risk management

We understand strongly the importance of climate change-related risk management. Every year, the management team conducts checks and reviews after extracting climate change-related risks that have the potential to significantly impact management, taking into comprehensive account factors such as the probability of occurrence, and their impact on earnings and expenses (Cost increases, etc.). We strive to prevent the occurrence of risks and reduce their impact on the operation of our business by incorporating the results into our business plans for the following fiscal year. See page 63

* Our climate change-related risk management system is integrated into our company-wide risk management system

Strategy

We will continuously evaluate and confirm what kinds of impacts climate change-related risks and opportunities will have on our company's business operations under certain future scenarios, formulate the required measures based on the results, and then transit to the execution of those measures.

Scenario selection

We selected a scenario in which measures at the current level could continue to be taken (Scenario involving less than 4°C*1), a scenario involving the taking of measures which are stricter in comparison with the current level (2°C scenario*2), and a scenario involving the taking of

Change in global average temperature from 1850 to 1900

(°C)

5

SSP5-8.5

4

SSP3-7.0

measures which are even stricter than those involved in the 2°C scenario (1.5°C scenario*3). We then assumed the future image of the electric power business under each scenario.

*1 See the Stated Policies Scenario (STEPS) presented by the International Energy Agency (IEA) and SSP2-4.5 of the IPCC Sixth Assessment Report

*2 See the Announced Pledges Scenario (APS) presented by the International Energy Agency (IEA) and SSP1-2.6 of the IPCC Sixth Assessment Report

3

2

1

0

-1

SSP2-4.5

SSP1-2.6

SSP1-1.9

*3 See The Net Zero Emissions by 2050 Scenario (NZE) presented by the International Energy Agency (IEA) and SSP1-1.9 of the IPCC Sixth Assessment Report

1950

2000 2015

2050

2100 (year)

Source: IPCC AR6 WG I

Future image of the electric power business

	Item	1.5°C scenario, 2°C scenario	Scenario involving less than 4°C
		• Rapid change in policies aimed at decarbonization	• Gradual change of policies aimed at decarbonization (Thermal
		power is maintained while introducing renewable energy as an
	Energy policy	(promotion of the development of renewable energy, nuclear
	extension of current policy in consideration of stable supply and
	energy and hydrogen energy)
Policies		economic factors)
	Other policies	• Introduction of carbon taxes and emission trading schemes	• Introduction of carbon taxes and emission trading schemes
	advances rapidly	advances gradually
Technology	Low carbonization and	• Technological innovation in low carbonized and	• Technological innovation in low carbonized and decarbonized
decarbonization technologies	decarbonized power generation progresses rapidly	power generation progresses gently
Fuel price	Fossil fuels	• Fossil fuel use declines and fuel prices fall	• Fossil fuel use gradually declines and fuel prices gradually fall
	Energy demand	• Increasing electrification undertaken in an effort to	• The lack of societal momentum toward decarbonization and the
	lack of progress in terms of electrification will reduce demand for
	decarbonize will serve to increase demand for electricity
Market		electricity
Customer needs	• Needs for low carbonized/decarbonized power significantly	• The need for low carbonized/decarbonized electricity will increase
	increase	to a certain extent
Disasters	Unusual weather	• Typhoons and other disasters occur, but the extent of the	• Typhoons and other disasters will become more intense, causing
damage caused is not much different than the current situation	more damage than seen currently

47 Shikoku Electric Power Group INTEGRATED REPORT 2022

Shikoku Electric Power Group		President's Message		Value Creation through		Business Management that		Financial / Corporate Information
Value Creation			Business Activities		Increases Sustainability

Risks and opportunities

Climate change-related risks and opportunities were identified for the 1.5°C scenario, the 2°C scenario, and the scenario involving less than 4°C. We conducted an evaluation and confirmation of the major factors which will affect our company's business in the future. As a result, we were able to confirm that while there is a possibility of increased costs due mainly to the "expansion of the ratio of non-fossil power sources / strengthening of regulations on thermal power sources" and the "introduction of a carbon pricing" when it comes to the 2°C scenario and a scenario involving less than 4°C, on the other hand, we can also expect improvements in profitability due to "improvements in the value of non-fossil power sources" and the "development of electrification / expansion of needs for low carbonized /decarbonized electricity." The trends seen in terms of these effects may be more pronounced in the 1.5 °C scenario.

We also considered measures serving to minimize risks and maximize opportunities. Each of these measures has been reflected upon the Group's Medium-Term Management Plan. We will contribute to the realization of a sustainable society through the steady implementation of these measures.

Key risks, opportunities and responses as extracted from each scenario

Transition risks

Physical risks

Opportunities

Classication	Impact period*	Details of risks and opportunities	Main measures
	Expansion of the ratio	Short/	• Cost increases due to the expansion of the ratio of
	of non-fossil power sources /	Medium/	non-fossil power sources and the strengthening of
	strengthening of regulations	• R&D and introduction of new technologies such as
	Long	regulations on thermal power sources
	on thermal power sources
Policies and	hydrogen and ammonia power generation
			•Further expansion of the introduction of renewable
regulations		Short/	• Increase in costs resulting from the introduction of
Introduction of carbon pricing	energy power sources
	Medium/
	carbon pricing
		Long
Market		Short/	• Reduction in electricity sales due to the lack of electrification	• Promotion of electrification
Decline in electricity sales	Medium/	• Reduction in sales of electricity due to reduced	• Promotion of low carbonization and
		Long	acceptance of thermal power sources	decarbonization of power sources
Reputation		Short/	• Decline in investors' appetite for investment and	• Appropriate disclosure of information to
Lack of information disclosure	Medium/	withdrawal of investments (Divestment) due to
stakeholders
		Long	declining reputation
		Short/	• Insufficient supply and adjustment capabilities resulting	• Securing supply and adjustment capabilities
Chronic	Increased chronicity of	from increases in peak demand arising due to rising
Medium/
abnormal weather	and falling of temperatures and due to increases in	through the further utilization of electric energy
	Long
		renewable energy
	Intensification of	Short/	• Increases in the cost of recovery from typhoons and	• Strengthening of disaster response systems including
Acute	Medium/	the strengthening of cooperation with local
natural disasters	other natural disasters
	Long	governments, related organizations, etc. (Reference (1))
		Short/	• Improvements in the superiority of nuclear power stations	• Continuation of the safe and stable operation of
	Improvements in the value of	nuclear power stations (Reference (2))
	Medium/	• Increases in profits due to the expanded introduction of
	non-fossil power sources	• Further expansion of the introduction of renewable
	Long	renewable energy
Energy		energy power sources
sources	R&D progress for		• Commercialization of hydrogen power generation
	Long	• Promotion of decarbonization of power sources
	new technologies	through progress in research and development
	Development of	Short/	• Increases in sales of electricity due to increased	• Further expansion of the introduction of low
Products/	electrification and expansion of	electrification needs	carbonized and decarbonized power sources,
Medium/
services	needs for low carbonized/	• Increases in electricity sales volumes due to increases	promotion of electrification, and other such elements
Long
	decarbonized electricity	in low carbonized/decarbonized electricity needs	• Provision of CO2-free rate menus, etc.
	Increasing need to	Short/	• Rising market prices due to a lack of supply and	• Securing of supply and adjustment capabilities
	secure supply and	Medium/
	adjustment capabilities nationwide	based on the optimization of supply facilities
	adjustment capabilities	Long
Resilience
Increasing need for	Short/	• Improvement of corporate evaluations relating to	• Strengthening of disaster response systems
	disaster prevention and	Medium/	including the strengthening of cooperation with
	disaster responses
	mitigation	Long	local governments, related organizations, etc.

* Short/medium term: Up to 2030; Long term: Up to 2050

Major impact assessment for fiscal 2030 in terms of the 2°C scenario and a scenario involving less than 4°C

	Expansion of the ratio of		Risks					Opportunities
							Improvements in
	non-fossil power sources /	Introduction of	Decline in
	the value of non-fossil
	strengthening of regulations
	electricity sales
	carbon pricing			power sources
	on thermal power sources
	2°C	Less than		Less than		Less than
	4°C	2°C	4°C	2°C	4°C
									2°C Less than	2°C Less than
									4°C	4°C

Development of electrication and expansion of needs for low carbonized/ decarbonized electricity

Major financial impact (Reference)

1. Responses to increasingly severe natural disasters

Costs for recovery from the July in 2018 Japan floods

Approx. 3 billion yen

1. Safe and stable operation of nuclear power

Improved balance of payments after one month of

safe and stable operation of Ikata Unit No.3*

Approx. 4 billion yen

* Effects in terms of improvement of the balance of payments related to supply and demand estimated based on fiscal 2021 results

Shikoku Electric Power Group INTEGRATED REPORT 2022 48

See pages 15-16

Business Management that Increases Sustainability

Responding to Environmental Issues

Transition plan: Carbon Neutral Challenge 2050

The Group has set up a challenge of becoming carbon neutral in 2050 as a long-term priority within its Medium-Term Management Plan. With that being the case, we have formulated a roadmap and are promoting specific initiatives concerning the "low carbonization

and decarbonization of power sources," and the "further utilization of electric energy" with a view to fiscal 2030 and even further ahead to fiscal 2050 based on the measures serving to address climate change-related risks and opportunities which have been reflected within our Medium-Term Management Plan.

Indicators and targets

We have set targets for various climate-related indicators, such as CO2 emissions and ratios for non-fossil power sources. We will work to minimize climate change-related risks and maximize opportunities by promoting initiatives that are aimed at achieving these targets.

Halve CO2 emissions produced by the Company's retail sector by fiscal 2030

(in comparison to fiscal 2013)

Our Group is promoting the "low carbonization and decarbonization of power sources" by maximizing the use of nuclear power and renewable energy, improving the efficiency of thermal power generation, and expanding upon the introduction of renewable energy, as well as the "further use of electric energy" based on initiatives such as the promotion of electrification including the industrial and transportation sectors. By doing so, we aim to reduce our CO2 emissions in the retail sector by half in fiscal 2030 compared to fiscal 2013.

* CO2 emissions for the most recent fiscal year		See page 73

CO2 emissions related to retail sector

(10,000 tons-CO2)

2,000

	1,962*1				Reduction
1,500					target
				-50%
1,000			1,315*1
			(1,189*2	)
500					Approx. 980
0
2013	2021		Target for 2030	(FY)

*1 Emissions excluding free allocation of FIT on the same basis as the fiscal 2030 target *2 Emissions including free allocation of FIT (Value based on the Act on Promotion of

Global Warming Countermeasures)

Greenhouse gas emissions in the supply chain (Scopes 1, 2, and 3)*1 and a breakdown of Scope 3

Calculated referred to documents such as the "Basic Guidelines for Calculating Greenhouse Gas Emissions through the Supply Chain (ver. 2.4)" (Ministry of the Environment / Ministry of Economy, Trade and Industry)

Item*2	Emissions volume
(10,000 tons-CO2)
Purchased materials and equipment	0.8

Scope 3

721.3
	Fiscal 2021
	(10,000 tons-CO2)
Scope 2	Scope 1
0.0
966.0

Scope 1:

Emissions associated with fuel use for our own power generation and so on. [Including CO2, SF6, N2O and HFCs]

Scope 2:

Emissions associated with the use of electricity purchased from other companies at our places of business (ofces)

Scope 3:

Emissions contained in electricity purchased from other companies for sale, etc.

Capital goods	40.4
Fuel and energy-related activities	664.8
Transportation, delivery (upstream)	0.0
Waste produced by business	2.8
Business trips	0.1
Employee commuting	0.1
Investments	12.4

*1 This does not correspond with CO2 emissions in retail sales, including CO2 emissions in wholesale sales, etc.

*2 There are no emissions with respect to lease assets (upstream or downstream), transportation and distribution (downstream), sold products (used, processed, disposed) or franchises.

49 Shikoku Electric Power Group INTEGRATED REPORT 2022

See page 73

Shikoku Electric Power Group		President's Message		Value Creation through		Business Management that		Financial / Corporate Information
Value Creation			Business Activities		Increases Sustainability

Ratio of non-fossil certificates held by the retail sector of the Company in relation to the amount of electricity sold*1 Achievement of 44% or more*2 in fiscal 2030

In order to respond to opportunities such as the increasing need for low carbonized and decarbonized electricity, we will aim to increase the ratio of non-fossil certificates held by the retail sector in relation to the amount of electricity sold (Equivalent to the ratio of non-fossil power sources derived from the Act on Sophisticated Methods of Energy Supply Structures*1) to 44% or more*2 in fiscal 2030.

We will also proactively work on continuing the safe and stable operation of nuclear power plants, which are non-fossil power sources, increase the output of hydroelectric power plants, and other such efforts.

Ratio of non-fossil certificates held by the retail sector

of the Company in relation to the amount of electricity sold

Zero power plants that are inadequately prepared for conceivable flood risks

We have conducted risk assessments of power plants in relation to conceivable floods based on past disasters and other factors. As a result of these assessments, we have completed the construction works for countermeasures at power plants requiring countermeasures.

We will continue to make efforts to prepare for risks, including responding to disasters which had not been previously anticipated in the past. This is something that we will do by implementing measures in terms of equipment and providing responses with respect to elements of an intangible nature such as disaster drills.

Achievement of the fiscal 2030 benchmark indicators (Act on the Rational Use of Energy)*1

Fiscal 2021

No fossil value

70%

Non-fossil certificates (With renewable energy designation)

15%

Non-fossil certificates (Without renewable energy designation)

3%

Allocation of surplus non-fossil value (Including FIT free-of-charge distribution)

12%

(Indicator A: 1.00 or higher, Indicator B: 44.3% or higher)*2

The thermal efficiency of thermal power plants declines gradually, caused by operating time and the deterioration of facilities. We implement daily equipment inspections, operational management and equipment upgrades appropriately to make efforts to maintain the thermal efficiency of existing thermal power plants. We are also working on improving the efficiency of thermal power generation through the promotion of the replacement of aging thermal power facilities (See page 31).

*1 In order to promote the effective use of non-fossil power sources such as renewable energy and nuclear power, the Act on Sophisticated Methods of Energy Supply Structures (Act on the Promotion of Use of Non-Fossil Energy Sources and the Effective Use of Fossil Energy Materials by Energy Suppliers) sets a target for the ratio of non-fossil power sources for retail electric power business operators, etc., who supply electricity

Actual non-fossil power ratio in the most recent fiscal year

*2 Notification No. 79 of the Ministry of Economy, Trade and Industry of 2020 "Judgment Standard for Electricity Utilities Concerning the Use of Non-Fossil Energy Sources" requires that, in fiscal 2030, 44% or more of the electricity supplied by retail electric power business operators be derived from non-fossil power sources.

Investments aimed at low carbonization and decarbonization of power sources Cumulative total of 350 billion yen for the 10-year period spanning from fiscal 2021 to fiscal 2030

In order to respond to climate change-related risks and opportunities, we will invest a cumulative 350 billion yen over the 10-year period spanning from fiscal 2021 to fiscal 2030 to promote low carbon and decarbonization of power sources.

	FY2021 performance
Amount of investments related to low	Approx. 70 billion yen
carbonization and decarbonization of power sources

Through these efforts, we aim to achieve the benchmark indicator targets of the Act on the Rational Use of Energy in fiscal 2030.

	FY2019	FY2020	FY2021
Indicator A	1.03	1.02	1.02
Indicator B (%)	43.1	43.1	42.1

*1 Under the Act on the Rational Use of Energy, an index (benchmark index) is set for a specific industry and field so that the state of energy saving of business operators in that industry can be compared.

Indicator A: Indicator of the rate of accomplishment of target for power generation efficiency by fuel source

Indicator B: Indicator of overall thermal power generation efficiency

*2 Notification No. 69 of the Ministry of Economy, Trade and Industry of 2021 "Judgment Standards for Business Operators Concerning Rationalization of the Use of Energy in Factories, etc." stipulates that the target level in fiscal 2030 for Indicator A is 1.0 or more and for Indicator B is 44.3% or more.

Developing new renewable energy throughout the Group

500 MW by fiscal 2030

2,000 MW by fiscal 2050

* Results up to the end of fiscal 2021		See page 29

Shikoku Electric Power Group INTEGRATED REPORT 2022 50