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Environmental Actions

Transformation Risk Scenario Analysis

According to the scenario analysis results from The Network of Central Banks and Supervisors for Greening the Financial System (NGFS), if the current situation continues, the global temperature will rise by 1.5℃ in 2030, 2℃in 2050 and 3℃ in 2090.

In the case of global temperature rise of 3℃, about 10% of the labor force will be lost due to high temperature. River flooding doubles in China and triples in India. Typhoons and cyclones increased by 16% in Japan, 12% in the Philippines, and 47% in the United States. On the economic side, due to the impact of natural disasters, the world will lose 2% of GDP in 2040, and the economic development of many countries has stagnated since then. And if the goal of net zero by 2050 can be achieved, although the temperature will still rise by 1.4℃ by 2050, the next generation of human beings will have the opportunity to change. The greatest transition risk is our mismanagement of emission reduction pathway and miss last chance to prevent the critical point.

 

Scenario

 

TECO’s Action

NET ZERO 2050

 

global temperature rise 1.4℃

Five-fold increase in renewable energy, 50% electrification of residential and commercial buildings (including the production of building materials),

Use 40% carbon-neutral fuel (including hydrogen energy, bio diesel, etc.), sequester 5 Gt of carbon per year, improve energy efficiency, reduce energy consumption intensity by 60%, and decarbonize the use of agriculture, forestry and land resources.
  • In its industry, TECO has developed high-efficiency motors. The sales ratio by quantity in 2022 is 49%, exceeding the global average of 27%, showing TECO leads the wave of upgrade.
  • At the same time, the development of anti-corrosion and explosion-proof motors required by carbon capture equipment has entered its supply chain.
  • The urban electric bus power module has entered the mass production. 200 sets were shipped in 2022, and another 250 will be delivered to fleet in 2023.
  • TECO has built solar power generation facilities in factory sites, with a total power generation of about 9.6 million kWh in 2022, accounting for about 10% of the total power consumption of the group.

IEA 2DS

EU carbon price rises above 100 euros per ton

The EU carbon price has exceed 100 euros (about 107 US dollars) per ton in early 2023, which is the highest price since the EU launched the carbon emissions trading system (ETS) in 2005.

If TECO does not deploy ahead of schedule, it will lose the competitiveness of international trade due to carbon tax. Taking a 150HP motor as an example, the carbon emission in the manufacturing stage is 375 kgCO2e and it will be charged during export tradings.

When the carbon price reaches 100 euros per metric ton, the potential carbon cost is 40 U.S. dollars for every motor to export. In 2022, the number of motors shipped from TECO's Asian plant to Motovario, Italy is 5,469 units, and Westinghouse, USA is 143,183 units. The total cost impact is NTD 178,382,400.

TECO implements the "internal carbon price system" to reduce the carbon footprint of products in materials and manufacturing stages.

NDC

Power shortage and rising electricity fee in the countries where TECO belong

Italy’s electricity price has quadrupled since the start of the Ukrainian-Russian war, China requires production to be shift from daytime to night, and Taiwan’s average electricity price in 2023 has risen by 11%. Electricity demand has increased but electricity costs have continued to rise. Enterprises must have their own electricity generation capability to face future challenges.

In 2022, TECO started to build solar power generation facilities in factory sites, including factories in Wuxi Jiangsu, Qingdao Shandong, Vietnam, and Malaysia, with a total capacity of 5MW.

Together with the original power generation capacity, the total power generation in 2022 is 9.6 million kWh has accounted for 10% of the total electricity consumption of the group (global base).

In 2023, power generation facilities will be expanded in Italy, Texas, and Australia. The target annual power generation will increase by about 4.8 million kWh, which can reach 15% of the total power consumption.

 

 

Physical Risk Scenario Analysis

 

RCP Scenario: Representative Concentration Pathways (RCPs) which utilize the change in radiative forcing from 1750 to 2100 as the main indicator are employed for future temperature and precipitation change analysis. RCP2.6 (increase in radiative forcing by 2.6W/m2) is the scenario of mitigated global warming, while RCP4.5-RCP6.0 and RCP8.5 (and above) are scenarios characterized by limited mitigation or no mitigation, respectively. According to the scenario simulations of Taiwan Climate Change Projection Information and Adaptation Knowledge Platform (TCCIP) and Network for Greening the Financial System (NGFS), RCP results in vastly different outcomes for global TECO manufacture sites:

 

RCP 2.6  CO2 level 421 ppm

RCP 6.0  CO2 level 670 ppm

 

Temperature

Productivity

Temperature

Productivity

  Taiwan

rise by 2.3℃

drop by 2.3 (pp)

rise by 2℃

drop by 2.8 (pp)

  China

rise by 1.3℃

drop by 2.5 (pp)

rise by 1.5℃

drop by 3.1 (pp)

  USA

rise by 1.4℃

drop by 4.0 (pp)

rise by 1.6℃

drop by 4.9 (pp)

  Italy

rise by1.3℃

drop by 1.0 (pp)

rise by 1.6℃

drop by 1.2 (pp)

  Vietnam

rise by 1.0℃

drop by 5.6 (pp)

rise by 1.2℃

drop by 6.4 (pp)

  Malaysia

rise by 1.0℃

drop by 5.8 (pp)

rise by 1.1℃

drop by 6.7 (pp)

  Mexico

rise by 1.0℃

drop by 1.9 (pp)

rise by 1.4℃

drop by 2.3 (pp)

  India

rise by 1.1℃

drop by 6.1 (pp)

rise by 1.2℃

drop by 7.1 (pp)

 

  • Data source for Taiwan is from Taiwan Climate Change Projection Information and Adaptation Knowledge Platform (TCCIP) and is compared to current weather data.
  • Data source for other countries are from Network for Greening the Financial System (NGFS) and is compared with 1986-2006 data.

 

Financial impact:

 

RCP 2.6        CO2 421 ppm

RCP 6.0         CO2 670 ppm

2050 weather phenomenon
  • Temperature rise by 0.92℃
  • Rainfall increased by 4.36 mm/day, equal to a 73% increase in rainfall
  • Temperature rise by 0.93℃
  • Rainfall reduced by 2.56 mm/day, equivalent to a 42% reduction in rainfall

Impacts
  • Working condition: Factory needs to be equipped with ventilation and cooling facilities under rising temperature.
  • Floods: Caused damage to production equipment...delayed delivery, installed water baffles at the doors to reduce the impact of flooding
  • Working condition: Factory needs to be equipped with ventilation and cooling facilities under rising temperature.
  • Drought: Lack of cooling water, foundry electric furnace, baking furnace, and air-conditioning equipment cannot operate normally.

Losses
  • Prepare a budget of about 1 million every year for continuous improvement to maintain the health of employees
  • The one-day shutdown of global factories resulted in a loss of production capacity of about NT$30.56 million.
  • The recycling water consumption of the cooling water tower in the factory area is 76 tons/day, and it is necessary to purchase water source to supplement its scattering and evaporation, which is about 0.3% of the circulating volume.

 

Data source for Taiwan is from Taiwan Climate Change Projection Information and Adaptation Knowledge Platform (TCCIP) and is compared to current weather data.

 

 

 

Water Sensitivity Analysis

TECO Motor's flagship Chongli factory is located in Taoyuan. Based on the statistical data of the annual hydrological report released by Taiwan as a reference for drought-prone areas, the water sensitivity analysis of weather phenomena and corresponding measures under RCP2.6 and 6.0 scenarios in 2021 is as follows:

Scenario

Corresponding actions

RCP 2.6

CO2 level 421 ppm

 

What If it floods for more than 10 cm high?
  • Prior protection: None of the production equipment and materials of Chungli No. 1 Factory will be destroyed if flooded. If it is predicted in advance that there will be heavy rain, the factory may plan the surrounding sandbags in advance to prevent water from flooding into the factory building, and the construction cost of sandbag stacking is estimated at NT$4 million.
  • Flooded: If there is a sudden heavy rain, the water will flood into the factory on the day of the torrential rain; sand bags cannot be stacked in the factory in advance for waterproofing, and it is necessary to urgently mobilize 30 water pumps to drain the flooded area quickly. The investment amount of 30 water pumps is estimated at NT$500,000.

RCP 6.0

CO2 level 670 ppm

 

What If water supply stops for 1 week?
  • The water used in Chungli Plant is mainly used for casting, dissolving, sand treatment and dip painting (80 tons/day of shared water), and for the circulating water (10 tons/day of shared water) for air conditioning cooling by the integrated factory’s electricians and cutting by the mechanics.
    • Water interruption within 4 days: The water storage of the foundry factory (315 tons of capacity) and the water storage of the integrated factory (55 tons of capacity) can be used for support.
    • Water interruption for over 4 days: A 25-ton waterwheel (4 trips/day) can be employed, and the cost is NT$80,000 for water replenishment each time.

 

 

 

Contact window: ESG Office/ Jay LC Huang, csr@teco.com.tw