Chugoku Electric Power

Chugoku has set scope 1 emissions targets to reduce its absolute emissions by 50% and emissions intensity by 34.74% by 2030 compared to 2013. The company also aims to achieve carbon neutrality by 2050, but this target lacks clarity. Despite purchased power making up nearly half of the company’s sold power, it does not appear to have set any scope 3 emissions targets. To improve, Chugoku should set a long-term emissions reduction target that covers all its electricity emissions and is aligned with a 1.5°C pathway. The company should also disclose any planned use of offsets to achieve the targets. Additionally, Chugoku should set interim targets at gaps of no more than five years to incentivise continued action towards its long-term goal.

Coal currently accounts for approximately 50% of Chugoku’s energy mix. Instead of committing to phasing out the fuel source, Chugoku reports its plans to spend USD 1 billion on its coal gasification and CCUS project, Osaki CoolGen. Though the project aims to capture 90% of its CO2 released, it also clearly signals the company’s planned future reliance on coal. As a company in an advanced economy, Chugoku shouldn’t be extending the life of coal. The company’s investment in this project is money that it could instead have spent on proven renewable technology or advancing interventions to reduce embodied emissions from renewable energy sources.

Beyond its energy efficiency services, Chugoku has plans to increase its renewable energy capacity by at least 300 megawatts (MW) by 2030. This would almost triple the company’s current renewable energy capacity of 170 MW, but it will still be significantly smaller than its current thermal capacity of 7400 MW. Additionally, the company has completed a battery system with a capacity of 6.2 MW. This is important as grid-scale storage is expected to play a crucial role in managing variations in renewable electricity output. However, to improve and enable the company to decouple financial results from greenhouse gas (GHG) emissions, it will need to rapidly scale up these projects.

Chugoku views energy efficiency and electrification as important for decarbonisation. The company promotes services to measure businesses’ energy consumption as well as demand control equipment such as smart meters. The company also aims to grow its high-efficiency electrical equipment units by 28% by 2030. Additionally, Chugoku supports customers in installing solar power and batteries. It is unclear what impact these actions have on the company’s revenue. To improve its performance on the benchmark, the company should disclose its current and projected revenues from energy efficiency services for the next five years.

Chugoku aims to achieve what the company terms “carbon neutrality” by 2050. As the company’s reporting is unclear, it is assumed this target applies to the company’s scope 1 emissions. Chugoku has also set two interim targets. The first is to reduce its absolute scope 1 emissions by 50% by 2030 and the second is to reduce its scope 1 emissions intensity by 34.74% by 2030, both compared to 2013. Despite half of the company’s power being purchased for resale, it does not appear to have set any scope 3 emissions targets.

The company aims to increase its renewables capacity by at least 300 MW (from 3700 MW in 2022) by 2030. It also hopes to restart its nuclear facilities, recently announcing its approval to restart the operation of one unit in August 2024. The company also states that it plans to phase out non-efficient coal power by 2030 and develop CO2 separation and capture as well as carbon recycling technology. Additionally, Chugoku plans to promote electrification and energy efficiency with its clients.

Chugoku’s finances imply that its focus is the Osaki CoolGen project, which combines coal gasification combined cycle technology with CO2 capture. In 2021, and for the next five years, the company is investing 100% of its power generation capital expenditure (CapEx) on the project. There is no evidence that the company is investing in interventions to reduce the embodied emissions of its low-carbon energy generation.

Chugoku’s emissions intensity for its generated energy remained static between 2016 and 2021, which is not aligned with the company’s 1.5°C pathway. This is a consequence of no change in the company’s fuel mix, which has remained constant, comprising approximately 90% fossil fuels and 10% hydropower since 2016. However, the company’s emissions intensity for purchased power, representing around half of the company’s total electricity sales, did decrease in line with its 1.5°C pathway.

As a company in an advanced economy, Chugoku should be seeking to phase out coal power. Instead, its significant investment in the Osaki CoolGen project illustrates its continued reliance on coal. This not only means the company will exceed its 1.5°C carbon budget until 2037, but also that it is not spending on proven renewable technology or developing interventions to reduce the life cycle emissions of its low-carbon assets, which could go a long way in making it a leader in a low-carbon future.

The company publicly discloses a commitment to engaging in social dialogue with workers and unions. However, no relevant disclosure was found regarding the categories of stakeholders it engages with on a just transition. Nor was there any evidence to show the company’s ongoing social dialogue and meaningful engagement with affected stakeholders. No evidence was found of the company undertaking low-carbon transition planning to mitigate the social impacts of the transition on workers, affected stakeholders and its business relationships. Additionally, no evidence was found to demonstrate the company’s engagement in social dialogue and with stakeholders in its just transition planning.

The company discloses the measures it takes to ensure that the jobs created embed equality of opportunity for women and vulnerable groups. In particular, it established a voluntary reemployment system for senior citizens. However, no evidence was found of the company committing to create and support access to green and decent jobs as part of the low-carbon transition. Furthermore, no relevant disclosure was found of the company’s assessment of employment dislocation risks. No public commitment by the company was found stating its intention to re-skill and up-skill workers displaced by the transition to a low-carbon economy. Additionally, no evidence was found that the company re-skills and up-skills workers in a way that ensures gender balance and inclusion of vulnerable groups.

No relevant disclosure was found to show if the company identifies impacts of the low-carbon transition on social protection for workers and affected stakeholders, nor how it contributes to social protection. Additionally, no evidence was found that the company expects its business relationships to contribute to the social protection of their workers and affected stakeholders. No relevant disclosure was found to show how the company identifies any misalignment of its lobbying activities with policies and regulations that support the just transition, nor of the measures it takes to address misalignment. Furthermore, no evidence was found that the company lobbies for policies and regulations for green and decent job creation; retention, education and reskilling; and social protection for workers.

The company has a grievance mechanism available to workers. However, no other policies or commitments of the company related to respect for human rights were found in the public domain. This includes the necessary policies and systems by which the company can ensure respect for basic human rights in its operations and supply chain. 

The company discloses the gender of its workforce by employee category as its indicator of workforce diversity. The company also discloses its target to increase the number of female employees in management positions by 2025. However, no other evidence of the company’s policies or commitments related to key decent work issues were found in the public domain. These issues include the provision of secure, safe and healthy workplaces, where workers are fairly renumerated and have a meaningful say in decision-making.  

No policies or commitments of the company are available related to key ethical business topics such as personal data protection, tax, bribery and corruption, and lobbying and political engagement were found in the public domain. This includes ensuring ethical business conduct throughout its operations and in its relationships with business partners.