Volume 44—Solar Technology & Project Developers

Title: Volume 44—Solar Technology & Project Developers

Category: Part B—Industry-based Guidance for IFRS S2

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Year: 2023

Type: Industry

Industry-based Guidance on implementing

Climate-related Disclosures

Volume 44—Solar Technology & Project Developers

June 2023

IFRS S2

IFRS

® Sustainability Disclosure Standard

International Sustainability Standards Board

This Industry-based Guidance accompanies IFRS S2 Climate related Disclosures (published

June 2023; see separate booklet) and is issued by the International Sustainability

Standards Board (ISSB).

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IFRS S2 CLIMATE-RELATED DISCLOSURES–JUNE 2023

Introduction

This volume is part of the Industry-based Guidance on Implementing IFRS S2 Climate-related

Disclosures. This guidance suggests possible ways to apply some of the disclosure requirements in

IFRS S2 but does not create additional requirements.

This volume suggests possible ways to identify, measure and disclose information about

climate-related risks and opportunities that are associated with particular business

models, economic activities and other common features that characterise participation in

this industry.

This industry-based guidance has been derived from Sustainability Accounting Standards

Board (SASB) Standards, which are maintained by the International Sustainability

Standards Board (ISSB). The metric codes used in SASB Standards have been included for

ease of reference. For additional context regarding the industry-based guidance contained

in this volume, including structure and terminology, application and illustrative

examples, refer to Section III of the Accompanying Guidance to IFRS S2.

IFRS S2 INDUSTRY-BASED GUIDANCE

Volume 44—Solar Technology & Project Developers

Industry Description

Solar Technology & Project Developers industry entities manufacture solar energy

equipment, including solar photovoltaic (PV) modules, polysilicon feedstock, solar

thermal electricity-generation systems, solar inverters and other related components.

Entities also may develop, build and manage solar energy projects and offer financing or

maintenance services to customers. The industry uses two primary technologies: PV and

concentrated solar power (CSP). Within solar PV, two main technologies exist: crystalline

silicon-based solar and thin-film solar, which includes panels made using copper indium

gallium selenide and cadmium telluride. The primary markets for solar panels are

residential, non-residential (commercial and industrial) and utility-scale projects. Entities

in the industry operate globally.

Sustainability Disclosure Topics & Metrics

Table 1. Sustainability Disclosure Topics & Metrics

TOPIC

METRIC

CATEGORY

UNIT OF

MEASURE

CODE

Total capacity of completed solar energy systems 74 Quantitative Megawatts (MW) RR-ST-000.B Total project development assets 75 Quantitative Presentation currency RR-ST-000.C Energy Management in Manufacturing Topic Summary Solar panel manufacturing typically uses electrical energy purchased from the grid.

Energy can account for a considerable share of the total cost of production. Considering rising energy costs and regulatory uncertainty surrounding the future of fossil-based energy, entities that diversify their energy sources may manage the associated risks and maintain a reliable energy supply more effectively. Entities that minimise energy use through effective energy management may reduce costs and gain a competitive advantage through operational efficiency and competitive pricing of products.

Competitively priced products are particularly important given the intense price competition within the solar technology industry.

Metrics RR-ST-130a.1. (1) Total energy consumed, (2) percentage grid electricity and

(3) percentage renewable 1 The entity shall disclose (1) the total amount of energy it consumed as an aggregate figure, in gigajoules (GJ).

1.1

The scope of energy consumption includes energy from all sources,

including energy purchased from external sources and energy produced by the entity itself (self-generated). For example, direct fuel usage, purchased electricity, and heating, cooling and steam energy are all included within the scope of energy consumption.

1.2

The scope of energy consumption includes only energy directly consumed by the entity during the reporting period.

74 Note to RR-ST-000.B – Solar energy systems are defined as any system that converts sunlight into electrical energy, including photovoltaic (PV) systems and solar thermal electric systems.

Completed systems are defined by the entity, consistent with its existing public disclosure of completed systems.

75 Note to RR-ST-000.C – Project development assets are defined by the entity, consistent with its existing public disclosure of project development assets, regardless of terminology used by the entity (e.g., “Project assets,” “Project assets—plants and land,” “Solar Energy Systems Held for Development and Sale,” etc.). At a minimum, project development assets include assets that are associated with solar energy systems that are under development or fully developed, owned by the entity, and held for sale or intended to be sold to a third party prior to the execution of a definitive sales agreement, and assets that consist primarily of capitalised costs incurred in connection with the development of solar energy systems.

IFRS S2 INDUSTRY-BASED GUIDANCE 4© IFRS Foundation

1.3

In calculating energy consumption from fuels and biofuels, the entity shall use higher heating values (HHV), also known as gross calorific values (GCV), which are measured directly or taken from the Intergovernmental Panel on Climate Change (IPCC).

2 The entity shall disclose (2) the percentage of energy it consumed that was supplied from grid electricity.

2.1

The percentage shall be calculated as purchased grid electricity consumption divided by total energy consumption.

3 The entity shall disclose (3) the percentage of energy it consumed that was renewable energy.

3.1

Renewable energy is defined as energy from sources that are replenished at a rate greater than or equal to their rate of depletion, such as geothermal, wind, solar, hydro and biomass.

3.2

The percentage shall be calculated as renewable energy consumption divided by total energy consumption.

3.3

The scope of renewable energy includes renewable fuel the entity consumed, renewable energy the entity directly produced and renewable energy the entity purchased, if purchased through a renewable power purchase agreement (PPA) that explicitly includes renewable energy certificates (RECs) or Guarantees of Origin (GOs), a Green‐e Energy Certified utility or supplier programme, or other green power products that explicitly include RECs or GOs, or for which Green‐e Energy Certified RECs are paired with grid electricity.

3.3.1

For any renewable electricity generated on-site, any RECs and GOs shall be retained (not sold) and retired or cancelled on behalf of the entity for the entity to claim them as renewable energy.

3.3.2

For renewable PPAs and green power products, the agreement shall explicitly include and convey that RECs and GOs be retained or replaced and retired or cancelled on behalf of the entity for the entity to claim them as renewable energy.

3.3.3

The renewable portion of the electricity grid mix that is outside of the control or influence of the entity is excluded from the scope of renewable energy.

3.4

For the purposes of this disclosure, the scope of renewable energy from biomass sources is limited to materials certified to a third-party standard (for example, Forest Stewardship Council, Sustainable Forest Initiative,

Programme for the Endorsement of Forest Certification or American Tree Farm System), materials considered eligible sources of supply according to the Green-e Framework for Renewable Energy Certification, Version 1.0 (2017) or Green-e regional standards, or materials eligible for an applicable jurisdictional renewable portfolio standard.

IFRS S2 CLIMATE-RELATED DISCLOSURES–JUNE 2023© IFRS Foundation 5

4 The entity shall apply conversion factors consistently for all data reported under this disclosure, such as the use of HHVs for fuel usage (including biofuels) and conversion of kilowatt hours (kWh) to GJ (for energy data including electricity from solar or wind energy).

Water Management in Manufacturing Topic Summary Solar photovoltaic panel manufacturing can be water-intensive, and ultra-pure water is a critical input in some processes. The manufacturing process also may generate wastewater, which must be treated before disposal or reuse, and therefore may result in incremental operating costs and capital expenditures. Furthermore, depending on the location, solar equipment manufacturing facilities may face water scarcity and related cost increases or operational disruptions. Water resource use may generate tension with local water users and associated risks, potentially disrupting manufacturing operations and adversely affecting brand value. To mitigate water supply and treatment risks,

entities may adopt various strategies such as recycling process water, improving production techniques to lower water intensity, and improving water treatment systems.

Metrics RR-ST-140a.1. (1) Total water withdrawn, (2) total water consumed; percentage of each in regions with High or Extremely High Baseline Water Stress 1 The entity shall disclose the amount of water, in thousands of cubic meters, that was withdrawn from all sources.

1.1

Water sources include surface water (including water from wetlands,

rivers, lakes, and oceans), groundwater, rainwater collected directly and stored by the entity, and water and wastewater obtained from municipal water supplies, water utilities, or other entities.

2 The entity may disclose portions of its supply by source if, for example, significant portions of withdrawals are from non-freshwater sources.

2.1

Fresh water may be defined according to the local laws and regulations where the entity operates. If no legal definition exists, fresh water shall be considered to be water that has less than 1,000 parts per million of dissolved solids.

2.2

Water obtained from a water utility in compliance with jurisdictional drinking water regulations can be assumed to meet the definition of fresh water.

3 The entity shall disclose the amount of water, in thousands of cubic meters, that was consumed in its operations.

3.1

Water consumption is defined as:

3.1.1

Water that evaporates during withdrawal, use and discharge

3.1.2

Water that is directly or indirectly incorporated into the entity’s product or service IFRS S2 INDUSTRY-BASED GUIDANCE 6© IFRS Foundation

3.1.3

Water that does not otherwise return to the same catchment area from which it was withdrawn, such as water returned to another catchment area or the sea.

4 The entity shall analyze all of its operations for water risks and identify activities that withdraw and consume water in locations with High (40–80 percent) or Extremely High (>80 percent) Baseline Water Stress as classified by the World Resources Institute’s (WRI) Water Risk Atlas tool, Aqueduct.

5 The entity shall disclose its water withdrawn in locations with High or Extremely High Baseline Water Stress as a percentage of the total water withdrawn.

6 The entity shall disclose its water consumed in locations with High or Extremely High Baseline Water Stress as a percentage of the total water consumed.

RR-ST-140a.2. Description of water management risks and discussion of strategies and practices to mitigate those risks 1 The entity shall describe its water management risks associated with water withdrawals, water consumption and discharge of water or wastewater.

1.1

Risks associated with water withdrawals and water consumption include risks to the availability of adequate, clean water resources, which include:

1.1.1

Environmental constraints—such as operating in water-stressed regions,drought,concerns of aquatic impingement or entrainment, interannual or seasonal variability, and risks from the impact of climate change

1.1.2

Regulatory and financial constraints—such as volatility in water costs, stakeholder perceptions and concerns related to water withdrawals (for example, those from local communities, non-

governmental organisations and regulatory agencies), direct competition with and impact from the actions of other users (for example, commercial and municipal users), restrictions to withdrawals because of regulations, and constraints on the entity’s ability to obtain and retain water rights or permits

1.2

Risks associated with the discharge of water or wastewater include the ability to obtain rights or permits related to discharges, regulatory compliance related to discharges, restrictions to discharges, the ability to maintain control over the temperature of water discharges, liabilities,

reputational risks and increased operating costs because of regulation,

stakeholder perceptions and concerns related to water discharges (for example, those from local communities, non-governmental organisations and regulatory agencies).

2 The entity may describe water management risks in the context of:

2.1

How risks may vary by withdrawal source, including surface water (including water from wetlands, rivers, lakes and oceans), groundwater,

rainwater collected directly and stored by the entity, and water and wastewater obtained from municipal water supplies, water utilities or other entities; and IFRS S2 CLIMATE-RELATED DISCLOSURES–JUNE 2023© IFRS Foundation 7

2.2

How risks may vary by discharge destinations, including surface water,

groundwater or wastewater utilities.

3 The entity may discuss the potential effects that water management risks may have on its operations and the time line over which such risks are expected to manifest.

3.1

Effects include those associated with costs, revenue, liabilities, continuity of operations and reputation.

4 The entity shall discuss its short- and long-term strategies or plans to mitigate water management risks, which include:

4.1

The scope of its strategy, plans, goals or targets, such as how they relate to various business units, geographies or water-consuming operational processes.

4.2

Any water management goals or targets it has prioritised, and an analysis of performance against those goals or targets.

4.2.1

Goals and targets include those associated with reducing water withdrawals,reducing water consumption,reducing water discharges, reducing aquatic impingements, improving the quality of water discharges and regulatory compliance.

4.3

The activities and investments required to achieve the plans, goals or targets, and any risks or limiting factors that might affect achievement of the plans or targets.

4.4

Disclosure of strategies, plans, goals or targets shall be limited to activities that were ongoing (active) or reached completion during the reporting period.

5 For water management targets, the entity shall additionally disclose:

5.1

Whether the target is absolute or intensity-based, and the metric denominator if it is an intensity-based target.

5.2

The time lines for the water management activities, including the start year, the target year and the base year.

5.3

The mechanism(s) for achieving the target, including:

5.3.1

Efficiency efforts, such as the use of water recycling or closed-loop systems;

5.3.2

Product innovations, such as redesigning products or services to require less water;

5.3.3

Process and equipment innovations, such as those that enable the reduction of aquatic impingements or entrainments;

5.3.4

Use of tools and technologies (for example, the World Wildlife Fund Water Risk Filter, the Global Water Tool and Water Footprint Network Footprint Assessment Tool) to analyse water use, risks and opportunities; and IFRS S2 INDUSTRY-BASED GUIDANCE 8© IFRS Foundation

5.3.5

Collaborations or programmes in place with the community or other organisations

5.4

The percentage reduction or improvement from the base year, in which the base year is the first year against which water management targets are evaluated towards the achievement of the target.

6 The entity shall discuss whether its water management practices result in any additional lifecycle impacts or trade-offs in its organisation, including trade-offs in land use, energy production and greenhouse gas (GHG) emissions, and why the entity chose these practices despite lifecycle trade-offs.

Management of Energy Infrastructure Integration & Related Regulations Topic Summary Entities in the industry have faced challenges in establishing solar energy as a cost-

competitive means of energy production and GHG reduction, and they have encountered difficulty in capturing a greater market share of global energy generation. To promote greater adoption of solar, the industry may benefit by preventing systemic disruptions to the existing energy infrastructure and essential energy services. Entities are innovating to overcome the technical challenges of increasing solar integration with the grid. They also are engaging regulatory agencies and policymakers to reduce regulatory barriers to solar energy adoption, many of which are emerging because of concerns regarding increasing overall grid electricity costs and grid disruptions. Solar entities are investing in innovative technologies to reduce hardware and installation costs, and they are pursuing business-model innovation to reduce the cost of capital and facilitate the purchase of solar energy systems. Solar technology entities may improve their competitiveness through deploying one or more of these strategies successfully to ensure their ability to scale over the long term.

Metrics RR-ST-410a.1. Description of risks associated with integration of solar energy into existing energy infrastructure and discussion of efforts to manage those risks 1 The entity shall describe risks, challenges and barriers surrounding the integration of solar energy into the existing energy infrastructure in terms of its products and services.

1.1

Relevant information to provide may include:

1.1.1

Technological barriers to increased integration of solar energy,

such as limited transmission network connectivity, lack of access to high-capacity transmission networks,variability in interconnection standards,and inverter interconnection requirements

1.1.2

Operational barriers to increased integration of solar energy, such as curtailment and challenges associated with the variable nature of solar energy IFRS S2 CLIMATE-RELATED DISCLOSURES–JUNE 2023© IFRS Foundation 9

1.1.3

Customer motivations for seeking increased solar energy integration, such as economic advantages, regulatory compliance,

risk mitigation, and public perception or reputational risk 2 The entity shall discuss its strategy and approach to design, development and sales to integrate solar energy into the existing energy infrastructure.

2.1

Relevant strategies and approaches may include:

2.1.1

Technical product design

2.1.2

New product or product components development (for example,smart inverters)

2.1.3

Technical innovation to reduce the cost of solar energy modules or systems

2.1.4

Third-party partnerships and product integrations

2.1.5

Project design (for example, project siting in regions with reduced curtailment risk)

2.1.6

Project risk transfer (for example, power purchase agreements (PPAs) with curtailment caps)

2.1.7

Marketing and sales (for example, focus on regions or customer segments with less grid integration risk)

2.1.8

Incorporating energy storage technology or ‘smart grid’ technology into solar energy systems,whether through proprietary technological development or collaboration with third parties

2.1.9

Products designed to operate ‘off-grid’ or as part of ‘micro-grids’

2.1.10 Innovation that decreases solar energy’s levelised cost of energy

(LCOE) through the reduction in ‘soft costs’, including financing,

leasing, customer acquisition and development costs

2.1.11 Innovation that increases the total addressable solar energy market

2.2

Relevant information to provide includes:

2.2.1

Whether the entity pursues more than one approach

2.2.2

Whether the entity’s approach varies by market

2.2.3

The intensity of R&D requirements for the entity’s approach and strategy

2.2.4

The level of competition relative to the entity’s approach and strategy

2.2.5

How the entity evaluates the success of its approach 3 The scope of disclosure shall include all the entity’s solar energy-related products,

product components, projects, project development efforts and services, as well as the associated marketing and sales strategies, in the markets in which the entity operates.

4 The entity may describe how energy infrastructure influences the establishment of sales targets, strategies for specific product categories, technologies or marketing practices in specific regions, research and development (R&D) objectives, and partnerships.

RR-ST-410a.2. Description of risks and opportunities associated with energy policy and its effect on the integration of solar energy into existing energy infrastructure 1 The entity shall discuss the risks and opportunities associated with energy policy and the effect energy policy has on solar energy integration into existing energy infrastructure, in which:

1.1

Relevant risks and opportunities may include:

1.1.1

Direct or indirect government subsidization of solar energy

1.1.2

International trade policy disputes and agreements

1.1.3

Public policies that set out minimum requirements for renewable energy generation (for example, renewable portfolio standards)

1.1.4

Public policies that affect the monetisation of solar energy generation, which may include net metering, time-of-use rates,

feed-in tariffs, utility fixed fees and renewable energy priority dispatch

1.1.5

Public policies that affect the financing and tax structure of solar energy, which may include investment tax credits, property-

assessed clean energy, loan guarantees and depreciation schedules

1.1.6

Public policies pertaining to any external social costs created by distributed solar energy generation

1.1.7

Policies pertaining to electricity transmission, which may include regional transmission planning, interconnected transmission networks,interconnection standards and high-capacity transmission networks

1.1.8

Replacements to ageing energy generation and transmission infrastructure 2 The entity shall identify the risks and opportunities related to legislation,

regulation, rule-making and the overall political environment (hereafter referred to collectively as ‘regulatory and political environment’) regarding energy policy and the integration of solar energy into energy infrastructure.

2.1

The scope shall include existing, emerging and known future risks and opportunities.

2.2

The scope shall include risks and opportunities that may exist at each jurisdictional level, international governmental organisations, and regulatory organisations.

2.2.1

The scope shall include the relevant policies of utilities, rule-

makers and regulators.

3 Relevant information to provide includes, but is not limited to, the impact on demand for the entity’s solar energy products and services and the impact on business viability related to risks and opportunities associated with energy policy and the impact energy policy has on the integration of solar energy into the existing energy infrastructure.

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