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TSMC brags of 20TWh solar scheme. Feels a bit like greenwashing to us

A welcome development, but let's not overdo it

Chip maker TSMC in collaboration with ARK Power on Friday said it intended to source 20,000 gigawatt-hours of electricity from solar power.

While that may sound immense, it's not nearly as big as TSMC might have you believe. The 20TWh sum is an aggregate spanning the project's 20-year term. In reality, TSMC and ARK Power are targeting 1,000 gigawatt hours over a year from solar power. By our estimate that's roughly equivalent to 114MW of effective power.

Of course the sun only shines for so many hours a day, so to hit that, we expect the actual deployed capacity will be a fair bit better to account for this. ARK projects that the project should lead to the installation of about 2GW of solar capacity within three years. Still, that's nowhere near what TSMC's 20,000GWh claims would lead you to believe.

What's more, TSMC has only actually committed to purchasing 500GWh of solar energy from ARK annually. The other 500GWh of annual generation will be made available to TSMC's suppliers to jointly subscribe to. In this regard, the project is an apparent bid to not only reduce TSMC's greenhouse gas emissions (GHG), but get its suppliers — which contribute in part to the foundry's Scope 3 emission — to reduce their own.

As TSMC explains it, under the program, participating suppliers will be provided electrical evaluation and planning services, as well as a 20-year service agreement designed to reduce the overall capex expenditure and reduce the barrier to adoption. To us, this sounds a little like a group buy.

"Through this innovative joint procurement model for renewable energy, we join hands with our industry partners to promote a sustainable low-carbon semiconductor supply chain," J.K. Lin, SVP of information technology and materials management at TSMC, said in a statement.

As altruistic as this might sound, it's in TSMC's interest for its suppliers to curb their GHG emissions. It's no secret that semiconductor manufacturing is a notoriously resource intensive industry. And, while the solar project will inevitably contribute to TSMC's stated goal of net-zero emissions by 2050, achieving that goal is complicated by the semiconductor industry's complex supply chains, many of which contribute to the company's Scope-3, or indirect, emissions.

Scope-3 emissions are a major contributor to a company's carbon footprint, as it takes into account the greenhouse gasses generated by the sale of goods and services, the transportation of those services, and the use of products over their lifetimes. This means that if suppliers curb their scope-1 or-2 emissions by deploying solar or purchasing a larger share of renewable energy, TSMC's scope-3 emissions will be reduced as well.

This isn't the first time TSMC has asked its suppliers to clean up their acts. According to TSMC's latest ESG report, it's asked "high-energy consumption suppliers" to pass GHG emissions inventories which have to be confirmed by a third party. The company has also asked its suppliers to set annual targets for reducing their annual energy consumption. And the company says it's worked with its partners to tweak delivery schedules to curb emissions from shipping.

With that said, the world's largest chip manufacturer's emissions remain considerable. In 2021, the Taiwanese giant reported roughly 16 million metric tons of combined GHG emissions. ®

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