100% renewable energy: Making that commitment count
September 12, 2023
Could an emissions accounting update drive the next phase of our energy transition? Let’s find out.
As the risks of climate change continue to gain more public awareness, a growing number of organizations have established climate goals. Goals are an important starting point, but the real impacts come from action. Measuring greenhouse gas (GHG) emissions—and being able to track reductions—can be surprisingly complicated. Why? Because of all the ways that GHG emissions are generated. GHG emissions accounting may sound like a bland topic, but it’s critical to decarbonization.
Updating emissions accounting standards could drive the evolution of the energy transition. So, let’s dig into how organizations around the world are making commitments to reduce emissions and combat the climate crisis.
As renewables like solar panels and wind turbines have become more affordable and popular, electricity system operators have had to adapt to the variability of these resources.
What are Scope 1, 2, 3 emissions?
Accounting for all the ways an organization contributes to GHGs is not easy. After all, our economy and energy systems are complex. The GHG Protocol—a global standard for organizational GHG emission accounting—uses three scopes of emissions. Scope 1 emissions result from direct use of fossil fuels. Scope 2 emissions are indirectly generated from energy purchased. This is usually electricity, but also steam, heat, or cooling utility services. Scope 3 emissions are the hardest to track. They include all of the emissions that go into producing products and services throughout an organization’s supply chain. The categorization of emissions scopes moves from those that are most directly measured (Scope 1) to the emissions that aren’t (Scope 3).
Measuring GHG emissions isn’t exactly new. What is emerging are new regulations for companies to calculate their emissions and publicly include them in regulated financials. The global focus on the energy transition, along with technological innovation, is creating new opportunities to drive greater impact. This is particularly true with Scope 2 emissions in the electricity sector. It’s key to understand how Scope 2 emissions are currently measured and how that approach has supported renewable energy around the world. Only then can we consider improvements to Scope 2 emissions accounting and examine the real-world impact that these changes could make.
Updating emissions accounting standards could drive the evolution of the energy transition.
How are Scope 2 emissions calculated?
Electricity systems are complicated engineering feats. Vast networks of distribution and transmission lines bring electricity to customers as they plug-in and turn-on appliances. The GHG emissions resulting from electricity consumption vary depending on the energy mix used to generate the electricity. Some regional grids rely heavily on fossil fuels like coal and natural gas, which result in a high level of GHG emissions. Other regional grids incorporate renewable energy—such as solar, wind, or hydro—or nuclear power, resulting in lower emissions.
The amount of GHGs produced from an electrical system fluctuates by the day, minute, or month. This is because different generation resources combine to supply the electricity needed at that very moment. An electricity system with lots of solar generation resources will produce fewer emissions during the day when the sun is shining. But the emissions in the region might increase in the evening if fossil fuel generation is needed as the sun sets and solar production drops off.
Under the current GHG Protocol, Scope 2 emissions are determined by collecting regional data on the generation mix and calculating the average annual emission production. Organizations can review their annual energy consumption and determine their associated Scope 2 emissions by applying a local emissions factor for the year. Location-based Scope 2 emissions reference the actual energy consumption. Market-based Scope 2 emissions consider the generation sources of the regional grid and the use of renewable energy. Once quantified, the organization can then consider next steps for reducing their Scope 2 emissions.
It’s key to understand how Scope 2 emissions are currently measured and how that approach has supported renewable energy around the world.
How can we reduce Scope 2 emissions?
Shy of moving operations to a region with lower emissions, organizations looking to reduce their Scope 2 emissions have a few options. First, they can find efficiencies that reduce their energy consumption. Doing this will reduce the emissions produced equivalent to the emission factor for their location. Increasing energy efficiency is often the most cost-effective means to reduce emissions.
The best way for organizations looking to drastically reduce their market-based Scope 2 emissions is to work with their utility companies to purchase renewable energy or invest in on-site renewable generation. Alternatively, many purchase Energy Attribute Certificates, more commonly known as Renewable Energy Certificates (RECs).These certificates are used to verify the production of a specific amount of renewable energy. Organizations looking to eliminate their Scope 2 emissions pay renewable energy developers to have exclusive rights to a project’s RECs for renewable energy generation equivalent to their consumption. Using the purchased RECs as proof, an organization can then claim to use 100% renewable energy. These can come in the form of bundled RECs when sold with the associated energy use, or unbundled RECs when they are not.
The added value of these credits offers renewable energy developers a second stream of income. In addition to selling energy generated by their facilities to a local grid, they can also sell the certificates to organizations that want to reduce their Scope 2 emissions. These credits have been important for incentivizing the development of renewable energy projects.
The best way for organizations looking to drastically reduce their market-based Scope 2 emissions is to work with their utility companies to purchase renewable energy or invest in on-site renewable generation.
The evolution to carbon free energy
The concept of using unbundled RECs to claim 100% renewable energy consumption is abstract. While RECs guarantee the production of a certain quantity of renewable energy, that energy may have no relation to the actual energy consumed by the organization claiming to be 100% renewable energy powered.
A new target called 24/7 Carbon-free Energy (CFE) aims to address each of these issues and improve current accounting and REC use. It pushes climate commitments to the next level and believes organizations should only be able to claim credit for renewable energy that can be delivered to their facility. These are bundled RECs. In practice, this means organizations can only claim RECs for renewable energy projects that are connected into their electricity system. As a result, organizations wanting to meet 24/7 Carbon-free Energy goals need to support local projects.
Another part of 24/7 Carbon-free Energy is aligning RECs to match when energy is consumed. Doing this has the potential to drive investment in enabling technologies—such as energy storage—that will be key to the energy transition. But this is a bigger task than it may initially seem. Instead of measuring energy use and RECs on a yearly basis, the calculations need to be completed on a much smaller time scale, using hourly measurements.
Innovations in metering have made energy accounting on an hourly level possible, but this is not a trivial update. Instead of focusing on one annual total, it’s necessary to account for 8,760 unique hours in a year. The benefit of this type of evolution in emission targets would mean that organizations would be incentivized to minimize emissions more directly, but the level of effort to do so could be significant.
As the risks of climate change continue to gain more public awareness, a growing number of organizations have established climate goals.
The future of our energy mix
Increased investment in renewable energy is undoubtedly a great benefit as society aims to mitigate the effects of climate change. And, in the earliest phases of our energy transition, 100% renewable energy goals stimulated renewable energy development. That’s clearly a net-benefit to climate action.
As renewables like solar panels and wind turbines have become more affordable and popular, electricity system operators have had to adapt to the variability of these resources. In some cases, however, this has promoted the use of new GHG emitting sources of power like natural gas. Why? Because it can react quickly to help balance the grid as renewable generation sources wain and is much less carbon intensive than coal.
The emerging efforts to make 24/7 Carbon-free Energy commitments are pushing organizations to support investments in energy storage. It shows a real promise in promoting renewables but also introduces a number of complexities regarding emissions calculations. The focus of all our efforts needs to be to encourage system-wide emissions reductions and real change, rather than just focusing on producing numbers in a ledger.