What questions do you have about green power “purchasing”?
If you work on or with corporate greenhouse gas (GHG) reporting, unfortunately, you have probably been using misleading guidance on Scope 2 emissions. Why and how, though, is an unusually complicated question.
To begin helping clean up the legacy mess within Scope 2 emissions reporting, we created a new frequently asked questions (FAQ) resource. This FAQ answers questions on GHG emissions accounting and green power purchasing claims and does so with an evidence-based approach. In doing so, it necessarily provides explanations of fundamental, yet often misunderstood, concepts in environmental accounting. It also exposes flawed practices in GHG reporting associated with voluntary market Energy Attribute Certificates—referred to as either Renewable Energy Certificates (RECs) or Guarantees of Origin (GOs).
We strongly agree that accelerated policy and financial support for renewable energy deployment is urgently needed to help address climate change! However, it is also critical for GHG professionals to ensure the credibility of GHG disclosures by documenting true environmental outcomes as it supports decision making. Unfortunately, current practices in Scope 2 reporting jeopardize this credibility.
We start this new FAQ with the following basic, but critical, question:
What is a “green power purchase”?
Frustratingly, from the perspective of an end-use consumer on an electricity distribution grid, there is no accepted definition. A muddled miscellany of financial and contractual arrangements is commonly referred to as “buying green power,” most of which have little bearing on the origins of the electrical energy a buyer physically consumes. This reality presents challenges for representing “green power purchases” in a company’s GHG emissions reporting.
You can explore the full FAQ here.
For a document version of the FAQ, click below:
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This new FAQ was authored by the Greenhouse Gas Management Institute and the Stockholm Environment Institute through a grant from the High Tide Foundation.
Please contact [email protected] with any questions or comments.
Photo Credit: “Portals” by Matt Blaze is licensed under CC BY-NC 2.0. https://creativecommons.org/licenses/by-nc-nd/2.0/
Does the premise that paying for RECs does not drive investment in renewable sources still hold with the higher prices for RECs? In Australia LGCs are approaching AU$50/MWh, and while it is correlation not necessarily cause, the price of the LGCs in Australia does appear to be increasing with the increased demand for renewables.
Are we also making life too hard for ourselves in GHG accounting if we have to look at the traceability of electricity after it has entered the grid? Electricity retailers (in deregulated markets) couldn’t exist if they had to have strict traceability when they were charging customers for their electricity.
Thank you for your question, Steve. I am not fully familiar with Australia’s system and development to date as our research is primarily focused on the USA and EU. We would assume the same conclusions would apply to other contexts unless evidence can be identified showing how and why it would be different in the country’s context. Taking a stepping back and looking from an economy perspective, I would investigate the trend of the compliance vs. voluntary LGCs against the country’s national renewable energy target (e.g. Renewable Energy Act 2000). If there’s a meaningful quota in the country, then most likely utilities would demand and buy most, if not all, LGCs for compliance purposes and hence leaving little to nothing for the voluntary market. In that case, this could also be impacting the price curve for LGCs in the country (e.g., could be a sign of scarcity). Thus, a main driver for investment (and the price signal) in renewable generation would be coming from the compliance side.
As we mention in the FAQ, these energy attribute certificates are not, and were not originally, designed for traceability of electricity to an end-user and should not function as such. They are only a record of generation. As you say, that would not only be a headache but also physically not possible. For corporate GHG accounting, emissions from grid-purchased electricity can only be properly attributed to an entity with a location-based average emission factor.