The scope for onsite renewables

Victor Parrilla on how to account for onsite renewables in carbon reporting

Early this year, new guidance was published on how organisations should measure scope 2 emissions, from purchased or acquired electricity, steam, heat and cooling, for example. It also clarified the reporting of emissions associated with the consumption of renewable energy.

Two figures

Under the new guidance, issued by the World Resources Institute (WRI), companies that consume low-carbon electricity can now reflect the emissions savings through their greenhouse-gas reporting. The approach requires companies to report two carbon emission figures for their electricity use: a location figure using standard grid factors; and a market figure of the GHG emissions based on their choice of supply. WRI says the market-based method shows emissions from electricity that firms have purposefully chosen.

The market-based figure depends on "ownership" of energy attributes. These represent the environmental (and sometimes other non-power) qualities of renewable electricity, such as zero-carbon generation. When a renewables installation produces electricity, energy attributes are generated too. Both attributes can then be sold or used together or separately.

Onsite renewables

There are five questions organisations must answer to report renewable energy correctly under the guidance.

1. Is your onsite renewable installation connected to the grid? If the answer is no, the electricity generated can be regarded as either low or zero carbon in the organisation's scope 2 emissions. However, most installations will be connected, so the organisation should move to the next question.
2. Do you benefit from feed-in tariffs (FITs) paid by the government? Most companies receive FITs. Those that do must answer the next question; those that do not should go straight to question four.
3. Does national regulation enable the organisation to receive both FITs and energy attributes for its renewable energy or does the regulation prohibit it from receiving energy attributes if it receives FITs? In some countries, including the UK, renewable projects that benefit from FITs have their environmental attributes retired on behalf of all consumers. Public taxation funds the attributes so the government believes it owns them. In such cases, the electricity generated needs to be reported as non-zero carbon (see top panel, right). In other countries, including Hungary, ownership of energy attributes is allowed in some circumstances in addition to national subsidies. If this applies, move to the next question.
4. Does the organisation consume the electricity produced onsite? If yes, it can report this as either low or zero carbon in the organisation's scope 2 emissions; if the electricity is sold, question five applies. It may be that the organisation consumes some of the electricity produced onsite and sells the remainder. In this case, the organisation should report the electricity it uses as zero carbon and answer question five for the electricity it sells.
5. Does national regulation allow organisations to sell electricity generated from onsite renewables and retain its energy attributes? In many countries, when the electricity is sold, its environmental attributes are transferred at the same time. If this is the case, the electricity generated is classed as not zero carbon for reporting purposes and the appropriate emission factor applies. If national regulation allows the organisation to retain the attributes after the electricity is sold, these steps must be taken:

• identify what scheme operates in the country for carbon-related energy certificates to be issued;
• register the renewables installation and obtain the certificates; and
• retire them in order to reduce the carbon footprint of the electricity purchased and consumed. This enables the organisation to claim zero carbon for the electricity - typically one certificate equals 1MWh.

The new guidance should result in companies applying them to reduce their GHG emissions. WRI says nearly 40% of global emissions can be traced to electricity generation, and half of that is consumed by businesses. The new guidance seeks to improve footprint accuracy and provides a further incentive to use renewable electricity, whether it is produced onsite or bought through a supplier.

Reporting examples: UK and Italy