100% renewable energy: Making that commitment count
September 12, 2023
Tracking carbon emissions is now a requirement for many organisations and crucial to meeting climate targets. But getting it right is complicated.
Could an emissions accounting update drive the next phase of Australasia's energy transition? Let¡¯s find out.
Tracking and reporting on greenhouse gas (GHG) emissions is now a requirement for many organisations on both sides of the Tasman. With Australia and New Zealand aiming for net zero by 2050, plus increasing public awareness of the risks of climate change, new regulations are being introduced to help reach our goals. ?We¡¯re also seeing more businesses of all shapes and sizes setting their own net zero targets.
But measuring GHG emissions can be complicated. This is especially true for indirect emissions. These are the emissions that are outside of organisation¡¯s control and it¡¯s difficult for to track their progress. Also, many organisations don¡¯t have a clear view of what data they can track and report on in the first place.
Getting GHG emissions accounting right may sound like a bland topic. But it¡¯s critical to meeting both organisational and global climate targets.
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 organisation contributes to GHG emissions is not easy. After all, our economies and energy systems are complex. The GHG Protocol¡ªa global standard for organisational GHG emission accounting¡ªuses three scopes of emissions. The categorisation of emissions scopes moves from those that are most directly measured (Scope 1) to the emissions that aren¡¯t (Scope 3).
Scope 1 emissions result from an organisation¡¯s own use of fossil fuels. Scope 2 emissions are indirectly generated from energy purchased. This is usually electricity. It can include 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 organisation¡¯s supply chain.
Measuring GHG emissions isn¡¯t new. What¡¯s changed is the introduction of new regulations that require organisations to calculate their emissions and publicly include them in regulated financials. Australia and New Zealand have both introduced legislation aimed at reducing GHG emissions and promoting renewable energy. These include reporting schemes like the Renewable Energy Target (RET) and Australian National Greenhouse and Energy Reporting (NGER) schemes and the New Zealand Emissions Trading Scheme (NZETS).
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 measured now and how that approach has supported renewable energy around the world. Only then can we look for 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 from electricity consumption vary. They depend on the energy mix used to generate the power. Some regional grids rely heavily on fossil fuels like coal and natural gas. That results in a high level of GHG emissions. Other regional grids incorporate renewable energy sources¡ªsuch as solar, wind, or hydropower¡ªresulting in lower emissions.
The amount of GHGs produced from an electrical system fluctuates by the minute, day, and month. This is because different generation resources combine to supply the electricity needed at that very moment. A 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.
Right now, we determine Scope 2 emissions by collecting regional data on the generation mix and calculating the average annual emission production. It results in an emission factor describing the annual average emissions per kWh of energy consumption. Organisations can review their annual energy consumption and determine their associated Scope 2 emissions by applying a local emissions factor for the year. Once quantified, the organisation can then consider next steps for reducing its Scope 2 emissions.
How can we reduce Scope 2 emissions?
Organisations looking to reduce their Scope 2 emissions have a few options. First, they can find internal efficiencies that reduce their consumption. Doing this will reduce the emissions produced equivalent to the emission factor for their location. Boosting energy efficiency is often the most cost-effective means to reduce emissions.
Australia and New Zealand have both introduced legislation aimed at reducing GHG emissions and promoting renewable energy.
For those looking to greatly reduce their market-based Scope 2 emissions, they can work with utility companies to purchase renewable energy or invest in on-site renewable generation. One example is the Gunnedah Solar Farm in New South Wales, which will help power Amazon¡¯s operations in Australia. Alternatively, many purchase renewable energy certificates (RECs) under the Australian RET framework or the voluntary New Zealand Energy Certificate System (NZECS). These certificates are used to verify the production of a certain amount of renewable energy. They make it easier to track the generation and use of renewable energy. They also support renewable energy projects and help meet regulatory requirements or voluntary sustainability goals by offsetting their carbon footprint.
What can an organization do if it wants to eliminate its Scope 2 emissions? It can pay renewable energy developers to have exclusive rights to a project¡¯s RECs for renewable energy generation equivalent to its consumption. Using the RECs as proof, an organisation can then claim to use 100 percent renewable energy. RECs function as proof of investment in renewable energy projects, but they do not necessarily have a physical relationship to the energy being used and consumed by an organisation. 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 those looking to reduce their Scope 2 emissions. These credits have been important in developing renewable energy projects.?
The best way for organisations 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 percent renewable energy use is abstract. RECs guarantee the production of a certain quantity of renewable energy. That energy may have no relation to the actual energy consumed by the organisation claiming to be 100 percent powered by renewables.
A new target called 24/7 Carbon-free Energy, set by the UN-supported international organisation Sustainable Energy for All, aims to address these issues and improve current accounting and REC use. It pushes climate commitments to the next level. It says organisations should only be able to claim credit for renewable energy that can be delivered to their facility, through the purchase of bundled RECs. In practice, this means they can only claim RECs for renewable energy projects that are connected into their electricity system. As a result, organisations wanting to meet 24/7 Carbon-free Energy goals will need to support local renewable projects.
Another part of 24/7 Carbon-free Energy is aligning RECs to match when energy is consumed. It has the potential to drive investment in enabling technologies¡ªsuch as energy storage¡ªthat are key to the energy transition. But this is a bigger task than it may 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. Instead of focusing on one annual total, it can account for 8,760 unique hours in a year. This incentivises a reduction in 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 organisations have established climate goals.
The future of our energy mix
As society aims to mitigate the effects of climate change, more investments in renewable energy are great. Goals of 100 percent renewable energy stimulated development in the early phases of the energy transition. That¡¯s clearly a net benefit to climate action.
Renewables like solar panels and wind turbines are more affordable and popular. That means electricity system operators have adapted to the variability of these resources. In some cases, 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 wane; it is much less carbon-intensive than coal.
The efforts to make 24/7 Carbon-free Energy commitments are pushing organisations to support more energy storage. It shows a real promise in promoting renewables but also introduces some complexities around emissions calculations. The focus of all our efforts needs to encourage system-wide emissions reductions and real change. That, rather than just focusing on producing numbers in a ledger, is key.