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Target zero emissions and fair accounting for renewable energy

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CONTRIBUTOR: Switching to 100 per cent renewable electricity is the single biggest step most organisations can take towards achieving zero emissions. Renewable electricity can either be generated on-site or delivered through the grid and in either case robust accounting is necessary to support claims of zero emissions, avoiding double-counting and ensuring customers of GreenPower or Renewable Energy Certificates are certain of getting what they pay for. 

As a growing number of property owners commit to zero emissions it’s timely to check that Australia’s renewable energy and emissions accounting withstands all challenges.

Australia is fortunate to have mechanisms that allow all electricity consumers to purchase renewable energy through the grid, either as GreenPower or by voluntarily retiring renewable energy certificates (LGCs, or large-scale generation certificates to be precise). 

The latest revision of the Greenhouse Gas Protocol endorses this approach to reducing emissions and provides accounting methods that haven’t yet been widely applied in Australia.

Carbon accounting needs to recognise the greening of the grid and other programs

As the use of renewable electricity grows, the way it is treated in carbon accounting becomes more important, more material.  Voluntary purchases through the GreenPower program or mandatory inclusion of renewable energy through the renewable energy target are all contributing to greening of the grid and need to be recognised in an organisation’s carbon inventory. 

The Greenhouse Gas Protocol, a fundamental reference for greenhouse emissions accounting, was updated in 2015 to ensure that organisations moving to renewable energy could ensure reliable claims. 

The GHG Protocol Scope 2 Guidance requires Australian companies reporting emissions to use two methods of accounting and reporting; the location based method and the market-based method.  

Location based accounting most resembles the method Australian organisations have been using for decades and is largely consistent with the National Greenhouse and Energy Reporting Scheme, or NGERS. 

Scope 2 emissions are calculated taking the sum of energy consumed (generally electricity but can also include thermal energy) and multiplying this total by a location based emission factor.  Under this method there is no means to recognise the use of renewables except that they may have contributed to a reduction in the average grid emission factor for all consumers.

The market based method recognises renewable energy purchases as long as the certificates or contracts used to purchase renewable energy meet defined quality criteria. 

Australian Renewable Energy Certificates and the GreenPower program are called out in the Protocol as being examples of certificate systems of the highest quality

Fortunately, Australian Renewable Energy Certificates and the GreenPower program are called out in the Protocol as being examples of certificate systems of the highest quality.  

Under the market based method renewable electricity supply is recognised as having a zero emission factor, emissions that never happened.  

Once 100 per cent renewable electricity is achieved, which might comprise 20 per cent delivered via the Renewable Energy Target and 80 per cent voluntary certificate retirement Scope 2 emissions have been totally avoided.

In the Australian property sector both DEXUS and GPT have moved to emissions reporting aligned with the Protocol, as Steve Ford, Head of Sustainability and Energy says:

“Applying the GHG Protocol Scope 2 Guidance ensures GPT is reporting in accordance with a globally accepted standard. More importantly, it helps illustrate to stakeholders the steps we are taking to ensure long term, sustainable carbon emission reductions in a way that avoids double counting.”

A new report from the Low Carbon Living CRC (Calculating the Market-Based Emissions-Intensity of Electricity Consumed in Australia – SP0021 ) that analyses in detail the potential for double counting and reliable emissions claims in the Australian market concludes that 

There is an opportunity to define, and populate with available data, a market based methodology for greenhouse gas emissions associated with electricity consumption. This approach – which would complement and not replace current regional-based accounting constructs – is consistent with international best practice as set out in the World Resources Institute’s GHG Protocol Scope 2 Guidance.

The report provides valuable analysis of the methods to define Australian residual mix emission factors to be used in the case where an organisation hasn’t reached 100 per cent renewables. 

In the market based method the residual mix factor replaces the regional average grid factors that are used in the location based method, and by NGERS.  The residual mix factor represents the emissions intensity of grid electricity after all the tradeable renewable energy has been backed out.  

If an organisation has 20 per cent electricity from mandatory renewables, 30 per cent GreenPower the remaining 50 per cent electricity would have the residual mix factor applied to determine the greenhouse gas total. 

In lieu of published residual mix factors DEXUS and GPT have taken slightly different approaches. DEXUS has used the published average grid factors while GPT explains in the most recent environmental data pack that an estimate of residual mix factors has been made by factoring average emission factors by the percentage renewable energy published by the Clean Energy Regulator. 

Residual mix factors will be applied to an ever decreasing amount of non renewables and are redundant for all organisations that are targeting zero emissions through 100 per cent renewables.  Published factors would avoid any confusion.

Additionality – it’s important 

In any discussion about purchasing renewable energy the question of “additionality” arises.  It’s an important concept but one that must be dealt with carefully so that it doesn’t just become an excuse for inaction.  Anyone voluntarily buying renewable energy would want to know that it is additional to the National Renewable Energy Target and voluntarily retiring LGCs, or buying GreenPower is a clear method of ensuring that’s the case.  

Others may want to know if the renewable energy they’re purchasing is additional to Australia’s international commitments or has financial additionality or project additionality, so that this action results in a new renewable energy generator being installed. 

These questions, commonly applied when determining the integrity of carbon offsets, are not useful when considering renewable energy leading the GHG Protocol to include, “Offset additionality criteria are not fundamental to, or largely compatible with, the underlying rules for market-based scope 2 accounting and allocation.”  

The C40 group of councils released a new standard this month (Defining Carbon Neutrality for Cities and Managing Residual Emissions – C40 ) that provides clear guidance compatible with the GHG Protocol

In Australia, state based energy targets should also be recognised in an organisation’s carbon inventory; the ACT target of 100 per cent renewable electricity by 2020 is among the most ambitious.  

The ACT Government’s website defines that the target is to be achieved by purchasing renewable energy in the form of LGCs from GreenPower accredited generators and retiring these certificates in proportion to the total of all electricity consumed in the territory after allowing for the National Renewable Energy Target.   

This method is analogous to all territory electricity consumers buying 100 per cent GreenPower.  Leading to the conclusion that all organisations with assets in the ACT in 2020 will have zero scope 2 emissions for as long as the program is maintained using the market based method. 

Similar programs in other states could follow ACT’s lead in providing a clear definition (and hopefully, transparency) of the purchase and retirement of certificates.

The GHG Protocol Scope 2 Guidance provides a globally accepted method for accounting for renewable energy that can be readily adopted by Australian organisations targeting zero emissions.   

Organisations can confidently purchase renewable energy via LGCs or GreenPower, take into account state and national renewable energy targets and avoid double counting or double investment.

The author thanks GPT and Stockland for contributing to research on scope 2 reporting.  The Property Council of Australia has commissioned an Australian Workbook on Accounting for Scope 2 Emissions on behalf of members targeting zero emission buildings.  If you would like to discuss or contribute to this work please email bruce.precious@sixcapitalsconsulting.com.au

Bruce Precious, is principal consultant, Six Capitals Consulting


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