New Scope 2 reporting guidelines

The Carbon Disclosure Project issued new guidance last week, on how businesses should account for Scope 2 emissions - otherwise known as emissions from electricity. The revision recognises that, prior to this, the guidelines were in a bit of a mess when it came to the question of how to account for emissions from electricity generated from renewable sources.

Everyone felt that the blanket use of a grid average emissions factor was wrong but no one had come up with an alternative.  The good folk of the GHG Protocol had maintained a stony silence while their working group looked into the issue, Defra created a Gross and Net approach, energy suppliers had exploited the confusion to sell "green" tariffs that were anything but and businesses that had paid a premium for a renewable energy supply felt cheated that they were then not able to use it in their green house gas calculations.         

There are 2 major differences in the new guidance. 

In simple terms, businesses are now required to account for emissions from electricity using a supplier specific conversion factor (not grid average), based on the supplier’s declared fuel mix.

Furthermore, businesses can log zero emissions for each MW of electricity consumed for which they receive an acceptable tracking instrument.  These instruments are Guarantees of Origin, confirming that the electricity consumed corresponds to an equivalent amount of electricity generated from a renewable source.    

Putting to one side the fact that this will add another level of complexity to an already complicated process (one of our clients has almost 100,000 electricity meters)  its interesting to look through the facts to speculate on the potential implications -  

1. Procurement of electricity generated from renewable sources will now be seen as a valid component of a corrporate GHG reduction strategy.  Will this increase demand, price and therefore encourage investment in new supply? Clearly this is the hope from a policy perspective

  

2. Energy company tariffs will be less important than fuel mix. Will suppliers scale back green tariffs, which have had little to recommend them and aim to buy more renewable supply?     

3. EDF and British Gas could be beneficiaries.  A look at table below shows the fuel mix of major suppliers in the UK. As maybe expected, Good energy and Ecotricity top the table for lowest emissions per kWh, but with the likelihood of higher unit costs.  EDF and British Gas, on the other hand, with high proportion of nuclear in the fuel mix, are significantly better than the rest at no premium.  

Supplier	Coal	Gas	Nuclear	Renewable	CO2*
Good Energy	0.00%	0.00%	0.00%	100%	0.000 g/kWh
Ecotricity	12.10%	19.70%	2.30%	64.30%	195.5 g/kWh
EDF Energy	27.90%	5.70%	61.80%	3.90%	280 g/kWh
British Gas (Centrica)	11.40%	56.90%	22.80%	7.70%	338 g/kWh
EBICo	29%	59%	1%	10%	505 g/kWh
Scottish and Southern Energy	29%	59%	1%	10%	505 g/kWh
npower (RWE npower)	28%	60%	1%	9%	509 g/kWh
Utility Warehouse	28%	60%	1%	9%	509 g/kWh
E.ON Energy	34.30%	47%	5%	10.20%	543 g/kWh
ScottishPower	48.90%	43.40%	0.00%	7.60%	620 g/kWh
UK average	28.90%	44.20%	17.30%	7.90%	450 g/kWh

Source - Uswitch