Energy Customers, Solution Providers, and Stakeholders Assess the Role of Avoided Emissions in Decision-Making and Greenhouse Gas Accounting
The Clean Energy Buyers Institute’s NextGen Activator Workshop series is defining the necessary updates to the current system of energy attribute certificates, data, leadership recognition programs, and greenhouse gas accounting to enable an expansion of the suite of carbon-free procurement options available to customers to achieve their clean energy goals and better optimize their decarbonization impact.
A growing group of energy customers want their carbon-free electricity (CFE) procurement to have systemic impacts by sending market signals for investments that accelerate grid decarbonization in places and times where action is most needed.
Customers are seeking clearer guidance on the use of avoided emissions impacts to drive their CFE procurement decisions and greenhouse gas accounting and reporting. The lack of clarity on how to assess, use for decision-making, and report avoided emissions presents a key barrier to four of the top eight customer-identified objectives for next generation CFE procurement, such as scenarios where a customer wants to procure CFE from the most carbon-intensive locations or times of day in order to optimize emission reductions.
Energy customers, solution providers, and stakeholders assembled at CEBA Connect Spring Summit 2022 on May 18th, 2022, in Detroit, Michigan for the third workshop in CEBI’s NextGen Activator series to evaluate the role of avoided emissions in CFE procurement decision-making and greenhouse gas accounting. This workshop generated insights to the following three critical questions:
Question #1: What is the role of avoided emissions (i.e., the change in emissions caused by decisions or interventions) in decision-making?
Insight #1: Customers want the ability to make comparisons of consequential, carbon-based impacts of CFE procurement options for more informed decisions.
Avoided emissions may serve an important role in decision-making as a new criterion that empowers customers to use a common denominator of decarbonization impact in prioritizing investment decisions across diverse CFE procurement options. These comparisons may result in customers making different CFE procurement decisions than they otherwise would have made.
For example, the use of avoided emissions as this common denominator may compel a customer to procure CFE in a location or at a time of day where they do not have load because it can deliver greater avoided emissions based on the carbon intensity of the grid in that location or at that time. Similarly, this may compel a customer to take more action to decarbonize their value chain (in line with the U.S. Environmental Protection Agency’s new guidance for buying CFE on behalf of others) or over-procure CFE in certain geographic regions to cover load in other regions with limited or no CFE options. How to capture and report on these impacts is detailed in Question/Insight #3 below.
Question #2: What are the data and methodology bottlenecks to using avoided emissions?
Insight #2: Access to transparent hourly consumption data and generation data as well as standardized methodologies are needed.
To evaluate avoided emissions, like energy efficiency estimates, customers need access to hourly consumption and generation data and a standardized methodology for the counterfactual (i.e., the baseline for comparison). Although data exists, the level and quality of data needed is not easily or transparently available to customers and the persistent challenge with accessing granular data complicates the ease and accuracy of customers’ measurements of avoided emissions for greenhouse gas accounting and reporting purposes. As these data (or at least modeled estimates in the interim) become available, customers are asking for clearer guidance from market system stakeholders about how to determine the counterfactual for calculating the avoided emissions and how to report avoided emissions in greenhouse gas accounting and reporting.
By gaining access to better data and clarifying how to use that data to measure avoided emissions, it will become easier to create market incentives and recognize customer leadership. For example, access to granular data will make it easier for customers to evaluate the decarbonization impact of charging or discharging a battery at a certain time of day, which then may cause demand for new categories in existing leadership recognition programs, or an entirely new customer leadership recognition program focused on maximizing avoided emissions.
Question 3: Can a company include avoided emissions directly in its corporate inventory for greenhouse gas accounting and, if so, what are the implications for reporting emissions?
Insight #3: Capturing the avoided emissions impact of actions is important, but there is a lack of consensus on how and where they should be accounted for and reported.
Traditionally, avoided emissions and carbon offsets have been treated similarly by reporting them as supplemental information, but not directly part of corporate greenhouse gas inventory accounting. Currently, a growing group of energy customers and solution providers believe positive decarbonization impacts on the grid from clean energy procurement targeting dirtier grids results in a more granular type of avoided emission that should be calculated and reported differently than a conventional offset.
While discussions will continue if and how it is possible to incorporate avoided emissions directly in a corporate inventory, three options surfaced for incorporating avoided emissions into greenhouse gas reporting for stakeholders, each of which CEBI will explore further with its NextGen Activator community:
- Report avoided emissions as supplemental information only, with the requirement to disclose following standardized methodologies (this is closest to the status quo since it is currently optional to disclose avoided emissions).
- In addition to location-based and market-based figures, companies optionally report a new third avoided emissions value under Scope 2 (which would need to follow standardized methodologies and calculations).
- Report avoided emissions outside the Corporate Standard but following an additional method under the GHG Protocol (akin to the project-based standard).
While the discussion continues about a sound recommendation on how to treat avoided emissions, there is common ground among participants: while energy customers can and should value avoided emissions and can elect to use this metric alongside other impact metrics for their CFE procurement, any updates to accounting and reporting methodologies should not eliminate existing CFE procurement options or disrupt existing transactions. In other words, a solution for avoided emissions that undermines global momentum and growth in voluntary CFE markets must be avoided. Adoption of avoided emissions as a decision-making criterion and metric for greenhouse gas accounting and reporting depends on parallel evolutions in the voluntary market system (i.e., as discussed above, the attributes and underlying data carried by energy attribute certificates, plus standardized methodologies and calculations for avoided emissions).
Additionally, customers and solution providers also emphasized the importance of market instruments (i.e., energy attribute certificates) for voluntary market integrity and growth. Any solution for the treatment of avoided emissions should not undermine the availability of market instruments because these instruments are the linchpin of procurement and procurement verification in voluntary CFE markets. Instead, any solution should focus on adding attributes to capture in energy attribute certificates to reflect carbon and/or clarifying how to differentiate across procurement options and capture any associated avoided emissions in greenhouse gas reporting.
CEBI will continue the NextGen Activator workshop series over the coming months to develop comprehensive guidance on implementation pathways for the updates needed to evolve the current system of underpinning voluntary CFE markets:
- Energy attribute certificates, where engagement is encouraged particularly from energy attribute certificate standards and issuing bodies / registries;
- Data access, where engagement is encouraged particularly from data providers and standards bodies;
- Customer leadership recognition programs, where engagement is encouraged particularly from existing programs and customers that participate in these programs; and
- Greenhouse gas accounting and reporting frameworks, where engagement is encouraged particularly from customers and solution providers along with market system stakeholders.
This guidance will sow the seeds for activating a broader suite of CFE procurement options that advance systemic investments in decarbonizing the electric grid. Stay tuned for information on dates and registration in the CEBI and CEBA newsletters. Subscribe to receive updates.