nzero 2024
Net zero has a new standard
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Energy supply is the largest contributor to global greenhouse emissions.  Understanding and reducing the emissions associated with the electrical grid remains a critical, but difficult task that hinders our ability to decarbonize our economies. Deep in the sustainability world, an impassioned debate is unfolding between two competing theories of how the impacts of the purchase of electricity (called “Scope-2 emissions”) should be accounted for by corporate entities. The outcome of this debate will impact the work of millions of sustainability practitioners, facilities managers, corporate executives, and policy makers - not to mention billions of citizens of the planet whose future quality of life will hinge upon getting decarbonization right, and meeting our goals in time.

Let’s call one side Team Actuals.  Team Actuals promotes something called Granular Consumption-Based Accounting.  On the other side is Team Impact, promoting Impact-based Accounting. Each of Team Actuals and Team Impacts include scientists, policy experts, and thought leaders, who are, in many cases, working for or supported by one or more major tech companies with millions of dollars of investment into decarbonizing their own operations.  Quiet, but looming behind the debaters, is a third option, not so much a team, but rather a large group of companies that prefer retaining some version of the status quo.  This debate is occurring against the backdrop of an ongoing update to the Greenhouse Gas Protocol’s Scope-2 Corporate Guidance, which is the touchstone for how electric emissions are reported world-wide. 

But just the name of the process is a mouthful. Put simply, the GHG Protocol and a hard-working crew from the World Resources Institute are revising the guidance that describes how corporate entities should account for and report their emissions from the use of purchased electricity.  GHG Protocol staff have synthesized hundreds of comments and proposals submitted by a wide range of corporates, NGOs, and other stakeholders. The GHG Protocol’s Corporate Guidance is not, of itself, mandatory, but it has been adopted by an overwhelming majority of companies that are setting science-based targets for greenhouse gas reductions, and it has been made mandatory by some governments. Following GHG Protocol guidelines serves as a safe-harbor for corporations that report their emissions.

Of the proposed paths forward, retaining some form of the status quo is easiest to understand. The current framework permits corporate climate reports to rely on coarse-grained data, such as summing annual electric consumption and multiplying this usage number by an out-of-date annual average rate of emissions per kilowatt hour in the region (called “location based”), or the annual average emissions rate calculated by a specific supplier (“market based”).  The evidence is mounting that either type of coarse-grained annual data can be extremely inaccurate and leads to under- or over-reporting by margins of as much as 35 percent.  This is because the emissions created in the generation of a kilowatt varies greatly depending on when and where it was generated.  

Why does it matter?  Retaining the status quo is easy and widely accessible, but it means accepting low-confidence corporate reporting, as well as the likelihood that we will invest in “fixes” that don’t effectively drive decarbonization. It is both a time problem (when did consumption or generation occur?) and a place problem (where did the consumption or generation occur?). An HVAC system operating at noon in Las Vegas may be drawing from a grid that is relatively clean because of the amount of solar on the grid.  That same HVAC operating at midnight may be supplied by a combination of natural gas and coal.  Buying renewable energy credits from a solar plant does not effectively reduce the carbon impact of an HVAC system operating at night because it is still using power generated by burning coal and gas. The opposite pattern may be true in Pittsburgh, where nuclear energy and wind supply a higher percentage of nighttime power, but coal and gas may produce more of the grid’s energy at noon.  Without more reliable reporting and good data to drive the deployment of dollars, the tools we have to fight climate change become blunt instruments, or in the worst cases, useless.  

Enter Team Actuals and Team Impact.  

Team Actual’s Granular Consumption-Based Accounting focuses on shifting toward using hourly data to help solve the when problem, and it introduces the concept of “deliverability,” meaning that a company claiming that it used a specific renewable resource during any hour of the year should also be able to demonstrate that the energy injected into the grid could reach the customer. This is critical because if it can’t reach the customer, then some other nearby resource, very often a carbon-emitting resource, is turned up to meet the customer’s demand.  That’s simply how the electrical grid works - all of the required energy is injected into a shared pool, and drawn out the same instant it is created, and the grid operator must turn up any generator required to keep the grid stable and everyone’s lights on. Another way to look at it is this: when I flip on a light switch, somebody, somewhere, turns up a generator to meet that need.  Granular Consumption-Based Accounting proposes that I should be responsible for the generator or mix of generators that was actually turned up on my behalf.

Team Impact also promotes the use of far more accurate and granular data to address the time and place problems, but it looks specifically at intervention-based effects.  In other words, a corporation may decide to invest in a solar plant, but realize that investing in solar near its headquarters in Palo Alto may have surprisingly little impact on global emissions because it will operate during the sunny hours when the grid in California is already relatively clean.  That means the new energy is displacing relatively clean resources.  On the other hand, investing the same dollars in a solar plant located in a coal-reliant grid, such as in India, might have a much larger immediate impact because a far dirtier generator will be displaced, notwithstanding that corporate headquarters in California will obviously not be consuming electricity from the generator.

Advocates of Impact-Based Accounting argue that companies should be able to offset their own actual emissions by doing good deeds in other places (it’s a global problem with only one atmosphere, after all), while advocates of Granular Consumption-Based Accounting point out that doing good deeds elsewhere doesn’t absolve you of responsibility for the carbon emissions in your own backyard, and often leads to local utilities installing additional, dirtier resources locally to meet your needs because the resource you invested in can’t reach you when you need it.  It’s a nuanced and worthwhile debate over two ways to do the right thing that we all need to begin to understand and participate in.

Far more dangerous, though, is the idea that we should do little or nothing to improve current standards.  Both Team Actuals and Team Impact face criticism that any significant change to the status quo reporting frameworks is too hard, and only well-heeled companies like Google and Apple, Microsoft and Meta can afford to worry about the problems of time and place.  Fortunately, this is no longer true.  

A range of electric providers, from behemoth investor-owned utilities to networks of local cooperatives are actively investigating ways to meet growing customer awareness that “green” should also mean reducing carbon emissions.  The Biden Administration’s Executive Order 14057 mandates that federal facilities must move to the consumption of carbon-free energy, and that 50% of the consumption must be matched in time and place.  A range of young, exciting companies are offering products that solve the problem of handling all of the data needed to match time and place of use to supply, making tools available to anyone that until recently, only Palo Alto could aspire to. 

Investing in a low carbon electric grid is critical to any hope of averting the worst potential outcomes of climate change.  Directly in front of us is the first step regardless of the outcome of the Actuals vs. Impact debate: we must embrace new, granular, data-driven accounting in order to have a chance to decarbonize the electrical grid at pace, and in time. 

For sustainability leaders, by sustainability leaders.