By any measure, last year was one for the corporate clean energy procurement books. Companies publicly contracted a record 68 gigawatts of clean electricity globally, including 21.7 GW in the United States alone. It was a massive bump from 2023, when companies purchased some 46 GW overall and 17.3 GW in the US.
Precisely how that clean energy should trickle down to companies’ carbon balance sheet is another matter — and a hotly contested one. This arithmetic is known as allocational accounting, in which each company is assigned (i.e., allocated) a portion of the power grid’s emissions proportional to 1) the emissions their electricity load caused, and 2) the benefits of their clean energy procurement.
In a perfect world, the total allocated scope 2 (indirect) emissions from electricity consumption would exactly equal the scope 1 (direct) emissions from electricity generation. But we don’t live — or do carbon accounting — in a perfect world.
The Greenhouse Gas Protocol’s pursuit of carbon accounting improvement
The Greenhouse Gas Protocol has earned a justified place as the global standard for corporate emissions reporting. It’s also now undergoing the first major revision to its scope 2 market-based method in a decade.
GHGP and the members of its technical working group advising on potential revisions to the scope 2 market-based method are considering a range of ideas and proposals to improve the current system and increase the accuracy of how electricity-sector emissions are allocated to individual companies.
One of the leading proposals for how to update the scope 2 market-based method recommends matching clean energy attributes to electricity consumption on an hourly basis within a given market boundary — often referred to as “24/7” accounting, or simply hourly matching. Advocates say it’s a more precise and transparent way of linking clean power to corporate demand.
However, current proposals for how to implement 24/7 could actually make carbon accounting significantly less accurate, exactly 180 degrees counter to the goal, all while adding significant complexities that risk slowing voluntary action. Let’s take a closer look at two important reasons why this is the case.
The double (and triple) counting pitfalls of 24/7
For a company to claim credit for clean energy, it needs to own and retire a renewable energy certificate, or REC. A REC is essentially a tradeable commodity that represents the environmental attributes of one megawatt-hour of generation — and is a tool to ensure that those attributes are only counted once.
To calculate their scope 2 emissions, today’s GHGP lets companies subtract their annual clean energy purchases (RECs) from their annual electricity use, then multiply the remaining unmatched load by an average emissions rate for the power grid in question.
But for as long as RECs have been part of scope 2 emissions calculations, there have been concerns about double counting. Double counting refers to times when two different organizations both make a claim on the same environmental attribute — in this case, a quantity of clean energy. It could also refer to times when a single organization (often inadvertently) counts clean energy twice in its own accounting.
In the name of improved accuracy, 24/7 brings an hourly matching component to the market-based equation. But the details of how it is implemented matter — a lot. That’s because under some 24/7 proposals, the issue of double counting (and the risk of even triple counting) is actually made worse. Here’s how it happens.
First, as with GHGP’s current market-based method, 24/7 accounting applies a company’s contracted clean energy against its electricity load. That’s the first time the clean energy gets counted.
Second, for remaining electricity load not matched with contracted clean energy, a company next applies the clean energy percentage of the grid’s “native” generation mix. But that grid mix includes the contracted clean energy already being claimed by the company and/or other clean energy buyers. This constitutes double counting.
Third, for electricity load that still remains unmatched after considering both contracted clean energy and clean energy that’s part of the grid’s native generation mix, a company needs to allocate emissions to those unmatched megawatt-hours. To calculate those emissions, they’ll commonly use an average emissions factor for the grid in question, taking into account all generators. And — you guessed it — that average emissions factor typically includes contracted clean energy as part of the overall grid mix, thus triple counting the same clean energy.
One proposed solution is to use an hourly residual mix factor, in which all contracted or claimed clean energy has been removed from the grid mix and its emissions rate. Unfortunately, the reality is that very few jurisdictions have developed residual mix emissions rates on an annual basis, and virtually nowhere is it currently available on an hourly basis.
This lack of data access will most likely cause companies to default to using average emissions rates, which will result in the aforementioned double counting and should not be permitted under the revised scope 2 standard.
The dilemma of deliverability
The problem with double or triple counting clean energy is self-evident: It overstates the benefits of a company’s clean energy procurement and understates the emissions impact of the electricity consumption of the company’s operations.
But even if 24/7 proponents could fully solve double counting’s pitfalls, the methodology still leaves the equally important issue of deliverability unaddressed. Put simply, deliverability is the ability of electricity to get from where it’s generated to where it’s consumed — which it too often cannot. This has important implications for carbon accounting.
The 24/7 approach includes time matching and narrower geographic boundaries for procurements. But geography does not always ensure deliverability, and most 24/7 proposals fail to account for the large and growing intra-regional transmission challenges that modern grids face.
For example, consider a company trying to balance its Houston-based load by purchasing plentiful new West Texas wind to help match on a 24/7 basis. The transmission lines between renewables-rich West Texas and load in south Texas around Houston often become congested, like a highway at rush hour. Therefore, despite being in the same grid region as the wind generation, that wind power purchased by the company may not be physically deliverable to its load in Houston. Instead, its power demand will actually be served by local — and likely fossil — generation resources.
You cannot, therefore, assume that a clean MWh generated in West Texas will have the same emissions impact as a MWh consumed near Houston. Under the 24/7 proposal, this scenario will be considered appropriately location-matched.
The path forward
For the GHGP revision process to succeed in its effort, the revised scope 2 standard should be more accurate to better reflect true emissions impacts, taking into account real-world considerations such as deliverability and eliminating double counting issues. Unfortunately, some 24/7 accounting proposals run the risk of making scope 2 less accurate, not more.
These issues must be resolved. First, the 24/7 framework must find a way to prevent the potential double counting of emissions using available and accessible data. And second, it must demonstrate actual electricity deliverability to the point of consumption and account for transmission congestion instead of depending on arbitrary grid boundaries.
Without these changes, the GHGP revision process risks introducing new complexities and feasibility challenges with 24/7 that risk slowing the pace of clean energy development — all while making the scope 2 standard less accurate.
Roger Ballentine is the president of Green Strategies Inc., a sustainability and clean energy consulting service for corporate and financial sector clients. Patrick Falwell is the vice president of Green Strategies, Inc. For a more detailed explanation of the double and triple counting issue, see the authors’ article in SSRN. The opinions represented in this article are solely those of the author and do not reflect the views of Latitude Media or any of its staff.
