5.4 Distinguishing Scopes by Production and Distribution Methods
Once electricity is generated, it generally cannot be stored.
Electricity can be either (1) consumed directly by the company that produced it or
(2) transmitted to another company through a direct line transfer or the electric
grid. The electric grid is a complex system that enables the T&D of electricity
from producers to consumers.
Construction Ahead
Whereas the electric grid operates to balance supply and demand for nearly
immediate consumption by customers, technological advances are beginning to
make it possible to store electricity so that a customer’s operations can
consume it later when needed. Because this is an emerging area, using
electricity from storage instead of purchasing and consuming it
simultaneously may warrant additional consideration.
The means by which electricity is generated and consumed is important to the
determination of whether to account for and report GHG emissions from the generation
of that electricity in Scope 1 or Scope 2. A reporting company will account for GHG
emissions from electricity in Scope 2 under either of the following scenarios:
-
The reporting company obtains its electricity from another company.
-
The reporting company sells an energy attribute certificate for owned and consumed generation.
For more information about energy attribute certificates, see
Section 5.6.2.2.1. For more information
about the sale of energy attribute certificates and its impact on accounting for
Scope 2 emissions, see Section 5.6.6.
The Scope 2 Guidance identifies the following four scenarios in which a company can
obtain the electricity it consumes:
-
The electricity the company consumes is generated entirely, and for its exclusive use, by equipment it owns or operates.
-
Electricity the company consumes comes from a direct line transfer.
-
Electricity the company consumes comes directly from the grid.
-
The company consumes a combination of (1) electricity from a generation facility it owns or operates and (2) electricity purchased directly from the grid.
For a discussion of each of these scenarios, see Sections 5.4.1 through
5.4.4 of this Roadmap.
Scope 2 Guidance, Chapter 5, “Identifying Scope 2 Emissions
and Setting the Scope 2 Boundary,” Page 35
5.4 Distinguishing Scopes Reporting by Electricity
Production/Distribution Method . . .
Under all four scenarios identified below, companies should
report electricity consumption separately from the scopes as
part of reporting the total quantity of energy consumption
in kWh, MWhs, TJ, BTUs or other relevant units.
5.4.1 Electricity Consumed Is Generated for the Company’s Exclusive Use by Equipment the Company Owns or Operates
If a company generates electricity and consumes all of that electricity (i.e.,
with no connection to the grid and no direct lines to other companies), there
will be no Scope 2 emissions to record since all of the GHG emissions from power
generation will have already been included in the company’s Scope 1
emissions.
Scope 2 Guidance, Chapter 5, “Identifying Scope 2
Emissions and Setting the Scope 2 Boundary,” Page 35
5.4 Distinguishing Scopes Reporting by Electricity
Production/Distribution Method . . .
Figure 5.1 Energy Production and Consumption From
Owned/Operated Generation
5.4.2 Consumption of Electricity From a Direct Line Transfer
A direct line transfer occurs when electricity is generated by one company and
then directly and exclusively transferred to another company for consumption.
For example, in the graphic below, Company A directly transfers all of the
electricity it generates to Company B for consumption.
Scope 2 Guidance, Chapter 5, “Identifying Scope 2
Emissions and Setting the Scope 2 Boundary,” Page 36
5.4 Distinguishing Scopes Reporting by Electricity
Production/Distribution Method . . .
Figure 5.2 Direct Line Energy Transfer
When electricity is transferred via a direct line, the company that has
operational or financial control of the generation facility (Company A in the
illustration above) will report the GHG emissions from generation in its Scope 1
inventory. The company that consumes the electricity (Company B in the
illustration above) would report those same GHG emissions in its Scope 2
inventory. In this scenario, B’s Scope 2 emissions will generally be equal to
A’s Scope 1 emissions. While losses may occur during the T&D process, direct
line transfers generally do not result in such losses.
Connecting the Dots
The consolidation approach chosen is important to the determination of
the appropriate classification of GHG emissions in this scenario. For
example, if a company that applies the operational control approach owns
the generation facility but does not operate it, the company would not
record any GHG emissions from the generation of electricity at the
facility. Rather, these would be accounted for as Scope 1 emissions by
the operator of the facility. However, if the owner of the facility
applies the financial control or equity share approach, it would account
for these GHG emissions in its Scope 1 inventory. The same holds true
for the scenarios discussed in Sections 5.4.3 and
5.4.4.
The following excerpt from the Scope 2 Guidance provides additional examples of
direct line transfers:
Scope 2 Guidance, Chapter 5, “Identifying Scope 2
Emissions and Setting the Scope 2 Boundary,” Page 36
5.4 Distinguishing Scopes Reporting by Electricity
Production/Distribution Method . . .
[This scenario] applies to several types of direct line
transfers, including:
-
An industrial park or collection of facilities, where one facility creates electricity, heat, steam, or cooling and transfers it directly to a facility owned or operated by a different party.
-
For energy produced by equipment installed on-site (e.g., on-site solar array or a fuel cell using natural gas) that is owned and operated by a third party.
-
For electricity, heat, steam, or cooling produced within a multi-tenant leased building (by a central boiler, or on-site solar) and sold to individual tenants who do not own or operate the building or the equipment. Tenants may pay for this energy as part of a lump rental cost and the tenant may not receive a separate bill.
5.4.3 Consumption of Electricity Purchased Directly From the Grid
Nearly all consumers purchase some or all of their electricity from the electric
grid. Electric grids will vary in size and may include many types of generation
facilities (e.g., nuclear, coal, natural gas, wind, solar) that provide
electricity to the grid. The graphic below illustrates two generation facilities
providing electricity to the electric grid and three consumers using electricity
from the grid.
Scope 2 Guidance, Chapter 5, “Identifying Scope 2
Emissions and Setting the Scope 2 Boundary,” Page 37
5.4 Distinguishing Scopes Reporting by Electricity
Production/Distribution Method . . .
Figure 5.3 Electricity Distribution on a
Grid
When electricity is distributed to and consumed from the electric grid, the
generation facility will report the GHG emissions from generation as Scope 1
emissions. A company that consumes the electricity would report those same GHG
emissions in its Scope 2 inventory. Because the electric grid is a shared
network, consumers of electricity from the grid, unlike consumers of electricity
from a direct line transfer, will generally not be able to identify the
generation facility that produced the electricity they are using.
Note that if the electricity is generated from renewable or nuclear sources, the
generation facility would report zero Scope 1 emissions from this generation
since the GHG emission rate for such activity is zero emissions per
megawatt-hour (MWh).
The electric grid will often have multiple generation facilities. Under the
location-based method, consumers of electricity from the grid will account for
and report GHG emissions from the generation of the purchased electricity by
using the location-based emission factor (sometimes referred to as a “grid
average”). If a consumer wants to use electricity from a specific generation
facility on the grid, it can do so only through a contractual agreement, which
is accounted for under the market-based method.
Scope 2 Guidance, Chapter 5, “Identifying Scope 2
Emissions and Setting the Scope 2 Boundary,” Page 37
5.4 Distinguishing Scopes Reporting by Electricity
Production/Distribution Method . . .
Steam, heat, and cooling can also be delivered through a
grid, often called a district energy system. Such
systems provide energy to multiple consumers, though
they often have only one generation facility and serve a
more limited geographic area than electricity grids.
5.4.4 Consumption of Both Electricity Generated by Owned or Operated Equipment and Electricity Purchased Directly From the Grid
A company that owns or operates generation equipment to produce
electricity for its own consumption may also purchase some of its electricity
directly from the grid. For example, a company may turn to the grid to
supplement the electricity it produces from solar panels on its buildings.
Further, a company may not consume all of the electricity produced by its
generation equipment and may therefore sell some or all of the electricity it
generated back to the grid. As a result, a company may have both (1) Scope 1
emissions from the electricity it generated and (2) Scope 2 emissions from the
electricity it purchased from the grid for consumption in its operations.1 This scenario is illustrated as follows:
Scope 2 Guidance, Chapter 5, “Identifying Scope 2
Emissions and Setting the Scope 2 Boundary,” Page 38
5.4 Distinguishing Scopes Reporting by Electricity
Production/Distribution Method . . .
Figure 5.4 Facility Consuming Both Energy Generated
On-Site and Purchased From the Grid
In the graphic above, Company A generated electricity through owned or operated
generation equipment and sold a portion of the electricity that it did not
consume to the electric grid. The GHG emissions related to all of the
electricity generated by A, including the portion of that electricity that A
consumed, are reported in Scope 1. Company A also purchased and consumed
electricity from the grid, which is accounted for in A’s Scope 2 emissions.
One challenge that companies in this scenario may face when accounting for their
GHG emissions is collecting activity data to appropriately reflect GHG emissions
in Scopes 1 and 2. For example, consider “net metering”:
Scope 2 Guidance, Chapter 5, “Identifying Scope 2
Emissions and Setting the Scope 2 Boundary,” Page 38
5.4 Distinguishing Scopes Reporting by Electricity
Production/Distribution Method . . .
Many markets utilize “net metering” for these systems,
which allows grid purchases to be measured only as net
of any energy exported to the grid. This net number may
also be the basis for how costs are assessed.
However, to appropriately reflect Scope 2 emissions, companies are required to
account for their gross electricity consumption from the grid rather than the
net amount. As a result, the total electricity consumed by the company will
include both of the following:
-
Electricity generated and consumed by the company (Scope 1).
-
Gross electricity purchased from the grid (Scope 2).
Scope 2 Guidance, Chapter 5,
“Identifying Scope 2 Emissions and Setting the Scope 2
Boundary,” Page 38
5.4 Distinguishing
Scopes Reporting by Electricity
Production/Distribution Method . . .
If a company cannot distinguish between
its gross and net grid purchases, it should state and
justify this in the inventory.
The table below provides an illustrative example of gross versus net electricity
consumption and demonstrates how the accuracy of the Scope 2 emission inventory
will differ when a company cannot distinguish between its gross and net
purchases of electricity from the grid.
Scope 2 Guidance, Chapter 5, “Identifying Scope 2
Emissions and Setting the Scope 2 Boundary,” Page 39
5.4 Distinguishing Scopes Reporting by Electricity
Production/Distribution Method . . .
Table 5.1 Comparing Gross and Net Energy
Consumption