Author: Bridget Cameron specializes in marketing & communications at Schneider Electric, including clean energy claims.
Commercial, industrial, and institutional (C&I) buyers are rapidly emerging as powerful players in a growing renewables market. In the last 1-2 years alone, 72% of companies surveyed by Pricewaterhouse Coopers claimed that they are actively pursuing renewable energy purchases in order to reduce greenhouse gas emissions, among other things.
As organizations build out their renewable portfolios, Energy Attribute Certificates (EACs) and Power Purchase Agreements (PPAs) are the two primary contractual instruments that they rely upon. An EAC, referred to in North America as a renewable energy certificate (REC), verifies that one megawatt-hour of renewable electricity was generated and added to the grid from a clean power source. EACs are the leading way that global organizations acquire, track, and trade clean energy. When bundled with grid-sourced electricity, EACs allow organizations to claim that they are using renewable energy.
A PPA, on the other hand, is a long-term contract between a renewable developer and a dedicated, creditworthy buyer. This contract critically supports the financing of a wind or solar project. PPAs also rely on EACs to convey the environmental attributes of their clean generation. Organizations that enter PPA contracts can choose to keep and retire the associated EACs in order to make similar renewable energy utilization claims.
Organizations that use these contractual instruments enjoy reputational, social, and environmental value. They must, however, pay careful attention to how they market their associated emissions reductions, as accurate clean energy claims enable companies to realize the following benefits:
Ameliorate Agency & NGO Pressures
Inaccurate clean energy claims can create conflict with multiple oversight bodies, including the U.S. Federal Trade Commission (FTC), as well as CDP, World Resources Institute (WRI), and World Wildlife Fund (WWF). While each agency has a unique position on renewables and carbon reporting in this market, a uniting element is that they are equally urging stronger action from organizations. Examples of this have manifested in partnerships to drive science-based target reporting – which appeared in CDP’s questionnaire for the first time this year – and collaborative efforts to encourage companies to join the RE100 by making commitments to 100% renewable energy. By accurately reporting and marketing clean energy claims, companies can remain in good standing among these active oversight bodies.
Comply with Reporting Guidance Updates
In January 2015, WRI issued updated guidance on Scope 2 emissions reporting as part of the Greenhouse Gas (GHG) Protocol Corporate Standard. Scope 2 refers to the indirect emissions produced from a company’s purchased electricity, heat, steam, or cooling. The new guidance directs C&I buyers to report their Scope 2 emissions on both a location-basis and a market-basis if they have consumer choice regarding renewable electricity in the markets in which they operate.
The location-based metric quantifies Scope 2 emissions averages from the grid associated with a company’s operations. As this method articulates the effects of a company’s regional energy generation, GHG reductions are based on improving efficiency and lowering energy consumption. The market-based method, however, measures Scope 2 emissions associated with the contractual instruments – such as EACs or PPAs – that a company may decide to purchase. The market-based method appreciates that buyers have a choice regarding renewable power in their markets, so emissions reductions are dependent on choosing low-carbon contracts.
This year and going forward, accurate emissions reduction claims will consider both metrics in order to appropriately comply with the GHG Protocol – the worldwide, gold-standard for accounting organizational emissions. To comply with the new guidance, C&I buyers will report how they have used contractual instruments to reduce their Scope 2 emissions. By purchasing EACs—directly, or as part of a PPA contract–to match 100% of Scope 2 emissions, companies can report zero emissions in this category.
Balance Disclosure Details Appropriately
Claims that communicate emissions reductions or market sustainability initiatives can position an organization as a leader in climate change mitigation. Some companies may, however, consider a balance between disclosing strategic details and keeping competitive information proprietary.
For this reason and more, accurate clean energy claims have very precise language. They reference material purchases and are supported by verified contractual instruments – such as EACs – that meet specific issuance criteria, including generation data and ownership. By paying close attention to the nuances of these communications, organizations can appropriately report details that are significant and credible.