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Transitioning From Annual to Hourly Accounting

Annual carbon-free energy products have played a crucial role in helping businesses meet their sustainability goals, providing a foundation for reducing greenhouse gas emissions and promoting clean energy adoption. However, as clean energy procurement has increased, the current Scope 2 market-based standard has been criticized for its lack of accuracy and transparency, undermining the credibility of corporate clean energy purchasing and emissions reduction claims. 

A significant issue is the disconnect between reported zero-emissions electricity use and the actual locational and temporal patterns in consumption and clean energy generation. For example, a reporting company can claim zero Scope 2 market-based emissions from its overnight load via the procurement of solar renewable energy certificates (RECs) generated thousands of miles away during the day. Revised inventory accounting rules based on hourly and regional matching will enhance the credibility of emissions claims and create demand for a resilient clean energy mix.


Example using 100% matching of load with solar generation on an annual basis
 

 

Transitioning to hourly accounting marks a critical step in addressing existing gaps in emissions reporting. By focusing on aligning clean electricity usage, load and Scope 2 emissions with real-time electricity market dynamics, the proposed revisions will enhance credible reporting and encourage investments in a diverse mix of clean energy technologies, including nuclear energy, renewables, geothermal and storage. These technologies are crucial for achieving deep grid decarbonization while maintaining affordability and reliability, helping to ensure that power is on when and where it's needed through the energy transition. 

 

What Does This Change Mean for Reporting Companies?

Professionals responsible for accounting for GHG emissions have a valuable opportunity to enhance their impact as they navigate the evolving landscape of Scope 2 market-based emissions. While it's possible that a company’s Scope 2 market-based emissions inventory may rise during this transition period based on current procurement activities, that is only because the new methodology more accurately reports emissions associated with clean energy procurement.  Voluntary procurement of clean energy will need to evolve to address the challenge of fully decarbonizing the grid—a pivotal step towards achieving a more sustainable future. Embracing this challenge prepares companies to make meaningful contributions to the climate transition. 


Summary of Anticipated Scope 2 Market-Based Revisions

The GHG Protocol has introduced three new quality criteria into the Scope 2 market-based revisions. Those are: 

  1. Hourly matching: To make clean energy claims, there will be a requirement that clean energy generation is temporally matched to load. 
  2. Deliverability: Clean energy generation will need to occur within the same deliverability region as load, unless there is a physical power purchase agreement (PPA) or ability to demonstrate available transmission between generation and supply. 
  3. Standard supply service: Reporting companies will now be able to take credit for clean energy procured on their behalf by their suppliers as part of their default service. For example, Constellation procures renewable energy certificates (RECs) on behalf of our customers in states with Renewable Portfolio Standards (RPS). Moving forward, reporting companies will have the ability to claim their pro rata share of that clean energy in combination with voluntary clean energy procurement to achieve reductions to their Scope 2 market-based emissions. 

GHG Protocol is also actively working on two exemptions for feasibility and recognition of historic investment in clean energy resources, and is inviting public input in their development:

  1. A small load and/or small-to-medium sized company exemption: This could be an exemption for load under certain thresholds within defined “deliverable” regions and/or for small-to-medium sized companies, such that they do not have to comply with hourly matching.
  2. A legacy contract exemption: This may be an exemption for existing contracts signed prior to a cut-off date that may lend preferential treatment to historically procured clean generation under the Scope 2 revisions for a period of time to be determined.

 

Hourly Scope 2 Greenhouse Gas Emissions Calculator

At Constellation, we are committed to providing our customers with access to information on their greenhouse gas (GHG) emissions. For example, in 2022, we provided 100% of our commercial and industrial power and gas customers with information on their GHG emissions for Constellation-supplied facilities. 

To further advance that commitment, our free Hourly Scope 2 Greenhouse Gas Emissions Calculator enables PJM, ERCOT, and CAISO users to estimate their hourly Scope 2 market-based emissions. Over time, we will expand the coverage of this calculator to more territories. It is built on Greenhouse Gas Protocol’s recently published revisions to Scope 2 guidance, currently open for public consultation.


During mid-day hours, solar production rises sharply, creating a tradeable surplus of clean energy, while in the early morning and late evening solar drops off and gaps in clean energy procurement start to appear that require other sources to fill the shortfall. Typically, these gaps are filled with some of the most carbon intensive sources like coal plants, older gas units. and peaker plants.  

Note that because the exact details of the small load and legacy contract exemptions are still under deliberation during the public comment phase, we did not include the ability to apply them in this hourly Scope 2 market-based GHG emissions estimation tool. Therefore, you can think of the estimated results from this tool as the least favorable outcome in terms of impact to your Scope 2 market-based emissions under the proposed revisions, without any exemptions that you may ultimately qualify for under the Scope 2 revisions, once finalized at the end of 2027. 
 

Ready to Estimate Your Hourly Scope 2 Greenhouse Gas Emissions?

As the transition to hourly accounting takes place, practitioners may be wondering if they have ready access to hourly electric use data. If detailed hourly is unavailable, the revised draft GHG Protocol Scope 2 guidance allows for the use of generic, publicly available profiles to estimate hourly Scope 2 emissions to enable anyone to calculate hourly Scope 2 emissions today. This tool works by transforming user-provided demand- and supply-side data, including building type, location, and generation type, into hourly Scope 2 emission estimates using these generic, publicly available profiles. 

It relies on publicly available, regional load and supply profiles, helping stakeholders understand the implications of proposed Scope 2 updates on market-based emissions calculation and serving as a practical resource for those aiming to align with evolving standards and progress in their sustainability efforts. 

Click the button below to open the tool and learn what data we’ll need to estimate your hourly scope 2 greenhouse gas emissions.
 


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