During 2023, Climate Active has made a number of updates to its guidance regarding how to account for electricity-based emissions and reduction measures, which is helping to provide clarity and consistency on some important, long-standing issues. Guidance was updated in March, and again in August, and an updated electricity calculator was also released by Climate Active in April. To make things simpler, we have summarised the key changes below.
In the most recent version of the calculator, adjustments have been made to correctly calculate the percentage of LRET (Large-scale Renewable Energy Target) allocation for electricity consumption in the Australian Capital Territory. Furthermore, the calculator no longer allows for exported electricity to be deducted from your electricity emissions unless LGCs (Large-scale Generation Certificates) have been surrendered (more on this below).
Electricity exported from behind-the-meter renewable energy systems
From the CY22 reporting year, renewable system owners that export electricity to the grid are no longer able to claim this electricity to reduce emissions in their carbon account, except under the market-based method where LGCs have been created and voluntarily surrendered.
For STC (Small-scale Technology Certificate) sized systems, renewable energy exports cannot be claimed at all. This change may have implications for certain emission reduction strategies. As there is no longer any carbon accounting benefit of exporting renewable electricity from small scale systems, organisations may seek to use a greater proportion of previously exported electricity onsite, to reduce demand for emissions-intensive grid electricity. For example, the case for “load shifting” or adding battery storage to enable a greater proportion of generated electricity to be consumed onsite, may be viewed more favourably.
Added guidance for liable entities
The latest guidance makes it clear that liable entities cannot claim LGCs that have been surrendered to meet the LRET to also account for customer electricity consumption within their own organisation’s carbon account.
- “Liable entities” refers to the obligation of certain entities, typically electricity retailers and other relevant large energy users, to acquire and surrender a specific number of LGCs to the government as part of meeting their renewable energy targets. This requirement is set by the government to ensure that a certain percentage of electricity generation comes from renewable sources.
Grid electricity consumers can claim the renewable electricity represented by LGCs under the Climate Active market-based method, while liable entities may claim only their proportion of the LRET for their organisation’s direct grid electricity consumption.
LGC vintage requirements
The latest guidance specifies that LGCs need to be created either within three years of a reporting year, or between the end of the reporting year and the deadline for reporting. For instance, if you’re reporting for the calendar year 2022 (which ends on December 31, 2022), you can use LGCs generated in 2020, but not those from 2019.
- In addition to the condition that LGCs need to be created within three years of a reporting year, Climate Active now also accepts LGCs that are created between the end of the reporting year and the reporting due date. For instance, a calendar year 2020 report could use LGCs with an issuance date generated in 2018 or use LGCs generated from 31 Dec 2020 to 30 April 2021 (the deadline for CY 2020 reporting).
Electricity purchases from outside Australia
The latest guidance also stresses that any “international” electricity consumption must be assessed for relevance and, if so, included in your Climate Active electricity account. Clarification has also been provided about how to assess the relevance and emissions intensity.
Electricity consumption from international sources is deemed relevant if it is in the organisation’s control, or may be assessed as relevant if it is outside of the organisation’s control but arises due to the organisation’s operations.
If electricity consumption outside of Australia is included, international electricity emissions should be calculated by multiplying total relevant international electricity consumption by a regionally appropriate grid emissions factor. Both the scope 2 and scope 3 (transmission and distribution losses and upstream emissions) components of grid electricity must be accounted for.
If you are matching international electricity with eligible Renewable Energy Certificates (RECs), a regionally appropriate Residual Mix Factor must be used in order to calculate emissions from any remaining international electricity consumption from that grid.
International electricity cannot be reported via the Climate Active electricity calculator. Instead, it must be entered as a bespoke line in the standard calculator.
Updated Residual Mix Factor (RMF)
Another important development is the formulation of a new methodology for the residual mix factor (RMF). The volume of LGCs is increasing significantly beyond the legislated 33,000 GWh target driven by voluntary demand, meaning using the RPP as a proxy to represent the share of renewables in the grid is no longer accurate. A collaborative effort between Climate Active and the Clean Energy Regulator has resulted in a refined approach to calculating the RMF.
The new RMF plays a critical role in the market-based method. It removes the emissions benefit of renewable electricity generation from the emissions factor, thus enhancing the precision of emissions assessment. This method replaces the Renewable Power Percentage (RPP) in the existing RMF equation with a ‘Claimable Renewables Percentage’ which ensures that residual electricity consumption, not matched by renewable investments, is accurately evaluated, preventing any double counting of emissions benefits from renewables.
An important implication of the RMF revision is that users of the market-based accounting method may in future notice a minor increase in emissions compared with previous calculations, all else being equal.
For more information and background on Climate Active electricity accounting rules, check out our blog post from March 2021. The blog post covers an array of topics, from the contrasting methods of location-based and market-based approaches for electricity emissions calculation, to the treatment of Renewable Energy Certificates (RECs), GreenPower®, and Power Purchase Agreements on emissions reporting. The post highlights the nuances of jurisdictional targets, certified carbon-neutral electricity, and the treatment of residual grid-imported electricity. The post also explains how businesses can navigate these intricacies using various tools and calculators provided by Climate Active for accurate emissions assessment.
If you are interested in the development of a Climate Active carbon inventory for your organisation that takes into account scope 3 emissions and properly accounts for electricity-based emissions/reductions, please contact us. We can guide you through the process of achieving certification or developing a Climate Active-ready carbon inventory. If you would like more information, please download our Climate Active brochure, or contact Barbara or Patrick.
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