The NGA Factors evolution: Embracing the market-based method - 100% Renewables

The NGA Factors evolution: Embracing the market-based method

The National Greenhouse Account (NGA) Factors document released in August last year introduced significant alterations that reflect the evolving landscape of emissions assessment practices. Notably, the changes represent an important move towards greater harmony with the methodologies used under Climate Active, reflecting a greater degree of collaboration and coordination across different areas of Federal government policy. This latest NGA revision is marked by two key developments:

Inclusion of a Market-based method

In contrast to past NGA publications that solely focused on location-based factors, the latest document includes the incorporation of a market-based method. This method is designed to harmonise with provisions previously adopted by Climate Active. While location-based factors centered on the emissions intensity of specific regions, the market-based method delves into a company’s broader engagements within different electricity markets and product offerings. Both location and market-based methods have their advantages and limitations, and enabling the use of either (or both) approaches as appropriate is a step towards achieving greater accuracy and improved insights.

If you would like more information about the differences in accounting for electricity emissions under the market and location-based methods, please refer to this blog post and video.

Residual Mix Factor (RMF) methodology refinement

Another pivotal development is the formulation of a new methodology for the residual mix factor (RMF). A collaborative effort with Climate Active has resulted in a refined approach to calculating the RMF. The RMF, previously limited to Climate Active, now assumes a prominent role in the NGA Factors document, serving to account for both renewable and non-renewable electricity sources.

The new RMF methodology works hand-in-hand with the inclusion of a market based method. Under the location-based method, organisations’ grid electricity emissions are calculated based on the average emissions intensity of the grid within their state or territory. However, the inclusion of a market-based method offers a different perspective by considering an organisation’s investments in various energy sources, services and products. This encompasses voluntary procurement of renewable electricity and participation in regulatory initiatives like the Large-scale Renewable Energy Target.

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. As the volume of LGCs is increasing significantly beyond the legislated 33,000 GWh target driven by voluntary demand, using the RPP as a proxy to represent the share of renewables in the grid is no longer accurate.

A key implication for organisations to keep in mind is explained on page 8 of the document:

“Companies should be aware that when they are consuming electricity from the grid, they are consuming electricity from a range of generating technologies in operation at the time of consumption, which may include non-renewable sources of generation. The market-based method allows companies to match their consumption with investments in renewable electricity, but it does not mean that they are only consuming electricity from renewable generators.”

These changes in the NGA Factors document signify a move towards a more accurate, nuanced and comprehensive approach to emissions assessment, and greater harmony across national GHG accounting policy areas. By embracing both location-based and market-based methods and refining the RMF methodology, the document responds to the evolving complexities of emissions reporting and assessment and helps ensure emissions reduction claims cannot be overstated.

 

If you need help developing a net zero strategy, contact us today to learn how we can support your transition. Reach out to  Barbara or Patrick for more information.

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