Green Power and Greenhouse Gas Management

Electricity-related emissions (known as Scope 2 emissions) represent a significant portion of total greenhouse gases for commercial and industrial businesses (Figure 5).  Scope 2 emissions are determined by the quantity of electricity consumed and the emission rate associated with its generation.
                                    
Electricity Consumption (MWh)   x   CO₂ Emissions Rate (tons/MWh)   =   Total CO₂ Emissions (tons)

Companies seeking to reduce Scope 2 emissions have two options; reduce electricity consumption and/or purchase green power.  Reducing consumption should always be the first step; it delivers emission reductions and lowers annual electricity costs.  After efficiency options have been exhausted or become cost prohibitive, futher emission reductions can be achieved through the purchase of green power.  Green power is electricity generated from renewable sources, such as solar, wind, biomass, geothermal and low-impact hydro, which are environmentally friendly and produce little or no greenhouse gases. 

Figure 5 – Greenhouse gas emissions by the economic sector.

Green power is available in multiple forms – electricity products, renewable energy credits (RECs), and on-site renewable generation –all involving the same basic transaction: the creation and consumption (or retirement) of RECs.  RECs represent the environmental attributes of renewable energy and are created whenever a renewable facility delivers power onto the grid. Because the source of particular electrons is impossible to track once electricity enters the grid, consumers purchase renewables at the production end of the supply chain.  RECs allow electricity end-users to take ownership of renewable attributes and differentiate the electricity they consume from the overall mix. 

• Electricity products – These products consist of grid electricity bundled with RECs (generally from renewable facilities in the same grid or an adjacent grid) and delivered to the customer.  The advantage of these products is that the economic and local air quality benefits of investing in renewable generation are focused in the same region as the electricity user.  The downside is that limiting REC sourcing to local renewable sources can significantly increase costs and may not deliver the maximum greenhouse gas emission reduction possible.

• Renewable Energy Credits – These products are sourced from facilities outside the area of the electricity user and are used to “green-up” grid power.  The benefit of this approach is that there are no geographic constraints on the sourcing of RECs, reducing costs and allowing for the maximum greenhouse gas emission reduction per MWh purchased.  For purchasers with a focus on benefiting the local economy and air quality it may not be the best option.  However, in terms of reducing greenhouse gas emissions this option allows for maximum effect. Avoided CO₂ anywhere has an equal benefit to reducing the effects of climate change.

• On-site – These systems consist of grid connected renewable generation that produces both electricity and RECs. Generally, the RECs produced from the installation are retired immediately.  In cases where the volume of electricity generated is less than that consumed by the host, additional electricity is taken from the grid.  When the project generates more electricity than the host consumes, the extra is delivered to the grid.  On-site generation produces electricity at a known price for a set period of time, delivering price stability to its host.