Tag: scope 2

Authored by Adam Reeve, SVP, Customer Experience, REsurety

Scope 2 rules are changing, and the ripple effects will hit every corner of the clean energy market. If the current trajectory continues, buyers will face higher costs to meet their goals. Developers may need to structure offtake contracts differently. Investors will likely be asking new questions about value and risk.

When accounting rules change in any market, the effects cascade through all market participants – starting with the companies doing the accounting, but rippling through everyone in the value chain. REsurety’s data and analytics bring clarity to clean energy contract value and risks under a range of accounting rules, so you are working from a clear foundation no matter how the market evolves.

Now let’s take a closer look at the potential changes coming to Scope 2 accounting — and what’s at stake for your business.

Understanding the upcoming Scope 2 revisions

Scope 2 emissions are associated with purchased electricity, which is often treated as essentially synonymous with grid-based electricity use. Under the current market-based accounting method, procured clean energy — through unbundled RECs or bundled PPAs — is assigned against electricity consumption and counted as zero emissions, regardless of when and where the clean energy generation happened. So the net emissions reported only reflect emissions from the remaining balance of grid-based electricity use.

Now the Greenhouse Gas Protocol is revising Scope 2, with new standards expected to come into force in 2028. Though voluntary, the Protocol is the standard used for 97% of corporate disclosures, so the incentives created by the Protocol will shape corporate purchasing activity, which in turn will impact investors and project developers.

Two distinct Scope 2 proposals are on the table:

• Hourly matching (24/7 carbon-free energy [CFE]). Matching consumption with clean generation in the same grid, in each hour of the day. The theory behind this approach is that same-hour, same-location matching will result in more accurate claims about plausibly consumed electricity. In other words: it’s easier to be accountable when the project is on the same grid, and if the energy was generated at the same time as it was consumed. This approach encourages the purchases of clean energy close to load, and – because of the constant balancing required to match consumption and generation – is expected to drive more activity in the spot market rather than long-term purchase agreements (such as PPAs).
• Consequential emissions accounting. Some refer to this as “impact accounting” as well. Rather than attempting to match megawatt-hours of electricity usage or consumption, this approach measures the emissions impact of electricity usage/generation – such as induced emissions from load, or emissions avoided by clean generation – and adds up those impacts. The resulting incentive for a corporate buyer is to focus on clean energy procurement in the dirtiest grids, not necessarily the areas closest to their load. This approach offers lower cost implementation thanks to increased flexibility, more effective decarbonization, and also encourages the long-term purchases of power that drive global impact.

At the moment, it looks like hourly matching will be required as part of future reporting rules, and consequential emissions accounting will be a parallel reported metric. Here, we’ll focus on hourly matching, given it looks more likely to be a required part of future reporting standards.

Turning Scope 2 challenges into opportunities

As Scope 2 rules evolve, companies will need to navigate rising costs, new technologies, and shifting market dynamics. But these challenges also create opportunities for careful planning and smart strategies to make a real difference.

Challenge #1: Rising costs

Most studies agree that hourly matching will result in higher costs. If hourly matching becomes a requirement, increased costs will come from i) the need to buy zero or low-carbon power in times and locations when it is scarce, and ii) meaningfully higher transaction and management costs to matching of clean power and consumption. Auditing costs will also likely increase, as the volume and complexity of data required increases significantly.

So, think about your portfolio and business goals: How much clean energy will you need to buy over the next five or ten years? What is your current portfolio of purchases, and how does that leave you exposed in a changing accounting environment? In which hours and locations are you most likely to be long/short relative to your forecasted load, and what will the cost be to close those gaps partially or fully? How much will external risks – such as hourly weather variability or a changing power market supply stack – impact your carbon claims?

The time is now to start asking these questions. We are seeing a race for procurement of good projects as buyers scramble to lock in favorable contracts that will be “grandfathered in” before accounting rules change. In addition, even though the rules don’t take effect until 2028, large projects like a data center or a multi-year renewable deal take years to develop – making now the time to start planning.

Solution: REsurety can help you optimize spend

We know the rules, we know the policies, we know the markets – and we share your goals. We can talk dollars and cents to help you make the right decisions for your clean energy purchasing strategy.

For example, we helped one of the world’s biggest tech companies evaluate the cost of various strategies to meet their emission reduction goals through clean energy procurement: hourly matching, annual matching, and consequential carbon matching. We laid out the impact in multiple scenarios and the financial costs of each strategy. 

The work helped leadership within the sustainability, finance and procurement functions of the organization to understand the cost / benefit analysis with each path, clarifying what each decision would mean for the overall business. In the end, we helped bring clarity to energy purchasing, enabling them to move forward a plan with a view on expected costs, ensured alignment with sustainability goals, and reduced financial risk.

Challenge #2: It’s going to require new solutions – from hardware to systems design

Some corporate clean energy buyers will need to consider new generation or reporting technology to meet new accounting requirements which may impact emissions goals. This might include diligence of new technologies (such as battery storage or carbon capture), optimizing renewable integration, or improving reporting systems.

If the GHGP Scope 2 rules go toward CFE/hourly time-matching, demand will rise for non-intermittent resources (i.e., dispatchable fuel types – like storage, nuclear, geothermal, and gas with carbon capture & sequestration [CCS]). For traditional thermal generation like natural gas power plants, if carbon capture is added, there would be a dramatic reduction in emissions that would flow through to companies that buy power from those resources.

Solution: REsurety can help you understand and de-risk new technologies

REsurety helps evaluate and implement the right technologies for your portfolio.

For example, using technology to foster around-the-clock low-carbon power is a strong complement to renewables. Our consulting practice recently worked with an organization to evaluate CCS technology at a large cogeneration plant, considering the technology from a range of angles (emissions considerations, carbon accounting limitations / benefits, time-to-value, comparison to next best alternatives, etc.). As natural gas-fired generation expands its role as a critical flexible resource to enable load growth, understanding new solutions like CCS will become more important.

Challenge #3: The voluntary market will shift

Corporate buyers, who voluntarily procure clean energy to offset their emissions footprint, are critical to new clean energy projects getting built. Long-term offtake agreements in the form of virtual power purchase agreements (VPPAs) or REC purchase agreements provide increased revenue stability to the project, thereby enabling access to critical project finance. Our recent analysis for the Clean Energy Buyers Association (CEBA), shows just how important this clean energy purchasing has been in the past: corporate voluntary clean energy purchases were shown to reduce project financial risks by up to 90%.

There is growing concern that a scenario where buyers must purchase hourly clean energy within the grid region where they operate – as hourly 24/7 would require – would make it harder for big corporations to make long-term contractual agreements. Why invest in an expensive and complex long-term agreement if you can’t use all of the resulting power for sustainability claims (due to inevitable hourly mismatch between generation and your consumption)? The business case quickly erodes. As a result, many people expect that hourly matching accounting rules will drive the market away from long-term offtake agreements and towards a short-term, hourly spot market. This will require projects to secure alternative means of offtake to fill the gap left by corporates (and it’s a big gap: 41% of US offtake over the past decade was driven by corporate purchases). New approaches to active portfolio management contracting structures and risk allocation approaches will be required.

Solution: REsurety gives you the tools for active portfolio management

The era of “set it and forget it” long-term PPA management is over, and a shift to hourly matching will accelerate that transition. Buyers, sellers, and traders are now actively engaging in shorter-term portfolio management trades to manage the exposures associated with long-term PPAs. Our team helps buyers evaluate portfolio management strategies – ranging from brokered spot market purchases, to a blend of long-term and short-term purchases, to crafting strategic long-term commitments. After setting a strategy, buyers and sellers can execute transactions on CleanTrade, the only federally regulated marketplace for clean energy. It provides near real-time data on projects that are available for purchase or sale, and liquidity/transparency needed to act quickly in response to changing demand requirements and market conditions.

Turning change into opportunity

Scope 2 is entering a new chapter. The rules are still being written, but one thing is clear: data-driven strategy is more important than ever. Paying attention now will put you ahead down the line.

REsurety was built for moments like this. With the right data and strategy, you can align budgets, manage risk, and make credible carbon claims. Whether you’re deciding how to buy, where to site, or which claims to make, we help you act with confidence and ensure your portfolio meets your business goals.

At the end of the day, our vision is simple: more clean energy, period. Let’s get your portfolio ready now so when the rules land, you’re already where you need to be.

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