Author: Noah Bucon

Noah Bucon is the Regulatory Affairs Manager on 3Degrees’ Market Intelligence Team where he focuses on ensuring the integrity and impact of 3Degrees’ participation in global renewable energy and carbon markets.

Setting an RE100 Target in 2021: What You Need to Know

RE100 2021 Guidance

Across the world, the private sector is increasingly doing its part to support the energy transition. In fact, as of Q2 2021, approximately 300 global companies are now members of the RE10o initiative, which means they have committed to using 100% renewable electricity across their global operations. To join, companies must meet RE100’s eligibility criteria and must commit to reaching a 100% target by 2050, though many companies have committed to reaching their target earlier. RE100 supports renewable electricity development by giving companies a public platform to make ambitious commitments, by setting technical criteria to ensure these targets are met with integrity, and by giving companies access to a community of peers to aggregate demand and share best practices.

Changes to RE100 reporting for 2021

When companies sign on to an RE100 commitment, they must ensure they are up to date with the initiative’s reporting guidance, which is reviewed and updated on an annual basis. To that end, there were some notable recent changes to RE100’s technical criteria. The most significant updates are listed below and apply to the 2021 reporting year:

  • Standard delivery of renewable electricity is now eligible to be counted toward an RE100 target, provided that it is substantiated by renewable energy attribute certificates (EACs). This update is in line with recent efforts to better align clean energy targets of energy users and suppliers, including a report from Center for Resource Solutions’ Clean Energy Accounting Project (CEAP) and a white paper from the Renewable Energy Buyers Alliance (REBA).
  • Average grid mix can now be counted toward an RE100 target, provided that it is greater than 95% renewable, and that there is no mechanism for actively sourcing renewable electricity in that market.
  • New language clarifies that contractual instruments other than EACs may be used for voluntary procurement, provided that they meet Scope 2 Quality Criteria.
  • Third-party verification of RE100 submissions is now required; chain-of-custody certification, such as Green-e®, or third-party auditing of Scope 2 emissions, such as for CDP reporting, will satisfy this requirement, provided that other RE100 technical criteria are met.
  • Third-party certification, such as Green-e®, is recommended to ensure the environmental sustainability of hydropower and biomass.
  • Companies are now requested to report the commissioning date of the facilities they source from, although there are not yet any requirements regarding the “new date” of power plants.
  • New references have been made to the RE100 Materiality Threshold and Market Boundary criteria.

Understanding the importance of renewable energy market boundaries

RE100 requires that, outside of the regional markets that exist in the United States and Canada, as well as in Europe, all renewable energy must be sourced from the same country in which a company is claiming the consumption of that renewable energy. In other words, in most parts of the world, a country’s market boundary is its own geographic borders. In defining what constitutes a market boundary, RE100 aligns with the Greenhouse Gas Protocol’s guidance for market-based instruments and considers: 1) physical grid connection and coordination, 2) regulatory consistency across electricity sectors, and 3) mutual recognition of renewable energy instruments between countries. Adhering to market boundaries is a critical component of a credible renewable energy claim.

Addressing challenges associated with market boundaries and supply limitations

The greatest challenges to meeting a global RE100 target are often associated with geographic restrictions around procurement. There are many countries around the world — primarily in Latin America, Africa, and Asia — that have limited or virtually no market-based options for purchasing renewable energy. Although financially attractive and impactful, on-site generation is not always a realistic option due to either limited space, local regulations, or complications associated with facility ownership. 

Companies faced with geographic eligibility challenges may do the following:

  1. Companies are encouraged to report these barriers through the RE100 initiative, and if possible, communicate their demand for renewable energy options to local stakeholders. This allows buyers to demonstrate aggregated demand for renewable energy in these markets and strengthens the message sent to local policymakers and NGOs to remove obstacles to in-market procurement. 
  2. Companies may choose to purchase from adjacent countries while in-country options are being developed. This sends demand signals for renewables regionally, however, it is not compliant with RE100 technical criteria and will affect the nature of renewable energy claims a company can make. When considering whether to source renewable energy regionally, buyers must be aware of the limitations imposed by market boundaries. Furthermore, buyers who do choose to source EACs from outside of a market boundary should consider where their purchase will have the greatest impact on market development.

Navigating the path to 100% renewable electricity

Understanding how to reach a global 100% renewable electricity target that balances impact, cost effectiveness, and compliance with reporting requirements can be complicated and is especially challenging for companies with operations across multiple continents. Companies committing to RE100 must first ensure they understand the current reporting criteria and should identify the greatest barriers to reaching their target. Additionally, companies that want to follow RE100 recommendations should consider adding ecolabels, such as the Green-e®, EKOenergy, and Peace REC programs, to their renewable energy purchases to improve the integrity and impact of their procurement. 

If your company is seeking to understand and address barriers to achieving an RE100 target, or is interested in maximizing the environmental and social impact of your renewable energy purchases, please feel free to reach out to us. We’re happy to help.

Guarantees of Origin: An option for renewable energy in Europe

europe street

Since the World Resources Institute (WRI) unveiled new guidance for Scope 2 emissions accounting within the Greenhouse Gas Protocol Corporate Standard back in 2015, there has been an increased focus on global energy purchasing, with more organizations looking for options across the globe.  

Guarantees of origin

One such option is the Guarantee of Origin (GO), a voluntary renewable energy product that is used to claim consumption of renewable energy in Europe. A GO represents one megawatt hour of electricity from a renewable resource. Similar to a REC in the U.S., a GO represents the environmental attributes (but not the power) associated with renewable energy. Although all European countries are required to use GOs to track renewable energy consumption, not all have joined the Association of Issuing Bodies (AIB), which ensures adherence to best practices and market rules.

In countries that have joined the AIB, the European Energy Certificate System (EECS) certifies and registers each GO, preventing double counting and identifying the source of the GO and the method of production. In some countries, GOs may also be used to track renewable natural gas as well as some nonrenewable resources, so it is important to specify the type of GO desired when procuring these instruments. GO certificates are viable for 12 months from the date of issue.

Guarantee-of-origin-features

Regulatory considerations

The European voluntary market is well defined with clear norms of transparency and accountability. However, there are some complexities to the market that are important to understand. Although the EECS system creates rules around the creation and transfer of GOs, there are some country specific rules that can impact customers, specifically around project eligibility and GO cancellation. Although Europe is considered to be a single market, GOs are intended (where possible) to be cancelled in the GO registry of the country in which renewable energy claims are made. Due to a patchwork of trading/cancellation restrictions across the continent, this requirement can add administrative complexity for companies with operations in multiple countries. 3Degrees works closely with our clients to help them navigate the logistics of making EU-wide renewable energy claims in line with market rules.

AIB-members-2020

Note: As of Q1 2020, Latvia, Montenegro, and Portugal are in the process of applying to join the Association of Issuing Bodies (AIB).

Interested in learning more about global renewable energy options? Read our blog on Navigating the Opportunities and Pitfalls of International Renewable Energy Markets or this case study on how Verisk is successfully addressing emissions from its global energy load.

Exploring I-RECs: A renewable energy option in international markets

wind turbines in Asia

In 2015, the World Resources Institute (WRI) unveiled new guidance for Scope 2 emissions accounting within the Greenhouse Gas Protocol Corporate Standard. This update introduced a market-based accounting mechanism that gives companies the opportunity to reduce their Scope 2 emissions through the purchase of renewable energy certificates, PPAs, and other contractual instruments. This provision has driven a new focus on global energy purchasing, with more organizations looking for options across the globe.

Product Profile

The I-REC, an international renewable energy certificate, represents transferrable proof that one MWh of electricity was produced from renewable energy sources and added to an electrical grid. Purchasing an I-REC allows the buyer to claim consumption of one MWh of renewable energy. I-RECs can originate from wind, solar, ocean energy, biomass, hydropower, landfill gas, aerothermal, geothermal, and landfill gas projects. 3Degrees only transacts I-RECs issued in countries authorized by the International REC Standard and traded on the I-REC Registry. This standard establishes rules and regulations for a transparent system that simplifies claims and eliminates double counting issues, making products compliant with Scope 2 reporting guidelines. Valid renewable energy claims also depend on additional factors, such as whether production and consumption occur within an appropriate market boundary.

Regulatory Considerations

In some cases, the I-REC Secretariat implements country-specific restrictions on certificate issuance to ensure environmental integrity and prevent double counting. For example, issuance would be prohibited for generation that is counted toward a state-mandated renewable energy delivery quota. Every country’s regulatory environment is unique, and even though a policy may not lead to double counting, it may nonetheless change the scope of claims an I-REC purchaser can make. 3Degrees’ Regulatory Affairs team reviews each country in which I-REC issuance is authorized to comprehensively understand and communicate the integrity and impact of our clients’ I-REC purchases.

I RECs map

Interested in learning more about global renewable energy options? Read our blog on Navigating the Opportunities and Pitfalls of International Renewable Energy Markets or this case study on how Verisk is successfully addressing emissions from its global energy load.

Using gas certificates to address Scope 1 emissions in Europe

europe-gas-certificates

Europe is by far the largest and most liquid market for energy attribute certificates globally, and it is poised for further expansion. For decades, Guarantees of Origin (GOs) have been used to claim the consumption of renewable electricity in Europe. Now, the GO system, which is enshrined in EU law through the Renewable Energy Directive, is being expanded to cover other energy carriers, specifically biomethane (also known as renewable natural gas) and hydrogen. In the coming months and years, companies will see increasingly accessible opportunities to use gas GOs to address their Scope 1 emissions on their journey to net zero. Compared to electricity markets, though, markets for renewable gases in Europe are nascent and exceedingly heterogeneous.

State of the European gas certificate market

The recast Renewable Energy Directive (RED II) requires the use of GOs to claim consumption of renewable energy. While this has become commonplace for renewable electricity claims in Europe, it is still an emerging option for renewable gases and is likely to be less familiar to many companies. This lack of familiarity can be compounded by the fact that the European gas GO market is fragmented, technically complex, and evolving quickly. Because of RED II requirements, EU member states are mandated to be actively implementing gas GO systems — or updating their existing GO systems — to accommodate energy carriers other than electricity. 

Despite momentum at the EU level, there are currently only a handful of countries in Europe that have registries that can accommodate the issuance and trade of gas GOs, including Germany, Austria, France, Denmark, Lithuania, the Netherlands, and the United Kingdom. Although it did exit from the EU, the UK is actually one of the most mature markets for gas GOs in Europe. These countries with active gas GO registries are members of the European Renewable Gas Registry (ERGaR), which is a membership organization dedicated to enabling the cross-border transfer of renewable gas certificates. While the market for gas certificates is moving toward increased cross-border fungibility, such functionality is still fairly limited. ERGaR has designed two gas certification systems: one that strictly utilizes book-and-claim accounting, and one that incorporates mass balancing calculations. It is possible that the mass balancing scheme could be used to comply with RED II transportation decarbonization mandates.

Another layer of complexity arises from the fact that the Association of Issuing Bodies (AIB), a membership organization that includes competent bodies responsible for the issuance of electricity GOs in 28 European countries, is expanding the European Energy Certificate System (EECS) to accommodate the issuance, trade, and cancellation of gas GOs. EECS Rules have been updated to incorporate energy carriers other than electricity, and so far seven AIB members have been appointed as the competent bodies for gas GO issuance. Although the AIB Hub will eventually streamline fungibility between countries, cross-border trading in the near term will be limited to countries with bilateral trade agreements.

Forthcoming European market eevelopments

The gas GO market will evolve significantly over the next year (or years, depending on the ambition of regulators). Companies seeking to use gas GOs to address Scope 1 emissions in Europe should be aware of three main areas of change.

  • Standardized gas GO issuance will spread across the European continent. The current patchwork of GO systems will homogenize, and cross-border fungibility will increase. The roles and relationship between AIB and ERGaR will become apparent. 
  • Rules for issuing, trading, and canceling gas GOs will be finalized as RED II is implemented, and the EN16325 Standard is finalized. Companies should note that adherence to EN16325 is required by RED II and is intended to ensure that GO systems are accurate, reliable, and secure. It should also resolve outstanding questions regarding topics such as gas certificate vintage, expiration, and market boundaries. Standardized rules for how gas certificates will interact with RED II transportation mandates and the EU Emissions Trading System should also emerge, but implementation could vary by country. 
  • In late 2022, the Greenhouse Gas Protocol will publish new guidance on bioenergy accounting and claims; a range of industry stakeholders are participating in this process, including 3Degrees. This will be critically important for companies seeking to use biomethane to reduce their Scope 1 emissions.

Best practices for early movers

Although the structures and rules of gas GO markets are evolving, this should not dissuade companies from becoming early participants in these markets. Sending early demand signals is crucial to kick-starting these markets, which will play a pivotal role in the EU bloc reaching its net zero by 2050 target. While EU-wide market rules are being finalized, and as stakeholders await updated Greenhouse Gas Protocol guidance, they should keep the following best practices in mind:

  • Source certificates that were issued close in time to gas consumption: For electricity GOs, production and consumption are typically matched on a calendar-year basis, but the acceptable vintage window for gas GOs may be longer. 
  • Source certificates from within the same market: The EU gas grid is typically considered a single balancing facility, but other political and regulatory factors have historically influenced market boundaries. 
  • Source from sustainable feedstocks: Gas certificates originate from a range of feedstocks, which can vary considerably in terms of life cycle GHG intensity and price; companies should weigh cost-effectiveness with environmental impact and reputational risk.

Markets for renewable gases are beginning to emerge in other regions of the world as well, most notably in the United States and Canada. If your company is seeking to understand how to best leverage emerging markets for renewable gas certificates to address your Scope 1 emissions, feel free to reach out to us. We are happy to help.

 
 

 

What the European Green Deal means for companies’ climate commitments in Europe

Electric Tram in Reims, France

“Green growth” — the concept of decoupling economic expansion from negative environmental impacts — is by no means a new idea, but it is more frequently discussed in textbooks than in national legislation. In Europe, however, this is no longer the case. The European Green Deal is a commitment from the European Commission for the EU bloc to be climate neutral by 2050. The climate-related investments necessary to achieve this target are intended to serve as both a near-term stimulus to help the European economy recover from its pandemic-induced recession and a catalyst for a continent-wide green economy transition. While this cements the EU’s role as a global climate leader, European regulators are still in the very early days of making this commitment a reality. For companies seeking to proactively reduce their carbon footprint in Europe, the Green Deal is welcome news, and they want to learn more. Below are answers to some of the most common questions being asked.

How is the Green Deal being implemented across Europe?

The Green Deal is an aspirational commitment that will be underpinned by forthcoming EU-level legislation and then implemented via EU Member State policies and regulation. EU legislation will come in the form of the European Climate Law, which will bind Member States to the 2050 climate neutrality target, then national-level policy will follow suit. The European Commission has also committed to developing a Just Transition Mechanism to support the green economy transition in Member States that will be subject to the greatest economic hardship, i.e. those whose economies are most dependent on fossil fuels. The EU is committed to leaving no country behind in its pursuit of climate neutrality.

What sectors are most affected by the Green Deal?

In addition to supporting biodiversity and agricultural initiatives, the Green Deal will also support clean energy and decarbonization across four key sectors:

  • Energy: 75% of EU emissions come from energy production — to address this, the EU will prioritize support for offshore wind production, gas decarbonization, interconnected and digitalized energy markets, smart grids, hydrogen networks, and carbon capture, storage and utilization projects.
  • Buildings: 40% of energy use occurs in buildings — the EU has proposed widespread efficiency upgrades and plans to include emissions from buildings in the EU Emissions Trading System (ETS).
  • Transport: 25% of total emissions come from transportation — the EU aims to reduce these emissions by 90% through significant investment in alternative transport fuels and is striving for 1 million public electric vehicle (EV) charging stations and 13 million zero/low-emission vehicles by 2025.
  • Industry: Over the next 25 years, energy-intensive sectors will undergo a major shift toward decarbonization; the EU aims to help its industries become global leaders in sustainable products and technologies that promote a circular economy.

What does this mean for companies seeking to reduce their carbon footprint in Europe?

While the Green Deal aims to reduce greenhouse gas (GHG) emissions by 55% by 2030 en route to zero by 2050, the EU’s 2030 renewable energy target remains at just 32%. For this reason, the European Commission is evaluating whether and how its Renewable Energy Directive should be adjusted and strengthened in the context of achieving the more ambitious targets set out by the Green Deal. Corporate renewable energy buyers can expect increasing accessibility to renewable power purchase agreements (PPAs), increasing reliance on Guarantees of Origin (GOs) to track electricity use, and increasing adoption of biomethane and hydrogen GOs in the gas sector. Companies with vehicle fleets can also expect enhanced fiscal support for the decarbonization of these services.

How much will it cost, and what should companies look out for next?

Green Deal investments will be jump-started by the Recovery Plan for Europe, which bolstered the COVID-19 recovery budget to €1.8 trillion, while committing 30% of these funds to fighting climate change. The European Commission expects it to cost approximately €1 trillion to reach its 2030 targets, with these funds coming from the EU budget, national governments, and the private sector. As the Green Deal commitments are gradually embedded into legislation and regulation across Europe, companies can expect an explosion of green growth opportunities, especially in the energy and transport sectors. They should also be aware of changing policy environments geared toward facilitating this green economy transition and should stay apprised of incentives for companies doing their part to become climate neutral by 2050.

Despite how ambitious and unprecedented the Green Deal is, the true test will come in the form of maintaining unity across the bloc and ensuring that investments are properly leveraged to efficiently support economic growth that benefits both people and the planet. Once successful, this initiative will serve as a proven blueprint for green economic recovery around the world.

If you have additional questions about the Green Deal, or how it might impact your organization’s emissions reduction plans in Europe, please feel free to reach out to us.