Energy Trends That Are Here to Stay: Starting with Sustainability Basics4 min read
The energy industry is evolving at a rapid speed. Driven by a combination of corporate environmental, social and governance (ESG) initiatives, competitive pressures, and compliance with new federal, regional or statewide policies, organizations are exploring the implementation of new sustainability strategies in their overall business strategy.
At Constellation, we strive to keep you apprised of the latest trends as they relate to energy, and most recently, sustainability. In a recent survey with Constellation customers, we learned that only 15% have a sustainability plan in place and 85% have limited knowledge of where to start or are just getting started with developing a strategy.
In our new blog series titled “Energy Trends that Are Here to Stay”, we will discuss the meaning of energy trends that are increasingly common in industry news and that are quickly being adopted by businesses in an effort to increase their competitiveness.
Five important terms to know include:
Net-zero emissions (or climate neutrality)
Net zero refers to the balance between the amount of greenhouse gases released into and removed from the atmosphere. For example, a net-zero goal requires the amount of greenhouse gases (GHG) emitted into the atmosphere to be offset by GHG-reducing projects.1 Such projects may include forestry preservation and new renewable energy projects and are critical for reaching climate neutrality.
In most cases, getting to net-zero for a business, a specific facility, or a region will require a combination of (1) decreasing emissions through the use of emission-free or renewable energy, renewable natural gas and efficiency measures, and (2) offsetting emissions through the use of carbon offsets.
Carbon offsets represent verified GHG emission reductions, measured in tons of carbon dioxide equivalent, or CO2e, resulting from projects such as forestry preservation and management, certain energy efficiency measures and renewable energy development, chemical processes and industrial manufacturing recycling and sequestration, methane capture, and other carbon capture and sequestration projects. A key requirement for carbon offset projects is that they be “additional,” meaning that they would not have occurred in the absence of a market for carbon offset credits.
By purchasing carbon offsets, businesses can indirectly reduce, or “offset”, their on-site GHG emissions, also known as Scope 1 emissions. Carbon offsets also allow facilities to offset emissions made elsewhere beyond their own operations – such as for emissions associated with their electricity use, known as Scope 2 emissions, and for emissions associated with business travel and in their supply chains—known as Scope 3 GHG emissions,
Scope 1 emissions
Scope 1 emissions are one area that businesses tend to focus on as they comprise sources from a business’ owned or controlled assets, and upgrades to these areas are typically easiest to manage. More than 7,000 facilities are required to report these emissions in their business’ GHG report on an annual basis, according to the Environmental Protection Agency (EPA).2
Because Scope 1 emissions involve direct emissions created at customer sites or in their owned equipment (e.g., natural gas burned in a boiler or gasoline/diesel/fuel oil used in vehicles or equipment), energy efficiency upgrades, fleet electrification and the use of renewable natural gas may be helpful in reducing these emissions.
Businesses looking to reduce their fossil-fueled electricity use, known as Scope 2 emissions, may purchase renewable energy certificates (RECs). RECs are proof that energy has been generated from renewable sources, such as solar energy, wind power, hydropower, geothermal energy and/or biomass energy. Each REC represents the environmental benefits of 1MWh of renewable energy generation and may be sold and traded.
The purchase of RECs helps support the market for renewable electricity, which in turn may displace fossil fuel-based electricity generation in the region where the renewable electricity generator is located. Companies purchasing electricity matched with RECs can legally claim to have purchased renewable energy.
Whereas RECs track the renewable associated with renewable generation, emission-free energy certificates (EFECs) track the zero-carbon generation attributes associated with emission-free generation. These generation sources may include, but are not limited to, renewable generation (e.g., nuclear, solar, wind, hydropower, etc).
When matched with electricity (which generates Scope 2 emissions), EFECs represent the environmental attributes associated with the generation of electricity from sources that do not emit greenhouse gases from combustion. Most of the time, EFECs sold in the voluntary market are associated with nuclear or large-scale hydroelectric generation.
EFECs are interchangeable substitutes for RECs in greenhouse gas emissions accounting, resulting in zero Scope 2 emissions if matched with all of a company’s electricity load. If zero carbon is a customer’s main goal, EFECs may be the more cost-effective option.
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We invite you to take our quiz to tell us where you are in building and implementing your sustainability plan so we can better help you.
Based on current World Resources Institute (WRI) guidance. Scope 2 reporting claims of this product may be affected by future changes.