Green power is electricity that comes from a renewable source, such as sun, wind or biomass. By using green power, you can reduce your company’s CO₂ emissions. The CO₂ Performance Ladder has strict requirements for what you can count as green electricity in your emissions accounting. In this article, we explain what the requirements are and what is changing in the new version (4.0) of the CO₂ Performance Ladder.
Most of the electricity used by companies comes from the electricity grid. In your energy contract, you can agree with your energy supplier that some or all of the power you buy is green. But because there is one electricity grid that we all use, it is impossible to physically tell green and grey power apart.
Guarantees of Origin (GoOs)
The solution: Guarantees of Origin (GoOs). GoOs guarantee that as much green electricity is put on the grid as is taken off as ‘green’. An energy supplier can receive a GoO by generating its own green electricity, but also by purchasing green energy from third parties. 1 GoO is equivalent to 1 megawatt hour (MWh) of sustainably generated energy.
Registration of GoOs
When you purchase green electricity, your energy supplier books GoOs through a registration platform. The energy supplier only needs to be able to prove that enough GoOs have been purchased and that they have only been sold to you. On the electricity label and/or your energy contract, you will find how much green electricity you have purchased.
European trade in GoOs
GoOs are part of the European Energy Certificate System (EECS). GoOs can be freely traded between EU member states and a number of other countries, such as Norway, Iceland, Liechtenstein and Switzerland. As a result, countries that generate more energy than they consume themselves, such as Scandinavian countries, sell many GoOs to countries where there is a lower supply of renewable energy and GoOs, such as the Netherlands.
Guarantees of Origin and the CO₂ Performance Ladder
The CO₂ Performance Ladder allows the use of GoOs, but under one condition: the green power must be produced in the same country where the power is used. This means that if your company is located in the Netherlands for example, the power from your GvO must also have been generated in the Netherlands. The same condition applies to branches of your company abroad i.e. a subsidiary in the UK should purchase GvOs for electricity purchased in the UK.
Additionality
The reason we choose this condition in the CO₂ Performance Ladder is that we believe that buying a GoO should actually contribute to the production of extra green power.
This is also known as additionality. GoOs from countries with a surplus of green energy, such as Norway, do not have this additional value. This is because, due to the large supply in Norway, the yield of the GoO is not used for even more generation of green power.
Exception to the rule
There is an exception to the rule that green power in a GoO must come from the same country where it is used. This exception applies if you can prove that your financial contribution is decisive for the realisation or continuation of a renewable energy generation project. In that case, you can enter into a Power Purchase Agreement (PPA).
Power Purchase Agreement (PPA)
In a PPA, you agree with the producer that you will purchase power for a number of years, including the corresponding certificates. Your contribution gives a producer financial security for the project, thus creating additionality.
Limitations of PPAs
PPAs also have limitations. For instance, the country where the energy is generated must have a direct connection to the country of consumption. As a company in the Netherlands for instance, you may enter into an agreement with a project developer in Denmark or the United Kingdom, but not in Iceland or Africa.
Buying GoOs directly yourself
Besides buying GoOs through your energy supplier or a PPA, you can also buy GoOs yourself on the energy market. You can do this through a supplier of GoOs, for example at a trading house (broker). Most countries have its own platform(s) for the registration of GoOs.
Why buy GoOs yourself?
Buying GoOs directly can be a solution, for example, if your organisation has many electric cars. Charging often takes place at charging stations that supply electricity from a different supplier than the one you have an energy contract with. Because charging companies do not always supply green power, you have to count the power you buy as grey. By purchasing GoOs yourself, you can still count the power for your electric vehicle fleet as green in your emissions accounting.
Translating power consumption into CO₂ emissions
In version 4.0 of the CO₂ Performance Ladder, translating (green) grid electricity into CO₂ emissions must be done in two ways: both via the market-based method and via the location-based method. Version 3.1 only allowed you to use the market-based method in your CO₂ accounting.
1. The market-based method
With the market-based method, you calculate an emission factor of 0 for the share of green electricity you purchase from your energy supplier. The share of grey electricity is multiplied by the factor that applies to the source, such as coal or gas. The emission factors per source could vary per country. On your energy supplier’s power label, you will find the mix of energy sources and the share of the different forms of green and grey power.
Calculation formula example:
Your power consumption in kWh x percentage of green power x 0
+ Your electricity consumption in kWh x percentage of grey electricity source A x emission factor source A
+ Your electricity consumption in kWh x percentage of grey electricity source B x emission factor source B
+ Your electricity consumption in kWh x percentage of grey electricity source C x emission factor source C
= The CO₂ emissions of your company
2. The location-based method
The location-based method looks at the emission factor of the total production mix of a country. This emission factor (kg CO₂ per kWh) is the amount of CO₂ emissions from all energy sources of the country in question divided by the amount of electricity produced by the country. Since the production mix per country changes every year, the emission factor also changes. Multiply this emission factor by your electricity consumption.
Calculation formula:
Your electricity consumption in kWh x emission factor of the country
= The CO₂ emissions of your company
As this method looks at the country’s total production mix, it does not matter whether you have agreed in your energy contract to buy green electricity. With the location-based method, you therefore cannot offset your emissions via GoOs.
Why apply both methods?
Applying both methods in the CO₂ Performance Ladder provides a more complete picture of your emissions. It also makes the use of GoOs less decisive. With this, we try to encourage you to reduce your power consumption and generate your own energy.
Generating your own green energy
More and more companies are generating their own green electricity. This usually involves solar energy from solar panels, but sometimes also energy from wind farms and green electricity from sewage sludge.
Power that you feed back to the electricity grid does not provide any benefits in your emission accounting of the CO₂ Performance Ladder. This is because you are not allowed to use this self-generated power to compensate for the use of grid power at another time. You may, however, report the feed-in in your emission accounting.
More emphasis on energy saving
In summary, under the CO₂ Performance Ladder, electricity is considered green:
- With GoOs from the country your company uses the electricity
- When the energy comes from a project abroad to which your organisation has made a crucial financial contribution
- When you have generated the energy yourself from a sustainable source
Due to the changes explained above, such as applying both the location-based and market-based method, version 4.0 of the CO₂ Performance Ladder puts more emphasis on energy saving as a way to reduce your CO₂ emissions.