By Dr. Samantha Mudie, Head of Technical Development
This month, I had the pleasure of contributing to the UK Green Building Council’s (UKGBC)
consultation on carbon offsetting and energy procurement.
In April 2019, UKGBC published a draft consultation paper ‘Net Zero Carbon Buildings: A Framework Definition’, which puts in place detailed guidance for the property and construction sectors to achieve net zero carbon with both building construction and operations. As part of its ongoing work, the UKGBC felt that further clarity regarding renewable energy procurement and carbon offsetting was required, to ensure the framework is used consistently and to align businesses with best practice.
A task group representing industry bodies, built environment professionals, leading businesses in the field and technical institutes was convened, and draft guidance with a consultation document was published at the start of November. This was split into 4 key areas:
NET ZERO OPERATIONS: FOSSIL FUEL USE
To date, discussions on renewable energy procurement have understandably focused on electricity purchasing as market maturity has led to products such as power-purchasing agreements (PPAs). However, 21% of the UK’s total emissions are attributed to heating and hot water, with 75% of this demand met by natural gas. Given the overarching framework principles of ‘action today and tighten requirements over time’, the new consultation document focusses on measures that are implementable today, and when alternative heat decarbonisation pathways become viable, the guidance will be updated to reflect these.
Currently ‘green gas’ is in its infancy, with biomethane from anaerobic digestion, landfill gas and synthetic gas (gasification of biomass) as the only options. These are not Ofgem certified as yet, and instead Renewable Gas Guarantees of Origin (RGGOs) and the Biomethane Certification Scheme (BMCs) are being administered by the industry. Replacement of fossil fuel systems with a low carbon alternative should be made a priority at the next system replacement cycle.
RENEWABLE ELECTRICITY PROCUREMENT
The quality of electricity procurement can and should be assessed using the three principles of energy attribute, renewable sourcing and additionality. However, the distinction being made in the consultation document between ‘high quality green tariffs’ and ‘low quality green tariffs’ could potentially disadvantage traditional larger suppliers who tend to have a well-established generation arm containing gas / nuclear assets. This could be considered unfair (and decreases competition) given that we still do need some baseload and flexible generation at present. It is not beyond the realms of possibility that a supplier could hold gas-fired assets, but provably supply the end-users contract via a direct PPA or some form of specialised product that is green.
Users should demonstrate that a share of their overall strategy is high or medium quality for ‘renewable sourced’ and ‘additionality’; and, where this is not currently feasible, the rationale should be publicly disclosed with an action plan on how high or medium quality procurement route(s) will be achieved at the next procurement cycle opportunity. We also agree on limiting the use of unbundled REGOs to only tenants who have no control over their energy procurement. We have long been champions of the public disclosure of annual electricity consumption (kWh) and the proportion attributed to each procurement route, with a narrative on how the various procurement routes were considered.
We feel that the principles and requirements set out in the document are achievable for most building and user types. Given that PPAs are not currently an option for many in the property sector due to insufficient volumes and offshoring of business arrangements, it means that the only available option to many is through a traditional retail supply contract. Therefore, current tightness in credit markets and the limited number of suppliers that could offer a ‘high quality green tariff’, means that finding a solution may not always be possible.
There has long been concerns over the voluntary carbon offset market (which warrants a blog/article in its own right). The consultation paper sets out a number of ‘allowable offset approaches’ whereby UK Woodland Code Units (WCUs) may be purchased alongside high quality voluntary credits. This should be at a greater than 1:1 ratio, as per the Stockholm Institute’s guidance on discounting (http://www.offsetguide.org/wp-content/uploads/2020/03/Carbon-Offset-Guide_3122020.pdf) and should be credible (currently via the Gold Standard, Verified Carbon Standard or the Clean Development Mechanism). These should rightly adhere to the principles of additionality, avoiding leakage, measurability and be real/proven, permanent, independently verified, unique and transparent. The purchase of WCUs would give greater confidence that the purchaser was meeting net zero on a building level, as well as accelerating the transformation in UK land use required to meet out CCC target of 30,000 hectares per year to 2050.
A further approach of utilising a ‘transition fund’ has been put forward whereby an explicit and pre-determined carbon price, equal to the HMT Green Book (£70/tCO2 in 2021), is placed on the organisations residual emissions. This is offset through the voluntary market and the remaining transition fund may be spent on net zero aligned projects such as internal reinvestment in energy efficiency, insetting, developing forestry or community and local authority projects. The core premise is to unlock the funds needed to reduce emissions close to zero without offsetting in order to meet the UK’s net zero target of 2050. As long-lived carbon storage and carbon removal projects become more economically viable over the coming decades, these will be priority. The document also rightly points out that local planning authorities (LPAs) carbon offset funds, provided by developers (akin to a carbon tax), are not often spent within a timeframe compatible with net zero claims and often do not align with offset principles as set out above.
The final section relates to carbon accounting, with the recommendation that dual reporting as per GHG Protocol Scope 2 guidance should be required. Upfront embodied carbon can no longer be accounted for through the export of renewable energy for either the building in question, or elsewhere in a portfolio or multi-building development. Exported renewable energy may however be used to account for gas consumption if converted to kgCO2. Carbon offsets cannot be used to account for electricity consumption as there are readily available market mechanisms (such as green tariffs) to ensure emissions from electricity procurement is close to zero. Finally, we welcome the suggestion that that all renewable generators expected to export more than a cumulative 0.5-1.0MWh over the financial year should be required to claim and retire the associated REGOs if the export is to be used as a carbon offset.
The consultation closed this week and we look forward to the finalised framework when published in March.