Introduction

Tracking renewable energy consumption is a critical component of sustainability reporting. Companies often use two methodologies to calculate their renewable energy consumption: the supplier-based method and the location-based method. Each approach has distinct criteria and use cases, and understanding the differences is essential for accurate reporting.

This guide will explain how to differentiate between the two methodologies, the criteria for calculating each, and provide practical examples.

Context

Understanding the differences between supplier-based and location-based methodologies ensures accurate tracking of renewable energy consumption, aligning with frameworks like the GHG Protocol Scope 2 Guidance and EDCI reporting requirements.

Supplier-based method

The supplier-based method calculates renewable energy consumption based on contractual agreements with energy suppliers. This approach assigns renewable energy use based on direct procurement actions and requires proof to ensure accuracy:

The company must have direct contracts or certificates (RECs. PPOs, GOs or other regionally recognised instruments) for renewable energy procurement. All certificates must be retired in accordance with Scope 2 Quality Criteria to prevent double counting.

Example

A company purchases 100 MWh of electricity and holds RECs for 80 MWh of renewable energy. Renewable energy share would be calculated as:

Renewable energy consumption = 80 MWh

Location-based method

Definition

The location-based method calculates renewable energy consumption based on the average energy mix of the local electricity grid, irrespective of supplier contracts. This method reflects the regional renewable energy share and is less specific to individual actions.

Companies should use the location-based method only in the absence of supplier-based data, as it is less reliable and does not account for individual energy procurement efforts like PPAs or RECs.

Example

A company consumes 100 MWh of electricity in a region where the renewable energy share of the grid is 30%.

Renewable energy consumption = Grid Renewable Share (30%) * Total Electricity Consumption (100 MWh) = 30MWh

Sources

To calculate renewable energy share using the location-based method, the following sources provide reliable data on energy mix by region or country:

Note: When calculating renewable energy shares, include only the following energy sources – Wind, Solar, Hydro, Geothermal, and sustainably sourced Biomass.

Comparison: Supplier vs. Location-Based Methods

Conclusion

The supplier-based method offers greater precision and highlights corporate renewable procurement efforts, while the location-based method provides a view of the regional energy mix.