How can the avoided emissions of renewable energy installations be calculated?
Motivation and starting point
In the context of the EU’s Sustainable Finance Framework, sustainability metrics are becoming increasingly important. As investors increasingly include sustainability criteria in their decisions, it is becoming more and more relevant for investment companies, such as Aquila Capital, to collect and communicate sustainability indicators. Aquila Capital is an investment company with a focus on investments in renewable energies (RE) and sustainable infrastructure projects. Up to now, the sustainability indicator has been calculated as the emissions saved by renewable energy plants over their lifetime compared to the displaced electricity mix. In this context, FfE was commissioned as an independent, scientific institution to further develop the existing methodology and data basis. The project aimed to develop a transparent, credible, comprehensible, practicable, and consistent approach to calculating avoided emissions. The resulting methodology and database take into account both life-cycle emissions and future developments of the energy system.
Procedure for calculating avoided emissions
The basic methodology for calculating avoided emissions is shown in Figure 1. Lifetime avoided emissions are calculated as the sum of the emissions from the displaced grid purchase minus the emissions from the RE installation.
The data basis for the calculation is the composition of the current and future electricity mix depending on the location, as well as emission factors for all conventional and renewable electricity generation plants. The emission factors take into account the greenhouse gas emissions from all life cycle phases, as shown in Figure 2.
The challenge in determining such life-cycle-based emission factors is the selection of consistent and transparent data sources that sufficiently reflect the current state of technology. This required a combination of different sources depending on the energy plant. Among other things, data from the International Energy Agency, the ecoinvent life cycle assessment database, and current literature sources were used.
To determine the current and future electricity mix, the results of a global energy system model are needed. This should be geographically resolved, have a time horizon of at least 2050, and be regularly updated. In addition, the scenario used should be consistent with the storyline of the entire project, i.e. the increased expansion of RE. For these reasons, the “IMAGE” model published by the Netherlands Environmental Assessment Agency would be used.
The calculation method represents as accurate an estimate as possible of the emission avoidance of various investments, nevertheless, this is also subject to some uncertainties and approximations. Future changes in demographics or economic growth could play a major role here, but systemic effects, such as the electrification of new applications, can also significantly influence the results. However, especially in the short to medium term, avoided emissions are a useful indicator to quantify the positive contribution of renewable energies to climate protection.
Use of the results
Thus, the project was able to provide a scientifically sound but also practicable methodology and database for calculating avoided emissions over the lifetime of RE installations. The methodology and database were reviewed and verified by TÜV after the project was completed. The key figures quantified with the help of the methodology can then be used for reporting to current and potential investors and for identifying reduction potentials through RE projects.