Leveraging the potential of carbon avoidance in the energy sector to reach net zero
28 July 2022
Since the beginning of 2022, we’ve been working with climate action consultancy, South Pole. They support businesses to develop deep decarbonisation strategies to implement into their long-term business plans. And together we’ve been working on a robust carbon avoidance methodology that businesses across the globe will be able to build their sustainability strategies around.
Why your business needs carbon avoidance methods
Now more than ever, it’s critical that companies commit to transitioning to a lower-carbon economy. With the vision of net zero in mind, many companies are setting themselves ambitious decarbonisation goals that align with the objectives of the Paris Agreement – limiting global warming to 1.5ºC.
Deep and rapid emission reductions represent the backbone of any credible net zero journey. But evaluating precisely the positive climate impact of products and services within a commercial strategy remains a hurdle – particularly knowing which ones to prioritise in order to meet your targets. This is especially true if your company’s carbon footprint is driven by customers using your product.
The question is, how do you capture that positive impact accurately and transparently, while incentivising customers to opt for low-carbon solutions?
In collaboration with South Pole, we’ve designed a new carbon avoidance methodology which does just that – calculating the positive environmental impact of offering lower-carbon products or services to our customers.
A methodology to help households decarbonise
Our pathway to net zero focuses on helping our customers use less energy to heat and power their homes – and getting more of that energy to come from low-carbon sources.
Conventional greenhouse gas accounting methods (like the Greenhouse Gas Protocol) measure the total tonnes of greenhouse gases emitted as a result of a company’s activities. This serves as a template for companies to measure the negative impact of their operations, supply chain and services on the climate. But what this type of methodology doesn’t do, is help a company to calculate the positive impact that offering lower-carbon products or services could have through avoiding emissions.
This is particularly important for companies, like us, whose carbon footprint is driven by customers using their product. Over 99% of our carbon footprint, for example, comes from our customers’ use of electricity and gas.
We’ve worked together with South Pole to create a new carbon avoidance methodology, which hopefully will be adopted by others in the energy sector. The methodology measures the carbon avoided over a product lifecycle when a customer switches from their existing technology (like a gas boiler) to a low-carbon solution (like an air source heat pump).
Rob Ellinson, a consultant at South Pole, explains, “For each low-carbon solution, we calculated a carbon avoidance factor that compared the emissions from a business-as-usual scenario to a low-carbon solution. For example, the emissions that are avoided through replacing a gas boiler with an air source heat pump.”
We initially reviewed 18 products within our existing and future low-carbon solution product portfolio with the new methodology – including roof insulation, electronic vehicle leasing and heat pumps. But it can also be replicated and applied as and when products enter and exit our product portfolio.
Net zero ambitions translated into commercial strategies
Through the carbon avoidance assessments, we now have an understanding of how much carbon could be avoided by growing the share of low-emission products and services across our portfolio.
Kim van Lieshout, OVO’s senior sustainability manager, added, “Knowing the carbon avoidance factor for each of our products and services means that we can translate our climate targets into commercial targets. Such as how many heat pumps do we need to install to avoid 1 million tonnes of carbon? This helps us consider carbon avoidance impact alongside other technical, financial and commercial factors when deciding which products to prioritise, scale up and roll out. This information can then become key to us driving our commercial strategy to meet our net zero ambition.
“It also gives us a tool to inform our customers of the potential carbon avoidance impact associated with any choices they make across our product range. With customers being more and more engaged in sustainability, informing them of the carbon avoidance impact of their choices is a valuable marketing tool. It can help them make their own choices and trade-offs to optimise energy use to lower their carbon footprint.
“Conducting this analysis threw light on which of our products had the greatest potential to avoid carbon emissions entering the atmosphere. We learned that fuel-switching technologies like heat pumps or EVs (that take customer energy use away from gas, diesel or petrol and switch it to clean electricity) help reduce carbon emissions. But we also learned that combining smaller, less costly actions could add up to a significant change in emissions – particularly as these are more often accessible to the majority of our customers. For example, behavioural efficiencies like shorter showers or turning down the thermostat by 1 degree.”
Catalysing climate action with carbon avoidance
The methodology has been developed with the purpose of inspiring others to take action on climate and make progress towards net zero. To learn how to leverage the carbon avoidance potential of your business, read the full open source report