Compliance guide · Updated 12 May 2026

Scope 2 emissions reduction with commercial solar: 2026 methodology

Scope 2 emissions — indirect emissions from purchased electricity, steam, heating and cooling — is the most directly-influenceable category in corporate carbon accounting. Commercial solar PV reduces Scope 2 directly: every kWh of self-consumed solar electricity removes the equivalent kWh × grid emission factor from your reported emissions. Here's the 2026 methodology, with the choices and pitfalls.

The GHG Protocol Scope framework

The Greenhouse Gas Protocol Corporate Standard, published by the World Resources Institute and World Business Council for Sustainable Development, defines three scopes of emissions:

- Scope 1: Direct emissions from owned or controlled sources — combustion in boilers, fleet vehicles, on-site CHP. - Scope 2: Indirect emissions from purchased electricity, steam, heat or cooling — your gas-fired boiler is Scope 1, but the imported grid electricity that runs your equipment is Scope 2. - Scope 3: Indirect emissions across the value chain — supplier emissions, employee commuting, product use phase, end-of-life.

For most commercial property businesses, Scope 2 is 20-60% of total Scope 1+2 emissions. For services businesses (offices, retail) it's typically dominant. For industrial businesses it varies — manufacturing with significant fossil-fuel process heat has higher Scope 1.

Scope 2 is the most directly-actionable for commercial property: switching to renewable electricity or installing on-site generation reduces Scope 2 emissions immediately and verifiably.

Market-based vs location-based reporting

GHG Protocol Scope 2 Guidance (2015) requires dual reporting:

Location-based reporting uses the grid average emission factor for the geography. UK 2026 factor: ~0.21 kgCO2e/kWh published annually by DESNZ.

Market-based reporting uses contractual emission factors — what you're actually paying for. A renewable supplier with REGO-backed tariff: 0 kgCO2e/kWh. A standard grid tariff: typically the residual grid factor (excluding renewables claimed elsewhere).

The two figures diverge most when companies buy renewable energy supply (PPA, REGO, green tariff). Location-based shows the grid average regardless of what you buy; market-based shows zero for renewable purchases.

For TCFD disclosure, both must be reported. Companies typically lead with market-based (it shows the strongest commitment) and disclose location-based as a 'sense check'.

Solar PV in Scope 2 accounting

Self-consumed solar electricity gets the most generous treatment in both methodologies:

- Location-based: Each self-consumed kWh removed from your Scope 2. Saving = self-consumed kWh × grid factor. - Market-based: Each self-consumed kWh is from your own renewable generation; zero emissions per market-based methodology.

Exported solar requires the REGO decision:

- REGO retained: Scope 2 reduction applies for exported kWh under market-based methodology (you keep the renewable claim). - REGO sold: No Scope 2 benefit for exported kWh — the buyer takes the renewable claim. You receive cash instead.

The REGO sell-vs-retain choice is therefore not just a revenue question — it's a Scope 2 accounting question. For TCFD-disclosing or SBTi-committed companies, retention is usually preferred.

Calculating solar's Scope 2 impact: worked example

Worked example: A UK manufacturer with 4 GWh/year electricity import, 100% from a standard grid tariff (residual factor 0.22 kgCO2e/kWh, similar to grid average). Pre-solar Scope 2: 880 tCO2e/year.

Project: 1MWp commercial solar rooftop generating 950,000 kWh/year. Self-consumption rate 80% (730,000 kWh). Export rate 20% (190,000 kWh).

Location-based saving: - Self-consumed kWh × grid factor: 730,000 × 0.21 = 153 tCO2e/year - Export with REGO retained: 190,000 × 0.21 = 40 tCO2e/year - Total: 193 tCO2e/year saving (22% reduction)

Market-based saving: - Self-consumed kWh × residual grid factor: 730,000 × 0.22 = 161 tCO2e/year - Exported kWh (REGO retained, zero emissions): full 100% renewable claim - Total: 161 tCO2e/year saving + retained REGO claim

The market-based methodology generally rewards renewable purchase decisions; location-based is more conservative.

Carbon factor trajectory and reporting nuance

UK grid emission factor has declined steadily:

- 2010: ~0.51 kgCO2e/kWh - 2015: ~0.43 kgCO2e/kWh - 2020: ~0.27 kgCO2e/kWh - 2025: ~0.23 kgCO2e/kWh - 2026 (current): ~0.21 kgCO2e/kWh - 2030 (projected): ~0.15 kgCO2e/kWh - 2035 (projected): ~0.08 kgCO2e/kWh

This trajectory matters for project decisions:

1. A solar project's annual carbon savings will decline over its 25-year lifetime as the grid decarbonises 2. Lifetime carbon analysis must use year-by-year projected factors 3. Some reporting frameworks (legacy ISO 14064-1) use base-year factors throughout; modern frameworks (SBTi, TCFD-aligned) require current factors 4. The trajectory does NOT invalidate solar — self-consumption saves higher rates throughout — but it does affect the rate of carbon impact decline

For TCFD disclosure, presenting solar's declining carbon impact alongside the grid decarbonisation backdrop is more credible than assuming static savings.

FAQs

Scope 2 emissions reduction with commercial solar: 2026 methodology · FAQs

How much does solar reduce Scope 2 emissions?

A 100kWp commercial system with 60% self-consumption typically saves 12-15 tCO2e/year (location-based, 2026 factor). Higher with strong self-consumption.

What is the difference between market-based and location-based reporting?

Location-based uses the grid average emission factor. Market-based uses the contractual factor of what you're actually paying for — zero for renewable-backed tariffs, higher for standard grid. Both must be reported under GHG Protocol.

Should I retain or sell REGOs?

For TCFD-disclosing or SBTi-committed companies, retain. The Scope 2 reduction is usually worth more than the £8-£20 per REGO sale revenue.

Does the falling grid factor reduce solar's value over time?

It reduces the carbon-saving rate over the system life (less avoided emissions per kWh as the grid decarbonises). It does not reduce the financial value — you still avoid the import cost.