Making Progress on Methane 

Methane is a colorless and odorless super-pollutant — and today’s energy procurement and emissions accounting practices make it invisible to corporate emissions inventories as well. Addressing these impediments can unlock corporate low-emissions energy procurement opportunities to drive methane emissions reductions from oil and gas. Large load energy customers, including hyperscalers and data center developers, are well positioned to harness this opportunity, strengthening the demand signal for lower-methane-intensity gas, and demonstrating leading environmental performance.  

RMI is prioritizing faster deployment of energy efficiency, renewables, storage, transmission, and other solutions that can meet growing electricity demand from data centers and other end users, while strengthening reliability and resilience. At the same time, because gas will remain part of the energy mix, RMI is working to drive oil and gas methane emissions to near-zero levels. 

Capturing methane’s true impact 

Corporate energy buyers typically do not purchase gas directly, but the methane emissions associated with their power use can be significant. Methane is 80 times more potent than carbon dioxide over a 20-year period, and oil and gas production is responsible for approximately 22% of methane emissions from human activity. In the United States, a company that uses grid-connected power is most likely dependent on gas for some share of its generation. Upstream of that generation are associated methane emissions from avoidable venting or leakage.  

The challenge is that methane’s true impact on total emissions is often obscured by emissions accounting practices. A company typically reports emissions in CO₂-equivalent units, without separating methane from other sources of emissions. In addition, standard emissions accounting practices report a pollutant’s impact over a 100-year period, which masks the short-term warming impact of a super-pollutant like methane. Further, companies often do not adequately account for Scope 3 emissions associated with methane leakage up the gas supply chain, prior to combustion. 

Changing the methane calculus  

Under standard practices, companies must report two categories of Scope 2 emissions: location-based emissions, calculated from facility demand and regional grid emissions rates; and market-based emissions, representing a modified emissions inventory from claiming contractual instruments like renewable energy certificates (RECs). Under current market-based reporting frameworks, companies can reduce, or even eliminate, their Scope 2 emissions on paper through the purchase of RECs via contracts like virtual power purchase agreements (VPPAs) with renewable generators. This ability to reduce Scope 2 emissions on paper can create the impression that the emissions associated with power generation and upstream emissions governed by Scope 3 have been addressed when, in fact, the physical electricity consumed and upstream emissions remain unchanged.  

The Greenhouse Gas Protocol Scope 2 does not account for upstream methane emissions from oil and gas production — instead, these are reported in Scope 3, where there is currently limited guidance on how companies can reduce reported emissions with environmental attribute certificates (EACs), instruments analogous to RECs. Emerging sector-specific guidance would provide clarity and enable corporations to pursue these reductions.  

Methane emissions factors used for purchased electricity are generic averages that often undercount emissions and don’t reflect the large variances in actual methane emissions from oil and gas production. While methane is often underrepresented in emissions accounting, its disproportionate impact in the short term means that its mitigation can dramatically reduce near-term warming. 

This presents an opportunity for companies, especially large load energy customers. They can demonstrate environmental and energy leadership by voluntarily measuring and addressing both the emissions associated with power generation and the upstream methane associated with any gas use. This can be done through the procurement of credible low-leak gas via either direct procurement or credible certificates (EACs). 

Energy buyers can take action on methane 

Energy buyers, through both collective and independent action, can strengthen the market for low-leak gas. 

Buyers can advocate with their local utility or public utility commission to monitor upstream methane emissions and expand low-leak gas procurement. Many large customers have proven influential in large load tariff design, advocating for and receiving clean supply options from renewable energy resources. Large load customers can similarly apply their influence with utilities and commissions to improve transparent reporting of upstream methane emissions in their gas supply chains. These customers can also push utilities to procure physical volumes of certified low-leak gas and recover the incremental cost through large load tariff rates. While utilities are often required to source the lowest-cost available fuel to protect ratepayers, large loads can offer to cover these costs to preserve affordability for the broader rate base. 

Energy buyers can also take independent action, sidestepping utility procurement constraints entirely through independent procurements of low-leak gas certificates to address upstream emissions from the grid-connected gas facilities powering their load. Emerging methane emissions accounting guidance provides possible pathways to action. 

In many ways, the options available to companies to drive low-leak gas procurement today mirror those from the development and maturation of compliance and voluntary REC markets from the 1990’s into the 2010’s. Corporates advocated for policies requiring utility procurement of RECs and worked in trade groups like the Clean Energy Buyer’s Association and RE100 to codify voluntary procurement within emissions accounting frameworks like the Greenhouse Gas Protocol. Just like compliance and voluntary REC markets sent demand signals which accelerated clean power adoption, companies can act today to scale the market for low-leak gas. 

The strategies outlined above can be a powerful way to lower methane leakage and methane emissions associated with gas-fired power plants that power data centers connected to the local grid. Together with a continued improvement in the share of clean energy found in US grids, these strategies can go a long way toward reducing the overall greenhouse gas emissions impact of new data center development. 

For data center projects powered partially or exclusively by on-site gas generators, however, sourcing low-leak gas alone cannot mitigate the direct greenhouse gas emissions from on-site gas. Reducing upstream methane leakage impact is just one part of many in the overall emissions-reduction challenge for this data center archetype. 

Takeaway 

Data centers and other large loads are an important sector for emissions reductions. The tech industry has already made progress by pioneering renewable energy procurement. The next frontier in carbon accounting and emissions management is Scope 3 emissions –  in particular, upstream methane emissions. Low-leak gas procurement represents an immediate, actionable, cost-effective way to demonstrate leading environmental management, strengthening a company’s standing with investors, customers, and standards setters as scrutiny of full-footprint emissions intensifies.