Carbon Reporting

Scope 2 Emissions and Factory Solar: Carbon Reporting Made Simple

Q: How does solar affect my SECR report?

Under SECR (Streamlined Energy and Carbon Reporting), solar reduces your disclosed energy consumption and associated Scope 2 emissions. You must separately disclose on-site renewable generation as a positive contribution. Your energy intensity metric (e.g., kWh per unit of production) will improve, strengthening your annual SECR report and demonstrating progress to shareholders and investors.

Factory solar directly and permanently reduces your Scope 2 emissions. Understand how solar fits into SECR, TCFD, CDP and Science Based Targets reporting for UK manufacturers.

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Key Facts: Solar and Scope 2 Emissions

Factory solar directly cuts Scope 2 emissions — the greenhouse gases produced in generating the electricity your facility uses. A 300kW solar system generates approximately 270,000 kWh/year, avoiding 62 tonnes of CO2e using the UK grid emission factor (0.233 kg CO2e/kWh in 2024). This reduction appears directly in your annual SECR, TCFD, and CDP carbon disclosures.

Scope 1, 2 and 3 Explained for Factory Managers

The GHG Protocol Corporate Standard divides emissions into three scopes. Understanding which scope your electricity use falls into — and how solar addresses it — is fundamental to carbon reporting.

Scope 1

Direct Emissions

Emissions you directly produce on-site. For factories, this includes:

● Natural gas combustion (boilers, furnaces)
● Diesel for on-site vehicles and generators
● Process emissions (e.g., cement kilns)
● Refrigerant leaks

Solar impact: None directly — solar generates electricity, not heat.

Scope 2

Purchased Energy Emissions

Emissions from electricity, heat, steam, or cooling you purchase. For UK factories:

● Grid electricity purchases (largest for most factories)
● District heating or cooling
● Purchased steam

Solar impact: Direct, significant reduction — typically 20-40% of total electricity use.

Scope 3

Value Chain Emissions

Indirect emissions throughout your value chain:

● Purchased goods and services
● Business travel
● Employee commuting
● Waste disposal

Solar impact: Indirect — lower energy costs can support cleaner supply chain choices.

UK Reporting Frameworks Requiring Scope 2 Disclosure

Multiple UK and international frameworks require or encourage Scope 2 disclosure. Factory solar generates measurable, auditable reductions that strengthen all of these reports.

MANDATORY

SECR — Streamlined Energy and Carbon Reporting

Mandatory for all quoted companies and large UK companies (turnover >£36m, balance sheet >£18m, or >250 employees). SECR requires annual disclosure of UK energy use and Scope 1 + 2 emissions in your Directors' Report. Solar generation reduces your disclosed electricity consumption and Scope 2 figure, and must be reported as on-site renewable generation.

Reporting frequency: Annual, aligned with financial year end. Penalties for non-compliance under Companies Act 2006.

MANDATORY (LARGE)

TCFD — Task Force on Climate-related Financial Disclosures

Mandatory for premium-listed UK companies, large UK registered companies, LLPs, and banks and insurers. TCFD requires disclosure of climate-related risks and opportunities including energy transition risks. Factory solar installations directly reduce climate-related physical and transition risk exposure.

Scope 2 relevance: Reduced electricity cost exposure to carbon pricing; lower Scope 2 intensity metrics.

VOLUNTARY

CDP (Carbon Disclosure Project)

Used by thousands of UK companies voluntarily and often required by corporate customers within supply chain sustainability programmes. CDP questionnaires specifically ask about renewable energy procurement and on-site generation. Solar installations directly improve CDP scoring, particularly in the Energy section.

Competitive advantage: Higher CDP scores increasingly required for Tier 1 automotive, retail, and FMCG supplier relationships.

COMMITMENT

Science Based Targets (SBTi)

The Science Based Targets initiative (SBTi) requires companies to set emission reduction targets in line with the Paris Agreement (1.5°C pathway). Solar is one of the most credible pathways to meeting absolute Scope 2 reduction targets required under SBTi Corporate Standard. Market-based Scope 2 accounting using owned solar generation counts as zero-carbon electricity.

SBTi recognition: On-site solar generation is explicitly recognised as a preferred abatement action for Scope 2 targets.

Market-Based vs Location-Based Scope 2: How Solar Affects Each

The GHG Protocol allows two methods for calculating Scope 2 emissions. Understanding both is important for accurate reporting and for maximising the reported benefit of your solar installation.

Location-Based Method

Uses the average emissions intensity of the electricity grid in the country of operation (UK: 0.233 kg CO2e/kWh in 2024).

How solar affects this:

Solar generation reduces your net purchased electricity. You deduct solar generation from total consumption before applying the grid emission factor. Result: direct proportional reduction in Scope 2 figure.

Calculation: (Total kWh consumed - Solar kWh generated) × 0.233 kg CO2e/kWh = Scope 2 (location-based)

Market-Based Method

Uses contractual instruments (Energy Attribute Certificates) to assign a specific emission factor to purchased electricity. REGO certificates in the UK allow zero-carbon attribution.

How solar affects this:

Owned solar generation is inherently zero-carbon under market-based accounting — you generated the clean electricity yourself. The fraction of your total consumption covered by solar attracts a 0 kg CO2e/kWh factor, significantly reducing your market-based Scope 2 figure.

Advantage: Market-based can achieve lower Scope 2 than location-based — particularly valuable for SBTi and CDP reporting where net-zero ambitions are assessed.

Best Practice: Report Both Methods

The GHG Protocol and TCFD recommend reporting both market-based and location-based Scope 2 figures. Companies with on-site solar often show a lower market-based figure due to zero-carbon self-generation, and a location-based figure that reflects the improving UK grid mix. Both figures demonstrate genuine progress.

Worked Example: Scope 2 Reduction from a 300kW Solar System

Here is a step-by-step calculation showing how a mid-sized UK factory can reduce its Scope 2 emissions and what this means for annual SECR reporting.

Scenario: Medium Engineering Factory, 300kW Solar System

Baseline (Pre-Solar)

Annual electricity consumption 800,000 kWh

UK grid emission factor (2024) 0.233 kg CO2e/kWh

Scope 2 emissions (location-based) 186.4 tCO2e

After Solar Installation

Solar annual generation 270,000 kWh

Net grid electricity purchased 530,000 kWh

Scope 2 emissions (location-based) 123.5 tCO2e

Annual Scope 2 reduction 62.9 tCO2e (33.7%)

Equivalent to removing approximately 38 average UK cars from the road for one year.

REGO Certificates and Market-Based Zero-Carbon Claims

Renewable Energy Guarantee of Origin (REGO) certificates are the UK's mechanism for certifying the renewable origin of electricity. Understanding how they interact with your solar installation is important for accurate market-based Scope 2 reporting.

If You Own Your Solar Installation

When you own the solar panels, you own the generation attribute of the electricity produced. For market-based Scope 2 reporting, this means:

✓ You can claim zero-carbon status for the electricity you generate and consume on-site
✓ No separate REGO purchase needed for the self-consumed portion
✓ REGOs are issued by Ofgem for registered generators — you can choose to surrender these for formal certification

If Solar is Under a PPA or Lease

Under a Power Purchase Agreement where the installer retains ownership, the generation attribute ownership needs to be clearly defined in the contract:

● Ensure the PPA contract explicitly transfers the REGO certificates or generation attribute to you
● Without this, you cannot make market-based zero-carbon claims for the solar generation
● Location-based Scope 2 reduction still applies regardless of ownership structure

UK Carbon Reporting Calendar

SECR reporting is aligned with your financial year end. Here is how the reporting cycle works for UK manufacturers.

Framework	Reporting Period	Deadline	Mandatory?
SECR	Financial year	Within Directors' Report (6 months after FY end for public companies)	Mandatory
TCFD	Financial year	Annual Report (aligned with SECR)	Mandatory (large)
CDP	Calendar year	Annual questionnaire (typically July-August)	Voluntary
SBTi Progress	Calendar year	Annual progress report via CDP or directly	Commitment

Frequently Asked Questions

Does rooftop solar reduce Scope 2 emissions? ▼

Yes. Rooftop solar directly reduces Scope 2 emissions because it generates electricity on-site, displacing electricity purchased from the grid. Every kWh generated by your solar system is a kWh you do not buy from the grid, reducing your purchased electricity volume and therefore your Scope 2 emissions. Under both location-based and market-based accounting methods, owned solar generation reduces your reportable Scope 2 figure.

What is the UK grid emission factor for 2024? ▼

The UK government publishes official conversion factors annually. For 2024, the UK grid electricity emission factor for Scope 2 location-based reporting is 0.233 kg CO2e per kWh (transmission and distribution losses excluded). This is a significant reduction from 0.283 kg CO2e/kWh in 2021, reflecting the continued growth of renewable energy in the UK mix. Always use the DEFRA/DESNZ conversion factors published for your reporting year.

Do I need REGO certificates if I own my solar? ▼

For location-based Scope 2 reporting, you do not need REGO certificates — you simply subtract the solar generation from your total electricity consumption before applying the grid emission factor. For market-based Scope 2 reporting, owning the solar installation and generating the electricity yourself allows you to claim zero-carbon electricity without a separate REGO certificate, as the generation attribute is inherent in your ownership of the system. However, obtaining and surrendering REGOs provides formal third-party verification of your renewable generation claim.

How does solar affect my SECR report? ▼

Under SECR, solar reduces your disclosed energy consumption and associated Scope 2 emissions. You must separately disclose on-site renewable generation as a positive contribution. Your energy intensity metric (e.g., kWh per unit of production) will improve, strengthening your annual SECR report and demonstrating progress to shareholders and investors. Solar also supports the narrative sections of your SECR report where companies must describe energy efficiency actions taken.

Can solar help meet a Science Based Target? ▼

Yes. Science Based Targets (SBTi) require companies to reduce absolute Scope 2 emissions in line with 1.5°C pathway. Rooftop solar is one of the most credible and permanent ways to reduce Scope 2 emissions. Under SBTi methodology, market-based Scope 2 accounting using zero-carbon generation from owned solar counts towards meeting absolute Scope 2 reduction targets. The SBTi Corporate Standard explicitly recognises on-site solar as a preferred abatement action for Scope 2.