Scope 2 emissions: location-based vs market-based for SECR

What scope 2 emissions are

Scope 2 is the indirect emissions from the electricity, heat, steam and cooling you buy. The fuel is burned at the power station or district-energy plant, not on your site — but because you paid for the energy and consumed it, the emissions are allocated to you. The GHG Protocol Scope 2 Guidance sets the rules, and SECR reporting is built on it.

For almost every UK organisation, scope 2 is dominated by one source: purchased grid electricity. Heat, steam and cooling only count if you buy them from a supplier — a district-energy network, or a neighbouring plant. If you're not on a district network, scope 2 is simply your electricity.

You calculate it the same way as every other scope — activity data times an emissions factor:

kWh purchased × emissions factor = scope 2 emissions

The twist with scope 2 is that there are two factors you can use, and SECR has a view on which.

The two scopes either side of it

The GHG Protocol splits emissions into three scopes so the same tonne of CO₂ is never counted twice between companies — your supplier's scope 1 fuel becomes your scope 2.

• Scope 1 — direct emissions from sources you own or control: gas boilers, your fleet, refrigerant leaks. See the scope 1 guide.
• Scope 2 — purchased electricity, heat and steam (this guide). Indirect: the combustion happens off-site, the emissions are yours.
• Scope 3 — everything else across your value chain: purchased goods, business travel, the supply chain, product use and end-of-life. Fifteen categories, usually the biggest slice of the total. See the scope 3 guide.

SECR mandates scope 1 and scope 2 plus an intensity ratio. Scope 3 is voluntary.

Location-based vs market-based — the two methods

The GHG Protocol asks for dual reporting: two parallel scope 2 figures from two different factors. Getting both right is where most reports stand or fall.

Location-based (mandatory for SECR)

You multiply your kWh by the UK national grid average factor published each year by DEFRA. Every organisation on the grid uses the same factor, so figures are comparable between companies. This is the baseline SECR requires — you cannot skip it.

Market-based (voluntary, but required if you make a green claim)

You use the factor of the electricity you've actually contracted for:

• REGO-backed / green tariffs — if your tariff is backed by Renewable Energy Guarantees of Origin, your market-based figure for that energy is zero or near-zero.
• PPAs (Power Purchase Agreements) — a long-term contract with a specific generator; the generator's profile sets your factor.
• No contractual instruments — you fall back to the supplier or residual-mix factor, which is higher than the grid average, because the renewables have been allocated to those who paid for them.

Market-based is optional under SECR. But the moment you publish a claim like "100% renewable electricity", you must show the market-based figure that backs it up.

If you have any contractual instrument at all, disclose both. CDP and most ESG raters now expect it, and the FRC looks for both where green claims are made.

Worked example

A UK office uses 520,000 kWh over the year on a REGO-backed tariff. The grid factor below is illustrative — always use the current published DEFRA factor for the year your data covers. Run your own numbers in the SECR carbon calculator and check the latest factors against the DEFRA conversion factors.

In the SECR report, both figures sit in the emissions table with a footnote stating the method and citing the REGO contract. Reporting only the 0 would be non-compliant — and misleading.

REGOs and PPAs in plain terms

REGO certificates are issued by Ofgem to UK renewable generators. One REGO = 1 MWh (1,000 kWh) of certified renewable generation. Your supplier retires REGOs against your consumption so you can claim it as zero-emission for market-based scope 2.

The catch: a REGO is not the physical electricity. A supplier can sell brown power and buy unbundled REGOs to dress it up as green on paper. That's legal, but increasingly treated as greenwashing. Stronger claims, in order: on-site generation (rooftop solar, CHP) > PPAs with a named generator > bundled REGOs (sold with the electricity from the same source) > unbundled REGOs.

A PPA is a long-term contract, often 10–15 years, with a renewable generator. A physical PPA flows power to your site; a virtual PPA is financial-only — you receive the environmental attributes (REGOs) without physical delivery. Both support a zero-emission market-based claim, provided you document the contract and the REGO retirement.

Why your scope 2 falls on its own

The UK grid has decarbonised dramatically over the past decade as coal dropped out and renewables grew. The DEFRA grid factor has fallen with it. So even with identical electricity use, your location-based scope 2 drops year on year — through no action of your own.

This matters for your SECR narrative: say so. If you let a grid-driven fall read as your own achievement, an auditor or sceptical investor will spot it, and it undermines the rest of your report. Separate "the grid decarbonised" from "we used less".

How scope 2 fits SECR

You're in scope for SECR if you meet two of three: turnover of £36m or more, balance sheet of £18m or more, or 250 or more employees. The April 2025 Companies Act change raised the general "large" definition to £54m / £27m, but the SECR thresholds did not move — so a company now classed as "medium" can still be caught. Not sure? Use the SECR eligibility checker.

Five mistakes to avoid

1. Reporting only the market-based figure. Location-based is the mandatory baseline — disclose it even if it's higher.
2. Using the wrong year's grid factor. Match the factor to the year your data covers, not the latest published one.
3. Counting transmission and distribution losses as scope 2. T&D losses are scope 3, category 3. Counting them here double-counts.
4. Forgetting heat and steam. District heating is scope 2 too, not just electricity.
5. Mixing kWh and MWh. Suppliers report both — convert to one unit before you multiply.

How to cut scope 2 — in order of credibility

Scope 2 is usually the easiest scope to reduce: you can switch supplier or sign a PPA without changing how you operate, which makes it the natural first target in a net-zero strategy. In order of real-world impact:

1. Use less. Every kWh you don't consume is zero scope 2. Efficiency beats every certificate.
2. Generate on-site. Rooftop solar or CHP directly displaces grid power.
3. Sign a PPA with a new-build generator — the strongest market-based claim, because it adds renewable capacity.
4. Buy a bundled REGO tariff — electricity and certificate from the same source.
5. Unbundled REGOs — last resort. They move the number on paper without changing the physical grid.

Get your methodology checked

Scope 2 is where SECR reports most often go wrong — usually on market-based claims and REGO documentation. We match you with a vetted, IEMA-qualified SECR specialist who can calculate both figures, document the audit trail and keep your green claims defensible. Check your eligibility and we'll introduce you — free, no obligation.