How will the energy transition affect accounting?

As energy suppliers and global policy makers embark on and accelerate efforts with respect to the Energy Transition, new business models will be formed that will give rise to new accounting complexities for consideration.

What is a battery energy storage system?

Battery energy storage systems (BESSs) allow a company to solve problems related to energy delivery by maximizing the use of renewable electricity and increasing the reliability of otherwise intermittent generation sources.

What is applying IFRS to the energy transition?

Our ‘Applying IFRS to the Energy Transition’ publication series seeks to explore the accounting implications of emerging business models and arrangements related to the Energy Transition. Each publication will focus on a topic and explore the potential accounting implications.

How does accounting affect a power & utility entity's financial statements?

The accounting for financial instruments can have a major impact on a power and utility entity’s financial statements. Many utilities use a range of derivatives to manage the commodity, currency and interest rate risks to which they are operationally exposed.

Can a utility entity recover operating costs under cost-based regulation?

A utility entity operating under cost-based regulation is typically permitted the recovery of an agreed level of operating costs, together with a return on assets employed. An entity’s accounting policies should consider the regulatory regime and the requirements of IFRS.

What is a Bess energy off-take arrangement?

An energy off-take arrangement involving a BESS would generally be subject to the commodity contract accounting guidance for both parties to the contract (project owner and energy off-taker/customer).