Carbon Intensity Contract
A carbon intensity contract ties energy procurement or hedging payments to the measured carbon intensity of delivered electricity. Corporate buyers use these contracts to ensure that power purchases align with emissions targets, receiving credits when carbon intensity falls below agreed thresholds and paying premiums when it rises.
Contracts rely on verified grid emissions factors, metered renewable production, or clean energy certificates with temporal matching. They can be layered on top of PPAs, retail tariffs, or proxy hedges, converting environmental attributes into financial incentives.
Developers offering carbon intensity products must provide granular telemetry, data assurance, and auditing rights so buyers can report compliance under ESG frameworks. Financial institutions are exploring structured products that settle on carbon intensity indices similar to commodity swaps.
These contracts accelerate demand for clean energy during high-emission hours, influencing storage dispatch and VPP operations that strategically reduce net emissions rather than simply matching annual volumes.
Technical Details
- •Settles financially based on measured or modeled kg CO2e per MWh
- •May include caps, floors, or incentive tiers tied to carbon intensity
- •Requires verified data sources and independent assurance
- •Often layered with PPAs, retail tariffs, or REC strategies
- •Aligns with emerging 24-7 carbon free energy standards
Why It Matters
Carbon intensity contracts translate decarbonization goals into enforceable financial terms. Tera tracks contract structures, counterparties, and supporting data feeds so buyers and developers can design products that withstand ESG scrutiny.
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