The framing of Serbia’s energy transition predominantly in megawatts (MW) is becoming increasingly problematic, particularly for exporters subject to the Carbon Border Adjustment Mechanism (CBAM). Current discussions and announcements focus on capacity in MW, which can create a misleading impression of the actual energy availability. For these exporters, the critical metric is not the theoretical capacity but the actual terawatt-hours (TWh) of green electricity that can be reliably delivered to industrial users over time.
This distinction between MW and TWh is crucial. While megawatts reflect installed capacity and political objectives, terawatt-hours represent the tangible energy output that industries require. A solar project boasting 1,000 MW may only generate about 1.5 to 1.7 TWh annually under optimal conditions, given its capacity factor of 17-19%. In contrast, a 600 MW wind project, operating at a higher capacity factor of 32-38%, could produce a similar or even greater amount of usable energy. For exporters facing CBAM regulations, the focus must shift from capacity optics to the actual deliverable energy.
Moreover, the timing of energy production varies significantly between solar and wind sources. Solar energy is primarily generated during midday hours, while wind energy can be produced more consistently throughout different times of the day and across seasons. Therefore, even if two projects produce equivalent annual TWh, their economic value can differ greatly based on when that energy is available. This aspect is often overlooked when only MW metrics are considered.
Electricity consumption patterns in industries such as aluminum processing or steel manufacturing require a stable supply across various shifts and seasons. A green electricity strategy that cannot provide energy consistently will force these industries into complex purchasing arrangements that undermine compliance with CBAM. Consequently, procurement decisions are increasingly focused on how many usable megawatt-hours (MWh) can be delivered according to specific load profiles rather than merely how much capacity exists.
Curtailment poses another significant challenge to the MW-centric view. In systems with high solar penetration, curtailment rates can reach 5-10%, meaning that installed capacity does not equate to actual delivered energy. For instance, a solar portfolio generating 1.6 TWh but losing 8% to curtailment would only deliver approximately 1.47 TWh of eligible green electricity. This discrepancy translates into substantial financial losses and compliance risks for exporters.
Furthermore, transmission systems do not uniformly absorb capacity; they manage energy flows over time. Projects that aggregate large MW capacities may overwhelm grid nodes during peak times, leading to necessary curtailments or export limits. From an industrial buyer’s perspective, the actual delivery of contracted green electricity is paramount, highlighting the need for TWh accounting.
Public targets set in MW do not adequately communicate whether those capacities will translate into usable green supply for industries. As a result, two countries with identical MW goals might achieve vastly different outcomes based on factors like capacity utilization and curtailment policies.
Investors also face risks when focusing solely on MW metrics since project internal rate of returns (IRRs) depend on delivered MWh multiplied by market prices minus operational costs. Projects that appear cost-effective in terms of installed capacity may ultimately yield lower returns if they suffer from high curtailment rates or poor market pricing.
The current emphasis on MW over TWh can distort technology choices in renewable energy projects. Solar projects dominate installation figures due to their scalability in MW terms, while wind farms typically yield higher TWh outputs per installed MW. This bias towards solar can lead to less efficient investments when considering compliance under CBAM.
Storage solutions are often proposed as a means to reconcile MW with TWh outputs; however, storage does not generate additional energy but rather helps manage its delivery timing. The effectiveness of storage investments depends on their ability to mitigate losses in TWh due to curtailment rather than simply enhancing a poorly designed MW-focused portfolio.
In summary, as Serbia navigates its energy transition amidst increasing scrutiny from EU buyers under CBAM regulations, there is an urgent need for a shift in focus from megawatts to terawatt-hours delivered under real-world conditions. This change will better align national targets with industrial needs and ultimately enhance competitiveness in the European market.
