The implementation of the Carbon Border Adjustment Mechanism (CBAM) poses critical questions for Serbian industrial sectors regarding their electricity needs to maintain competitiveness in the European Union market. Companies must assess how much low-carbon electricity they require to safeguard their sales, identify cost-effective procurement methods, and understand the economic implications of potential grid delays and curtailment.
A structured approach to this challenge can be outlined through a “CBAM buyer map” focusing on five key categories that significantly impact Serbian heavy industry: iron and steel, aluminium, fertilisers, cement, and electricity exports. Each sector presents unique electricity intensity levels and varying willingness to invest in green attributes, influenced by their exposure to EU markets and operational margins.
Within Serbia’s industrial landscape, energy-intensive sectors exhibit distinct procurement strategies. For integrated steel production, while electricity does not primarily drive direct emissions, it is commercially relevant as EU buyers increasingly prioritize renewable energy procurement. In contrast, aluminium processing heavily relies on both electricity and heat inputs for cost management and emissions reduction. The fertiliser industry also ties electricity costs closely to gas prices, reflecting a shift towards transparent emissions accounting under CBAM.
By 2028–2030, Serbia’s industrial sector may require between 1.5 to 2.5 terawatt-hours (TWh) of contracted renewable electricity attributes annually. A more ambitious scenario could see demand rise to 3.0–4.0 TWh if EU clients enforce stricter supplier requirements and Serbian exporters proactively secure green procurement.
To visualize these requirements, a base case scenario of 2.0 TWh per year could be allocated across various segments: approximately 0.6–0.8 TWh for steel and downstream metal fabrication, 0.4–0.6 TWh for aluminium processing, 0.3–0.5 TWh for fertiliser production, 0.1–0.2 TWh for cement, and 0.2–0.4 TWh for electricity exports or utility support.
Translating this demand into megawatts (MW) reveals significant infrastructure needs: achieving 2.0 TWh annually through solar energy would necessitate around 1,200–1,400 MW of solar capacity at a capacity factor of 17–19%. Conversely, covering the same energy demand primarily with wind power would require only about 650–750 MW at a higher capacity factor of 32–38%, indicating a more efficient approach with less risk of price collapse due to curtailment.
A feasible supply platform capable of delivering approximately 2.0 TWh per year could consist of around 400–500 MW of wind energy complemented by 400–600 MW of solar power and battery storage ranging from 100–200 MW or 200–400 MWh. This diversified approach enhances reliability by mitigating risks associated with congestion and curtailment.
From a capital expenditure (CAPEX) perspective, utility-scale solar installations in Serbia typically cost between €0.55 million and €1.10 million per MW, while onshore wind ranges from €1.20 million to €1.80 million per MW depending on various factors like civil works and turbine specifications. The total CAPEX for a mixed generation setup could range from €1.1 billion to €3.2 billion based on the scale of deployment.
The financial viability of these projects hinges on whether they are constructed as merchant plants or under long-term contracts that provide stable pricing for industrial buyers. Under favorable conditions, such projects can yield unlevered returns between 7% and 10%, although solar projects may face more volatility due to curtailment risks compared to wind projects.
Curtailment poses a significant financial risk; for every percentage point of curtailment in a platform delivering 2.0 TWh per year, an estimated annual value loss between €1.4 million and €1.8 million could occur based on current green electricity pricing models.
Moreover, grid integration presents challenges that could influence the feasibility of meeting CBAM-related demands effectively. Constraints such as saturated connection nodes can lead to increased costs for additional capacity and exacerbate issues related to voltage management and reserve requirements.
Aggregation strategies are essential in navigating these constraints effectively; a portfolio-level aggregator can optimize diverse energy sources to ensure reliable delivery of green electricity to industries exposed to CBAM regulations.
Delays in grid upgrades pose another risk factor; if substantial planned capacity is postponed by even a few months, it could result in significant revenue losses during crucial early contract phases.
Ultimately, Serbian exporters must adopt comprehensive strategies that go beyond merely securing low-cost power purchase agreements (PPAs). A robust solution should incorporate wind-based supply frameworks with selective solar deployment and integrated storage solutions designed to ensure consistent delivery amid real-world grid limitations.
