The submarine electricity interconnector between Montenegro and Italy has highlighted how carbon border adjustment mechanism (CBAM) economics interact with wholesale price spreads and transmission availability. In the second quarter of 2026, Italy averaged €120.9/MWh, while Montenegro averaged €93.6/MWh. The resulting price differential was approximately €27.2/MWh, the widest among the main Western Balkan–EU borders. The gap narrowed sharply from around €44/MWh in Q1.
Italian and Montenegrin wholesale spreads versus CBAM default costs
Montenegro’s national CBAM default emission factor is set at 0.979 tCO2/MWh. Using that factor, the implied carbon cost for Q2 is approximately €73.70/MWh. On a quarterly-average basis, the potential CBAM charge was almost three times the visible Italian wholesale price premium. This comparison places the default-factor cost alongside the observed market spread between the two systems.
Despite that gap, scheduled Montenegro–Italy exports rose by around 19% year on year to approximately 708 GWh. Export-direction transmission capacity was offered during about 84% of quarter-hours and was almost fully allocated whenever available. The average daily auction value of the interconnector increased to approximately €8.59/MWh, reflecting continued demand for access to the route.
Export patterns linked to hourly premiums and contractual positions
The continued export volumes indicate that quarterly average price spreads and default-factor costs do not fully account for trading behaviour. Electricity can be exported during selected high-price hours when the Italian premium is significantly wider than the quarterly average. Some market participants may also hold contractual positions established before delivery. Others may be considering potential regulatory changes that could improve access to actual emission values or reduce the impact of default factors.
System value beyond day-ahead arbitrage
The interconnector also supports system value beyond day-ahead arbitrage. The Italy–Montenegro link connects the Western Balkan power system with one of Europe’s higher-priced electricity markets. It creates additional commercial optionality for hydropower, wind and future solar generation. Its value is described as particularly pronounced during periods of scarcity in Italy, generation outages and high cooling demand.
Default-factor distortion for renewable projects and financing requirements
For renewable energy generators, Montenegro’s national default factor is described as a significant distortion. The electricity system used for the factor is heavily influenced by the Pljevlja lignite-fired power plant, despite Montenegro’s substantial hydropower resources and growing wind generation. A Montenegrin wind project exporting electricity to Italy could therefore face a carbon cost that does not align with the actual emissions profile of its plant.
The implications extend to PPA structures and project finance. Lenders assessing wind or solar projects cannot rely on an assumption that the Italian wholesale premium will be fully accessible under CBAM-related requirements. Projects may need a verifiable physical PPA, hourly metering, traceable cross-border delivery, and access to an accredited verifier to demonstrate eligibility for more favourable emissions treatment. Without those elements, export revenues could be constrained to the domestic Montenegrin market.
Verification chain requirements for monetising interconnector capacity
The interconnector remains a major strategic asset, but CBAM changes what is required to monetise its capacity. Physical access to the Italian market is no longer sufficient on its own. The commercial value increasingly depends on proving the origin and emissions profile of each exported megawatt-hour. It also depends on maintaining a complete documentary and verification chain capable of withstanding scrutiny by importers and accredited verifiers.