Fixed-volume renewable power purchase agreements are encountering a compliance issue under the EU Carbon Border Adjustment Mechanism (CBAM). Where electricity is used to cover production shortfalls, it may not come from the contracted renewable installation. In such cases, part of the delivered volume can be exposed to national default emission factors and additional CBAM costs.
Under CBAM, electricity claimed using actual embedded emissions must be covered by a PPA. The agreement must be between an authorised CBAM declarant and a renewable electricity producer located in a third country. When the contracted volume aligns with the plant’s actual generation, the compliance setup is described as relatively straightforward.
Compliance becomes more complex when PPAs require baseload or shaped deliveries. Wind and solar generators cannot guarantee a fixed hourly production profile. If actual generation falls below the contract volume, the shortfall is typically covered through intraday or balancing markets.
Imbalance electricity traceability and CBAM default factors
The replacement electricity used for shortfalls may come from coal, gas, hydro, or an untraceable generation portfolio. This can make it difficult to show that electricity delivered under the PPA originated from the contracted renewable facility. The Energy Community Secretariat has warned that electricity delivered under a PPA but not generated by the named installation is expected to be subject to CBAM costs based on the national default emission factor.
This approach creates additional cost exposure for fixed-volume agreements. It can also affect the economics of PPAs with substantial profile obligations. The warning links the treatment of delivered volumes to whether they can be tied to the specified renewable generator.
National default charges in Serbia, Montenegro and North Macedonia
For Serbian electricity contracts, the applicable default charge was approximately €78.37/MWh in Q2 2026. The corresponding figure was around €73.70/MWh in Montenegro and almost €66.77/MWh in North Macedonia. At these levels, even modest imbalance volumes can reduce commercial margins for renewable PPAs.
The exposure can arise regardless of whether responsibility for the production profile is held by the generator or the offtaker. A generator that provides a fixed delivery guarantee may incur direct costs to procure replacement electricity, alongside associated CBAM exposure. An offtaker responsible for balancing may avoid direct contractual replacement costs but could still receive imported electricity with an origin that cannot be demonstrated as renewable.
PPA structures affecting volume and profile risk
A pay-as-produced PPA can reduce this risk by limiting contractual deliveries to the renewable installation’s actual metered output. In this structure, the offtaker assumes both volume and profile risk. The generator is not required to source replacement electricity to meet a fixed delivery obligation.
This arrangement is described as creating a clearer link between the generating facility’s measured output and the electricity being exported. The trade-off is commercial, as industrial consumers and utilities often prefer shaped or baseload delivery profiles for predictability and consumption matching.
A pay-as-produced arrangement requires buyers to manage remaining profile risk through balancing portfolios, storage, flexible demand, or additional electricity contracts. Battery storage can also help manage intraday production fluctuations and support compliance by shifting generation to periods when it is needed. Traceability requirements remain critical for demonstrating that stored and later delivered electricity originated from the qualifying renewable installation.
Traceability requirements for storage charged from the grid
If a battery is charged from the wider grid, traceability issues can reappear under CBAM-related documentation expectations. Documentation must demonstrate that electricity stored and subsequently delivered came from the qualifying renewable installation. This requirement applies even when storage is used to address intraday variability.
CBAM is therefore beginning to affect how renewable PPAs are valued in practice. The lowest headline electricity price may not reflect total contract cost once balancing electricity, national default emission factors, traceability, and verification costs are considered.
For buyers and renewable generators, the carbon status of imbalance electricity cannot be treated only as a conventional settlement matter. It becomes a contractual and financial variable that needs explicit pricing into PPA structures, particularly for renewable projects exporting electricity from the Western Balkans into the EU.