Southeast Europe's renewable energy sector faces structural returns crisis as CBAM's definitive phase forces industrial electricity buyers into mandatory compliance contracting
The era of standalone renewable energy projects generating viable returns in Southeast Europe is over, according to analysis published this week. A structural bifurcation has emerged between EU member states and Energy Community Treaty (ECT) candidate countries — including Serbia, Bosnia, North Macedonia, and Albania — with each bloc operating under fundamentally different regulatory and subsidy regimes.
The decisive development is the Carbon Border Adjustment Mechanism (CBAM) entering its definitive phase on 1 January 2026. CBAM requires importers of steel, aluminium, cement, fertilizers, and electricity into the EU to purchase and surrender certificates corresponding to the embedded carbon in those goods. For industrial exporters sourcing electricity from high-carbon grids — such as Serbia, where the grid runs at 61.03% coal — this converts electricity procurement from a commodity-buying decision into a mandatory compliance obligation with a direct cost of goods sold impact.
The practical consequence is that industrial players, including the HBIS steel complex at Smederevo, Serbia, now face a punitive border tax unless they can demonstrate that their electricity comes from low-carbon sources. This has created immediate commercial demand for power purchase agreements (PPAs) — long-term contracts between an energy buyer and a renewable generator — structured specifically to allow buyers to claim CBAM exemptions or reduced liability.
The 'premium stack' concept — layering multiple revenue streams including capacity payments, carbon credits, and PPAs onto a single renewable project — is emerging as the mechanism by which developers can restore project returns that have deteriorated as simple feed-in tariff (a guaranteed fixed price paid to generators for each unit of electricity produced) regimes are phased out. add a further 150 to 250 basis points to project IRR (internal rate of return, the annualised profitability measure used to assess infrastructure investments) in the base case.
Battery Energy Storage Systems (BESS)
Why this matters
CBAM compliance has converted renewable energy procurement from an optional ESG (environmental, social, and governance) preference into a hard commercial necessity for EU-exposed industrial exporters — creating urgent demand for energy lawyers who can structure compliant PPAs and advise on CBAM certificate obligations. The Energy Community Treaty bifurcation means that projects in candidate countries require bespoke structuring to access EU carbon market benefits, generating cross-border advisory work with a strong English law and EU regulatory dimension. The 'why now' is 1 January 2026 — the definitive phase entry date for CBAM, which converted compliance from a transition-period soft obligation into a live financial liability. Firms with project finance, energy regulatory, and carbon markets practices are directly in scope.
On the Ground
On a renewable energy project or PPA mandate in this region, a trainee would assist with summarising licence condition requirements under national energy regulatory frameworks and the Energy Community Treaty, coordinating regulatory filing submissions to local energy authorities, and reviewing grid connection agreements to assess whether guaranteed dispatch rights affect PPA pricing assumptions.
Interview prep
Soundbite
CBAM has made green electricity procurement a compliance obligation — industrial buyers can no longer treat PPAs as optional sustainability spend.
Question you might get
“How would you structure a PPA for a Serbian steel manufacturer to minimise its CBAM liability, and what legal risks arise from the fact that Serbia is an ECT candidate country rather than an EU member state?”
Full answer
The CBAM definitive phase, live since 1 January 2026, means that EU-exporting manufacturers sourcing power from high-carbon Southeast European grids now face a direct financial penalty on every unit of goods they export. The legal response is a wave of PPA structuring work, as industrials seek to demonstrate renewable sourcing and reduce CBAM liability. For project finance lawyers, this creates a new category of contractual complexity: PPAs must be drafted to satisfy both commercial risk allocation requirements and the evidentiary standards of CBAM certificate compliance. The structural point is that CBAM has effectively extended EU carbon market regulation beyond EU borders, creating compliance demand in jurisdictions with no prior exposure to EU energy law.