Fixed-volume renewable power purchase agreements are encountering a new compliance issue under the EU Carbon Border Adjustment Mechanism (CBAM). Electricity used to cover production shortfalls may not be sourced from the contracted renewable installation. As a result, part of the delivered volume could be exposed to national default emission factors and additional CBAM costs.
CBAM PPA requirements for embedded emissions
Under CBAM, electricity claimed using actual embedded emissions must be covered by a power purchase agreement (PPA). The agreement must be between an authorised CBAM declarant and a renewable electricity producer located in a third country. When the contracted volume matches the plant’s actual generation, the compliance structure is described as relatively straightforward.
Complexity increases when PPAs require baseload or shaped deliveries rather than output that tracks the plant’s metered production. This affects how electricity volumes tied to contract claims align with what the named installation actually generates.
Profile shortfalls and replacement power sourcing
Wind and solar generators cannot guarantee a fixed hourly production profile. When actual generation falls below the contracted volume, shortfalls are typically covered through intraday or balancing market mechanisms. The replacement electricity may come from coal, gas, hydro, or an untraceable generation portfolio.
That sourcing mix 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.
Default charges in Serbia, Montenegro and North Macedonia
The warning is relevant for fixed-volume agreements because it can introduce additional costs tied to default emission factors. For Serbia, the applicable default charge was approximately €78.37/MWh in Q2 2026. In Montenegro, the figure was around €73.70/MWh.
North Macedonia’s corresponding level was almost €66.77/MWh. At these rates, even relatively modest imbalance volumes can reduce the commercial margin of a renewable PPA. The impact depends on how much volume is treated as not generated by the named installation.
Who bears profile responsibility under different PPA designs
The exposure can arise whether responsibility for the production profile sits with the generator or the offtaker. A generator providing a fixed delivery guarantee may face direct costs for procuring replacement electricity alongside associated CBAM exposure. An offtaker responsible for balancing may avoid that direct contractual procurement cost.
However, that arrangement can still involve receiving imported electricity where renewable origin cannot be demonstrated for CBAM purposes. A pay-as-produced PPA is presented as a structure that can reduce this risk by limiting contractual deliveries to the renewable installation’s actual metered output.
Pay-as-produced structures and battery traceability
In pay-as-produced arrangements, the offtaker assumes both volume and profile risk. The generator is not required to source replacement electricity to meet a fixed delivery obligation tied to contract claims. This design is intended to create a clearer link between measured output from the generating facility and exported electricity.
The trade-off is commercial because shaped or baseload delivery profiles are often preferred by industrial consumers and utilities for predictability and consumption matching. Under pay-as-produced terms, buyers manage remaining profile risk through balancing portfolios, storage, flexible demand, or additional electricity contracts. Battery storage can also shift intraday production fluctuations into periods when generation is needed.
Traceability remains critical in storage-based setups because documentation must demonstrate that stored and subsequently delivered electricity originated from the qualifying renewable installation. If a battery is charged from the wider grid, traceability issues can reappear for volumes claimed under CBAM-linked arrangements.
Implications for pricing of imbalance volumes
CBAM is described as beginning to change how renewable PPAs are valued because headline electricity prices may not reflect total contract cost once balancing electricity, national default emission factors, traceability requirements and verification costs are included. For buyers and renewable generators, this means carbon status of imbalance electricity cannot be treated only as a conventional settlement matter.
Instead, it becomes a contractual and financial variable that needs explicit pricing within PPA structures. This is particularly relevant for renewable projects exporting electricity from the Western Balkans into the EU.
