Banks financing renewable energy projects in the Western Balkans increasingly need to assess not only whether a project can generate electricity, but also whether its intended customers can use that electricity in the way assumed by the project’s business model.
CBAM is bringing this question further into renewable-energy due diligence, particularly for projects whose revenues depend on EU exports or premium electricity supply to export-oriented industrial customers.
The issue is becoming more relevant as developers and lenders assess the commercial value of renewable electricity and its associated carbon attributes.
How the model works
Traditional renewable-project due diligence typically examines the energy resource, construction plan, grid connection, permits, operating costs and contracted revenues.
The additional layer focuses on the commercial usability of the electricity’s renewable and emissions-related attributes.
If a project assumes that its output can command a premium because it supports a customer’s carbon-management strategy, lenders need to determine whether the underlying contractual and evidence structure can support that assumption.
This can involve reviewing PPA structures, metering arrangements, generation allocation, certificates and delivery mechanisms.
Commercial impact
A PPA may appear bankable from a conventional electricity-market perspective but carry additional risk if part of its expected premium depends on a carbon-related claim that cannot be adequately substantiated.
Conversely, strong documentation, reliable metering and robust allocation systems can increase the commercial attractiveness of renewable electricity for sophisticated industrial buyers.
Banks may therefore increasingly introduce a dedicated carbon and evidence due-diligence workstream alongside their legal, technical and financial assessments.
Who benefits
Renewable projects with strong data, documentation and evidence structures can potentially strengthen their position when seeking financing and industrial offtake.
Banks gain greater visibility into the assumptions behind renewable and carbon-related premium revenues.
Industrial offtakers can access electricity products structured around their specific sourcing and emissions-management requirements.
Technical, legal and verification advisers can gain additional roles in assessing carbon attributes, contractual structures and evidence chains.
Why it matters now
Renewable projects across Southeast Europe are increasingly being financed through combinations of merchant exposure, contracts for difference, guarantees and corporate offtake agreements.
As these structures become more sophisticated, the next lending question extends beyond simply identifying the buyer of the electricity.
The key issue is increasingly whether the buyer can actually use the renewable and carbon characteristics of that electricity in the way the project’s revenue model assumes.
By Virtu.Energy
