As Serbia navigates the complexities of the EU’s Carbon Border Adjustment Mechanism (CBAM), the country’s energy policy appears to be leaning heavily towards solar energy solutions. This inclination is fueled by the modular and politically appealing nature of solar projects, which can be rapidly deployed and quantified in megawatts. However, for industrial buyers that are particularly vulnerable to CBAM regulations, this strategy may prove inadequate as it conflates capacity with actual value delivery and overlooks critical procurement realities.
The fundamental challenge lies not in the cleanliness of solar energy—indeed, it is a clean source—but in its ability to provide reliable and verifiable green electricity to heavy industries at scale. Under existing grid constraints, it has become increasingly evident that relying solely on solar energy is insufficient. A predominately solar-based approach may exacerbate issues as demand for green energy rises.
Wind energy presents a more compatible alternative with CBAM requirements. It not only generates cleaner electricity but also aligns better with system compatibility needs. In Serbia, bankable onshore wind sites achieve capacity factors between 32% and 38%, while utility-scale solar typically ranges from 17% to 19%. This disparity indicates that solar requires nearly double the installed capacity compared to wind to produce equivalent annual energy outputs. For instance, an industrial buyer seeking 2.0 TWh annually would need approximately 1,200–1,400 MW of solar capacity versus just 650–750 MW of wind.
Moreover, the output characteristics of solar energy present significant challenges. Solar generation is highly correlated across regions and times; when sunlight is abundant, it results in a system-wide surge that can depress prices and lead to curtailment unless storage solutions are developed at scale. Consequently, for industrial consumers, this synchronization poses risks as peak production coincides with lower market values for electricity.
In contrast, wind generation exhibits stochastic behavior driven by weather patterns and geographical diversity. Wind power tends to generate more electricity during evening hours and winter months when demand peaks, leading to capture prices that are generally higher than those achieved by solar—by approximately 5% to 15%. This price resilience is crucial for industries exposed to CBAM regulations where stable pricing is essential.
The implications for grid management are also notable. Solar-heavy portfolios tend to cluster around specific connection points due to developer preferences, leading to saturation issues that can increase costs and susceptibility to curtailment. Wind farms benefit from being more geographically dispersed, which helps mitigate these saturation effects and spread system stress more evenly across the grid.
Curtailment rates further highlight these operational differences; large-scale solar portfolios frequently experience structural curtailment beyond certain penetration levels due to oversupply during peak production times. In contrast, wind portfolios face localized curtailment triggered by specific congestion events rather than systemic oversupply issues. At scale, solar might see curtailment rates climb towards 8-10%, while well-sited wind farms often maintain rates between 1-3% even as they grow.
This difference translates into substantial financial implications for industrial buyers. Each percentage point of curtailment represents a loss of eligible volume—equating to €1.4 million to €1.8 million annually at current green electricity values of €70–90 per MWh. The financial gap between varying levels of curtailment could amount to €8–11 million per year—figures that procurement teams cannot overlook.
Equity returns also diverge significantly between the two sources; while high curtailment levels in solar portfolios may yield attractive best-case scenarios on paper, they also carry severe downside risks. Wind investments typically show tighter internal rate of return (IRR) distributions under similar conditions with unlevered IRRs ranging from 8% to 10%, whereas comparable solar investments target lower IRRs but may face greater downside volatility due to grid friction.
Storage solutions have been proposed as a remedy for some of solar’s inherent limitations; however, while storage can help manage output timing, it does not create additional grid capacity necessary for large-scale deployment of solar resources effectively. Thus far, wind projects do not require extensive storage solutions to be viable financially—storage enhances but does not serve as a lifeline for wind energy viability.
The rigidity imposed by CBAM further complicates Serbia’s reliance on a predominantly solar strategy since EU buyers prioritize consistent annual delivery with minimal variance over mere installed capacity metrics. This reality underscores a critical risk: a focus on solar could yield electricity that fails key timing and location requirements needed by industrial consumers under CBAM scrutiny.
While wind energy should serve as the backbone of Serbia’s renewable strategy moving forward—offering stability and compliance—the role of solar should be redefined as complementary rather than primary. Additionally, strategic aggregation efforts will be crucial in managing these resources effectively within the regulatory framework imposed by CBAM.
The operational realities suggest that Serbia must realign its decarbonization priorities if it aims to safeguard its industrial exports against EU market pressures effectively. A balanced approach prioritizing wind alongside strategic use of solar could prevent creating an illusory decarbonization facade that falters under scrutiny from EU procurement standards.
