As the European Union intensifies its focus on carbon emissions through the Carbon Border Adjustment Mechanism (CBAM), Serbia faces significant challenges in aligning its industrial electricity consumption with EU sustainability standards. The CBAM, set to be fully operational by 2026, acts as a competitiveness tax for industries that cannot demonstrate a low-carbon electricity supply, particularly those reliant on coal. This situation presents a pressing dilemma for Serbian exporters who must navigate a predominantly coal-linked electricity grid while striving for compliance with stringent EU regulations.
The national residual mix for Serbia in 2024 reveals a stark reality: approximately 66.60% of electricity is generated from brown coal and lignite, while hydropower contributes 23.81%. Other renewable sources like wind and solar are minimal, accounting for only 0.97% and 0.36%, respectively. This residual mix serves as the default electricity profile for exporters unless they can substantiate their low-carbon claims through Guarantees of Origin (GOs). The issuance of GOs in 2024 is projected at 2,405,275, but cancellations have already exceeded this figure at 2,447,795, highlighting the scarcity of available green attributes for heavy industrial consumers.
Recent developments in Serbia’s renewable energy sector include a second auction supported by the European Bank for Reconstruction and Development (EBRD), which offers a quota of 424.8 MW—300 MW from wind and 124.8 MW from solar PV—under long-term contracts for difference. While this auction represents a meaningful step toward increasing renewable energy capacity, it raises questions about how much of this output can be allocated specifically to exporters through power purchase agreements (PPAs) and GOs. The challenge lies in ensuring that the renewable energy produced can effectively displace the coal-heavy residual mix that dominates the current landscape.
The focus now shifts to estimating the green electricity demand among Serbia’s major exporters. Key players include HBIS Serbia, which operates the largest steel complex in Smederevo with an annual production capacity of 2.2 million tons. The estimated electricity demand for HBIS ranges between 660–990 GWh annually based on conservative consumption metrics. To enhance its competitiveness under CBAM regulations, HBIS must secure around 700–900 GWh/year of renewable electricity to credibly claim that its purchased energy is largely decarbonized.
In addition to steel production, Serbia’s cement industry also plays a crucial role in CBAM exposure with three major plants contributing to an overall capacity of 3.4 million tons per year. The estimated annual electricity demand for cement production is between 306–408 GWh, making it imperative to develop PPAs that ensure access to green attributes.
The fertiliser sector is represented by Elixir Prahovo, which aims to reduce its electricity consumption by up to 25% per ton produced by implementing new technologies. This shift underscores the growing importance of traceable low-carbon procurement strategies among Serbian exporters as they prepare for heightened scrutiny regarding emissions and sustainability practices.
In aluminium processing, while not as energy-intensive as primary smelting operations, there remains an opportunity for substantial green electricity procurement through mid-scale PPAs that can significantly impact product positioning within EU supply chains.
When aggregating these figures across sectors—steel (660–990 GWh), cement (306–408 GWh), fertilisers (100–250 GWh), and aluminium processing (50–150 GWh)—the total green electricity demand from Serbian exporters ranges between approximately 1.12 TWh and 1.80 TWh annually. However, the recent auction only provides an anticipated exporter-allocable supply of roughly 0.38–0.67 TWh/year based on conservative estimates regarding GO allocation.
This creates a notable gap of approximately 0.45–1.42 TWh/year between demand and available supply from current auctioned capacity alone—underscoring the urgent need for dedicated renewable projects tailored specifically to meet the demands of CBAM-exposed exporters.
The geographical distribution of Serbia’s industrial load complicates this situation further; most export-oriented industries are concentrated around Belgrade and the Danube basin while optimal wind resources are located in Vojvodina and South Banat regions. To facilitate effective renewable procurement strategies, infrastructure enhancements such as high-voltage transmission lines are essential to connect these regions and enable reliable delivery of green power.
Serbia’s future strategy regarding CBAM compliance could follow two distinct pathways: one focusing on supplier allocation where renewable attributes are sourced from existing suppliers through GO-backed contracts; another emphasizing direct investment in new renewable projects by large exporters via long-term PPAs with guaranteed attribute allocations against their consumption needs.
Ultimately, addressing these challenges requires more than simply increasing renewable generation; it necessitates targeted initiatives aimed at creating dedicated projects that cater specifically to CBAM-exposed industries in Serbia if they are to successfully transition away from reliance on coal-based energy sources.
