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Carbon cost to boost PPA uptake in Western Balkans

Carbon cost to boost PPA uptake in Western Balkans

Date: March 22nd 2024

Author: Maja Žuvela

Category: En.vision

Topic: Electricity , Renewables , Energy policy , CO2 emissions , Economy

The pressure to reduce the carbon footprint is expected to drive up the volume of corporate power purchase agreements (PPAs) across the Western Balkans, market participants said on Thursday.

The region has been lagging behind the rest of Europe in terms of large-scale projects and PPAs, with Serbia and Albania being the only countries where some modest progress in PPA volumes has been made, they told the Set energy conference in Bosnia and Herzegovina's (BiH) south-eastern town of Trebinje.

Petar Mitrovic, the legal and energy specialist, said that for decades businesses have been traditionally relying on public, mainly state-owned power suppliers.

“But after the energy crisis these suppliers are no longer in a position to offer stable long-term power supply contracts and this is the biggest challenge the companies are now facing,” he said.

Additionally, due to the expected cost of the carbon border adjustment mechanism (CBAM) as of 2026, “the companies will no longer be able to remain passive market players and will be forced to conclude corporate PPAs,” Mitrovic noted.

CFDs

One of the models to boost the uptake of the corporate PPA volume, but also speed up the energy transition and rollout of solar and wind in the mainly coal-reliant region, are auctions for contracts for difference (CFDs), said Milos Mladenovic, the managing director of Serbia's bourse Seepex.

Furthermore, there should be more flexibility in negotiating the contract models, he added.

Marko Jankovic, the head of power market department at CWP Global, said that financial PPAs for a period of over seven years could be the most suitable form to be applied in the Western Balkans.

Barriers

However, Jankovic cautioned that the main hurdles to the uptake of PPAs are cannibalisation, price, profile and liquidity risks on both electricity and real sector markets.

Naida Taso, renewable energy expert with the Vienna-based Energy Community, said that the only 6% share of solar and wind in the region's power mix has been identified as another impediment to PPAs.

She noted that the Energy Community has picked a consultant to carry out a study that would test demand, identify barriers and try to spur renewable energy PPAs in its nine contracting parties.

The results of that study will be made public in October, added Taso.


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