Montenegro’s expanding renewable electricity capacity could support industrial competitiveness by providing more predictable power costs, verifiable renewable attributes and emissions data for manufacturers supplying European Union markets. Renewable electricity contracts do not automatically reduce the current Carbon Border Adjustment Mechanism (CBAM) liabilities of exported aluminium, steel and other manufactured products.
The distinction is particularly relevant to aluminium production and metal processing, industries with established roots in Montenegro and significant exposure to electricity prices. Long-term power purchase agreements (PPAs) backed by hydropower, wind or solar generation can improve price visibility, support customer decarbonisation requirements and strengthen emissions reporting. Their effect on CBAM obligations, however, depends on the methodology applicable to the exported product.
Electricity and manufactured metals have different CBAM calculations
Electricity imported directly into the EU is subject to the electricity-specific CBAM methodology. Exports of aluminium, steel and other manufactured goods are assessed under the rules applicable to their respective products.
Under the current Annex II treatment, listed iron-and-steel and aluminium products generally account for direct emissions only. Purchasing renewable electricity therefore does not automatically reduce the certificate requirement for these goods through a deduction for indirect emissions.
Renewable power procurement can nevertheless influence industrial economics. Aluminium production is highly electricity-intensive, making power costs an important factor in the competitiveness of smelters and downstream processors.
A long-term renewable PPA can reduce electricity price volatility, meet customer procurement requirements and improve the investment case for facilities whose financiers assess transition risks beyond the minimum requirements of the current CBAM calculation.
Uniprom’s aluminium operations illustrate the industrial potential
Uniprom states that its export-oriented aluminium billet facility has production capacity of approximately 70,000 tonnes annually, alongside additional downstream capability through its alloy operations.
Whether individual products fall within the current or future CBAM scope depends on their Combined Nomenclature (CN) classification and production route. For Montenegro, verifiable renewable electricity could support investment in metal processing and fabrication even where the immediate reduction in CBAM liabilities is limited. The commercial value depends on the specific requirements of each industrial buyer, including electricity price stability, renewable attributes, corporate emissions reporting and product-level emissions documentation.
Electricity suppliers should therefore define the intended use of a renewable PPA before attaching a premium to it. Contracts need to distinguish between electricity delivery profiles, environmental attributes, data access rights and permitted reporting uses. A general claim that renewable electricity reduces CBAM liabilities could overstate the benefit where the applicable product methodology does not recognise the corresponding emissions reduction.
Proposed EU reforms could expand product coverage
The European Commission’s COM(2025) 989 proposal would extend CBAM from 2028 to a broader range of downstream goods with significant steel and aluminium content and introduce changes to the electricity methodology.
The final scope and application depend on the legislative process. Exporters therefore cannot treat the proposed changes as enacted law.
Nevertheless, the proposal reinforces the importance of developing product-level emissions data and verifiable electricity records ahead of potential changes to regulatory requirements and customer procurement standards.
For lenders assessing metal-processing businesses, relevant considerations include electricity prices, customer concentration, direct process emissions, precursor emissions, potential future CBAM scope expansion and the credibility of environmental claims. A renewable PPA can improve several of these factors without necessarily changing the current direct-emissions calculation for a particular exported product.
Domestic industrial consumption competes with electricity exports
Montenegro also faces a choice between exporting renewable electricity through regional markets and using more of that generation domestically to support higher-value industrial production.
A domestic industrial PPA can avoid some cross-border capacity and electricity-specific CBAM complications, but introduces separate considerations involving buyer creditworthiness and the emissions profile of manufactured products.
The relative value of domestic consumption and exports therefore depends on the full commercial return and strategic contribution of each option. Electricity can generate export revenue directly or support the production of higher-value goods for international markets. Montenegro’s renewable expansion could serve both purposes, provided contractual commitments and environmental claims remain consistent with the applicable legal and technical requirements.
By Virtu.Energy
