Supported by CBAM.Clarion.Engineer
Energy-intensive steel plants can offer renewable energy developers an advantage that merchant markets may not provide: long-term demand from industrial customers whose electricity consumption is directly linked to physical production. This makes steel mills potential anchor offtakers for renewable energy projects, even where power purchase agreements (PPAs) do not directly reduce current CBAM certificate liabilities.
Renewable PPAs deliver value beyond certificate costs
For iron-and-steel and aluminium goods currently listed in Annex II, the existing CBAM calculation takes account of direct emissions. Renewable electricity procurement can deliver significant operational, customer, financing and decarbonisation benefits without automatically reducing the current certificate liability through purchased-electricity emissions.
The commercial case for a PPA is strongest when its structure reflects the mill’s actual load profile, credit quality and operational flexibility rather than relying on a generic green-energy label. Wind and solar generation can be combined with market shaping, hydropower or storage services, while replacement electricity costs and volumes should remain separately identifiable.
The most competitive steel producers are likely to be those that combine credible electricity procurement with process decarbonisation. Addressing only one side of the equation can leave either carbon-related exposure or operating costs insufficiently managed.
Steel demand can support renewable project financing
Long-term industrial offtake can provide renewable developers with a more predictable revenue base. However, project economics depend on the relationship between the mill’s consumption profile and renewable generation, as well as the allocation of balancing, curtailment and replacement-power risks.
Banks financing renewable energy projects will assess the steel mill’s ability to meet its payment obligations, contractual termination rights, curtailment allocation and any premium dependent on supporting evidence. Lenders financing the mill will instead examine electricity-cost competitiveness and whether the PPA reduces existing exposure or concentrates risk in new contractual obligations.
The distinction matters to both sides: a renewable project needs a bankable offtake arrangement, while the industrial buyer needs an electricity supply structure compatible with its production requirements.
CBAM adds a strategic dimension to electricity procurement
CBAM strengthens the case for decarbonisation indirectly. EU customers are seeking better carbon data, and steel producers need credible plans for reducing emissions and demonstrating their environmental performance. Renewable electricity can therefore influence customer positioning and market access even when the current certificate calculation remains focused on direct emissions.
Downstream manufacturers should identify the CN codes relevant to their products and assess which sales have the greatest exposure to EU customers. This can help companies prioritise renewable electricity procurement and emissions-data investments where the commercial benefits are most likely to arise.
Proposed downstream expansion remains subject to negotiation
The same legislative file proposes extending CBAM coverage from 2028 to selected steel- and aluminium-intensive downstream goods. Both the Council and the European Parliament support an expansion, but their proposed product lists differ and remain subject to negotiation.
Until final legislation is adopted, the existing scope remains the operating baseline. Steel buyers should therefore evaluate renewable electricity against defined energy, customer or decarbonisation benefits rather than a generic CBAM saving that the current product methodology does not support.
The anchor-offtaker model is strongest when its economics are independently defensible, without assuming that every renewable megawatt-hour already translates into a reduction in CBAM certificate liability.
