The European Commission’s latest recommendation on removing barriers to power purchase agreements (PPAs), adopted on 22 April 2026, marks a decisive shift in how electricity markets across South-East Europe are expected to function, financed less through state guarantees and more through structured, long-term contracts between producers and industrial consumers. The implications extend far beyond Brussels. For Serbia, Montenegro and the wider Energy Community, the document effectively redraws the investment map for renewable energy, storage, and industrial decarbonisation over the remainder of the decade.
At its core, the recommendation recognises that PPAs are no longer a peripheral contracting tool but a system-critical mechanism required to deliver the European Union’s 42.5% renewable energy target and at least 55% emissions reduction by 2030. This framing carries immediate consequences for markets on the EU’s periphery. South-East Europe is not simply expected to follow; it is increasingly positioned as a supply-side extension of the EU’s clean power system, particularly through cross-border contracting structures.
The growth trajectory already reflects that shift. The volume of electricity contracted annually through corporate PPAs in Europe expanded from 7.4 TWh in 2020 to 31.4 TWh in 2024, with the number of deals rising from 60 to 276 over the same period. Solar photovoltaic assets have overtaken wind as the dominant technology, while hybrid contracts integrating storage are emerging as a defining feature of the next phase. This acceleration is not simply a function of decarbonisation policy; it reflects a deeper transformation in how energy risk is allocated and priced across the system.
For South-East Europe, the most consequential element of the Commission’s position lies in its explicit support for cross-border PPAs, particularly involving Energy Community markets. These contracts, under which electricity is purchased across national boundaries, are seen as a vehicle for integrating neighbouring systems into the EU’s internal electricity market while simultaneously unlocking investment in new generation capacity. In practical terms, this places Serbia and Montenegro at the intersection of two structural forces: rising EU demand for clean power and persistent regional price spreads that make export-oriented generation economically attractive.
Yet the document is equally clear about the obstacles that must be addressed before such a market can scale. Regulatory barriers remain entrenched, ranging from grid access constraints and slow permitting processes to inconsistencies in accounting rules and the treatment of guarantees of origin. In Serbia, where transmission capacity expansion at the 400 kV level is still lagging project pipelines, these constraints translate directly into delayed financial close for renewable projects. Montenegro faces a parallel challenge, where system size and interconnection limits restrict the ability to monetise surplus generation through long-term contracts.
Non-regulatory barriers are no less significant. The Commission identifies creditworthiness of buyers, lack of transparency, and limited contract standardisation as persistent frictions. These issues are particularly acute in South-East Europe, where large industrial offtakers—traditionally the backbone of PPA markets in Western Europe—are fewer, and balance sheets often weaker. Without credible counterparties, project developers struggle to secure financing even when resource potential is strong.
To address this, the EU is advancing a layered approach to risk mitigation. Member States are encouraged to deploy state-backed guarantee schemes, coordinated with the European Investment Bank’s 2025 counter-guarantee programme, to underwrite payment risk for corporate buyers. For Serbia, where industrial demand from metals, chemicals and data infrastructure is growing but still unevenly distributed, such mechanisms could prove decisive in unlocking multi-gigawatt PPA pipelines. Montenegro, with a smaller industrial base, is more likely to rely on export-linked contracts supported by international counterparties.
The evolving structure of PPAs themselves also reflects a more complex allocation of risk. The Commission distinguishes between physical and financial contracts, as well as between pay-as-produced and baseload delivery profiles. These distinctions are not merely technical. They determine who bears exposure to price volatility, volume fluctuations, and balancing costs—factors that directly influence project bankability and ultimately the equity internal rate of return. In markets such as Serbia, where balancing mechanisms are still developing, the shift away from simple pay-as-produced contracts towards shaped or hybrid structures is already visible.
Underlying these contractual changes is a broader market dynamic that the Commission addresses with unusual candour. The rapid expansion of renewable generation is leading to price cannibalisation and an increase in negative price hours, eroding revenues for developers and complicating PPA negotiations. This phenomenon is beginning to surface in parts of South-East Europe, particularly during periods of high solar output combined with limited export capacity. The implication is clear: future projects will increasingly require integrated solutions, combining generation with storage, demand response, or flexible consumption agreements to stabilise revenues.
This is where the interaction between PPAs and state support schemes becomes critical. The Commission acknowledges that two-way Contracts for Difference (2w-CfDs), which provide price certainty by stabilising revenues, can reduce financing costs but risk crowding out private PPA markets if poorly designed. The recommended approach is not substitution but coexistence, with hybrid models allowing part of a project’s output to be contracted through PPAs while the remainder benefits from state-backed mechanisms. For South-East Europe, where public budgets are constrained, this blended structure offers a pathway to scale investment without overreliance on subsidies.
Another structural innovation promoted by the Commission is the expansion of multi-buyer PPAs, in which multiple smaller consumers aggregate demand to match the scale of large generation assets. This model is particularly relevant for Serbia, where industrial consumption is fragmented across sectors and regions. By pooling demand, aggregators—potentially including industrial parks, business associations, or specialised intermediaries—can create bankable offtake structures that would otherwise be unattainable for individual companies. Montenegro, meanwhile, could leverage such models to anchor export-oriented projects with a combination of domestic and foreign buyers.
The development of market platforms for trading PPAs represents a further step towards institutionalisation. By increasing transparency, standardising contracts, and reducing transaction costs, such platforms could transform PPAs from bespoke bilateral agreements into more liquid market instruments. For South-East Europe, where market depth remains limited, the emergence of regional platforms could play a critical role in attracting international capital and integrating local projects into broader European portfolios.
A less visible but equally important reform concerns guarantees of origin, the certificates used to verify the renewable nature of electricity. The Commission advocates moving towards time granularity aligned with market intervals and full cross-border transferability. This shift has far-reaching implications. It effectively links the value of renewable energy to its temporal and geographical characteristics, increasing the importance of storage and flexibility while reducing the arbitrage opportunities associated with traditional certificate systems. For developers in Serbia and Montenegro, this means that project design will need to account not only for generation capacity but also for the ability to deliver power when and where it is most valuable.
The recommendation also broadens the scope of long-term contracting beyond electricity, encompassing hydrogen, biomethane, and heating and cooling agreements. While these markets are still nascent in South-East Europe, their inclusion signals the direction of travel. As industrial decarbonisation accelerates, demand for alternative energy carriers is expected to rise, creating new opportunities for integrated energy projects that combine generation, conversion, and supply under long-term contractual frameworks.
Taken together, these elements point to a fundamental reconfiguration of the energy investment model. The traditional paradigm—based on state-driven capacity expansion and regulated tariffs—is giving way to a system in which long-term contracts between private actors underpin both financing and risk management. The role of the state is evolving accordingly, from primary buyer or guarantor to facilitator of market conditions, providing targeted support where necessary but increasingly relying on contractual mechanisms to allocate risk.
For South-East Europe, this transition carries both opportunity and urgency. The region’s resource base—particularly in solar and wind—positions it as a potential exporter of clean electricity to the EU. At the same time, structural constraints in grid infrastructure, regulatory alignment, and market depth must be addressed if that potential is to be realised. The Commission’s recommendation does not solve these challenges, but it provides a clear blueprint for how they should be approached.
The immediate consequence is likely to be an acceleration of project development pipelines tied to cross-border PPAs, particularly in Serbia where industrial demand and grid connectivity offer a foundation for scaling. Montenegro, with its smaller domestic market, is more likely to see projects structured primarily around export contracts, leveraging its proximity to Italy and the broader Adriatic market. In both cases, the success of these strategies will depend on the ability to align national frameworks with the evolving EU model, particularly in areas such as guarantees of origin, permitting, and risk mitigation.
What emerges from the Commission’s approach is a system in which capital flows follow contracts, and contracts are increasingly shaped by the interplay of market dynamics, regulatory frameworks, and technological integration. South-East Europe is no longer on the margins of this process. It is becoming an integral part of the architecture, not as a passive recipient of policy but as an active participant in a market that is rapidly redefining the boundaries of Europe’s energy system.