Energy-intensive steel plants can provide renewable developers with long-term demand tied to industrial electricity use that is linked to physical production. This can make steel mills potential anchor offtakers for renewable energy projects, including situations where power purchase agreements do not directly reduce current CBAM certificate liabilities.
Renewable power benefits beyond CBAM certificate calculations
For iron-and-steel and aluminium goods currently covered in Annex II, the existing CBAM calculation accounts for direct emissions. Renewable electricity procurement can still deliver operational, customer, financing and decarbonisation benefits without automatically lowering the current certificate liability through purchased-electricity emissions.
The commercial case for a PPA depends on whether the agreement reflects the mill’s load profile, credit quality and operational flexibility. It should not rely on a generic green-energy label, and wind and solar generation may be paired with market shaping, hydropower or storage services.
Replacement electricity costs and volumes should remain separately identifiable within the contract structure. The approach also needs to address both carbon-related exposure and operating costs, since focusing only on one side can leave either element insufficiently managed.
PPA design, risk allocation and bankability for industrial buyers
Long-term industrial offtake can offer renewable developers a more predictable revenue base. Project economics depend on how the mill’s consumption profile aligns with renewable generation, as well as how balancing, curtailment and replacement-power risks are allocated.
Banks financing renewable projects will assess the steel mill’s ability to meet payment obligations, including contractual termination rights. They will also evaluate curtailment allocation and any premium that depends on supporting evidence.
Lenders financing the mill will focus on electricity-cost competitiveness and whether the PPA reduces existing exposure or shifts risk into new contractual obligations. The requirements differ because a renewable project needs a bankable offtake arrangement while the industrial buyer needs an electricity supply structure compatible with production requirements.
CBAM’s indirect influence on electricity procurement and reporting
CBAM can strengthen decarbonisation indirectly through customer expectations for carbon data. EU customers are seeking better carbon information, while steel producers need credible plans for reducing emissions and demonstrating environmental performance.
Renewable electricity can therefore affect customer positioning and market access even when the current certificate calculation remains focused on direct emissions. Downstream manufacturers are expected to identify relevant CN codes for their products and determine which sales face the greatest exposure to EU customers.
This assessment can guide prioritisation of renewable electricity procurement and emissions-data investments where commercial benefits are most likely to arise. It also aligns procurement decisions with which EU-facing sales drive exposure under CBAM.
Planned CBAM expansion from 2028 remains under 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 for compliance planning. Steel buyers are therefore expected to evaluate renewable electricity against defined energy, customer or decarbonisation benefits rather than assuming a generic CBAM saving that is not supported by the current product methodology.
The anchor-offtaker model is described as strongest when its economics are independently defensible. This approach does not assume that every renewable megawatt-hour automatically translates into a reduction in CBAM certificate liability.