How the ‘Premium Stack’ can rescue renewable energy returns in Southeast Europe
The era of simple, standalone renewable energy generation in Southeast Europe is over. That is according to the views of four industry experts, who outline why return-seeking energy developers need to pivot to the ‘Premium Stack’ – a layered architecture integrating batteries, agrivoltaic dual-use models, and long-term electricity contracts.
The more traditional energy investment models in Southeast Europe are seeing their business cases shift.
First, Romania’s onshore wind pipeline has been radically recalibrated. Previously cited at 14 GW of theoretical maximum capacity, the investable near-term pipeline is 3 to 5 GW. The 2024 CfD Round 1 awarded 1.53 GW at strike prices of €65/MWh for wind and €51/MWh for solar. A second round in 2025 awarded 2.75 GW, including 1.48 GW of solar at an average of €40.46/MWh and 1.26 GW of wind at €73.89/MWh – bringing the combined total to 4.2 GW.
Second, Serbia’s coal dependency is declining faster than consensus assumed. While historical analyses cited approximately 70%, official 2024 data from the transmission system operator confirms that brown coal and lignite accounted for 61.03% of the national electricity mix, with wind and solar combined at just 4.24%.
Third, the Carbon Border Adjustment Mechanism (CBAM) entered its definitive phase on 1 January 2026. Importers must now purchase and surrender certificates corresponding to embedded carbon in covered goods – steel, aluminium, cement, fertilizers, and electricity. For CBAM-exposed exporters such as the HBIS steel complex in Smederevo (Serbia), electricity sourced from a 61.03% coal grid carries a punitive border tax. This has converted industrial electricity procurement from commodity buying into mandatory compliance contracting.
The EU versus Energy Community Bifurcation
The region’s defining structural feature is the bifurcation between EU member states and Energy Community Treaty (ECT) candidate countries.
The EU cluster (Greece, Romania, Bulgaria, Croatia, and Slovenia) operates under RED III with full EU Taxonomy alignment, a WACC of 6.0% to 8.0%, and zero currency risk. The ECT candidate cluster (Serbia, Albania, North Macedonia, and Bosnia & Herzegovina) faces a WACC of 9.0% to 14.0%, reflecting a frontier premium driven by floating currencies and political uncertainties.
However, this premium is not immutable. The Western Balkans Investment Framework (WBIF) and the EBRD provide a powerful blended finance engine: every euro of WBIF grant capital leverages five to eight euros of development finance institution (DFI) debt, reducing the net cost of capital by 200 to 400 basis points. Projects that would be unbankable at a 10% base IRR become viable 14% assets once the blended finance stack is applied.
Architecting Alpha via the ‘Premium Stack’
The central insight of the 2026 landscape is that alpha in Southeast Europe renewables is no longer a function of resource quality or CAPEX arbitrage alone – it is a function of architecture. The Premium Stack is a three-layered structure that defends against downside shocks, bypasses siting friction, and secures premium offtake:
Layer 1: Defense through BESS Co-location
Grid curtailment is the dominant technical IRR detractor in Southeast Europe, particularly in Romania and Bulgaria, where curtailment reached 150 GWh in 2024 and is projected to double by 2027. Co-locating battery storage protects the 1.25x Debt Service Coverage Ratio (DSCR) floor that DFIs require for covenant compliance.
In the base case, Battery Energy Storage Systems (BESS) adds 150 to 250 basis points to project IRR by shifting generation to peak hours. Under stress conditions, BESS is the difference between solvency and covenant breach.
Layer 2: Frictionless Siting through Agrivoltaics
The Pannonian Plain – spanning Serbia’s Vojvodina, Romania’s western lowlands, and Croatia’s eastern flatlands – offers optimal conditions for agrivoltaic systems: flat terrain, high irradiation, and existing agricultural infrastructure.
By preserving 60% to 80% of normal agricultural yield while generating electricity at an LCOE of 30 to 52 euros per megawatt-hour, agrivoltaic projects achieve a composite unlevered IRR of 15.5% to 17.0%, net of the 12% to 18% CAPEX premium for elevated panel mounting. Agricultural classification accelerates permitting and bypasses land-use objections.
Layer 3: Offtake Security through CBAM-Driven Industrial PPAs
CBAM enforcement has created an entirely new class of creditworthy industrial offtakers. A 20-year industrial PPA for traceable renewable electricity at €75 to €90/MWh neutralizes the border tax for the offtaker while providing the generator with a 300 to 600 basis point uplift over standard CfD returns.
Serbia’s HBIS steel complex has already entered into long-term power arrangements, driving equity IRRs to 16% to 19%.
Stress Testing the Frontier
Granular sensitivity modeling applied to a standardized 100 MW utility solar project (Table 4) reveals the stark realities of frontier market risk.
An EU accession stall – triggered by geopolitical shock or rule-of-law regression – causes the base unlevered IRR of 13.0% to collapse to 8.5% to 9.5%, falling below the 10% floor DFIs typically require.
The grid-cascade insolvency curve is more severe. Simultaneous curtailment increasing to 12%, a retroactive CfD cut of 20%, and a EURIBOR spike of 200 basis points cause a standalone Romanian wind project’s DSCR to drop from 1.40x to 0.95x by Year 2 – an unlevered IRR of 4% to 5%. A wind-plus-BESS hybrid, by contrast, holds the DSCR at 1.28x, remaining above the 1.25x insolvency line.
On the upside, the CBAM industrial PPA scenario lifts a Serbia solar project’s base IRR of 13% to a 16% to 19% equity IRR, with annual revenue uplift of €1.5 to €2.1 million on a 100 MW project.
Five Non-Negotiable Capital Triggers
To secure DFI financing and maximize risk-adjusted ROI, investors must embed five structural provisions from inception:
EUR-denomination is mandatory
All non-euro SEE investments must be structured with EUR-denominated Contracts for Difference (CfDs) or Power Purchase Agreements (PPAs). Currency depreciation is an absolute IRR destroyer, not a theoretical risk.
BESS is a hard covenant
Wind or solar in grid-constrained markets must not be underwritten without co-located storage to protect the 1.25x DSCR floor.
ICSID BIT protections are essential
Bilateral Investment Treaty stabilization clauses with ICSID or UNCITRAL arbitration are the primary legal defense against retroactive regulatory changes – a documented risk in Bulgaria, Bosnia and Herzegovina, and Serbia.
Taxonomy compliance from Day 1
Designing for ‘Do No Significant Harm’ criteria unlocks the 15% to 22% green bond valuation premium and institutional investor mandates.
Target the CBAM offtaker
Pivoting from state CfDs to CBAM-exposed industrial exporters for 20-year PPAs is the single highest-impact strategic shift available to developers.
Conclusion
Southeast Europe offers a rare combination: double-digit unlevered returns in a region where EU accession creates a hard regulatory floor, blended finance via EBRD’s programmes REEP (Renewable Energy Efficiency Programme) and WBIF (Western Balkans Investment Framework) crushes the cost of capital, and CBAM enforcement manufactures premium demand.
The region’s structural CAPEX advantages remain intact, but the pathway to superior returns has narrowed to structured, hybrid deployments. The window is open, but it rewards those who move with precision, not those who move with haste.
Authors of this article are Edward Bodmer, Aleksandar Vujic, Paul Lalovich (managing partner of Agile Dynamics), and Henrik Von Scheel.
