For most industrial CFOs in South-East Europe, electricity procurement has historically sat just outside the core financial narrative. Power was an operating input, negotiated by procurement teams, reviewed annually, and managed within tolerable variance bands. Sustainability added a new dimension, but it did not fundamentally alter the financial treatment of electricity.
That separation no longer holds.
As volatility becomes structural rather than cyclical, electricity procurement increasingly behaves like a financial instrument with embedded optionality, liquidity risk, and balance-sheet consequences. Yet many CFOs continue to evaluate green power contracts through frameworks designed for stable commodity inputs. The result is a growing disconnect between how electricity risk is perceived at board level and how it actually materialises in cash flows and earnings.
This gap is where value is lost.
Green on paper, volatile in reality
Green power contracts often deliver exactly what they promise in sustainability terms. Renewable origin is verified. Annual emissions intensity declines. Compliance boxes are ticked. From a reporting standpoint, the transaction is a success.
Financially, however, the same contract can introduce new volatility channels that were previously absent. These do not show up in headline prices or annual averages. They appear in the mechanics of settlement, collateral, and residual exposure.
For CFOs, the uncomfortable truth is that carbon intensity and cash-flow stability are not aligned by default. In volatile grids, they can diverge sharply.
The hidden financial variables inside PPAs
Most CFO-level reviews of PPAs focus on a small number of visible variables: contract price, tenor, counterparty, and headline volume. The more complex variables — shape, imbalance, margining, intraday exposure — are often delegated or summarised.
Yet it is precisely these variables that determine financial behaviour under stress.
A PPA embeds assumptions about:
- when energy is delivered
- how deviations are settled
- how prices are marked to market
- how credit exposure is collateralised
Each of these assumptions can generate cash-flow volatility independent of the contracted price. When markets are calm, the effect is muted. When volatility spikes, it dominates outcomes.
Volatility does not average out for finance
A common argument in favour of renewable PPAs is that volatility “averages out” over time. This may be true statistically. It is not true financially.
Finance operates under constraints: liquidity, covenants, reporting periods, and stakeholder expectations. A company can survive years of average savings and still be destabilised by a single quarter of extreme volatility.
Electricity markets now produce precisely this pattern: long periods of benign pricing punctuated by sharp, short-lived stress events. For CFOs, these events are disproportionately important.
Collateral, credit, and the balance sheet
As power contracts become more financially structured, they increasingly resemble derivatives from a credit perspective. Counterparties manage risk through collateral, margining, and credit limits.
For industrial buyers, this introduces a balance-sheet dynamic that is often poorly anticipated. Collateral postings do not reduce profit, but they consume liquidity. They can affect leverage ratios, restrict financial flexibility, and complicate capital planning.
In volatile markets, collateral calls tend to be pro-cyclical. They arrive when prices spike and cash is already under pressure. CFOs who have not explicitly planned for this exposure find themselves reacting rather than managing.
Earnings volatility and investor perception
Electricity volatility increasingly feeds through to earnings volatility. This matters not only internally, but externally.
Investors and lenders value predictability. Unexpected swings in energy costs, even if temporary, raise questions about risk governance. In extreme cases, they prompt scrutiny of management’s understanding of operational exposure.
For export-oriented SEE industries competing in tight markets, even small margin swings can affect competitiveness and valuation. Electricity volatility becomes a strategic variable, not a technical one.
The governance gap
One of the most striking features of industrial power procurement in SEE is the governance gap.
Procurement teams optimise for price and contract terms. Sustainability teams optimise for emissions metrics. Finance teams manage outcomes after the fact. Rarely are these perspectives fully integrated at decision-making stage.
This siloed approach was manageable in stable systems. In volatile grids, it is a liability.
CFOs who remain at arm’s length from electricity procurement risk inheriting exposures they did not knowingly approve.
Why “doing the right thing” is not enough
Many industrial CFOs support renewable procurement because it aligns with long-term strategy and regulatory direction. This is rational.
What is not rational is assuming that sustainability alignment automatically implies financial robustness. In reality, the opposite can be true if contracts are poorly structured.
Doing the right thing environmentally does not absolve companies from managing financial risk. In volatile systems, it increases the need to do so.
From procurement decision to risk framework
The implication for CFOs is clear: electricity procurement must be brought inside the financial risk framework.
This does not mean turning finance teams into power traders. It means ensuring that:
- worst-case cash-flow scenarios are modelled
- collateral exposure is understood and planned
- contract structures are stress-tested, not just priced
- operational flexibility is valued financially
Electricity should be treated with the same discipline applied to FX, interest rates, or raw material hedging.
The trader’s insight: Volatility has a price
From a trader’s standpoint, volatility is never free. If a buyer is not explicitly paying for risk reduction, they are implicitly selling risk to the market.
In green power procurement, this often happens unintentionally. Buyers accept variable delivery and settlement structures without compensating mechanisms. The market prices the optionality and captures value during stress.
Understanding this dynamic is critical for CFOs seeking to reconcile sustainability with financial stability.
Reframing green power strategy
For SEE industry, the path forward is not to retreat from renewable procurement, but to reframe it.
Green power must be procured with:
- explicit recognition of volatility
- clear allocation of risk between parties
- integration with financial planning
- alignment with operational capability
CFOs who engage at this level transform electricity from a source of surprise into a managed variable.
Those who do not will continue to be surprised by outcomes that markets already anticipate.
Transition point
In volatile grids, green power procurement is as much a financial decision as an environmental one. CFOs who treat it otherwise inherit risk without control.
As SEE power systems evolve, the winners will not be those who buy the greenest electricity on paper, but those who buy electricity that behaves predictably in cash terms.
Elevated by clarion.energy