Coal remains one of the most difficult issues in the Western Balkans electricity sector. While coal is often described as outdated, it still provides functions that are difficult to replace. In several systems across the region, coal contributes to domestic electricity supply, employment, system inertia, dispatchable capacity and political security.
Coal’s role is embedded beyond power generation, extending into regional economies and social structures. As a result, the shift away from coal is not limited to swapping one technology for another. It is also linked to political economy considerations affecting how power systems and local industries operate.
Coal dependence across Western Balkan power systems
Research on the Western Balkan energy sector points to significant reliance on coal for electricity generation in Kosovo, Serbia, Bosnia and Herzegovina, North Macedonia and Montenegro. Albania is identified as a major exception due to its hydropower-based system. This pattern shapes how reliability is managed across different national grids.
The region faces a reliability dilemma as coal plants age. Coal units are described as aging, often inefficient and emissions-intensive, but they still provide firm generation when hydro output is weak. The same firm generation function is also relevant when imports are expensive or solar output is unavailable.
Reliability trade-offs amid aging assets
Replacing coal capacity without covering its system role would raise security-of-supply risks. The source material links this risk to periods when hydro generation cannot fully meet demand. It also ties the challenge to constraints that can affect alternative supply options during stressed conditions.
At the same time, the economics of coal are weakening under carbon-related policy signals. CBAM exposes carbon-intensive electricity exports to additional costs when sold into the EU. Reuters reported that electricity from coal-reliant Western Balkan producers is likely to become more expensive for EU importers under CBAM, reducing competitiveness in EU markets.
CBAM impact on export revenues and financing
Export competitiveness matters because exports have historically supported utility revenues in some countries. If coal-based exports become less attractive, domestic coal plants lose part of their commercial buffer. The source notes that plants may still be needed for local supply even if export economics deteriorate.
Pollution rules add further pressure on existing assets. Many coal facilities in the region require investment to meet environmental standards while lenders are increasingly reluctant to finance coal. Even where coal remains technically available, rising cost of capital and compliance burden increase financing constraints.
What replaces coal’s firm capacity function
The transition challenge is framed around what replaces coal’s firm capacity function rather than whether coal faces pressure. The source states that solar alone cannot provide this replacement role and wind alone cannot do it either. Hydro can help, but hydrology uncertainty limits its ability to cover all reliability needs.
Gas is described as a flexibility option but with fuel-price and import-dependence risks. Batteries are described as essential for short-duration flexibility but not sufficient to fully replace multi-day firm capacity. Demand response can reduce peaks, but it requires market design and consumer participation.
Portfolio requirements for reliability and system flexibility
A realistic pathway described in the source requires a portfolio approach including renewables, storage and grid upgrades. It also includes regional market integration and flexible hydro alongside limited flexible thermal backup. Demand response and energy efficiency are listed as additional elements for managing demand patterns.
The source also calls for domestic carbon-pricing discussions because paying carbon costs at the EU border is described as less useful than recycling revenues into local transition measures. It links this point to how costs affect investment decisions within the region rather than only cross-border payments.
Social transition pressures in coal regions
The social dimension is highlighted as part of the transition challenge. Coal regions need investment before closures rather than after them, according to the source material. Workers require retraining, municipalities need alternative tax bases and utilities need credible investment plans.
A disorderly transition is described as increasing political resistance and threatening security of supply. The source frames these outcomes as risks that can affect both operational planning and policy implementation timelines for power-sector change.
Investment risk framing for utilities and governments
For investors, the source describes coal-transition risk as having both downside and opportunity components. Downside includes stranded assets, rising compliance costs and export-market erosion tied to CBAM-driven competitiveness changes. Opportunity is linked to replacement infrastructure such as renewables, batteries, transmission and district heating modernization.
The replacement list also includes mine-land repurposing and flexible capacity intended to maintain reliability functions over time . For governments, the source identifies delay without preparation as the worst strategy because aging assets do not become more reliable with time . It also states that CBAM does not disappear due to domestic politics being difficult .
The source says waiting compresses the transition into a shorter and more expensive period while keeping reliability needs in focus . Coal may remain part of the Western Balkans power mix for some time even as its strategic position weakens . It adds that future reliability will increasingly come from flexibility portfolios rather than single-fuel dependence .
Coal’s last stronghold is identified not by generation volume but by firm capacity . That firm-capacity role is presented as the function the region must replace .
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