In January 2026, a significant shift in the energy landscape of South-East Europe was observed as gas reemerged as the primary marginal driver of electricity prices. Despite notable increases in renewable energy generation and improved hydro conditions in certain Balkan regions, these developments were insufficient to displace gas from its pivotal role in price formation during periods of system stress.
The resurgence of gas marginality was primarily influenced by risk expectations rather than outright scarcity. The TTF prices escalated from €28–29/MWh at the start of January to nearly €41/MWh by month-end, prompting power markets in Hungary, Romania, Italy, and Bulgaria to adjust their pricing strategies based on anticipated risks rather than immediate spot market conditions. This trend indicates a growing tendency for electricity bids to incorporate forward-looking gas price risks.
Hungary and Romania serve as key examples of this evolving market dynamic. Both countries reported average electricity prices exceeding €150/MWh, even amid modest demand growth. In Hungary, a net import share of 34.03% linked the local market to broader Central European gas dynamics. Meanwhile, Romania’s declining hydro output eliminated a crucial buffer, compelling gas and imports to set the market margin. This shift towards forward-looking price formation highlights an embedded volatility tied to gas before physical constraints became apparent.
Italy’s energy market further underscores the dominance of gas. With approximately 61.91% of its generation sourced from gas and net imports totaling 2.78 TWh, Italy maintained elevated electricity prices averaging €132.67/MWh. Even during periods characterized by robust renewable generation, gas remained the dominant factor in peak pricing, influencing Adriatic spreads and affecting neighboring markets through volatility transmission.
Hydro-rich nations like Greece and Serbia momentarily resisted this trend. Both countries experienced substantial hydro increases—155.37% in Greece and 186.06% in Serbia—allowing them to decouple from the prevailing gas-driven price surge temporarily. However, this insulation is deemed conditional; as hydro availability normalizes, pricing dynamics are expected to revert back to being dictated by gas and imports.
The overarching structural implications are significant. While renewable energy growth has modified average price levels across the region, it has not altered the fundamental control exerted by gas over marginal pricing. The absence of adequate dispatchable capacity or storage solutions means that intermittent renewable sources cannot effectively suppress gas prices during peak demand or stressful conditions. Consequently, gas continues to shape the upper limits of pricing, volatility profiles, and forward curve dynamics within South-East European electricity markets.
The conclusion drawn is that gas marginality has transitioned from a cyclical phenomenon to a systemic characteristic within these power markets. As such, entities operating within South-East Europe must prioritize gas as a critical variable in all aspects of pricing strategies, hedging approaches, and risk management decisions.
