The energy landscape in South-East Europe is undergoing a significant transformation as the region grapples with the implications of gas dependency for power pricing. Despite a growing narrative that positions gas as a transitional energy source, the realities of the market suggest a more complex scenario as we approach 2026. Current assessments indicate that gas will continue to play a crucial role in price formation, particularly during periods of system stress, rather than diminishing as renewable investments gain traction.
The operational framework for the next two years is defined by existing infrastructure and connected resources, rather than speculative projects. While battery storage capacity is on the rise, it predominantly offers short-duration solutions. Hydropower remains vulnerable to climatic variations, nuclear generation lacks flexibility, and while solar energy capacity is increasing, it is primarily concentrated around midday production. Wind energy is also expanding but continues to be subject to forecasting uncertainties. In this context, the existing gas infrastructure is adequate to address anticipated stress scenarios without necessitating additional capacity. The reliance on gas does not stem from an increase in plant numbers but rather from its essential role during critical supply shortages.
Understanding gas marginality requires a focus on timing rather than sheer usage volume. In 2026–2027, while gas may not dominate overall generation statistics, it will be vital during peak demand hours—such as winter evenings and periods of low renewable output. Under typical conditions, gas is expected to influence prices in approximately 20–30% of hours; however, during high-demand situations, this could surge to 40–60%. This shift indicates a compression of gas’s influence from surplus hours into those where it becomes indispensable for maintaining system stability and pricing integrity.
The expansion of solar energy across countries like Hungary, Romania, Bulgaria, Serbia, and Greece illustrates this dynamic. While midday prices are being suppressed due to increased solar generation—sometimes even turning negative—the marginality of gas shifts rather than diminishes. The scarcity of energy resources now occurs during evening ramp-up periods and winter peaks when gas remains crucial for meeting demand. Thus, although gas generation may occur less frequently, its economic significance during these critical hours intensifies.
Wind and hydro resources provide some temporary relief but do not offer a long-term solution to reduce reliance on gas. Wind developments in Greece and Romania can lower gas dispatch during favorable conditions; however, unpredictable weather patterns can lead to significant gaps in wind production when reliance on gas becomes necessary. Similarly, hydropower can suppress gas marginality when reservoir levels are high but does not eliminate the inherent risks associated with fluctuating water inflows. As demonstrated in early 2026 in Serbia and Greece, once reservoir levels decline, the abrupt need for gas re-emerges sharply.
Battery storage systems currently deployed across the region enhance operational efficiency but do not fundamentally change the dependency on gas. The largest systems available allow for only 2–3 hours of full-power discharge capability. While they can optimize intraday operations and manage peak demands more effectively, they lack the capacity for extended periods of low output or extreme weather events. Consequently, batteries serve primarily to optimize rather than replace gas usage within the market framework.
Key factors influencing gas marginality over the next two years include LNG exposure and storage levels. Currently, LNG constitutes around 57% of EU gas imports, with South-East Europe increasingly dependent on indirect supplies through Italy and Central European hubs. The pricing dynamics in this region are increasingly dictated by global LNG trends rather than local supply-demand fundamentals. Adequate storage levels entering winter are critical; well-stocked facilities can stabilize prices while low levels can lead to dramatic price volatility even under moderate weather stress.
Market indicators reinforce these observations with clear signals regarding future expectations. Forward contracts for winter and peak periods in South-East Europe continue to reflect significant risk premiums associated with gas prices. While summer baseload prices have decreased due to solar generation pressures, peak pricing remains elevated. If there were genuine signs of diminishing gas marginality, one would expect to see compression in peak forwards—yet such signals are absent.
To materially alter the current state of gas marginality by late 2027 would require substantial advancements that appear unlikely within the specified timeframe: large-scale multi-day storage solutions must be developed; demand-side flexibility must achieve true price responsiveness; new hydroelectric capacity must come online; or LNG markets must enter a prolonged oversupply phase that suppresses prices structurally—all conditions that remain uncertain.
The outlook for 2026–2027 suggests that gas marginality will remain firmly entrenched within power price formation frameworks. It will manifest less frequently but will be more concentrated and volatile during times of stress. The pressing challenge for power markets lies not in transitioning away from gas but in managing its associated risks more effectively within an increasingly renewable-centric system. Strategies that underestimate the continued relevance of gas could miscalculate exposure to peak pricing volatility.
In summary, while discussions surrounding energy transition continue to evolve, it is evident that gas will retain a defining role in South-East European power markets through 2026–2027.
