Hydropower has been viewed as one of Southeast Europe’s most valuable electricity assets, combining renewable output with dispatchability and the ability to respond quickly to changes in system demand. In August, conditions in the region highlighted a growing need for hydropower economics to account for hydrological risk. Water availability can affect both generation levels and market exposure.
Danube inflows weaken Serbia’s hydropower output
At Serbia’s Đerdap 1, Danube inflows fell to approximately 1,400 cubic metres per second. Production dropped to around 20% of normal output. Đerdap 2 also recorded weak performance, with generation at roughly 30% of normal levels.
The reduction coincided with elevated summer electricity demand in Serbia. As a result, the hydro fleet produced substantially less electricity during a period when additional supply was needed by the system. This timing contributed to a shift in how hydro generation met seasonal demand requirements.
Albania shifts to procurement after weaker water conditions
Albania experienced a similar change in market conditions as hydrological conditions weakened domestic generation. KESH, whose generation portfolio is overwhelmingly dependent on hydropower, moved into electricity procurement during late August. The procurement covered August 22–30 before being extended through August 31–September 30.
For Albania, which can become a significant electricity exporter during periods of strong water availability, the move toward imports showed how quickly hydrological conditions can shift national power-market positions. The change also affects how projects are assessed for value under different water scenarios.
Hydrological risk influences valuation and project modelling
Hydropower assets are often modelled using long-term average generation figures. Such averages can mask differences in annual and seasonal output that emerge under drought or other hydrological stress. Reservoir-based hydro can provide operational flexibility because operators can control when electricity is generated.
This control allows operators to respond to market conditions and preserve water for periods of higher demand. Run-of-river projects face more direct exposure to river flow changes, increasing sensitivity to hydrological conditions. A prolonged decline in Danube flows can also affect multiple generating stations at the same time across the region.
Germany funding supports upgrades at Albania’s Vau i Dejës
Drought conditions across the Balkans can place pressure on hydro production simultaneously in Serbia, Albania, Montenegro, Bosnia and Herzegovina, and North Macedonia. That pattern can reduce some diversification benefits associated with regional hydropower portfolios. Modernisation is therefore highlighted as important for improving resilience and efficiency of existing assets.
During August, Germany agreed to provide Albania with €114 million, made up of about €90 million in loans and €24 million in grants. The package supports energy investments including rehabilitation of the Vau i Dejës hydropower plant and improvements to the transmission network. Upgraded turbines, equipment, and plant controls can increase electricity extraction from available water and improve operational flexibility .
The upgrades cannot eliminate hydrological volatility. For investors, valuations increasingly need to differentiate between installed capacity, expected annual generation, and dependable output during periods of hydrological stress . As climate and weather patterns become more influential in regional electricity markets, hydro asset value depends not only on megawatts generated but on how reliably those megawatts can be delivered when the power system needs them most.
