In January, the electricity market in South-East Europe experienced significant price volatility, resulting in a marked redistribution of value across various segments of the energy value chain. The elevated wholesale prices did not uniformly benefit all market participants; instead, they highlighted existing structural advantages while revealing vulnerabilities among others.
Merchant thermal generators, particularly gas-fired and lignite plants, emerged as key beneficiaries during this period. These operators capitalized on price spikes that frequently exceeded €120–130/MWh, particularly during cold weather when gas units set the marginal price. In countries like Serbia, Romania, and Bulgaria, lignite plants with regulated fuel cost structures enjoyed disproportionate advantages as their operational costs remained significantly lower than market clearing prices. This allowed them to effectively capture scarcity rents driven by high winter demand alongside limited cross-border trading capacity.
Additionally, cross-border traders and those benefiting from congestion rents also found themselves on the winning side. The persistent bottlenecks on north-south and east-west transmission corridors resulted in substantial congestion income for transmission system operators (TSOs) and market participants positioned on these constrained interconnections. The wide price spreads between South-East European hubs and Central European markets during peak stress hours provided opportunities for traders with flexible portfolios to engage in arbitrage, while TSOs reported congestion revenues that were significantly higher than off-winter averages.
Hydropower operators also gained from selective opportunities. Although hydro availability varied across the region, plants equipped with reservoir flexibility managed to optimize their generation during peak price periods. Selling even modest volumes into price windows of €110–130/MWh considerably enhanced revenue profiles compared to average annual expectations.
Conversely, retail suppliers and utilities bound by fixed-price contracts faced substantial challenges. Many suppliers locked into regulated tariffs struggled with a growing gap between procurement costs and retail revenues. This situation was particularly acute in several Western Balkan markets where January’s dynamics underscored the necessity for upcoming tariff adjustments due to accumulating short-term losses in supply portfolios. State-owned suppliers bore significant fiscal pressure as wholesale price volatility impacted their balance sheets.
Energy-intensive industrial consumers were notably disadvantaged as well. Large industrial clients reliant on spot or index-linked contracts encountered sharply increased electricity costs throughout January, which adversely affected profit margins in sectors such as metals, construction materials, and chemicals. For exporters competing against producers in lower-priced Western European markets, the pricing environment widened existing competitiveness gaps rather than alleviating them.
Some renewable energy generators, particularly merchant solar operators, also underperformed relative to market expectations. The structurally low seasonal solar output in January limited these portfolios’ ability to capitalize on price spikes. While wind generation performed better at certain times, overall variability hindered many renewable assets from fully leveraging peak price events, especially where grid constraints or curtailments were present.
Finally, public finances and consumers indirectly absorbed losses due to the market conditions. Although household tariffs did not immediately reflect January’s wholesale prices across the board, the month intensified pressure on future regulatory decisions. Delayed adjustments to tariffs increased fiscal exposure for systems where utilities are state-backed and politically constrained from making necessary price changes.
The trends observed in January reaffirmed a consistent pattern within South-East Europe’s electricity markets: flexible dispatchable assets and strategically positioned traders are best positioned to capture volatility rents, while fixed-price suppliers, industrial consumers, and inflexible renewable portfolios bear the brunt of market fluctuations. These distributional effects are indicative of ongoing challenges related to scarcity, fuel linkage, and grid constraints shaping the dynamics of electricity markets in the region.
