Market coupling represents a significant reform in the European electricity landscape, aiming to enhance efficiency by linking national day-ahead markets. This initiative is particularly relevant for South-Eastern Europe (SEE), where it has facilitated connections among countries such as Serbia, Romania, Bulgaria, and Greece. While the theoretical framework suggests substantial benefits, practical outcomes reveal both progress and limitations.
Day-ahead market coupling has made notable strides, establishing direct or indirect links between most SEE markets and the broader European system. This integration has led to improved price formation that increasingly reflects regional dynamics rather than solely domestic conditions. As a result, cross-border trade volumes have surged, and price convergence has been observed during stable operational periods.
However, recent market stress events have exposed the vulnerabilities of this integration. High demand periods, low renewable energy output, and network outages have led to a rapid re-emergence of price divergence. This situation raises critical questions about whether market coupling has fostered structural resilience or simply redistributed volatility across the region.
Data indicates a mixed performance of market coupling under varying conditions. During normal operations, average price differences between neighboring SEE markets have decreased by 10–20% compared to pre-coupling scenarios. Yet, during times of stress, price spreads can widen significantly, occasionally exceeding €100/MWh for prolonged durations. These divergences often correlate with reduced cross-zonal capacity availability due to physical constraints or maintenance activities.
The effectiveness of market coupling appears conditional on several factors. It functions well when capacity is accessible and regulatory frameworks are aligned. Conversely, institutional and technical barriers can hinder its performance. Consequently, while SEE market coupling enhances efficiency during stable periods, it falls short of ensuring stability during peak stress events.
The scope of day-ahead coupling presents inherent limitations. It cannot adequately address real-time volatility within a system increasingly reliant on variable renewable energy sources. Complementary mechanisms such as intraday markets and balancing platforms are essential for comprehensive integration. Currently, intraday liquidity in SEE remains inconsistent, and efforts toward balancing integration are still underway. Without robust intraday and balancing coupling, day-ahead price convergence risks unraveling swiftly.
This fragility was evident during the summer of 2024. Despite the existence of formal coupling arrangements, extreme evening price spikes were recorded in various SEE regions due to surges in post-sunset demand coupled with constrained import capabilities. Analyses indicated that better utilization of cross-zonal capacity could have alleviated many of these issues, underscoring the fragility of coupling without sufficient capacity availability.
The interaction between market coupling and national policy frameworks complicates integration efforts. Variations in capacity mechanisms, network tariffs, and renewable energy support schemes across SEE countries distort price signals and create challenges for cross-border flows. For instance, discrepancies arise when one market incentivizes availability through subsidies while another relies solely on energy pricing mechanisms, leading to divergent dispatch incentives. While coupling effectively transmits prices, it does not necessarily convey investment signals across borders.
The institutional landscape further complicates matters. Some SEE nations are EU members subject to comprehensive market design obligations; others operate under the Energy Community framework with transitional regulations. Although alignment has progressed over time, significant differences persist in implementation speed, enforcement practices, and regulatory cultures—gaps that become particularly critical during periods requiring coordinated action.
The potential welfare gains from deeper integration are substantial. Research suggests that integrating balancing markets alone could yield over €1.6 billion in welfare benefits across Europe. For SEE specifically, similar gains could be realized if integration extends beyond day-ahead trading to include balancing and reserve sharing initiatives. Such advancements would facilitate flexibility in resource allocation where it is most needed while simultaneously reducing both price volatility and reserve costs.
The governance challenge remains a key hurdle for deeper coupling. Achieving enhanced integration necessitates trust among transmission system operators, harmonization of grid codes, and a willingness to share control over resources. In a region characterized by strong national narratives around energy sovereignty, these requirements pose significant challenges. Nevertheless, the alternative—persistent exposure to volatility—can undermine sovereignty through increased reliance on imports during crises.
Looking ahead, the focus should not solely be on whether SEE should pursue deeper market coupling but rather on the pace and coherence of such efforts. Incremental progress risks entrenching a scenario where theoretical integration fails to materialize during critical moments. Accelerating alignment in capacity calculations, outage planning processes, intraday markets, and balancing platforms could pave the way toward achieving genuine resilience within the region’s electricity markets.
The evolution of market coupling in SEE has already transformed electricity trading dynamics and pricing structures. The upcoming phase will be crucial in determining whether it evolves into a stabilizing force or remains a partial solution amid ongoing challenges related to high-renewable and high-volatility systems.
