The battery energy storage sector in South-East Europe is witnessing rapid expansion, yet a pivotal debate persists among investors regarding the operational framework for these projects. The core question remains whether battery storage systems should function as fully merchant assets, subject to market volatility, or rely on regulated support mechanisms that offer contracted revenues. As the region approaches 2026, this discussion is poised to significantly influence the trajectory of its energy transition.
Battery energy storage systems are increasingly recognized as critical infrastructure across Serbia, Greece, Romania, and Bulgaria, with gigawatt-scale projects emerging amid a backdrop of rising renewable energy penetration and volatile electricity markets. Unlike traditional generation assets, the economic viability of storage solutions hinges on the prevailing market design and regulatory landscape.
The choice of financing framework will determine which projects advance, which investors gain a foothold in the market, and the overall pace at which South-East Europe can cultivate a robust flexibility economy. The case for merchant operations is gaining traction as market volatility intensifies.
In Greece and Bulgaria, the rapid deployment of solar energy has led to significant price fluctuations during peak irradiation periods. Concurrently, wind generation in Serbia and Romania introduces sudden balancing challenges. These dynamics create an environment where batteries can effectively capitalize on price discrepancies by absorbing low-cost electricity during surplus periods and discharging during peak demand times.
Merchant battery storage systems generate revenue through various mechanisms including arbitrage, ancillary services, and congestion management rather than relying on fixed tariffs or capacity payments. Proponents argue that a sufficiently volatile market could sustain these systems commercially without extensive regulatory backing.
This perspective is increasingly embraced by commodity traders and infrastructure funds who view merchant battery energy storage systems (BESS) as essential components of a trading-oriented energy landscape. They anticipate that rising renewable penetration will enhance the value of flexibility in power markets, positioning batteries as active trading tools rather than merely regulated utility assets.
Serbia stands out as a key testing ground for this approach. Current agreements linked to approximately 4.54 GWh of planned storage reflect a market gearing up for increased volatility. Factors such as wind development in Vojvodina and expanding solar initiatives highlight Serbia’s strategic position within Central Europe’s energy network, potentially allowing batteries to capture significant intraday and balancing market values.
Investors are particularly drawn to strategically located batteries near congestion points or renewable clusters, which can operate similarly to physical trading desks by optimizing renewable output and balancing supply-demand mismatches. If volatility trends continue upward, revenues from merchant storage could become substantial.
Greece’s solar-dominant grid exemplifies this trend, with increasing intraday price spreads driven by midday oversupply and evening demand spikes creating opportunities for battery operators to monetize timing mismatches effectively.
Romania presents a more complex scenario with its diverse energy mix that includes nuclear baseload, hydropower, wind, and prospective offshore wind developments. This diversity offers multiple avenues for balancing opportunities, particularly for batteries positioned near strategic interconnectors with Hungary, Serbia, and Bulgaria.
The underlying assumption supporting the merchant model is that volatility will outpace market saturation. However, many financial institutions remain cautious due to traditional project finance preferences for predictable revenue streams. Historically, wind and solar projects have relied on stable income sources such as feed-in tariffs or long-term power purchase agreements (PPAs), while merchant batteries face uncertainties tied to future price spreads and market conditions.
This situation creates tension in financing approaches; while infrastructure funds may accept the risks associated with merchant operations based on anticipated flexibility shortages, commercial banks often favor partially contracted models that mitigate volatility risks.
This brings regulated-storage models into focus. Under these frameworks, battery systems receive stable revenue through capacity payments or ancillary service contracts designed to ensure system stability—benefits that may not be fully realized through merchant-only structures. Advocates argue that without clearer long-term revenue assurances, South-East European markets risk underbuilding storage capacities precisely when renewable volatility is set to increase.
The region currently grapples with incomplete balancing architectures characterized by uneven intraday liquidity and varying ancillary service frameworks across countries. This complexity raises concerns about the viability of pure merchant exposure for large-scale financing initiatives.
The philosophical debate surrounding these models centers on whether batteries should operate primarily as utilities enhancing system stability or as market-driven assets capitalizing on price volatility. Western Europe provides examples of both strategies; aggressive merchant deployment has occurred in the UK and parts of Germany driven by balancing needs while other regions rely more heavily on capacity mechanisms.
Each country within South-East Europe may arrive at different conclusions regarding their optimal approach. Greece’s solar-heavy profile increasingly favors merchant economics due to established price spreads; Serbia might initially require hybrid frameworks until its balancing markets mature; while Romania’s varied system could benefit from a blend of merchant optimization alongside ancillary contracts.
The implications of these decisions are significant. An overreliance on regulated support could slow deployment and foster utility-centric models; conversely, a rapid shift towards purely merchant frameworks could lead to high financing costs and uneven project rollouts.
A hybrid approach appears increasingly favorable among investors who advocate for mixed revenue models that combine elements of merchant arbitrage with contracted services to mitigate financial risk while still capturing growth potential from increasing market volatility.
Moreover, transmission infrastructure plays a critical role in determining where battery storage can be most effective. The Trans-Balkan Corridor and connections between Greece and Bulgaria are pivotal in shaping the economic viability of storage solutions based on geographic positioning relative to congestion nodes.
Countries like Albania, Montenegro, and Romania already possess substantial hydropower flexibility through reservoir systems that can complement battery operations—creating layered flexibility solutions where hydro manages longer-duration needs while batteries address short-term volatility challenges.
Data from the Energy Community indicates that structural pressures are rapidly transforming regional electricity economics; recent figures show a marked decline in commercial electricity exchanges between the EU and Western Balkans despite notable price disparities—underscoring how carbon exposure and congestion increasingly dictate market dynamics.
This trend reinforces the necessity for robust storage solutions as renewable integration escalates alongside more volatile cross-border flows. However, uncertainty surrounding long-term revenue monetization remains a critical risk factor for stakeholders in South-East European markets.
The evolution of battery systems from peripheral tools supporting renewables to core components of stable electricity markets is evident. The ongoing financing debate between merchant versus regulated models will not only dictate the pace of battery deployment but will also shape the broader trajectory of South-East Europe’s electricity sector over the coming decade.
