Southeast Europe’s growing solar and wind generation is renewing interest in pumped-storage hydropower, a flexibility technology used for balancing and grid services. Serbia’s planned Bistrica project is one of the clearest examples discussed for the region. The proposal includes around 680 MW of generating capacity and an estimated investment of approximately €1.2 billion.
Pumped storage works by moving water to an upper reservoir when electricity is abundant and prices are low. When demand rises and prices increase, the stored water is released through turbines to generate electricity. Over a full cycle, the plant consumes more electricity than it produces, but it converts lower-cost power into dispatchable peak generation. It can also provide reserves, inertia and other essential grid services.
Bistrica spatial approval and market value considerations
Bistrica’s relevance is linked to changes in Southeast Europe’s hourly electricity price profile. Rapid solar deployment can push prices lower during periods of strong midday generation. Prices can rise sharply in the evening after the sun sets. Batteries are described as effective for fast, short-duration balancing, while large pumped-storage facilities can store more energy and operate for several decades.
Serbia has approved the spatial plan for Bistrica and has explored potential Japanese participation. The stated goal is to bring the project into operation early in the next decade. The project’s economics are described as requiring careful scrutiny, including whether revenues from market operations would be sufficient. An estimated €1.2 billion investment is not the same as secured financing, and major hydropower developments face geological, environmental and construction risks.
The discussion highlights that electricity arbitrage alone may not deliver enough revenue to justify a capital-intensive asset. Alternative income streams mentioned include capacity payments and ancillary-service revenues or other mechanisms that compensate for wider system value. The need for such arrangements is presented as a factor that could affect whether Bistrica proceeds on commercially viable terms.
Refurbishment options alongside new flexibility projects
Alongside new pumped storage, existing hydropower infrastructure is described as a lower-risk route to increasing flexibility in the region. Romania’s Hidroelectrica signed a €188 million contract in May 2026 to refurbish the 335 MW Râul Mare Retezat hydropower plant. Modernisation is expected to extend asset life while improving efficiency and reliability. The approach is also described as recovering flexible generation without building an entirely new dam.
Serbia is also preparing the long-delayed reconstruction of the four-plant Vlasinske cascade. Support for that effort is cited from the EBRD and the European Union. Together, these examples are used to distinguish between refurbishment work and new-build flexibility developments.
The regional market distinction is framed as two categories: refurbishment projects that restore lost performance and adapt ageing assets to a more variable system, and new pumped-storage developments that depend on electricity-market design and financing conditions. The long-term value of new pumped storage is also described as tied to how flexibility services are treated over time.
Hydropower investment risks and cost escalation in Albania
Environmental and social considerations are highlighted as central for hydropower developments involving new reservoirs. Such projects can alter river ecosystems, inundate land and require community relocation. Albania’s proposed Skavica hydropower project is cited as illustrating these challenges.
Public cost estimates for Skavica have increased from earlier figures of €308–510 million to more than €1 billion in some assessments. Financing is described as uncertain, while opposition has focused on potential displacement and impacts on part of the Black Drin’s remaining free-flowing river section. The Western Balkans Investment Framework describes Skavica as a 132 MW project capable of producing around 450 GWh annually, though design and status remain contested.
Selectivity in hydropower strategy amid solar and wind growth
The discussion emphasizes a selective approach to hydropower investment across Southeast Europe rather than treating all proposals as equivalent. Refurbishment is described as appropriate where benefits are clear for adapting ageing infrastructure. Pumped storage is described as relevant where its contribution to system flexibility justifies costs.
The role of hydropower is also framed in relation to rising shares of solar and wind generation across the region’s mix. As those sources expand, hydropower value may increasingly relate to flexibility and storage rather than annual energy output alone. Capturing that value is described as requiring transparent assessments covering financial returns, system benefits, environmental impacts and social costs.
