As South-East Europe (SEE) advances towards a renewable-dominant electricity system, the need for a robust market architecture has become increasingly urgent. Countries such as Serbia, Romania, Greece, Bulgaria, Montenegro, Albania, and Bosnia and Herzegovina are witnessing significant expansions in wind and solar energy projects. Additionally, battery storage solutions are transitioning from theoretical models to practical implementations, while hydropower is regaining its significance as a flexible low-carbon resource. The importance of cross-border trading is also growing in tandem with the rise in renewable energy generation.
Despite these developments, the region currently lacks a critical element necessary for managing the complexities of renewable energy: an integrated regional balancing market. By 2026, this gap poses one of the most significant risks to electricity trading in SEE.
The historical power system in the Balkans has been primarily organized around national dispatch mechanisms. For instance, Serbia has depended on lignite and hydro resources, while Romania has balanced its energy mix with nuclear, hydro, coal, and wind. Greece’s energy strategy incorporates gas, imports, renewables, and liquefied natural gas (LNG), whereas Albania and Montenegro heavily rely on hydropower. Bulgaria maintains coal and nuclear as foundational elements of its energy system. Although cross-border electricity flows have been relevant, the balancing of supply and demand has largely been managed at the national level.
This approach is becoming increasingly inadequate as renewable energy sources introduce volatility that transcends national boundaries. Wind patterns can shift across multiple countries within hours, while solar generation can spike simultaneously in various regions. Adverse weather conditions affecting hydropower resources in one country can create challenges for neighboring systems that require additional balancing support. Consequently, a singular national market is ill-equipped to address these interdependencies effectively.
The implications of this fragmented approach are evident in the rising stress on electrical systems across the region. Without enhanced integration for balancing services, SEE markets risk facing persistent issues such as congestion, curtailment of renewable generation, spikes in imbalance costs, and inefficient procurement of reserves. Traders may observe wider price spreads; however, these may not always be actionable or beneficial. Developers could encounter increased financing costs due to market instability, while industrial consumers might experience heightened price volatility.
The transition to renewables hinges not only on infrastructure development but also on effective market design. While battery storage plays a role in enhancing flexibility—evidenced by Serbia’s planned 4.54 GWh storage pipeline—regional coordination remains vital for optimizing their use across various markets. Both Greece and Romania are rapidly advancing their battery storage capabilities; however, without cohesive regulatory frameworks, these assets may only address localized issues rather than contributing to regional efficiency.
Hydropower assets located in Albania, Montenegro, and Romania represent some of the most valuable flexible resources within SEE. A well-integrated balancing market could facilitate better reservoir management across borders and unlock high-value balancing revenues; conversely, fragmentation leads to underutilization of these assets.
The physical infrastructure supporting electricity transmission is crucial for enabling flexibility across borders. Key interconnections such as the Trans-Balkan Corridor, Montenegro–Italy cable, Greece–Bulgaria links, and Romania–Hungary interconnections enhance the region’s capacity to manage energy flows geographically.
However, transmission capabilities alone do not suffice; they must align with market regulations that facilitate efficient movement of balancing energy and reserve products across borders. Data from the Energy Community indicates that commercial electricity exchanges between the EU and Western Balkans dropped by approximately 25% in Q1 2026, highlighting that price signals alone cannot ensure efficient flow when constrained by carbon regulations and capacity limitations.
This underscores the necessity for SEE to adopt coordinated reserve procurement strategies, harmonized imbalance regulations, deeper intraday liquidity measures, regional frameworks for storage participation, and collaboration among transmission system operators (TSOs) that recognize flexibility as a shared resource.
The financing landscape will directly reflect these developments. Investors are more likely to support storage and hybrid projects when revenue streams are clear and regulatory environments are stable. A battery system limited to uncertain local arbitrage opportunities carries higher risk compared to one that can capitalize on balancing services and regional congestion management. The viability of wind-solar-storage combinations improves significantly when imbalance risks can be effectively managed through liquid regional markets.
This principle extends to industrial power purchase agreements (PPAs) as well. Manufacturers in Serbia, Romania, and Greece increasingly seek renewable-backed electricity; however, stable supply profiles necessitate robust balancing mechanisms. Without regional integration of flexibility resources, structuring and pricing renewable PPAs becomes increasingly complex.
The urgency of addressing these challenges cannot be overstated. The pace of renewable deployment is outstripping market integration efforts. Should SEE delay action until volatility escalates significantly, it may face a costly adjustment period characterized by stranded renewable generation assets, negative pricing scenarios, curtailment challenges, and escalating balancing expenses—a situation already witnessed in Western Europe.
Fortunately for South-East Europe, there remains an opportunity to establish a more effective model for electricity trading. The region possesses inherent advantages such as hydropower flexibility, manageable levels of renewable penetration across several markets, improving interconnections among countries, and an increasing interest from investors in storage solutions. However, these advantages will only translate into strategic benefits if they are harnessed within a cohesive regional balancing framework.
The future success of electricity trading in SEE will not solely depend on wind or solar capacity but rather on the ability to make flexibility a liquid and tradable commodity across borders. Failing to achieve this could result in renewable volatility outpacing the capacity of markets to adapt effectively.
