Courtesy of Virtu.Energy
In Southeast Europe, coal and lignite generation rose 3.40% to 3,225.35 GWh in Week 42, while gas-fired output fell 7.43% to 3,415.40 GWh. Regional thermal production overall declined 2.47% to 6,640.75 GWh, masking a shift in the generation mix. The change came as European natural gas prices climbed, with TTF averaging €86.54/MWh during the week.
Thermal generation shifts across the region
Coal and lignite output increased across Southeast Europe even as total thermal production fell, underscoring the continued role of solid fuels when gas prices rise and power systems need dispatchable generation. Country-level results showed how utilities responded to changing demand and renewable output. Bulgaria’s thermal generation rose 16.81%, largely through higher coal and lignite production as electricity demand strengthened and renewable generation weakened.
Serbia’s predominantly coal-fired thermal generation increased 5.45%. Romania raised both coal and gas generation, while Greece moved against the broader regional pattern and substantially increased gas-fired output. The shifts point to a difficult policy and investment equation for Southeast Europe.
Coal’s role and the cost of carbon
Coal can still provide large volumes of dispatchable electricity when demand rises or renewable production weakens. At the same time, generation from coal carries growing carbon and environmental costs. In EU member states, carbon costs are already directly incorporated through the EU Emissions Trading System.
In neighbouring Western Balkan markets, closer integration with European carbon policy and CBAM is increasingly raising the strategic cost of carbon-intensive electricity. The transition challenge cannot be addressed simply by announcing more renewable capacity. Replacing coal economically also means replacing the services coal plants provide: energy, capacity, reserves, system stability and dispatchability.
Flexibility needed to replace coal
Wind and solar can replace much of coal’s energy output, but cannot independently provide all of those system functions. Storage, grid-forming technologies, hydropower, demand response, regional interconnection and flexible generation therefore form part of the same transition package. Week 42 provided practical examples of the need for these capabilities.
Bulgaria’s renewable production fell sharply as demand increased, and coal output responded. Serbia recorded higher consumption and weaker hydropower output, while its coal fleet also increased generation. Without those plants, both power systems would have needed greater imports or additional demand-side adjustment.
Investment implications for power markets
The investment question is not whether coal generation will decline over time, but what will replace its flexibility before capacity is retired. This is particularly relevant to lenders assessing new renewable projects. Markets where wind and solar expand quickly but balancing capacity remains insufficient may face greater price volatility, curtailment and grid-connection risk.
For industrial consumers, the transition may also widen the gap between low-cost renewable hours and expensive peak periods. That price structure strengthens the economics of batteries and flexible demand. Week 42 reinforces the broader regional trend: coal remains operationally relevant in the short term, while the cost of maintaining that dependence continues to rise.
Investments that enable Southeast Europe to retire coal without increasing exposure to expensive imported gas or volatile cross-border electricity may therefore be particularly valuable.
