The energy landscape in Southeast Europe is undergoing significant transformation as Serbia and Romania chart markedly different paths in the wake of coal retirements. The period from 2025 to 2028 is poised to be particularly pivotal, as Romania accelerates its exit from coal while Serbia maintains a robust thermal generation base. This divergence is reshaping national adequacy metrics, cross-border electricity flows, and price dynamics across the Balkan-Central European interface, as highlighted by seasonal assessments from ENTSO-E.
Romania’s power system faces a substantial contraction in dispatchable capacity, with approximately 1.7 GW of lignite-fired generation expected to retire by early 2026, primarily from the Oltenia region. Historically, these units have been essential for providing baseload energy and ensuring winter reliability during periods of low hydro inflows and uncertain wind output. The impending loss of this capacity comes at a time when peak winter demand in Romania regularly approaches 9.0–9.5 GW, exacerbating concerns over reserve margins as new capacity lags behind demand growth.
In contrast, Serbia enters this critical period with a largely intact thermal generation fleet operated by Elektroprivreda Srbije, boasting over 4.4 GW of installed lignite capacity. Despite their aging infrastructure, these units continue to deliver reliable output at competitive operational costs ranging from €25–35/MWh, excluding carbon costs. Additionally, Serbia’s hydro capacity exceeding 3.0 GW allows for effective peak modulation, enabling the country to meet winter peaks of 7.5–8.0 GW without relying heavily on imports.
This contrasting situation has significant implications for regional power flows. Traditionally, Romania has been a net exporter to Hungary and occasionally to Serbia and Bulgaria during periods of high hydro output. However, as coal retirements accelerate, Romania’s ability to export becomes increasingly erratic. Under normal conditions with strong renewable generation, exports can still occur; however, during adverse weather conditions, Romania risks becoming a net importer, placing additional strain on north-south corridors connecting it with Hungary and Serbia.
Serbia’s emerging role in this new configuration is critical. As Romania’s system tightens due to coal retirements, Serbia stands out as one of the few neighboring systems capable of maintaining domestic balance without straining shared corridors. This dynamic allows Serbia to avoid importing electricity at times when Romania, Bulgaria, or Hungary require additional capacity most urgently. Consequently, Serbia’s stability during stress periods alleviates pressure on cross-border capacities and minimizes the likelihood of price spikes.
The evolving price dynamics reflect these shifts in supply and demand fundamentals. Romanian day-ahead prices have exhibited increased volatility, particularly during winter stress events, while Serbian prices remain more stable and closely tied to lignite marginal costs during similar periods. The widening price spread between Romanian and Serbian wholesale prices—sometimes exceeding €20–30/MWh—indicates a reallocation of scarcity rents within the region rather than traditional arbitrage opportunities due to transmission constraints.
This reallocation carries significant implications for investors and market participants. Romania’s transition towards a system characterized by frequent scarcity pricing enhances revenue potential for flexible assets like storage and gas peakers but also increases risk exposure for energy-intensive consumers. Conversely, Serbia’s ability to monetize reliability by mitigating volatility positions it favorably for long-term power purchase agreements and investments in grid services across the region.
The transmission interface between Serbia and Romania will be crucial in this context. Multiple 400 kV interconnections facilitate electricity exchange between the two countries; however, commercial capacity is often limited by N-1 security requirements and internal bottlenecks on both sides of the border. As Romanian coal exits more rapidly, these constraints are likely to become more pronounced during simultaneous stress events affecting Hungary and Bulgaria. Serbia’s ability to maintain internal balance reduces the risk of exacerbating these bottlenecks but also underscores the need for targeted grid reinforcements.
Investment estimates for enhancing the Serbia-Romania interface range from €200–400 million, reflecting projects that hold regional significance beyond national adequacy considerations alone. These investments are increasingly justified by their potential to mitigate congestion costs and reduce price volatility across interconnected markets. The retirement of Romanian coal units amplifies the value of every additional megawatt of reliable transfer capacity from Serbia.
The divergence between these two nations also highlights differing carbon risk profiles. Romania fully integrates EU ETS costs into its market mechanisms, hastening coal phase-out efforts while increasing reliance on variable renewables and gas sources that expose it to correlated weather risks. In contrast, Serbia retains a cost advantage from its lignite resources due to its non-participation in EU ETS regulations—at least in the short term—though this advantage may diminish as carbon pricing mechanisms evolve.
The operational risks associated with each country’s energy transition further differentiate their trajectories. Romania’s increasing dependence on variable renewables heightens vulnerability to correlated weather patterns impacting both renewable generation and gas supply stability. Meanwhile, Serbia must ensure continuous investment in mining infrastructure and maintenance practices that support lignite production—estimated at around €300–450 million annually—to sustain both domestic adequacy and regional stability.
The reliance on hydropower adds another layer of complexity; both countries depend on the Danube River for water resources but face correlated hydrological stress during winter months when reservoir management becomes critical. While Romania’s diminished thermal flexibility under such conditions amplifies vulnerability, Serbia’s retained baseload capacity serves as a stabilizing force during peak demand periods.
This divergence between Serbia and Romania is not merely transitional; it foreshadows broader trends in how uneven decarbonization will reshape regional power systems across Southeast Europe. Systems that expedite coal phase-out without adequate dispatchable replacements risk becoming import-dependent and price-sensitive, while those that retain baseload capabilities may accumulate carbon exposure over time.
For Serbia, leveraging its current advantages requires strategic action focused on reinforcing cross-border infrastructure, investing in alternative flexibility solutions that can replace lignite services over time, and structuring regional contracts that capitalize on reliability benefits. For Romania, addressing lost baseload capacity necessitates finding replacements that not only fulfill energy needs but also ensure system stability without importing instability from neighboring countries.
The ongoing assessments by ENTSO-E underscore the tightening margins in Romania alongside Serbia’s relative resilience as they reshape regional power flow dynamics. The center of gravity appears to be shifting southward and eastward toward systems that still maintain dispatchable capacity—a development that positions Serbia as a key player in determining whether Romania’s transition proceeds smoothly or encounters persistent challenges.
