The energy landscape in South-Eastern Europe is undergoing a significant transformation, particularly in its southern power markets. These regions are shifting from being perceived as merely discounted zones compared to Hungary and Core Europe to becoming structural curtailment basins. This evolution is characterized by increasing renewable energy penetration, transmission limitations, and a lack of flexibility within the grid, leading to profound changes in price formation mechanisms.
Recent trading data highlights this shift starkly. On February 26, 2026, Serbia cleared at 42.64 EUR/MWh, North Macedonia at 41.27 EUR/MWh, and Montenegro at 47.82 EUR/MWh, while Hungary’s prices reached 87.06 EUR/MWh. The more than 40 EUR/MWh price differential between these adjacent markets cannot be solely explained by variations in fuel costs or demand levels; rather, it reflects an oversupply of renewable energy that cannot be exported due to insufficient transmission capacity.
This pattern of price suppression is not limited to isolated incidents but is becoming increasingly systemic. The frequency of minimum price prints nearing zero in Serbia and North Macedonia—and occasionally in Croatia and Slovenia—indicates that price floor erosion is a persistent issue. This phenomenon has rendered thermal generation uneconomic during many hours, forcing gas plants out of the merit order for extended periods and limiting hydro output to preserve value for peak demand times.
The concept of economic curtailment plays a crucial role in this context. Even without formal curtailments by grid operators, the market conditions effectively suppress prices, discouraging additional production when midday prices dip to 0–10 EUR/MWh. While growth in installed capacity might suggest improved supply security, it increasingly undermines average price stability in these markets.
Transmission constraints exacerbate these challenges. Serbia’s ability to export surplus electricity to Hungary is hindered, especially during periods when Hungary relies on imports from Austria and Slovakia. The Hungarian market prioritizes northern imports when price spreads favor them, trapping excess renewable generation within southern SEE despite apparent price differentials that would typically encourage exports.
The structural characteristics of this curtailment basin are further intensified by the rapid expansion of solar installations in Serbia and North Macedonia, which outpace the development of necessary infrastructure such as storage solutions. The absence of grid-scale batteries or robust demand response programs means that excess midday generation cannot be shifted to meet evening demand peaks, exacerbating the imbalance between supply and demand.
As solar production declines in the evening, southern markets often see sharp price increases; however, these spikes are shorter than in previous years. The duration during which gas sets the marginal price has contracted significantly, sometimes lasting only three or four hours. Although peak prices can exceed 120–140 EUR/MWh, the reduced timeframe limits generators’ ability to recover losses incurred during low-price periods, resulting in increased volatility but diminished revenue stability.
This evolving market dynamic presents both risks and opportunities for traders. Long baseload positions in southern hubs face greater vulnerability due to midday price erosion. While average prices may appear stable over longer periods, intraday fluctuations can undermine flat positions. Conversely, traders who capitalize on short-duration trades aligned with predictable trough-and-spike patterns may find substantial value opportunities. Recognizing that this curtailment basin is a permanent feature will be crucial for market participants.
Romania’s position adds complexity to this landscape. Although it does not experience the same level of discounting as Serbia or North Macedonia, Romania’s market oscillates between surplus and deficit based on hydro conditions and interconnector flows. With plans to develop up to 500 MW of solar and storage projects, Romania could transition from a marginal exporter to a swing market player, potentially alleviating some pressures from southern curtailment or redistributing them depending on interconnection improvements.
The influence of carbon pricing further complicates matters. Elevated EUA prices render coal-fired units less competitive in southern SEE markets where coal still plays a significant role in generation. This trend accelerates the shift toward a binary system dominated by renewables and gas, as coal’s diminishing relevance removes a stabilizing influence that previously mitigated volatility.
Developments in gas corridors, including LNG flows into Greece and the Vertical Gas Corridor project, impact peak pricing dynamics but do little to alleviate midday oversupply issues. While enhanced gas availability may temper extreme evening spikes, it does not resolve the underlying curtailment basin situation; indeed, by capping peak prices, it may compress overall revenues for generators without raising the price floor.
From a structural perspective, southern SEE markets are gravitating toward a dual pricing system characterized by low solar prices during the day and compressed scarcity prices during peak hours. The narrowing gap between these two pricing regimes intensifies competition among flexible assets and necessitates adjustments in trading models. Traditional forecasting methods that assume linear relationships between demand and generation will increasingly fail to accurately predict outcomes.
As risk management strategies evolve in response to these changes, market participants must recognize that the widening disparity between daily averages and hourly extremes heightens exposure to tail risks. A portfolio that appears hedged on a daily basis could incur substantial losses during concentrated spike periods while failing to capture trough hours may erode profitability despite correct peak positioning strategies.
The trajectory for southern SEE markets appears clear: without significant advancements in storage capacity or cross-border transmission enhancements, they will remain entrenched as structural curtailment basins. Continued solar growth will exacerbate low-price conditions while constrained export capabilities will inhibit alignment with higher-priced markets like Hungary. Evening scarcity may persist but could become more fleeting as gas infrastructure evolves. Ultimately, this results in a market landscape defined by intraday polarization rather than consistent stability.
The events of February 26, 2026 serve as an illustrative example of how deeply entrenched this curtailment basin dynamic has become within regional price formation processes. For traders navigating this landscape, understanding that southern SEE is not just cheaper but fundamentally different is essential for developing effective strategies moving forward.
