In energy markets, it is tempting to equate resilience with scale. More megawatts, more storage volume, more infrastructure are often assumed to translate directly into greater stability. In a system dominated by variability and tight operational constraints, this assumption breaks down. What increasingly matters is not how much capacity exists, but how quickly and reliably it can respond when the system is stressed. The trade-off between speed of response and installed capacity has become a defining feature of modern energy economics.
Fast-response assets, such as batteries and certain demand-response mechanisms, deliver immediate stabilisation. They can react within seconds, preventing frequency deviations and smoothing intraday volatility. During sudden renewable shortfalls or demand spikes, this speed is invaluable. Prices often reflect this through scarcity rents that reward rapid response, even when total system capacity is ample.
However, speed alone cannot sustain the system through prolonged stress. Batteries discharge quickly and must recharge, often during periods of lower prices or higher renewable output. If volatility persists for hours or days, their contribution diminishes. Installed capacity without endurance provides protection against short shocks, but not against sustained imbalance.
Slow-response assets, such as gas storage or large hydro reservoirs, offer depth rather than immediacy. They can supply energy over extended periods, stabilising the system during long cold spells, heatwaves, or extended renewable droughts. Yet their slower ramp rates and operational constraints limit their ability to manage rapid fluctuations. In moments where seconds or minutes matter, they may arrive too late to prevent price spikes or operational stress.
South-East Europe’s challenge lies in balancing these attributes. The region often has sufficient installed capacity on paper, particularly when accounting for cross-border access. Yet the ability to deploy that capacity quickly and continuously is uneven. Transmission constraints, fuel logistics, and regulatory barriers can delay response, allowing small disturbances to escalate into large price movements.
Market design influences how this trade-off is valued. Short-term markets tend to reward speed, as prices reflect immediate scarcity. Long-term mechanisms often reward capacity, emphasising availability over responsiveness. When these incentives are misaligned, the system may overinvest in one dimension at the expense of the other. An abundance of fast but shallow resources can coexist with vulnerability to prolonged stress, while large but sluggish capacity may fail to prevent short-term volatility.
Financial behaviour mirrors these dynamics. Traders value optionality and fast response during volatile periods, while investors seek stable returns from capacity assets. Bridging this gap requires markets that transparently price both speed and endurance. Without such pricing, flexibility remains undervalued or misallocated.
The energy transition intensifies this tension. As renewable penetration rises, the frequency of short-term imbalances increases, elevating the value of speed. At the same time, climate variability and geopolitical uncertainty increase the likelihood of prolonged stress events, preserving the importance of installed capacity with endurance. The system must therefore manage two different types of risk simultaneously.
For South-East Europe, resolving this trade-off is critical. The region’s role as a balancing zone for neighbouring markets means it experiences both rapid swings and sustained pressures. A flexibility portfolio skewed too heavily toward one end of the spectrum risks amplifying volatility rather than containing it.
Elevated by clarion.energy
