Thermal generation across Southeast Europe entered a structurally more difficult market environment in Week 21, as renewable output rose, electricity demand softened and regional imports fell sharply. Total thermal generation declined 5% week-on-week to 3.84 TWh. Gas-fired output fell 6.6%, while coal and lignite generation dropped 2.4%.
The shift reduced conventional operating hours and pricing power, while thermal assets remained needed for balancing, reserve capacity and evening ramp stability. The change is becoming a key investment and policy issue for the region’s power systems.
Country-level changes in thermal output
Hungary recorded the steepest thermal decline in the region, with output falling 35.8%, primarily linked to lower gas-fired generation. Romania and Serbia also reported double-digit declines in coal generation. Greece moved in the opposite direction, increasing thermal generation by 4.2% as gas output rose 7.5%.
The Greek increase came as wind and hydro production weakened, requiring additional gas generation to compensate. Across the region, the pattern reflects a growing role for thermal plants as balancing resources when renewable output is lower or when evening demand ramps after solar generation fades.
Dispatch patterns and balancing revenue dependence
Coal and gas plants were traditionally built around higher utilization rates and relatively stable dispatch patterns. In the emerging Southeast Europe market structure, they face lower annual operating hours, more start-stop cycling and greater intraday volatility.
At the same time, plants increasingly rely on balancing revenues rather than baseload energy sales. This change affects how conventional assets perform financially as their operating profile shifts toward flexibility provision.
Renewables growth versus demand softness
Pressure is strongest in coal-heavy systems such as Serbia and parts of the Western Balkans, where solar output increased 8.1% during Week 21. Regional electricity demand fell by 1.7%, reducing daytime competition for thermal units.
During daylight hours, thermal plants face difficulty competing with low-marginal-cost renewables. During evening peaks and low-renewable periods, those same plants remain critical for grid stability.
Market mechanisms under consideration
The changing economics raise expectations for additional market mechanisms as conventional plants lose energy-market revenues but continue providing reliability services. Capacity payments, strategic reserve frameworks and ancillary-service remuneration are expected to become more important under these conditions.
TFF remained close to €50/MWh, keeping fuel costs elevated for gas-fired generation across Europe. This supports ongoing reliance on flexible gas units for balancing intermittent renewables while maintaining commercial pressure on gas economics.
Price divergence across Italy and Serbia
Southeast Europe faces a transition where renewables increasingly set daytime pricing but large-scale storage is not yet widely deployed enough to replace thermal flexibility fully. This can leave systems needing conventional backup without always being able to support it economically through wholesale markets alone.
Italy remained the highest-priced market at €116.31/MWh, despite weaker regional prices, with higher clearing prices supported by dependence on flexible gas-fired generation and imports during evening balancing periods. By contrast, Serbia saw its average price fall to €81.24/MWh.
The lower Serbian price reflects how solar-heavy conditions and reduced demand can suppress prices even in coal-oriented systems. The divergence increases pressure on coal and gas operators in lower-priced markets such as Serbia, Bulgaria and Romania if they cannot secure additional balancing-market revenues or regulatory support mechanisms.
Valuation shifts toward flexibility attributes
The valuation of thermal assets changes as future value depends less on annual generation volume and more on flexibility capability, ramp speed and minimum stable load. Start-up economics, fuel efficiency, access to ancillary services and participation in balancing markets also become more central to determining value.
Older inflexible coal units become increasingly exposed under this framework, while more efficient gas turbines and hybrid systems integrated with storage may retain strategic value longer due to faster response to renewable intermittency.
Implications for renewables development and system costs
The shift also affects renewable developers as weaker thermal marginality during solar-heavy periods can reduce the pricing captured by renewable projects without storage or contracted offtake structures. Industrial consumers may see temporary benefits from lower wholesale prices, while system costs continue to move toward balancing infrastructure, reserve mechanisms and grid investment needs for reliability.
Cross-border flows reduce import reliance
The wider cross-border market reinforces these dynamics as net regional imports fell 34.6%. Stronger renewable availability reduced reliance on imported thermal generation, while domestic solar and hydro availability increased direct competition for regional thermal fleets rather than benefiting from structurally tight import conditions.
Main functions of thermal generation over time
Over time, thermal generation’s role in Southeast Europe is expected to narrow toward system balancing, security-of-supply support and seasonal reliability during weak renewable periods. The market structure is moving toward a setup where conventional plants remain necessary but no longer dominate pricing or investment logic based solely on energy sales.
