In Week 08 of 2026, Southeast Europe (SEE) witnessed a significant transformation in its energy landscape as thermal generation, particularly from gas and coal, experienced a notable decline. This shift is not merely a reaction to fluctuating market prices but rather a reflection of enhanced system flexibility, recovery in hydro resources, and the expansion of renewable energy sources. For transmission system operators (TSOs), this development indicates that thermal assets are evolving from being the primary source of system adequacy to conditional resources, activated mainly during periods when flexibility is scarce.
Overall thermal generation across SEE decreased by -20.40% week-on-week to 6,079 GWh, translating to a reduction exceeding 1,550 GWh compared to the previous week. The decline was predominantly driven by gas-fired generation, which plummeted by -28.44% (-1,258 GWh). In contrast, coal and lignite output saw a more modest decrease of -9.33% (-300 GWh), suggesting that gas has become the primary swing resource in the region while coal increasingly serves as a residual baseload in systems reliant on it.
The rapid withdrawal of gas plants from the dispatch stack underscores a structural change within the energy market. Gas units are now functioning more as reserve capacity rather than as consistent generation assets, called upon primarily when renewable and hydro resources cannot maintain balance. This shift highlights the redefined role of gas as a flexibility backstop rather than a price-setting technology.
Hungary’s situation during this period exemplifies these changes. Despite having the highest average market price in the region at €107.17/MWh, Hungary experienced a sharp decline in thermal dispatch aligned with broader regional trends. An increase in demand of +5.86% did not lead to higher gas consumption, as imports and renewable sources absorbed the load instead. This indicates an increasing reliance on cross-border and non-thermal balancing mechanisms.
Italy’s experience further illustrates this trend on a larger scale. An exceptional rise in renewable output, including an increase of +449 GWh in variable renewable energy sources (RES), significantly displaced gas generation despite Italy’s historical dependence on gas. Consequently, there was a reduction in southbound import demand and a rebalancing of cross-border flows throughout SEE, positioning Italy’s thermal retreat as a stabilizing factor rather than a source of volatility.
The dynamics surrounding coal production during this period reveal another layer of complexity. Although coal and lignite output decreased by -9.33%, this decline was less severe than that for gas, reflecting coal’s entrenched role within certain national systems like Serbia and parts of the Western Balkans where lignite plants are critical for base load generation. Notably, Serbia recorded a slight increase in lignite output of +1.31%, diverging from regional trends.
This stability in coal output does not imply its continued relevance in price formation; instead, it has diminished significantly due to falling wholesale prices across the region and renewables increasingly setting marginal costs. As a result, coal units have been operating below economic dispatch thresholds, sustained more by considerations of system security than market competitiveness.
The interplay between thermal generation retreat and cross-border electricity trade further emphasizes the evolving adequacy paradigm. Regional net electricity imports surged to 7,426 GWh (+503% week-on-week), largely driven by Bulgaria’s remarkable net import position of 6,165 GWh. This surge occurred alongside declining thermal output, illustrating how the system has begun substituting cross-border inflows for domestic thermal generation.
This substitution presents both opportunities and challenges for TSOs. On one hand, it confirms that interconnection and market integration can offset reduced thermal dispatch; on the other hand, it concentrates adequacy risks within transmission corridors and neighboring systems. As gas and coal step back from their traditional roles, the grid assumes greater responsibility for maintaining balance, heightening the importance of corridor availability and contingency management.
The context surrounding natural gas markets adds another layer of vulnerability to this scenario. During Week 08, TTF gas prices averaged €31.5/MWh (-3.3% week-on-week), yet geopolitical tensions around key trade routes continue to pose risks. EU gas storage levels hovered around 32.5%, with Germany reporting its lowest seasonal level since 2022 at below 23%. These figures highlight that while gas may be retreating from routine dispatch, its systemic importance remains significant due to its potential for abrupt re-entry under adverse conditions.
The implications for system adequacy are intricate; thermal generation is no longer positioned as the first line of defense against load growth or variability but retains its status as the last resort when flexibility diminishes. Week 08 demonstrated that systems can operate effectively with reduced thermal output under favorable conditions but does not guarantee resilience under stress.
A critical aspect of this transition is the temporal role played by thermal units during peak periods and evening ramps. Although weekly thermal output has decreased, these units remain vital during short spikes in demand—periods where they could quickly regain pricing power if hydro resources were unavailable to fill gaps.
This necessitates that TSOs adjust their adequacy assessments away from annual or weekly averages towards hour-level stress analysis. Thermal capacity that seems superfluous based on energy metrics may still be essential from a capacity standpoint; thus, the observed retreat reduces operational hours without diminishing strategic value.
The economic ramifications are already becoming apparent within market behaviors—gas-fired generators face low utilization rates and volatile revenues while coal units encounter increasing carbon pressures alongside declining market relevance. This scenario raises concerns about reliance on non-market mechanisms such as capacity payments or regulated support to ensure essential thermal assets remain operational.
The uneven impact of thermal retreat across SEE suggests that systems rich in hydro and renewable resources experience smoother transitions with stable operations and price declines compared to those heavily reliant on imports and cross-border balancing mechanisms. This disparity indicates that the trajectory of thermal retreat will vary significantly across SEE based on national resource endowments and grid robustness.
Looking ahead, it is likely that thermal generation’s role will become increasingly episodic—gas units may operate fewer hours but will remain crucial during scarcity events while coal’s gradual retreat will be influenced by its foundational role in domestic adequacy amidst ongoing pressures from carbon pricing and competition from renewables.
The key takeaway for TSOs is that while thermal generation may appear less relevant today, its function has fundamentally shifted; these plants now delineate emergency boundaries rather than defining normal operating conditions.
This fundamental change necessitates heightened focus on forecasting accuracy, reserve management strategies, and cross-border coordination efforts. As thermal generation recedes from active roles in balancing supply-demand dynamics, TSOs must prioritize transmission availability and flexibility forecasting as essential components of their adequacy frameworks moving forward.
Week 08 illustrates that SEE can maintain operational integrity with significantly reduced thermal output under conducive circumstances while simultaneously highlighting that any reversal in these conditions could swiftly pivot reliance back toward traditional thermal sources.
