Southeast Europe has one of Europe’s most interconnected power systems, but its electricity markets remain divided by national rules, capacity-allocation procedures, regulatory borders and uneven liquidity. Electricity regularly moves across Serbia, Montenegro, Bosnia and Herzegovina, Albania and North Macedonia on routes between EU member states. Western Balkan markets still operate outside the full European architecture for day-ahead, intraday and balancing-market integration.
The physical system is increasingly used for shifting generation conditions as renewable output grows. The region is experiencing simultaneous periods of solar oversupply, hydropower shortages, thermal outages and sharp evening demand ramps. While interconnections can move electricity between these conditions, commercial fragmentation limits how traders, generators, storage operators and industrial consumers use the network compared with participants in the EU’s coupled market.
The Energy Community estimates that up to 70% of electricity passing through the Western Balkans may represent flows between different EU countries. Serbia is described as central to this transit structure, with connections to Hungary, Romania, Bulgaria, North Macedonia, Kosovo, Montenegro, Bosnia and Herzegovina and Croatia. Montenegro adds a 600 MW first pole of a submarine interconnector with Italy, while Albania and North Macedonia connect parts of the regional system with Greece.
EU market coupling moves toward shorter trading intervals and integrated balancing
ENTSO-E’s 2026 Market Report shows that the EU electricity market has moved toward 15-minute trading intervals in both day-ahead and intraday markets. It also reports that intraday cross-border gate closure times have been reduced from 60 minutes to 30 minutes on many participating borders. Balancing integration via the MARI and PICASSO platforms is expanding, while flow-based capacity allocation is being prepared for larger European regions.
European balancing platforms generated more than €1.18 billion in surplus in 2025 through imbalance netting and more efficient reserve activation. The report links this outcome to how spare flexibility in one system can become a tradable service for another. It also notes that this can lower balancing costs and reduce the volume of reserves each TSO must procure domestically.
The formal Southeast Europe Capacity Calculation Region assessment for 2026 still focuses on Bulgaria, Romania and Greece. Western Balkan TSOs are described as being in a transitional position even as EMS, CGES, MEPSO, NOSBiH, KOSTT and OST have agreed with EU neighbours on a framework for integrating coordinated system operation and capacity calculation with established European regions.
Serbia’s exchange structure shows day-ahead depth but limited intraday liquidity
Serbia has the region’s most developed electricity trading structure through SEEPEX. SEEPEX is now part of the wider ADEX group alongside Slovenia’s BSP SouthPool and Hungary’s HUPX. SEEPEX operates day-ahead and intraday markets.
Day-ahead trading volume in 2024 represented approximately 17.41% of Serbian electricity consumption, while intraday trading accounted for around 0.34%. The source links this gap to a broader challenge for market development as wind and solar capacity expands.
A functioning intraday platform exists, but liquidity remains too low to provide a reliable adjustment market for a rapidly expanding wind and solar fleet. Generators can trade closer to delivery, but thin order books increase transaction costs and leave larger balancing exposures with EPS, traders and EMS. SEEPEX introduced negative prices in May 2026 as part of this market evolution.
The introduction of negative prices followed a zero-price floor that concealed economic signals when renewable output plus inflexible thermal generation exceeded demand and export capacity. Negative prices allow the market to value curtailment while also pricing demand response, storage and flexible consumption. They also highlight weaknesses in fixed-premium support schemes and PPAs built on an assumption that wholesale prices would not fall below zero.
Day-ahead markets expand across the region while organised liquidity remains limited
Montenegro, Albania, North Macedonia and Kosovo have established day-ahead markets through MEPX, ALPEX and MEMO-related arrangements. Liquidity is described as constrained by small domestic demand, limited numbers of market participants and the absence of full cross-border coupling. Bosnia and Herzegovina is reported to be further behind due to fragmented institutional responsibilities affecting the creation of an organised electricity market.
The source reports strong correlation between regional prices based on shared physical fundamentals across the same interconnected system. It cites Balkan hydrology, Bulgarian and Romanian nuclear availability, Greek gas-fired marginal generation, Serbian coal output, Hungarian imports and Italian demand as factors influencing system-wide conditions. It also distinguishes correlation from convergence because border auctions, uncoordinated capacity calculations and administrative barriers can preserve price spreads even when supply conditions are similar.
Flow-based capacity allocation would change how cross-border transmission constraints are priced
Flow-based market coupling is presented as a mechanism that could change how regional transmission capacity is used. The source contrasts it with bilateral net-transfer capacities that treat each border separately and cannot fully reflect how commercial exchanges affect parallel flows across multiple countries. It gives an example where a Serbian export to Hungary could alter physical flows in Romania, Croatia or Bosnia and Herzegovina.
The described flow-based approach uses a regional network model to allocate capacity according to actual system constraints. This could increase tradable capacity while maintaining operational security under those constraints. The transition is described as technically and politically demanding because TSOs would need detailed grid model exchanges.
The process would require agreement on common contingencies and remedial actions, harmonised calculation methodologies and acceptance of regional scrutiny over internal constraints. Regulators would need to approve compatible terms and conditions for implementation. Power exchanges and market participants would also need operational procedures aligned with European algorithms and gate times.
Capacity availability rules interact with transit flows through Western Balkan grids
European rules require TSOs to make at least 70% of transmission capacity available for cross-border trade subject to justified security limitations. The source notes that Western Balkan grids often use internal elements alongside cross-border elements to carry transit flows together with domestic constraints. This makes it difficult to separate domestic limitations from capacity available for regional electricity trading under the rule set.
The source links progress on commercial integration to lessons from the June 2024 Balkan blackout regarding visibility during physical integration. It states that physical integration without complete regional visibility can amplify disturbances across interconnected systems. It adds that market integration cannot advance independently of coordinated security analysis, voltage assessment, contingency planning and real-time data exchange.
Batteries, flexibility services and hedging depend on access to multiple market layers
The source describes potential value from deeper integration across multiple flexibility use cases tied to specific national resources. It cites Serbia’s hydropower alongside future battery projects as potential providers of balancing and flexibility services into a larger market. It also references Montenegro’s Italian interconnector use under diverging hydrological conditions versus Italian prices.
The same section lists Albania monetising reservoir flexibility beyond day-ahead exports as well as North Macedonia reducing exposure to expensive emergency imports. For Bosnia and Herzegovina it points to improved utilisation of hydro and thermal portfolios while preparing for commercial impacts related to carbon pricing. Battery economics are described as sensitive because revenue from domestic day-ahead arbitrage alone may not support bankable cases in smaller markets.
The source says access to intraday volatility, balancing capacity, balancing energy and cross-border products can improve annual gross revenue for battery energy storage systems (BESS). It also states that diversifying revenue streams reduces dependence on any single price spread or market mechanism. Industrial consumers are described as facing exposure through fragmented markets that reduce their ability to hedge electricity costs across borders.
The source further notes limited forward-market liquidity restricts credible reference prices for long-term PPAs in some cases. It gives an example where an exporter buying renewable electricity in Serbia may hold physical power along with guarantees of origin and metering data required for low-carbon claims but still face basis risk if local PPA pricing cannot be efficiently hedged against liquid regional forward products.
Institutional differences remain obstacles across VAT, collateral, licensing and settlement
The main obstacles are described as institutional rather than technical within grid hardware already carrying European electricity flows. The source lists uneven VAT treatment, collateral requirements, licensing rules, financial settlement practices and cross-border taxation across the region. Market participants operating across multiple Western Balkan jurisdictions can face duplicated registrations, incompatible invoicing practices and higher working-capital requirements.
A credible integration sequence is described as combining coordinated capacity calculation with day-ahead coupling followed by intraday coupling plus staged access to European balancing platforms. The source cautions that advancing only day-ahead coupling could leave renewable generators exposed close to real time if intraday liquidity does not develop sufficiently. It adds that opening balancing markets without liquid intraday trading would shift forecasting risk toward TSOs rather than being managed through more granular trading opportunities.
ADEX-linked exchanges position Serbia as a liquidity anchor candidate
Serbia is positioned in the source as likely becoming a liquidity anchor because it combines the largest Western Balkan power system with extensive interconnections plus ownership links with EU exchanges through ADEX via SEEPEX participation in ADEX alongside BSP SouthPool and HUPX. The position is described as not automatic because liquidity needs expansion beyond current concentration in day-ahead trading. Market rules are said to need support for negative prices along with aggregation, storage participation and shorter trading products.
The source concludes that Western Balkans exchanges exist but lack final commercial and regulatory links needed for operation within one European market framework.
