Southeast Europe continued to reduce its reliance on coal during the second quarter of 2026, but the normalisation of hydro conditions brought natural gas back into the regional electricity mix. The shift highlights the region’s progress in reducing lignite generation while also showing its continued dependence on thermal flexibility when hydropower output weakens.
Total electricity generation across the Western Balkan Contracting Parties and neighbouring EU markets reached 107.97 TWh in Q2 2026, broadly unchanged from the same period a year earlier. Coal and lignite generation fell 8% to 10.34 TWh, while gas-fired generation increased 6% to 27.12 TWh. Renewable generation rose 2% to 56.58 TWh.
The figures underline that Southeast Europe’s energy transition is not following a linear path. Exceptional hydrological conditions in the first quarter had reduced the need for both coal and gas. As water availability returned closer to normal levels in Q2, part of the resulting decline in hydro generation was replaced by gas-fired generation, particularly in the larger EU electricity systems.
Italy remained the region’s largest electricity market, generating 53.17 TWh during the quarter, with gas, solar, hydropower and wind providing the main sources of generation. Greece recorded the strongest relative increase among neighbouring EU markets, with output rising 17% to 12.77 TWh, supported primarily by solar and wind generation. Bulgaria’s generation increased 9% to 9.04 TWh, while Romania and Hungary continued to benefit from significant nuclear generation.
Within the Western Balkans, Serbia remained the largest coal producer, although its total generation declined 12% to 6.54 TWh as lignite output fell. Bosnia and Herzegovina, Kosovo and North Macedonia also retained coal-heavy generation structures, while Albania continued to rely overwhelmingly on hydropower.
Montenegro recorded a sharp increase in generation to 0.52 TWh, largely reflecting the operation of the Pljevlja lignite-fired power plant after it had been offline during the corresponding quarter of 2025. The development demonstrates how the availability of a single large thermal asset can significantly influence the generation mix and emissions profile of a relatively small electricity system.
The trend was clearer over the first half of 2026. Regional coal generation declined 13% to 26.13 TWh, while renewable generation increased 11% to 109.10 TWh. Gas-fired generation also rose 3% to 72.23 TWh, with total regional electricity production increasing 3% to 237.57 TWh.
The renewable figures may still underestimate actual production in several Western Balkan markets. Rooftop solar, small hydropower plants and other distribution-connected assets are not fully captured in available statistics, with North Macedonia’s solar generation among the areas where reported output is particularly incomplete.
For CBAM, the changing generation mix has direct commercial implications. Coal-intensive electricity systems remain exposed to high national default emission factors, while Albania’s predominantly hydropower-based system benefits from a zero factor. The pace at which Serbia, Montenegro, Bosnia and Herzegovina, Kosovo and North Macedonia reduce lignite generation will therefore influence both domestic electricity economics and their ability to access higher-value EU electricity markets.
Q2 2026 demonstrated genuine progress in reducing coal generation, but it also highlighted the region’s continued dependence on gas and other thermal flexibility when hydropower output declines. For the reduction in coal generation to become structural rather than dependent on favourable weather conditions, renewable expansion will need to be accompanied by greater storage capacity, stronger balancing resources and additional grid investment.
The broader trend is therefore positive, but uneven. Southeast Europe is moving towards a lower-carbon generation mix, yet the next stage of the transition will depend increasingly on the ability of power systems to manage variability, seasonal hydro conditions and cross-border balancing needs without returning to coal whenever renewable output falls.
