Electricity markets across the Energy Community region remain structurally fragmented despite more than a decade of regulatory alignment with European Union electricity legislation. The January 2026 report by Energy Traders Europe, titled Compendium on Obstacles to Electricity Trading in Energy Community Countries, provides a comprehensive assessment of barriers preventing efficient cross-border electricity trading across Albania, Bosnia and Herzegovina, Montenegro, North Macedonia, Serbia, Ukraine, Moldova and Georgia.
The report identifies regulatory inconsistencies, infrastructure limitations and administrative barriers as the main factors preventing full electricity market integration with the EU. Although these countries formally adopted EU electricity market rules under the Energy Community framework, implementation remains uneven and operational integration is incomplete.
The region collectively represents a power system with more than 80 GW of installed generation capacity, including roughly 30 GW across the Western Balkans and over 50 GW in Ukraine before the destruction of energy infrastructure caused by the war. Hydropower, coal and nuclear power dominate the generation mix, while wind and solar capacity are expanding rapidly through auction schemes and international investment programs.
Despite this scale, electricity markets remain relatively isolated. Cross-border trading volumes are significantly lower than in the EU internal electricity market because market coupling and transmission capacity remain limited.
A core obstacle identified in the report is incomplete implementation of EU electricity market legislation. Energy Community countries have formally adopted the EU Third Energy Package, which established rules for electricity market liberalisation, cross-border trading and independent regulation. However, national regulatory frameworks often diverge in implementation and enforcement.
In several countries government intervention in electricity pricing and dispatch remains common. State-owned utilities often dominate wholesale electricity trading, reducing market liquidity and limiting opportunities for independent traders.
Albania illustrates the structural challenges faced by hydropower-dominated electricity systems. More than 95 percent of Albania’s electricity generation comes from hydropower plants, making supply highly sensitive to rainfall conditions. During wet years Albania becomes a net exporter of electricity, while dry years require large imports.
To improve price transparency and trading liquidity Albania launched the ALPEX power exchange, which operates jointly with Kosovo. However, the exchange remains relatively small and cross-border market coupling with neighboring EU markets has not yet been achieved. Transmission constraints toward Greece and North Macedonia further limit arbitrage opportunities.
Bosnia and Herzegovina faces additional institutional challenges because its electricity market remains divided between two political entities with separate regulatory frameworks. The country operates approximately 4.3 GW of coal-fired power plants and around 2.5 GW of hydropower capacity, making it a periodic electricity exporter when hydrological conditions are favorable.
However, the absence of a unified electricity exchange and the dominance of state-owned utilities reduce market transparency. Cross-border trading remains largely bilateral rather than exchange-based.
The joint ALPEX exchange with Albania represents an important step toward market integration, yet trading volumes remain limited. Administrative procedures and regulatory uncertainties continue to affect cross-border electricity trading with neighboring markets.
Montenegro’s electricity system occupies a strategic geographic position in Southeast Europe. The country is connected to Italy through the 1,000 MW submarine cable between Montenegro and Italy, one of the most important cross-border electricity infrastructure projects in the region.
This interconnector theoretically allows electricity from the Western Balkans to access the Italian and wider EU electricity markets. However, domestic market liquidity remains limited and administrative procedures create additional barriers for traders operating across multiple jurisdictions.
North Macedonia has made gradual progress toward electricity market liberalisation and exchange-based trading. The country operates around 1 GW of lignite-fired capacity, complemented by hydropower plants and growing solar generation.
The national electricity exchange has improved price transparency, yet regulatory alignment with EU balancing market rules remains incomplete. This reduces opportunities for international traders to participate in the market.
Serbia represents the largest electricity market in the Western Balkans. The country operates approximately 8.5 GW of installed generation capacity, including around 4.4 GW of lignite-fired power plants operated by the state-owned utility Elektroprivreda Srbije (EPS).
Serbia launched the SEEPEX power exchange to support day-ahead electricity trading and price discovery. While trading volumes have grown gradually, a significant share of electricity transactions still occurs through bilateral contracts rather than exchange-based trading.
Ukraine represents the largest electricity system within the Energy Community framework. Prior to the war the country operated more than 50 GW of installed generation capacity, including 15 nuclear reactors providing roughly half of electricity generation.
Ukraine’s grid was synchronised with the continental European system in March 2022, marking a historic milestone in electricity market integration. However, infrastructure damage and emergency regulatory measures introduced during the war continue to limit cross-border trading volumes.
Moldova operates a relatively small electricity system but plays an important role in regional electricity flows. The country relies heavily on imported electricity, particularly from Romania and Ukraine.
Market reforms are progressing, but balancing market structures remain underdeveloped and cross-border trading procedures continue to evolve.
Georgia operates a hydropower-dominated electricity system with more than 80 percent of generation coming from hydroelectric plants. Seasonal hydrological patterns strongly influence electricity trading flows, with the country exporting electricity during summer months and importing during winter.
Despite ongoing reforms, Georgia’s electricity market remains only partially integrated with European trading platforms.
Across the region the most significant structural barrier to electricity trading remains the absence of full EU market coupling. In the European Union, day-ahead electricity markets are integrated through automated coupling systems that optimise cross-border electricity flows across multiple countries simultaneously.
Energy Community markets still rely largely on bilateral capacity allocation mechanisms. Without automated market coupling, electricity flows cannot respond efficiently to price signals across borders.
Transmission constraints further limit trading opportunities. Several interconnectors between the Western Balkans and neighboring EU markets operate close to their technical limits during peak periods.
Grid congestion prevents cheaper electricity from flowing into higher-price markets, increasing overall system costs.
Balancing markets represent another major area where integration remains incomplete. Differences in balancing market design and participation rules prevent traders from optimising flexibility resources across borders.
Low market liquidity also continues to limit trading activity. Many Energy Community power exchanges are still in early development stages, with relatively small trading volumes and limited participation by international market participants.
Administrative barriers add another layer of complexity. Traders operating across multiple countries must navigate different licensing regimes and reporting requirements, increasing operational costs.
Despite these challenges, electricity market integration across the Energy Community remains a strategic priority for the European Union. Regional electricity trading is expected to become increasingly important as renewable generation expands and electricity demand grows.
The report concludes that removing regulatory barriers, expanding transmission infrastructure and implementing market coupling are essential steps toward creating a fully integrated electricity market across Southeast Europe.
