Europe’s balancing market is expanding deeper into Southeast Europe, creating new competition for reserve providers but also exposing the region’s uneven readiness to trade flexibility across borders.
ENTSO-E’s 2026 Market and Electricity Balancing reports documented rapid expansion of the common platforms for automatically and manually activated frequency-restoration reserves. Subsequent developments have moved the process forward, with Bulgaria’s transmission operator ESO joining MARI on 18 February 2026 and additional operators preparing connections.
MARI combines bids for manually activated frequency-restoration reserve, or mFRR, in a common European merit order. PICASSO performs a similar function for automatically activated frequency-restoration reserve, or aFRR.
The platforms allow a transmission operator to activate an eligible reserve bid in another participating country when it is cheaper than the available domestic alternative and cross-border capacity permits the exchange.
For Southeast Europe, Bulgaria’s entry is important because it connects a regional system with significant nuclear, thermal, hydro and emerging battery capacity to a larger balancing-energy pool. Greece’s IPTO has also been preparing participation, while Hungary has been advancing its integration and Romania is expected to follow on a later timetable.
The changes could lower balancing costs by increasing competition. They could also reduce extreme activation prices when a national system has limited reserve available.
But participation brings a second effect: domestic providers must compete against a wider European merit order. A hydro plant, battery or flexible generator that previously benefited from a shallow local market may be activated less often or receive a lower marginal price after coupling.
September volatility strengthens the case for integration
Recent trading conditions show why balancing integration matters.
Southeast European markets experienced steep intraday price changes during the summer and early September. In Romania, quarter-hourly day-ahead prices for one September delivery day moved from around €33/MWh in lower-priced intervals to more than €313/MWh during the evening.
Such variation reflects the interaction between solar output, demand, conventional availability and border capacity. It also raises the cost of forecasting errors.
A renewable producer that overestimates evening output must buy back its shortfall or face imbalance settlement. A supplier that underestimates demand faces the opposite exposure. As quarter-hourly trading and settlement spread, the commercial consequences of short forecasting errors become sharper.
More liquid intraday markets allow participants to correct positions before delivery. Common balancing platforms provide the final layer when commercial trading can no longer fully resolve the deviation.
The regional transition remains incomplete, however. EU markets including Hungary, Romania, Bulgaria, Croatia, Slovenia and Greece operate within increasingly integrated structures, while Serbia, Montenegro, Bosnia, Albania, Kosovo and North Macedonia are at different stages of alignment.
This creates an imbalance between physical and commercial integration. Western Balkan systems are electrically connected to the EU, but their flexibility cannot always enter the same European merit order.
Batteries face a changing revenue model
The expansion of MARI and PICASSO has direct implications for battery investment.
Many storage projects are modelled on a combination of energy arbitrage, capacity payments and balancing-market revenue. European integration can enlarge the addressable market, but it may also compress balancing prices by adding more competing bids.
Evidence from already connected markets suggests that balancing-price spreads can decline after integration. The commercial case for batteries will therefore depend less on occasional extreme activation prices and more on fast response, high availability and the ability to combine several services.
In Southeast Europe, this will favour projects with strong dispatch systems, accurate state-of-charge management and access to both intraday and reserve markets. Batteries developed solely around historic imbalance-price spikes face greater revenue risk.
Hydropower remains a formidable competitor. Plants with reservoirs can provide upward and downward regulation without the same short-duration constraint as many batteries. Yet hydro availability is weather-dependent, and drought can limit the amount of energy operators are willing to reserve for balancing.
Demand response could provide another source of competition. Industrial consumers able to reduce or shift demand may qualify directly or through aggregators, although regulatory and metering frameworks remain underdeveloped in much of the region.
Western Balkan reforms begin to align
Montenegro’s draft balancing-service rules illustrate the direction of travel. The proposed framework covers frequency containment reserve, aFRR, mFRR and replacement reserve and explicitly permits aggregation of generation, consumption and storage facilities.
It also introduces prequalification, data, activation, settlement and performance requirements compatible with a more European-style balancing market.
Serbia has a more developed balancing structure than several neighbouring Western Balkan markets, but full integration will require legal alignment, technical compatibility and reciprocal access to cross-border capacity.
The risk is that EU members gain access to deeper balancing liquidity while non-EU neighbours remain dependent on national arrangements. That would increase the commercial disadvantage already emerging from CBAM and incomplete day-ahead coupling.
Forecast: balancing prices may soften, but scarcity spikes will remain
As more transmission operators join MARI and PICASSO, average balancing-energy costs should gradually become more competitive across the connected area. The deepest price reductions are likely in smaller or concentrated national markets that previously depended on a narrow pool of providers.
That does not mean volatility will disappear.
Cross-border balancing exchanges can be blocked when transmission capacity is already used by day-ahead and intraday trading or reserved for operational security. During a broad regional shortage, several countries may request upward reserve simultaneously, pushing the common clearing price higher.
The autumn and winter outlook is therefore two-sided. Under normal conditions, wider integration should suppress some national price extremes. During nuclear outages, weak hydro or high gas-driven demand, the same platform can transmit scarcity prices across a larger area.
Battery developers should assume lower average spreads but continued tail-risk events. Traders and balance-responsible parties should expect stronger incentives for accurate quarter-hourly forecasting rather than relying on the balancing market as a routine source of energy.
The European system is replacing national reserve silos with a common market. Southeast Europe can benefit from that change, but only if its grids, control systems and market rules can move as quickly as the electricity they are meant to balance.
Elevated by Virtu.Energy
