Southeast Europe is becoming more integrated physically and commercially, but the two processes are moving at very different speeds. The planned GRITA 2 interconnector between Greece and Italy represents the region’s physical ambition: a high-voltage direct-current connection with up to 1,000 MW of capacity and a length of around 300 kilometres, including approximately 240 kilometres of subsea cable. Greece’s IPTO and Italy’s Terna expect the project to require around €1.9 billion in investment.
GRITA 2 would complement the existing 500 MW interconnector, which has been operating since 2002. The new link could significantly increase Greece’s ability to export renewable electricity during periods of surplus, import power during supply shortages and strengthen its role as a gateway between the Balkans and Western European electricity markets. For Italy, the project would provide access to a more diversified generation portfolio while reinforcing the wider Mediterranean electricity corridor.
However, the economic value of the new connection will depend on more than its headline capacity. Price differences between the Greek and Italian markets, availability during critical periods and the ability of domestic networks to transport electricity to and from the interconnector will all determine its utilisation. Cross-border capacity has limited value if internal congestion prevents electricity from reaching the border. The €1.9 billion investment will therefore need to be supported by coordinated onshore grid reinforcement and efficient capacity allocation.
The Western Balkans face a different challenge. The region has extensive physical interconnection, but commercial integration remains incomplete. Industry analysis citing Energy Community estimates suggests that as much as 70% of electricity flows through the region may represent transit between EU countries. Serbia alone is connected to eight neighbouring electricity systems, yet Western Balkan day-ahead markets are still not fully integrated into the EU Single Day-Ahead Coupling framework.
Market coupling allows electricity and cross-border transmission capacity to be allocated through a single calculation, directing electricity toward higher-priced markets until network constraints are reached. Without such mechanisms, traders must secure transmission rights and electricity separately, increasing transaction risks and limiting market liquidity. The result is a region with substantial physical electricity flows but without the full economic benefits of integrated trading.
Regulatory alignment also remains uneven across the Western Balkans. A 2025 assessment placed Serbia at 63% alignment with Energy Community requirements, followed by Montenegro and North Macedonia at 53%, Albania at 50%, Kosovo at 46% and Bosnia and Herzegovina at just 26%. Bosnia and Herzegovina still requires an effective state-level framework and organised electricity market, while other countries continue to work on balancing arrangements, unbundling and market-coupling reforms.
Carbon policy is adding further pressure for reform. From 2026, the EU’s Carbon Border Adjustment Mechanism (CBAM) applies to electricity imports, increasing the importance of aligning Western Balkan power markets with EU climate and electricity-market rules. Estimates suggest that up to 60% of electricity imported into the EU from Bosnia and Herzegovina, Montenegro, North Macedonia and Serbia can originate from coal generation. Introducing domestic carbon pricing could retain revenues within the region and help finance the energy transition, but it would also expose ageing lignite plants to their full economic costs.
GRITA 2 illustrates what deep physical integration could look like, while the Western Balkans demonstrate why transmission infrastructure alone is not enough. Southeast Europe needs functioning power exchanges, common market-coupling algorithms, transparent carbon pricing and coordinated cross-border capacity calculation.
Physical interconnectors move electricity; market integration determines the value of those flows. The region’s next stage of integration will therefore depend not only on building more cables, but on creating the regulatory and commercial structures capable of turning those connections into lower costs, greater security of supply and stronger incentives for cleaner generation.
