The European Electricity Review 2026 marks a structural turning point for Europe’s power system, but its implications are particularly acute for Southeast Europe (SEE). While the headline result is EU-wide — wind and solar together overtaking fossil fuels in 2025 — the real story for SEE lies in how rapidly the region’s inherited coal-centric systems are being squeezed by market integration, carbon pricing spillovers, and cross-border power flows driven by renewables elsewhere in Europe. The review effectively redraws the competitive map for SEE generators, grids, and investors over the 2026–2030 window.
Across the EU, wind and solar produced more electricity than fossil fuels for the first time in 2025, with renewables approaching half of total generation. That shift did not occur evenly. Northern and Western Europe led deployment and flexibility build-out, while much of SEE entered 2025 with a higher residual reliance on lignite, aging coal fleets, and hydro volatility. The result is a widening divergence inside the same synchronized market: low-marginal-cost renewable power increasingly sets prices and flows into SEE during many hours, while domestic coal assets are pushed to the margin or out of dispatch altogether.
For Serbia, Bosnia and Herzegovina, North Macedonia, and parts of Bulgaria, this dynamic has immediate balance-sheet consequences. Coal plants that once ran as baseload now face fewer operating hours, higher maintenance cost per MWh, and rising exposure to carbon costs through indirect ETS effects embedded in cross-border prices. Even where plants are outside the EU ETS, market coupling imports carbon-priced electricity into SEE price formation, compressing clean-spark spreads and eroding lignite margins.
The Ember review’s most relevant signal for SEE is not simply that coal is declining, but that price-setting power has shifted. Solar’s record output in 2025 — driven by utility-scale build-out and rooftop penetration — flattened daytime prices across the continent. Wind’s growing share extended low-price periods into shoulder seasons and nights. For SEE systems with limited flexibility, this translated into increased cycling stress on thermal units and higher hydro opportunity costs, particularly in dry periods when reservoirs could not arbitrage effectively.
Hydropower remains a stabilizer in SEE, especially in Montenegro and Croatia, but the review underscores a crucial risk: hydro variability is rising as climate volatility increases. In 2025, several SEE basins experienced uneven inflows, amplifying reliance on imports during peak demand hours. As EU renewables expand, those imports are increasingly cheap during solar-heavy hours and expensive during system stress events, widening intraday spreads. Without storage and demand response, SEE grids are exposed to this volatility.
Wind and solar deployment inside SEE accelerated in 2024–2025 but from a lower base. Romania and Bulgaria led solar additions; Croatia and Serbia advanced onshore wind pipelines; Montenegro cleared key permits for new wind capacity. Yet the Ember findings suggest that capacity alone is insufficient. Markets now reward flexibility, not just megawatts. Battery storage, fast-ramping gas, and grid-scale demand response determine who captures value in a system dominated by variable renewables.
This is where SEE’s structural constraints become binding. Transmission bottlenecks — both internal and cross-border — limit the ability to export surplus renewables or import cheap power at scale. Balancing markets remain shallow in parts of the region, and ancillary services procurement is still evolving. The review implies that without rapid upgrades, SEE risks higher curtailment as domestic solar grows, while still paying scarcity prices during evening ramps when flexibility is absent.
Coal’s role in SEE therefore shifts from baseload to contingency capacity. Several governments are implicitly moving coal into cold-reserve or strategic reserve frameworks to preserve security of supply through the late 2020s. The Ember data strengthens the economic case for this transition: running coal fewer hours but keeping units available for stress events is cheaper than forcing uneconomic baseload operation in a market increasingly set by zero-marginal-cost power. However, reserve remuneration must be transparent and time-limited, or it risks crowding out investment in cleaner flexibility.
Gas emerges in the review as a bridging flexibility fuel, not a growth engine. EU gas generation declined in 2025 despite electrification, because renewables displaced it in many hours. For SEE, this signals that new gas capacity should be designed as peaking and balancing assets — low load factors, high ramp rates — rather than mid-merit plants. Projects that assume high utilization risk underperforming as renewables penetration rises both domestically and in neighboring markets.
The cross-border dimension is decisive. Market coupling means SEE increasingly imports Europe’s decarbonization outcomes. When German or Italian solar floods the system, SEE prices follow. When Nordic wind surges, it ripples south through interconnectors. Conversely, when Europe faces continent-wide stress — cold snaps, low wind — SEE imports scarcity. The Ember review thus reframes energy security for SEE: it is no longer about national capacity alone, but about regional flexibility and interconnection quality.
Investment priorities follow directly. First, grid reinforcement and digitalization move from “enablers” to value creators. Second, storage — batteries in the short term, pumped hydro where geography allows — becomes central to price capture. Third, market design must evolve to reward flexibility services explicitly, not implicitly through energy prices alone. The review’s data makes clear that systems failing to price flexibility will overpay for security via inefficient thermal dispatch.
For policymakers, the message is stark. Aligning with the EU’s power transition is no longer optional for SEE; it is already happening through prices and flows. Delaying coal exit strategies increases fiscal and operational risk without preserving competitiveness. Accelerating renewables without flexibility increases curtailment and volatility. The narrow path forward is coordinated investment across generation, grids, storage, and markets.
For investors, the Ember review redraws risk maps. Merchant exposure for coal is structurally negative. Pure-play renewables without storage face cannibalization risk. Assets that combine generation with flexibility — wind plus batteries, solar plus storage, hydro plus ancillary services — sit on the right side of the curve. Grid-linked projects that ease congestion or provide balancing value command increasing strategic premium.
By 2025, Europe crossed a line where fossil fuels no longer anchor the power system. In Southeast Europe, that reality arrives with a lag but no less force. The European Electricity Review 2026 does not predict SEE’s transition; it confirms that the transition is already pricing itself into the region’s markets. The remaining question for SEE is not whether to adapt, but how quickly its institutions, grids, and capital allocation can catch up to a system where wind, solar, and flexibility — not coal — define value.
