Week 08 of 2026 marks a decisive inflection point in the operational role of thermal generation across South-East Europe. The sharp contraction in gas- and coal-fired output was not a transient response to price signals, but a direct consequence of improved system flexibility, hydro recovery and renewable expansion. For transmission system operators, this retreat provides a clear demonstration that thermal assets are no longer the backbone of routine system adequacy. They have become conditional resources, activated primarily during periods of flexibility scarcity rather than serving as continuous price setters.
Across SEE, total thermal generation fell by -20.40% week-on-week to 6,079 GWh, representing a reduction of more than 1,550 GWh compared with Week 07 . The contraction was overwhelmingly concentrated in gas-fired generation, which collapsed by -28.44% (-1,258 GWh). Coal and lignite output declined more moderately by -9.33% (-300 GWh), indicating that gas is now the system’s primary swing resource, while coal increasingly functions as residual baseload in coal-heavy systems.
For TSOs, the scale and speed of this gas withdrawal is structurally significant. Gas plants exited the dispatch stack almost immediately once renewable and hydro availability improved. This behavior confirms that gas has shifted from a price-forming marginal technology to a flexibility backstop, called upon only when weather-dependent resources and hydro cannot maintain balance. In operational terms, gas units now resemble reserve capacity rather than continuous generation assets.
Hungary’s experience during Week 08 illustrates this transformation clearly. Despite remaining the most expensive market in the region with a weekly average of €107.17/MWh, Hungary still recorded a sharp decline in thermal dispatch, aligned with regional trends . Rising demand of +5.86% did not translate into increased gas burn, because imports, renewables and hydro inflows absorbed the load. For the Hungarian TSO, this signals a growing reliance on cross-border and non-thermal balancing rather than domestic gas capacity.
Italy presents a parallel case on a larger scale. Exceptional renewable output, including a +449 GWh increase in variable RES generation, displaced gas generation materially despite Italy’s traditionally gas-heavy system . The result was a reduction in southbound import demand and a rebalancing of cross-border flows throughout SEE. From a system perspective, Italy’s thermal retreat acted as a regional stabilizer rather than a source of volatility.
Coal’s behavior in Week 08 highlights a different dynamic. While coal and lignite output declined by -9.33%, the reduction was far less pronounced than for gas . This reflects coal’s structural embedding in certain national systems, particularly Serbia and parts of the Western Balkans, where lignite plants remain integral to base generation. Serbia even recorded a slight increase in lignite output of +1.31%, bucking the regional trend . For TSOs, this divergence reinforces the importance of national generation structures in shaping regional outcomes.
However, even where coal remained stable, its role in price formation diminished. With wholesale prices falling sharply across the region and renewables setting the marginal cost in many hours, coal units increasingly operated below economic dispatch thresholds, sustained more by system security considerations than market competitiveness. This shift erodes the traditional linkage between coal availability and price stability.
The interaction between thermal retreat and cross-border trade further underlines the changing adequacy paradigm. Regional net electricity imports surged to 7,426 GWh (+503% week-on-week), driven almost entirely by Bulgaria’s extraordinary net import position of 6,165 GWh . This import shock occurred in parallel with declining thermal output, demonstrating that the system substituted cross-border inflows for domestic thermal generation where available.
For TSOs, this substitution is a double-edged sword. On one hand, it confirms that interconnection and market integration can compensate for reduced thermal dispatch. On the other, it concentrates adequacy risk in transmission corridors and neighboring systems. When gas and coal step back, the grid must carry more responsibility for balancing, increasing the criticality of corridor availability and contingency management.
The gas market context reinforces this vulnerability. While TTF gas prices averaged €31.5/MWh (-3.3% week-on-week)during Week 08, underlying risk remained elevated due to geopolitical tensions around the Strait of Hormuz, through which roughly 20% of global LNG trade passes . EU gas storage levels stood at approximately 32.5%, with Germany below 23%, the lowest seasonal level since 2022. For electricity TSOs, these figures underscore that gas’s retreat from routine dispatch does not equate to reduced systemic importance. Gas remains a latent risk factor, capable of re-entering the system abruptly under adverse conditions.
The adequacy implications are therefore nuanced. Thermal generation is no longer the first line of defense against load growth or variability, but it remains the last line of defense when flexibility erodes. Week 08 shows that the system can function smoothly with sharply reduced thermal output under favorable conditions. It does not prove that the system can do so under stress.
Another critical dimension is the temporal role of thermal units. Even as weekly thermal output fell, gas and coal units continued to play a decisive role during short peak periods and evening ramps. These hours may represent a small share of total energy, but they are disproportionately important for system security. Prices did not spike during Week 08 because hydro and imports filled these gaps. Without them, thermal units would have reasserted marginal pricing power rapidly.
For TSOs, this implies that adequacy assessments must shift away from annual or weekly averages toward hour-level stress analysis. Thermal capacity that appears redundant on an energy basis may still be indispensable on a capacity basis. The retreat observed in Week 08 therefore reduces operating hours, not strategic value.
The economic consequences of this shift are already visible in market behavior. Gas-fired generators increasingly face low utilization and volatile revenues, while coal units operate under rising carbon pressure and declining market relevance. From a system perspective, this increases reliance on non-market mechanisms such as capacity payments, strategic reserves or regulated support to keep essential thermal assets available.
Week 08 also highlights the asymmetric impact of thermal retreat across the region. Systems with strong hydro and renewable portfolios experienced smooth price declines and stable operation. Systems with weaker flexibility relied more heavily on imports and cross-border balancing. This asymmetry suggests that thermal retreat will not proceed uniformly across SEE, but will be mediated by national resource endowments and grid strength.
Looking forward, the role of thermal generation in SEE is likely to become increasingly episodic. Gas units will operate fewer hours but remain critical during scarcity events. Coal will retreat more slowly where it underpins domestic adequacy, but its economic viability will continue to erode under carbon pricing and renewable competition.
For transmission system operators, the central lesson of Week 08 is not that thermal generation is becoming irrelevant, but that its function has changed fundamentally. Thermal plants no longer define normal operating conditions. They define emergency boundaries.
This transformation places greater emphasis on forecasting, reserve management and cross-border coordination. When thermal generation withdraws, the grid becomes the primary balancing mechanism. TSOs must therefore treat transmission availability, flexibility forecasting and contingency planning as core adequacy tools rather than secondary considerations.
Week 08 demonstrates that SEE can operate with sharply reduced thermal output under favorable conditions. It also implicitly warns that when those conditions reverse, the system will pivot back toward thermal reliance rapidly and forcefully. Understanding this duality is essential for TSOs navigating a power system where adequacy is no longer guaranteed by fuel, but negotiated hour by hour through flexibility and flows.
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