South East Europe’s electricity market is entering a new phase. The defining issue is no longer simply whether power prices are high or low. The more important question is when prices are high, where they diverge, and which assets can respond quickly enough to capture value or maintain system stability.
For years, the region’s electricity markets were largely analysed through annual baseload prices, hydrological conditions, coal availability and import dependence. While these factors remain relevant, they no longer provide a complete picture. South East Europe is increasingly evolving into a market shaped by solar generation, steep evening ramps, limited system flexibility, grid bottlenecks, cross-border transmission capacity and carbon-adjusted electricity trade.
ACER’s 2026 assessment of South East Europe provides an important warning. During the summer stress events of 2024, several bidding zones across the region experienced significant evening price pressure. According to ACER, the challenge was not the growth of solar generation itself, but the lack of flexible resources capable of replacing solar output rapidly once production declined after sunset. Reduced gas-fired generation availability, low hydro reservoir levels, insufficient storage capacity, limited demand response and constrained cross-zonal transmission all contributed to the situation.
This reflects the region’s new electricity price structure: low-cost or even depressed prices during sunny midday hours, followed by expensive scarcity-driven prices in the evening. Solar generation suppresses demand for conventional generation during daylight hours, but once solar output fades, the system must rely on hydro plants, gas-fired generation, battery storage, imports or demand-side flexibility. Where these resources are insufficient, prices can rise sharply.
The ongoing solar expansion across South East Europe is reinforcing this trend. ACER reports that solar PV capacity in selected EU markets of the region reached approximately 29 GW in 2025, while dispatchable generation capacity did not expand at the same pace. The result is a system with more low-cost electricity during daylight hours but also greater exposure to scarcity and volatility during evening ramps.
Cross-border transmission capacity has emerged as a second major price driver. South East Europe is connected to wider European markets, yet the value of those interconnections depends on how much capacity is actually made available for commercial trading. ACER found that limited cross-zonal capacity restricted the region’s ability to import lower-priced electricity from Central Europe during periods of market stress. The agency also highlighted the importance of implementing the EU’s 70% cross-zonal capacity requirement, which obliges transmission system operators to make at least 70% of relevant physical transmission capacity available for cross-border trade while preserving system security.
A third market driver is increasingly visible along the EU–Western Balkans border: carbon costs. From 2026, the Carbon Border Adjustment Mechanism (CBAM) entered its definitive phase, requiring authorised declarants and certificate settlement for covered imports, including electricity. At the same time, the Energy Community’s first-quarter 2026 CBAM report revealed that Western Balkan day-ahead electricity prices were on average around €30/MWh lower than neighbouring EU markets, yet cross-border trade did not expand in the way a simple price-spread model would predict.
This represents a fundamental shift in regional market economics. Lower day-ahead prices are no longer automatically tradable arbitrage opportunities. Market participants must now account for carbon costs, default emissions factors, compliance requirements, documentation risks, route selection, transit exposure and the growing distinction between scheduled and physical electricity flows.
For industrial consumers, annual average prices are becoming a less useful benchmark. Procurement strategies increasingly need to consider load profiles, peak-hour exposure and hedging opportunities. For generators, merchant revenues depend more on capture prices than on average market prices. For traders, success is no longer defined solely by buying low and selling high across borders. It increasingly depends on managing time, shape, congestion, balancing risk and carbon exposure.
South East Europe may continue to experience periods of elevated electricity prices, but the deeper transformation is that prices are becoming more uneven, more locational and more time-sensitive. The market is no longer rewarding energy production alone. Increasingly, it is rewarding flexibility.
