The rapid expansion of renewable generation in Southeast Europe and the growing influence of the European Union’s Carbon Border Adjustment Mechanism are beginning to reshape electricity market logic across the region. In Serbia, where renewable investment is accelerating but coal still dominates the national electricity mix, a new question is emerging among energy traders and industrial strategists: could Serbia simultaneously import thermal electricity from neighbouring coal-based systems while exporting renewable electricity toward the European Union?
Such a model may initially appear counterintuitive, yet it reflects how modern electricity markets operate. Electricity itself is physically indistinguishable once injected into the grid, but environmental attributes attached to electricity production can be separated from physical flows through systems such as Guarantees of Origin. This distinction between physical electricity and environmental certification allows electricity to move through the grid according to network physics and market prices while renewable attributes travel through contractual and certification mechanisms.
In practical terms, this means that a country can import electricity produced by fossil fuels while exporting renewable electricity or renewable certificates to markets willing to pay a premium for decarbonized power. The European electricity market has already witnessed numerous examples of this structure. Countries with strong renewable resources frequently export green electricity attributes while importing conventional electricity when economic conditions favour such flows. The increasing importance of corporate decarbonisation strategies and regulatory mechanisms such as CBAM is expanding the economic value of certified renewable electricity, creating incentives for countries positioned between high-carbon and low-carbon electricity systems to act as trading hubs.
Serbia’s geographic position in Southeast Europe places it precisely at this intersection. The country sits between several electricity systems that still rely heavily on coal generation and the increasingly decarbonised electricity markets of Central Europe. Serbia maintains transmission connections with Hungary, Romania, Bulgaria, Bosnia and Herzegovina, Montenegro and North Macedonia, forming part of the broader regional power exchange network that links the Balkans with European electricity markets.
Historically Serbia has oscillated between being a net electricity importer and exporter depending on hydrological conditions and the operational reliability of its lignite fleet. The country’s power system includes roughly 4.4 GW of lignite capacity, approximately 3 GW of hydropower, around 0.6 GW of wind capacity, and a rapidly expanding solar pipeline. Coal plants continue to dominate baseload generation, but the renewable share of installed capacity is gradually increasing as new wind farms and solar parks enter development and construction phases.
At the same time Serbia’s neighbours continue to operate significant coal-based generation fleets capable of exporting electricity. Bosnia and Herzegovina in particular remains one of the most coal-dependent electricity systems in Europe. The country operates several large lignite plants including Tuzla, Kakanj, Ugljevik, Gacko, and Stanari. Because domestic electricity demand in Bosnia is relatively modest compared with generation capacity, the country has historically been a net exporter of electricity, particularly toward Croatia and Serbia.
Bulgaria also maintains substantial lignite generation capacity in the Maritsa East basin, where several large power stations supply the domestic grid and occasionally export electricity into neighbouring markets. Plants such as Maritsa East 2, AES Galabovo, and ContourGlobal Maritsa East 3 represent some of the largest thermal generation facilities in Southeast Europe. Bulgaria’s transmission system is connected to Serbia through high-voltage interconnectors, enabling electricity flows between the two markets depending on price signals and system conditions.
In a hypothetical future market configuration influenced by CBAM and corporate decarbonisation requirements, Serbia could import baseload electricity generated by coal plants in Bosnia or Bulgaria while exporting renewable electricity toward European Union markets where demand for certified green electricity is increasing rapidly. The underlying logic is economic rather than ideological. EU electricity markets increasingly place a premium on renewable electricity that can be accompanied by valid Guarantees of Origin or other forms of environmental certification. At the same time electricity produced in coal-dominated systems may remain relatively inexpensive when carbon pricing or environmental compliance costs are lower.
In such a scenario Serbia could use imported thermal electricity to satisfy domestic consumption during certain periods while exporting renewable electricity produced by its wind farms, solar parks and hydropower plants to markets where electricity buyers are willing to pay higher prices for green energy. These exports could flow toward neighbouring EU markets such as Hungary, Romania, Croatia or Slovenia, and potentially further into Central European electricity exchanges.
The key element enabling such trade structures is the separation between physical electricity flows and renewable certification systems. When renewable electricity is exported together with its corresponding Guarantee of Origin, the buyer receiving the electricity can claim consumption of renewable energy regardless of the physical mix of generation within the exporter’s domestic system. This certification mechanism underpins renewable electricity markets across Europe and increasingly influences corporate power procurement strategies.
However, while the theoretical logic of importing coal-based electricity and exporting renewable electricity is straightforward, the practical implementation of such a model depends on several structural conditions within the power system. The first constraint is transmission capacity. Serbia’s cross-border electricity flows rely on high-voltage interconnectors linking the national grid with neighbouring systems. Although Serbia maintains numerous cross-border connections, these lines were not designed for large structural shifts in electricity flows where imports and exports simultaneously increase in opposite directions.
For example, importing baseload electricity from Bosnia or Bulgaria while exporting renewable electricity to Hungary or Romania would require sufficient cross-border transmission capacity in multiple directions at the same time. If any of these corridors approach thermal limits, electricity flows must be curtailed or redirected through alternative routes. Transmission congestion can therefore limit the scale of arbitrage opportunities between neighbouring markets.
Domestic grid constraints also play a role. Serbia’s transmission system was originally designed around the geography of coal generation and large hydropower plants. Renewable energy development introduces new generation nodes in regions that historically hosted little power production. Moving electricity from these renewable generation zones toward export interconnectors may require reinforcement of internal transmission corridors and substations.
Balancing and system flexibility represent another challenge. Wind and solar generation fluctuate depending on weather conditions, creating variability in electricity output. Managing these fluctuations requires flexible generation resources, hydropower reservoirs, battery storage, or other forms of balancing capacity. If Serbia imports baseload electricity while exporting renewable power, the system operator must ensure that supply and demand remain balanced across the grid despite potentially large swings in renewable generation.
Price dynamics also determine whether such trade patterns become economically viable. Electricity arbitrage between neighbouring markets depends on sustained price differentials. Central European electricity markets often exhibit higher wholesale prices than Southeast European markets due to stronger demand, higher carbon pricing costs, and a greater willingness among industrial buyers to pay premiums for renewable electricity. If this price differential persists, exporting renewable electricity toward EU markets could generate higher revenue than selling the same electricity domestically.
Nevertheless, electricity price spreads fluctuate depending on fuel prices, weather conditions, and regional supply-demand balances. Periods of high hydropower production or strong renewable output in Central Europe can temporarily reduce price differences, limiting export opportunities. Energy traders must therefore constantly evaluate market conditions before committing to cross-border trading strategies.
Another important constraint involves the availability of renewable certificates. To export electricity as green power, the exporter must transfer a corresponding renewable certificate verifying the origin of the electricity. If domestic industrial consumers require these certificates to comply with CBAM-related decarbonisation requirements, competition for renewable attributes could intensify within Serbia’s electricity market. Exporting renewable certificates may become less attractive if domestic industry values them more highly.
This dynamic highlights a strategic choice facing Serbian energy policy. Renewable electricity can be used either to strengthen the competitiveness of domestic exporters or to generate revenue through cross-border electricity trading. Allocating renewable energy toward domestic industrial consumers helps steel producers, cement manufacturers, and chemical companies demonstrate lower carbon footprints for exports to EU markets. Allocating the same electricity toward exports may produce higher short-term revenues but could leave domestic industry exposed to CBAM-related costs.
The balance between these two strategies will likely evolve as Serbia’s renewable capacity expands. In the near term the country may pursue a hybrid model in which renewable electricity supports both domestic industrial decarbonisation and cross-border trading opportunities. As more wind and solar projects are commissioned, the volume of renewable electricity available for allocation will increase, allowing greater flexibility in managing exports and domestic consumption.
Battery storage and flexible generation technologies could further enable this hybrid approach. Battery systems can store excess renewable generation during periods of low demand and release it when electricity prices rise or when export opportunities emerge. This capability reduces curtailment risk and improves the economic value of renewable electricity. Storage systems also enhance grid stability by smoothing fluctuations in renewable output.
Over time Serbia’s role in regional electricity markets may evolve toward that of a balancing and trading hub positioned between coal-dominated Balkan electricity systems and decarbonising EU markets. The country’s central geographic location and extensive interconnection network give it the potential to mediate electricity flows between these regions. If renewable capacity continues to expand and grid infrastructure upgrades keep pace with generation growth, Serbia could capture economic value from both renewable electricity production and cross-border electricity trading.
Ultimately the feasibility of importing coal-based electricity while exporting renewable electricity will depend on infrastructure, market design, and policy priorities. Transmission capacity must expand to accommodate shifting electricity flows, renewable generation must continue to grow, and certificate systems must operate transparently to ensure the credibility of renewable electricity exports.
In this evolving landscape the electricity grid becomes more than a physical network. It becomes a strategic platform determining how Serbia positions itself within the regional energy transition. Whether the country prioritizes domestic industrial decarbonisation, cross-border renewable electricity trading, or a combination of both will shape the role of Serbia’s power system within Europe’s increasingly integrated energy markets.
Elevated by cbam.engineer