Thermal generation across Southeast Europe is entering a structurally more difficult market environment. Week 21 showed a clear decline in conventional generation economics as renewable output increased, electricity demand softened and regional imports fell sharply. Total thermal generation across SEE declined 5% week-on-week to 3.84 TWh, while gas-fired output dropped 6.6% and coal/lignite generation fell 2.4%.
At first glance, lower thermal output may appear like a straightforward decarbonization trend. In reality, the situation is far more complicated. Thermal assets are losing operating hours and pricing power, but power systems still depend on them for balancing, reserve capacity and evening ramp stability.
That contradiction is becoming one of the defining investment and policy challenges in Southeast Europe.
Hungary recorded the steepest thermal decline in the region, with output falling 35.8%, primarily because of reduced gas-fired generation. Romania and Serbia also posted double-digit coal declines. At the same time, Greece moved in the opposite direction, increasing thermal generation by 4.2% as gas output rose 7.5% to compensate for weaker wind and hydro production.
This divergence illustrates the new role thermal generation is beginning to play. Conventional plants are no longer simply baseload producers. They are increasingly balancing assets activated when renewable output weakens or when evening demand ramps sharply after solar production fades.
That operational shift has major financial consequences.
- Coal and gas plants were traditionally designed around high utilization rates and relatively stable dispatch patterns. In the emerging SEE market structure, they instead face:
- lower annual operating hours,
- higher start-stop cycling,
- greater intraday volatility,
- and increasing dependence on balancing revenues rather than baseload energy sales.
This gradually erodes traditional plant economics.
For coal-heavy systems such as Serbia and parts of the Western Balkans, the pressure is particularly strong. Solar generation across SEE increased 8.1% during Week 21, while electricity demand fell 1.7% regionally. During daylight hours, thermal plants increasingly struggle to compete against low-marginal-cost renewable output. Yet during evening peaks and low-renewable periods, the same plants remain critical for grid stability.
That means thermal fleets are becoming economically weaker while operationally indispensable.
The result may be a growing need for new market mechanisms. Capacity payments, strategic reserve frameworks and ancillary-service remuneration are likely to become increasingly important as conventional plants lose energy-market revenues but continue providing reliability services.
Gas economics complicate the picture further. TTF remained close to €50/MWh, reinforcing elevated fuel costs for gas-fired generation across Europe. This keeps flexible gas plants commercially expensive even though system operators rely on them for balancing intermittent renewables.
- In practical terms, Southeast Europe faces a transition problem:
- renewables increasingly dominate daytime pricing,
- but affordable large-scale storage is not yet deployed widely enough to fully replace thermal flexibility.
This creates an uncomfortable middle phase where systems require conventional backup but cannot always support it economically through wholesale markets alone.
Italy demonstrates this clearly. Despite weaker regional prices, Italy remained the highest-priced market at €116.31/MWh. The country’s dependence on flexible gas-fired generation and imports continues supporting higher clearing prices, particularly during evening balancing periods.
By contrast, Serbia’s average price collapsed to €81.24/MWh, showing how solar-heavy and lower-demand conditions can rapidly suppress prices even in coal-oriented systems.
This divergence increases pressure on thermal operators in lower-priced SEE markets. Coal and gas plants in Serbia, Bulgaria and Romania may face worsening margins unless they secure additional balancing-market revenues or regulatory support mechanisms.
For investors, this changes thermal asset valuation completely.
- Future thermal plant value will depend less on annual generation volume and more on:
- flexibility capability,
- ramp speed,
- minimum stable load,
- start-up economics,
- fuel efficiency,
- ancillary-services access,
- and balancing-market participation.
Older inflexible coal assets become increasingly exposed. More efficient gas turbines and hybrid systems integrated with storage may retain strategic value longer because they can respond faster to renewable intermittency.
This also affects renewable developers. The weaker thermal marginality becomes during solar-heavy periods, the more renewable projects need storage or contracted offtake structures to protect captured pricing.
Industrial consumers may benefit temporarily from lower wholesale prices, but system costs do not disappear. Instead, they increasingly shift into balancing infrastructure, reserve mechanisms and grid investments required to maintain reliability in a renewable-heavy system.
The wider cross-border market reinforces this transition. Net regional imports fell 34.6%, meaning stronger renewable availability reduced reliance on imported thermal generation. But this also means thermal fleets across the region compete more directly against domestic solar and hydro rather than benefiting from structurally tight import conditions.
- Over time, the role of thermal generation in Southeast Europe is likely to narrow toward three core functions:
- system balancing,
- security-of-supply support,
- and seasonal reliability during weak renewable periods.
The market is therefore moving toward a fundamentally different structure where conventional plants remain necessary but no longer dominate pricing or investment logic.
Week 21 shows that Southeast Europe’s electricity transition is no longer simply a renewable expansion story. It is increasingly a flexibility transition where thermal generation survives not because it is cheapest, but because it still performs functions the wider system cannot yet fully replace.