South East Europe’s electricity-price problem is often explained through generation: too much coal, not enough renewables, too much gas exposure, or not enough storage. These explanations are partly right, but incomplete. The grid is just as important.
In electricity markets, price differences are often the visible symptom of invisible constraints. If cheap power cannot reach a high-price area, prices separate. If interconnectors are congested or cross-zonal capacity is limited, regional stress cannot be relieved efficiently. That is exactly what South East Europe has experienced.
ACER found that more efficient use of available network capacity between South East Europe and the rest of the EU could have helped ease regional system stress during the 2024 price spikes. The agency also found that the price gap between Southeast and Central Europe persisted through 2025 and into early 2026, pointing to deeper structural challenges.
This is a critical point. Price spikes are not always caused by a lack of total generation. They can also be caused by the inability to move electricity across borders at the right time. A region can be surrounded by lower-cost power and still experience scarcity pricing if grid capacity is not available.
This is why cross-border capacity allocation has become a central market issue. ACER has recommended finalizing the implementation of the EU’s minimum 70% cross-zonal capacity requirement across Central and Southeast Europe, extending market coupling to non-EU neighbors, and expanding flow-based capacity calculation and allocation in the region.
The 70% rule matters because it aims to ensure that transmission capacity is made available for cross-border electricity trade instead of being excessively reserved for internal grid constraints. In a region like South East Europe, where demand, renewable output and hydro conditions can shift quickly, cross-border access is essential for price convergence.
Market coupling is the second part of the problem. EU member states participate in increasingly integrated day-ahead and intraday markets, while Western Balkan markets are still moving toward full integration. The Energy Community’s Electricity Integration Package is designed to enable Contracting Parties to integrate into the single European electricity market.
Until that integration is complete, liquidity remains fragmented. Traders face more friction. Cross-border flows may not respond efficiently to price spreads. Renewable exporters face more complexity. Consumers ultimately pay for the inefficiency.
The EU’s move to 15-minute day-ahead trading from 30 September 2025 adds another layer. More granular pricing helps reflect actual system conditions more accurately, especially with variable renewables. But for South East Europe, the benefit of granular pricing depends on the ability to move electricity across time and space. Fifteen-minute prices help reveal the problem; they do not solve grid congestion by themselves.
The grid bottleneck also affects renewable development. Solar and wind projects may be quick to build, but transmission upgrades are slower. If generation connects faster than the grid expands, the system faces curtailment, congestion and lower capture prices. Developers then face the risk that a technically strong project becomes commercially weak because it cannot deliver power when and where it is valuable.
This is why grid investment should be treated as energy-transition investment. Transmission lines, substations, digital control systems, dynamic line rating, phase-shifting transformers and better outage coordination are not secondary infrastructure. They are what allow renewable electricity to become useful electricity.
For investors, the lesson is clear: study the grid before studying only the resource map. The best solar irradiation or wind speed is not enough if the connection point is constrained. The best PPA is not enough if curtailment risk is poorly allocated. The best trading strategy is not enough if cross-border capacity is unavailable.
For policymakers, the message is equally clear. South East Europe cannot solve volatility with generation investment alone. It needs transmission reinforcement, market coupling, better capacity calculation, storage and demand flexibility.
The grid is the market. When the grid is constrained, prices diverge. When prices diverge, consumers pay, investors hesitate and system stress rises.
South East Europe’s next electricity-market reform must therefore be physical and institutional at the same time: build more grid and make better use of the grid that already exists.
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