Coal remains one of the most difficult issues in the Western Balkans electricity sector. It is easy to describe coal as outdated. It is harder to replace the role it still plays.
In several Western Balkan systems, coal provides domestic electricity, employment, system inertia, dispatchable capacity and political security. It is embedded not only in the power system but in regional economies and social structures. That is why the coal transition is not simply a technology substitution. It is a political economy challenge.
The region’s exposure is significant. Research on the Western Balkan energy sector has shown that Kosovo, Serbia, Bosnia and Herzegovina, North Macedonia and Montenegro have relied heavily on coal for electricity generation, while Albania is the major exception because of its hydropower-based system.
This creates a reliability dilemma. Coal plants are aging, often inefficient and emissions-intensive, but they still provide firm generation when hydro output is weak, imports are expensive or solar is unavailable. Closing coal capacity without replacing its system role would create security-of-supply risk.
At the same time, the economics of coal are weakening. CBAM exposes carbon-intensive electricity exports to additional costs when sold into the EU. Reuters reported that electricity from coal-reliant Western Balkan producers is likely to become more expensive for EU importers under CBAM, reducing competitiveness in EU markets.
That matters because exports have historically helped support utility revenues in some countries. If coal-based exports become less attractive, domestic coal plants lose part of their commercial buffer. They may still be needed for local supply, but they become harder to finance, modernize and justify.
Pollution rules add another pressure. Many coal assets in the region require investment to meet environmental standards. At the same time, lenders are increasingly reluctant to finance coal. Even where coal remains technically available, its cost of capital and compliance burden are rising.
The transition challenge is therefore not whether coal faces pressure. It clearly does. The real question is what replaces coal’s firm capacity function.
Solar alone cannot do it. Wind alone cannot do it. Hydro helps, but hydrology is uncertain. Gas can provide flexibility, but it introduces fuel-price and import-dependence risks. Batteries are essential for short-duration flexibility, but they do not fully replace multi-day firm capacity. Demand response can reduce peaks, but it requires market design and consumer participation.
A realistic transition pathway will need a portfolio: renewables, storage, grid upgrades, regional market integration, flexible hydro, limited flexible thermal backup, demand response, energy efficiency and targeted support for coal regions. It also needs domestic carbon-pricing discussions, because paying carbon costs at the EU border is less useful than recycling revenues into local transition.
The social dimension cannot be ignored. Coal regions need investment before closures, not after them. Workers need retraining, municipalities need alternative tax bases, and utilities need credible investment plans. A disorderly transition would increase political resistance and threaten security of supply.
For investors, coal-transition risk should be treated as both downside and opportunity. The downside is obvious: stranded assets, rising compliance costs and export-market erosion. The opportunity lies in replacement infrastructure: renewables, batteries, transmission, district heating modernization, mine-land repurposing and flexible capacity.
For governments, the worst strategy is delay without preparation. Aging coal assets do not become more reliable with time, and CBAM does not disappear because domestic politics are difficult. Waiting simply compresses the transition into a shorter and more expensive period.
Coal may remain part of the Western Balkan power mix for some time. But its strategic position is weakening. The future system will still need reliability, but reliability will increasingly come from flexibility portfolios rather than single-fuel dependence.
Coal’s last stronghold is not generation volume. It is firm capacity. That is the role the region must replace.
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