Beneath the visible structure of day-ahead prices, cross-border flows and long-term contracts sits a second market layer that is rapidly gaining financial significance: balancing and ancillary services. As renewable penetration rises across South-East Europe and system volatility increases, transmission system operators—EMS Serbia, Transelectrica Romania, ESO Bulgaria, IPTO Greece and CGES Montenegro—are expanding procurement of reserves to maintain frequency, voltage and system stability. What was once a technical necessity is now a growing revenue stream, increasingly integrated into project economics and investor models.
The scale of these markets is expanding in line with system variability. Across the region, balancing volumes are estimated at 5–10% of total electricity demand, translating into procurement of several gigawatts of upward and downward reserves on a continuous basis. In Greece, where renewable penetration and intraday volatility are highest, balancing costs have exceeded €300–500 million annually in recent periods, reflecting both the volume of reserves required and the price of flexibility. Romania and Bulgaria operate smaller but still material markets, with annual balancing expenditures in the range of €150–300 million.
Reserve products are increasingly standardised, aligned with European frameworks. Frequency containment reserve (FCR) provides immediate response, typically within seconds, while automatic frequency restoration reserve (aFRR) and manual reserve (mFRR) address imbalances over longer timeframes. Prices vary by market and system conditions but have risen significantly as flexibility becomes scarce. In Romania and Greece, aFRR capacity prices can reach €20,000–40,000 per MW per year, with energy activation prices adding further revenue depending on utilisation.
For traditional generators, these markets provide a supplementary income stream. Gas-fired plants, in particular, are well-suited to provide upward reserve, benefiting from both capacity payments and activation revenues. However, the rapid expansion of storage is reshaping participation. Battery systems, with near-instantaneous response times, are ideally positioned to deliver FCR and aFRR services, often at lower cost and with higher precision than conventional plants.
A 100 MW battery system participating in ancillary markets can generate €2–5 million annually from reserve capacity payments alone, with additional income from activation events. When combined with arbitrage revenues of €10–20 million, this creates a diversified revenue stack that supports equity IRRs of 12–16%, even in markets with moderate price spreads. In Greece, where both volatility and balancing demand are high, total revenues for similar systems can exceed €20–30 million per year, pushing returns toward the upper end of the range.
The interaction between balancing markets and day-ahead pricing is increasingly visible. During periods of high renewable output, system operators must manage rapid fluctuations in generation, leading to increased procurement of downward reserves. This can suppress day-ahead prices while elevating balancing prices, creating a divergence between the two markets. Conversely, during supply shortages or peak demand, upward reserve prices can spike, reinforcing high day-ahead prices and amplifying volatility.
Bulgaria provides a clear example of this dynamic. With strong interconnection to Greece and Romania, its balancing market reflects both domestic conditions and cross-border influences. During periods of high Greek prices, upward reserve demand increases, pushing balancing prices above €200/MWh in extreme cases. At the same time, midday solar output can create surplus conditions, requiring downward reserves and depressing prices. This duality creates opportunities for flexible assets but also increases system complexity.
Serbia’s balancing market is smaller but evolving. As renewable capacity expands—particularly solar projects in central and southern regions—EMS is increasing procurement of reserves to maintain system stability. Prices remain lower than in Greece or Romania but are trending upward, with capacity payments and activation revenues becoming more material for flexible assets. The integration of Serbia into broader European balancing platforms is expected to further align pricing and increase liquidity.
The financial implications for renewable projects are significant. Historically, ancillary revenues were not included in project models, as access was limited and revenues uncertain. This is changing. Hybrid projects combining generation and storage are now explicitly designed to participate in balancing markets, adding a third revenue stream alongside energy sales and arbitrage. For a 100 MW solar + 200 MWh battery project, ancillary services can contribute €2–6 million annually, improving overall project economics and stabilising cash flows.
Lenders are beginning to recognise these revenues, albeit cautiously. While energy and contracted revenues remain the primary basis for debt sizing, ancillary income is increasingly included in upside scenarios and sensitivity analyses. As markets mature and regulatory frameworks stabilise, a portion of these revenues may become bankable, supporting higher leverage and more favourable financing terms.
Regulation is a critical enabler. Access to balancing markets requires clear rules for participation, aggregation and settlement. Greece and Romania have made significant progress in integrating storage and new technologies into these markets, while other countries are still adapting their frameworks. Harmonisation with European platforms, such as the integration of aFRR and mFRR markets, is expected to improve efficiency and increase cross-border participation.
The role of aggregation is expanding in parallel. Smaller assets, including distributed storage and demand response, can participate in balancing markets through aggregators, increasing overall system flexibility. This creates additional revenue opportunities and enhances system resilience, particularly in markets with limited large-scale flexible generation.
For traders, balancing markets represent an additional dimension of optimisation. Firms are increasingly active in these markets, integrating reserve provision into their broader trading strategies. By managing portfolios of generation, storage and capacity rights, they can capture value across multiple layers of the system, from day-ahead pricing to real-time balancing.
Data and analytics are essential in this environment. Platforms like Electricity.Trade provide insights into balancing prices, reserve volumes and system conditions, enabling participants to anticipate market movements and optimise dispatch. The increasing granularity of data—moving from hourly to sub-hourly and real-time intervals—enhances the ability to capture value but also requires more sophisticated tools and expertise.
The growth of balancing markets reflects a fundamental shift in the electricity system. As renewable penetration increases, variability becomes a defining feature, and flexibility becomes a scarce resource. The value of electricity is no longer determined solely by supply and demand at a given moment but by the ability to respond to rapid changes in system conditions.
In South-East Europe, this shift is particularly pronounced due to the combination of rapid renewable growth and uneven infrastructure. Balancing markets are emerging as a critical mechanism for managing this complexity, providing both operational stability and financial opportunity. For investors and developers, the inclusion of ancillary revenues in project models is no longer optional; it is a necessary step in capturing the full value of the system.
The invisible layer of balancing markets is becoming visible in financial terms, shaping returns and influencing investment decisions. As the region’s power system continues to evolve, this layer will play an increasingly central role, linking physical stability with economic value and redefining how electricity is priced, managed and monetised.