Behind every price spread in South-East Europe sits a parallel market that rarely appears in headline pricing discussions but increasingly defines the economics of the system: cross-border capacity auctions. These auctions—administered through coordinated allocation platforms and transmission system operators such as EMS Serbia, MAVIR Hungary, Transelectrica Romania, ESO Bulgaria, IPTO Greece and CGES Montenegro—convert physical grid constraints into financial instruments. The result is a steady, infrastructure-like revenue stream in the form of congestion rents, now exceeding €0.8–1.2 billion annually across the wider SEE region, depending on market volatility.
The mechanics are straightforward but financially powerful. Interconnection capacity, defined as Net Transfer Capacity (NTC) and allocated as Available Transfer Capacity (ATC), is sold through yearly, monthly, daily and intraday auctions. Market participants—primarily traders such as MET Group, Axpo, GEN-I, EFT and PPC Trading—bid for the right to move electricity across borders. The price they pay reflects expected spreads between markets. When those spreads materialise, the value of the capacity is realised; when they do not, the capacity right itself becomes a sunk cost.
On the Serbia–Hungary border, one of the most liquid interfaces in the region, physical capacity reaches 1,200–1,500 MW, with ATC typically in the 600–1,000 MW range. Annual flows exceed 8–10 TWh, and auction prices for yearly capacity often imply forward spreads of €8–20/MWh. This translates into annual congestion revenues of approximately €70–120 million, shared between the two system operators. For participants holding long-term capacity rights, these revenues are effectively embedded in their trading portfolios, providing a predictable component of income.
The Bulgaria–Greece corridor operates at a larger scale and higher volatility. With capacity of 1,200–1,500 MW and flows exceeding 10–12 TWh annually, congestion rents have reached €150–200 million per year. The driver is the structural price differential between Greece’s gas-influenced market—where average prices range from €100–140/MWh—and Bulgaria’s more diversified system, typically priced at €80–110/MWh. Traders securing capacity on this border are effectively positioning on this structural spread, which has proven persistent even as market conditions fluctuate.
Romania’s interfaces with Hungary and Bulgaria add another layer to the regional system. The Romania–Hungary interconnection, with capacity around 1,500–2,000 MW, facilitates flows toward Central Europe, with annual traded volumes exceeding 12–15 TWh. Congestion revenues on this border can reach €100–150 million, particularly during periods when Romanian prices diverge from Hungarian benchmarks. The Romania–Bulgaria corridor, though smaller, still generates €50–80 million annually, reflecting both north–south and east–west flow dynamics.
The Montenegro–Italy HVDC link, with capacity of 600 MW and annual flows of 4–5 TWh, represents a different category of interconnection. As a controllable DC link, it allows more precise management of flows, effectively functioning as a dedicated arbitrage channel between Balkan and Italian markets. Congestion revenues are estimated at €70–150 million annually, depending on price spreads, which can range from €20–50/MWh. Access to this capacity is highly strategic, providing exposure to one of Europe’s largest and most liquid electricity markets.
These revenues are not incidental; they are integral to the financing of transmission infrastructure. Under European regulatory frameworks, congestion rents are typically reinvested into grid expansion or used to reduce network tariffs. In practice, they provide a quasi-stable cashflow that supports multi-billion-euro CAPEX programmes across the region. For example, revenues from key corridors are contributing to projects such as the Trans-Balkan Corridor (€300–400 million) and Bulgaria–Greece reinforcements exceeding €500 million.
For traders, capacity rights have evolved into a form of financial asset. Annual and multi-year allocations allow firms to lock in exposure to spreads, effectively converting volatile market opportunities into structured positions. A trader holding 200 MW of yearly capacity on the Bulgaria–Greece border, for instance, can capture €20–40/MWh spreads across 1.5–2 TWh of annual flow, generating gross margins of €30–80 million, depending on utilisation and market conditions. These positions are often hedged through forward contracts or balanced with physical assets, such as generation or storage.
The interaction between auctions and market coupling adds complexity. As day-ahead markets become increasingly integrated through European coupling mechanisms, explicit auctions for short-term capacity are gradually replaced by implicit allocation, where capacity is bundled with energy trades. However, long-term auctions—yearly and monthly—remain critical for managing exposure and securing access to constrained corridors. The coexistence of implicit and explicit mechanisms creates a layered market structure where different time horizons are monetised in different ways.
The distribution of congestion rents also reflects the underlying geography of the grid. Northern corridors connected to Central Europe tend to exhibit lower but more stable spreads, generating consistent but moderate revenues. Southern corridors, particularly those linked to Greece, produce higher and more volatile rents, reflecting the influence of gas pricing and renewable variability. East–west interfaces, such as Romania–Hungary, sit between these extremes, with revenues driven by both structural and short-term factors.
For renewable developers, the existence of congestion rents has indirect but significant implications. High congestion on a given corridor indicates limited ability to export surplus generation, increasing curtailment risk and reducing capture prices. Conversely, corridors with lower congestion or planned capacity expansion offer better access to markets and higher realised revenues. Developers are increasingly incorporating congestion data into site selection, recognising that proximity to low-cost transmission pathways can be as valuable as resource quality.
Storage assets interact with this system in a different way. By shifting energy across time rather than space, batteries can capture value that would otherwise be lost to congestion. However, they also influence flows, potentially reducing peak congestion and altering auction dynamics. As storage deployment increases—particularly in Greece and Bulgaria—the structure of congestion rents may evolve, with some spreads narrowing while others emerge in new locations.
Platforms such as Electricity.Trade are making these dynamics more transparent, providing data on capacity allocation, auction prices and flow patterns. For market participants, this information is critical for valuing capacity rights and integrating them into broader trading and investment strategies.
Financial investors are beginning to recognise the infrastructure-like characteristics of congestion rents. While direct investment in capacity rights is limited by regulatory frameworks, partnerships with traders or participation in transmission projects offer indirect exposure. The predictability of revenues on certain corridors, combined with the long-term nature of grid constraints, creates an asset profile that aligns with infrastructure investment criteria.
The persistence of congestion rents highlights a fundamental feature of the South-East European power system: physical constraints are not being eliminated, but monetised. As long as transmission capacity lags behind generation growth and market integration, price spreads will remain, and the rights to exploit them will retain value.
Cross-border auctions, therefore, are not merely administrative mechanisms. They are central to the financial architecture of the electricity market, converting physical limitations into tradable assets and stable cashflows. In a region defined by uneven infrastructure and rapid transformation, they represent both a constraint and an opportunity—one that continues to shape the economics of power flows across South-East Europe.