Europe’s electricity balancing market is expanding deeper into Southeast Europe, creating greater competition among reserve providers while also highlighting the region’s uneven readiness to exchange flexibility across borders.
ENTSO-E’s 2026 market and electricity balancing reports documented the rapid expansion of common European platforms for automatically and manually activated frequency-restoration reserves. The integration process has continued during 2026, with Bulgaria’s transmission system operator ESO joining MARI on 18 February 2026, while other regional operators are preparing to connect to the platforms.
MARI brings together bids for manually activated frequency-restoration reserve, or mFRR, into a common European merit order. PICASSO provides a similar mechanism for automatically activated frequency-restoration reserve, or aFRR.
The platforms enable transmission system operators to activate eligible reserve bids from participating countries when those offers are more competitive than available domestic alternatives and sufficient cross-border transmission capacity exists.
For Southeast Europe, Bulgaria’s participation is particularly significant because it links a power system with substantial nuclear, thermal and hydropower capacity, alongside a growing battery-storage sector, to a much broader European balancing pool. Greece’s IPTO has also been preparing for participation, while Hungary is advancing its integration and Romania is expected to follow according to a later timetable.
Greater integration could reduce balancing costs by expanding the number of competing reserve providers. It could also limit extreme activation prices when domestic markets face shortages of available flexibility.
However, cross-border coupling creates greater competition for domestic providers. Hydro plants, batteries and flexible generators that previously benefited from relatively limited national competition could be activated less frequently or receive lower marginal prices once they compete within a much larger European merit order.
Recent market volatility illustrates why balancing integration is becoming increasingly important. Southeast European electricity markets recorded significant intraday price movements during the summer and early September, with Romanian quarter-hourly day-ahead prices on one September delivery day moving from approximately €33/MWh to more than €313/MWh during the evening.
Such movements reflect the combined impact of solar generation, demand, conventional power-plant availability and cross-border transmission capacity. They also increase the financial consequences of forecasting errors for market participants.
A renewable generator that overestimates its evening production must cover the resulting shortfall through the market or face imbalance-settlement costs. Suppliers that underestimate demand face the opposite exposure. As quarter-hourly trading and settlement become more widespread, even relatively small forecasting errors can produce larger financial consequences.
More liquid intraday markets allow market participants to correct their positions before delivery, while common balancing platforms provide an additional mechanism when commercial trading can no longer fully eliminate deviations.
The integration process remains uneven across the region. EU markets including Hungary, Romania, Bulgaria, Croatia, Slovenia and Greece are becoming increasingly embedded in European market structures, while Serbia, Montenegro, Bosnia and Herzegovina, Albania, Kosovo and North Macedonia remain at different stages of regulatory and technical alignment.
This creates a gap between physical and commercial integration. Western Balkan power systems are physically connected to the EU network, but their flexibility cannot always participate in the same European balancing merit order.
The expansion of MARI and PICASSO also has important implications for battery-storage investment. Many projects have been developed around a combination of energy arbitrage, capacity-related revenues and balancing-market income. European integration could significantly expand the addressable market, but it could also put downward pressure on balancing prices by increasing competition between reserve providers.
Experience from already integrated markets suggests that balancing-price spreads can narrow as additional providers enter the common market. The investment case for batteries will therefore depend less on occasional extreme activation prices and increasingly on fast response, high availability and the ability to stack multiple revenue streams.
This environment is likely to favour storage projects with sophisticated dispatch systems, accurate state-of-charge management and access to both intraday and reserve markets. Batteries designed primarily around historic imbalance-price spikes could face greater revenue uncertainty as regional competition increases.
Hydropower remains a strong competitor for balancing services. Reservoir-based plants can provide upward and downward regulation without the same short-duration limitations faced by many battery systems. However, hydro availability remains heavily dependent on weather conditions, while drought can significantly reduce the amount of generation that operators are willing or able to reserve for balancing.
Demand response could provide another increasingly important source of flexibility. Industrial consumers capable of reducing or shifting electricity consumption could participate directly or through aggregators, although regulatory, metering and market-access frameworks remain relatively underdeveloped across parts of Southeast Europe.
Montenegro’s draft rules for balancing services illustrate the direction of regional reform. The proposed framework covers frequency containment reserve, aFRR, mFRR and replacement reserve, while also allowing aggregation of generation, consumption and storage resources.
The framework introduces requirements covering prequalification, data exchange, activation, settlement and performance, bringing Montenegro closer to the structure of a more integrated European balancing market.
Serbia already has a more developed balancing framework than several neighbouring Western Balkan countries. However, deeper integration will require further legal alignment, technical compatibility and reciprocal access to cross-border transmission capacity.
The risk is that EU member states gain access to increasingly liquid European balancing markets while non-EU Western Balkan countries remain more dependent on national arrangements. Such fragmentation could add to the competitive disadvantages already associated with incomplete electricity-market coupling and other forms of European market integration.
As more transmission system operators join MARI and PICASSO, average balancing-energy costs are likely to become more competitive across the connected region. The largest benefits could emerge in smaller or concentrated national markets that previously relied on a relatively narrow group of reserve providers.
However, greater integration will not eliminate price volatility. Cross-border balancing exchanges can be restricted when transmission capacity has already been used by day-ahead and intraday markets or when capacity must be retained for system-security purposes. During a widespread regional shortage, several countries could also require upward reserves at the same time, pushing the common balancing price significantly higher.
The outlook for autumn and winter is therefore mixed. Under normal system conditions, deeper market integration should reduce some national price extremes. During periods of nuclear outages, weak hydropower availability or strong gas-driven demand, however, the same interconnected platforms could transmit scarcity conditions and higher balancing prices across a much wider area.
For battery developers, the emerging market points towards lower average balancing spreads but continued exposure to extreme price events. Traders and balance-responsible parties will face stronger incentives to improve quarter-hourly forecasting and portfolio management rather than treating balancing markets as a routine source of energy.
Europe is gradually replacing fragmented national reserve markets with a common flexibility market. Southeast Europe stands to benefit from that transition, but the gains will depend on whether its transmission networks, control systems and market rules can develop quickly enough to match the growing need for flexibility created by the region’s renewable expansion.
Elevated by Virtu.Energy
