Coal and lignite generation increased across Southeast Europe in Week 42, despite a decline in overall thermal electricity production. The shift highlighted the continued importance of solid fuels in meeting electricity demand as rising natural gas prices and changing generation conditions influenced dispatch decisions across the region.
Total thermal generation fell by 2.47% to 6,640.75 GWh, but the overall decline concealed a notable change in the generation mix. Gas-fired electricity production decreased by 7.43% to 3,415.40 GWh, while coal and lignite output increased by 3.40% to 3,225.35 GWh.
The shift coincided with a sharp increase in European gas prices, with the Dutch TTF benchmark averaging €86.54/MWh during the week. Higher fuel costs put additional pressure on the economics of gas-fired power plants, improving the relative competitiveness of coal-fired generation where plant availability, carbon costs and local market conditions supported its dispatch.
Developments at the national level reflected these changing market dynamics. Bulgaria increased thermal generation by 16.81%, primarily through additional coal and lignite output as electricity demand strengthened and renewable generation weakened. Serbia’s predominantly coal-fired thermal generation rose by 5.45%, helping meet higher consumption alongside lower hydropower output.
Romania increased production from both coal- and gas-fired plants, demonstrating the importance of a diversified thermal fleet when demand rises. Greece followed a different pattern, substantially increasing gas-fired generation as domestic market conditions and export opportunities supported additional output.
These contrasting trends underline the importance of national generation mixes, fuel prices and market conditions in determining how electricity systems respond to changing demand. Although gas-fired output declined across the region overall, individual countries continued to increase gas generation where operational requirements and electricity prices justified the additional costs.
For Southeast Europe, the changing generation mix presents a significant energy security and decarbonisation challenge. Coal remains capable of supplying large volumes of dispatchable electricity when demand increases or renewable production falls. However, continued reliance on solid fuels carries environmental costs and increasing exposure to carbon pricing and climate policy.
Within the European Union, coal-fired generators face carbon costs under the EU Emissions Trading System (EU ETS). In the Western Balkans, the gradual alignment of energy and climate policies with European requirements, alongside the EU’s Carbon Border Adjustment Mechanism (CBAM), increases the importance of carbon intensity for electricity producers and energy-intensive industries. The precise impact depends on the applicable rules, exemptions and implementation arrangements.
The transition away from coal therefore requires more than the installation of additional wind and solar capacity. Coal plants provide several services beyond electricity production, including dispatchable capacity, operating reserves and certain system-stability functions. Replacing their contribution requires a combination of technologies and market mechanisms capable of maintaining reliable supply as conventional units are retired.
Renewable generation can replace a substantial share of coal-fired electricity production, but wind and solar alone cannot guarantee equivalent dispatchability at every hour. Battery storage, hydropower, grid reinforcement, demand response, regional interconnections and flexible generation will all play important roles in managing variability and maintaining system adequacy.
Week 42 illustrated these challenges in practice. Bulgaria experienced a sharp decline in combined wind and solar generation at the same time as electricity consumption increased, prompting greater reliance on conventional power plants. Serbia also faced stronger demand and weaker hydropower output, while coal-fired generation increased to support the domestic supply balance.
Without sufficient alternative flexibility, periods of low renewable availability can increase dependence on electricity imports, expose consumers to higher regional prices or require adjustments to demand. The consequences depend on available interconnection capacity, neighbouring market conditions and the ability of other generation sources to respond.
The investment implications extend across the electricity sector. Developers planning new renewable projects must consider whether storage, balancing services and grid infrastructure will be sufficient to manage fluctuations in output. In markets where flexibility remains limited, greater renewable penetration can contribute to more pronounced price differences between hours, alongside potential curtailment and grid-connection constraints.
Industrial consumers face a similar challenge. As renewable penetration increases, periods of abundant generation may coincide with lower wholesale prices, while evening peaks or periods of weak wind and solar output can remain expensive. Batteries, flexible consumption and well-structured electricity procurement agreements can help businesses manage these changing price patterns.
For policymakers and investors, the central question is no longer simply how quickly coal generation can be reduced, but how its contribution to system flexibility can be replaced before capacity is retired. The pace of that transition will depend on the availability of alternative resources, infrastructure investment, market design and the cost of maintaining reliable electricity supply.
Week 42 demonstrated that coal and lignite remain operationally important across Southeast Europe, particularly when demand strengthens and renewable output weakens. At the same time, rising fuel-market volatility and carbon-related costs reinforce the need to develop alternatives capable of providing dependable electricity without perpetuating long-term dependence on carbon-intensive generation.
The region’s most significant investment opportunities may therefore lie in solutions that enable coal capacity to be phased out while preserving system reliability and limiting exposure to expensive imported gas and volatile cross-border electricity prices.
Courtesy of Virtu.Energy
