The integration of electricity markets within the Energy Community countries has encountered persistent structural barriers, hindering effective cross-border trading. Despite over a decade of efforts to align with European Union electricity legislation, the region remains fragmented, as highlighted in a report by Energy Traders Europe published in January 2026. This report assesses obstacles impeding efficient electricity trading across key countries including Albania, Bosnia and Herzegovina, Montenegro, North Macedonia, Serbia, Ukraine, Moldova, and Georgia.
Key impediments identified include regulatory inconsistencies, infrastructural limitations, and administrative hurdles that obstruct full integration with the EU electricity market. While these nations have formally adopted EU regulations under the Energy Community framework, the implementation of these rules varies significantly across borders.
The collective installed generation capacity in this region exceeds 80 GW, with around 30 GW from the Western Balkans and over 50 GW from Ukraine before significant infrastructure damage due to conflict. The energy mix is predominantly composed of hydropower, coal, and nuclear sources; however, renewable energy capacity is on the rise through various auction schemes and international investments.
Despite this considerable capacity, cross-border trading volumes remain low compared to those within the EU internal market. Limited market coupling and transmission capabilities contribute to this isolation. The incomplete implementation of EU legislation on electricity markets is a core issue; although countries have adopted the EU Third Energy Package aimed at liberalizing markets and promoting independent regulation, local frameworks often diverge in practice.
Government intervention in pricing and dispatch is still prevalent in many jurisdictions. State-owned utilities dominate wholesale trading environments, which diminishes market liquidity and constrains opportunities for independent traders.
Albania exemplifies challenges faced by hydropower-dependent systems. With over 95% of its electricity generated from hydropower plants, Albania’s supply is highly vulnerable to climatic conditions. The country alternates between being a net exporter during wet years and relying on significant imports during drier periods. To enhance price transparency and liquidity, Albania established the ALPEX power exchange in collaboration with Kosovo. However, this exchange remains small-scale without achieving cross-border coupling with adjacent EU markets due to existing transmission constraints towards Greece and North Macedonia.
Bosnia and Herzegovina’s market structure presents additional complexities due to its division into two political entities with distinct regulatory frameworks. The nation operates approximately 4.3 GW of coal-fired capacity alongside about 2.5 GW from hydropower sources. Although it can export electricity under favorable hydrological conditions, the lack of a unified exchange reduces overall market transparency; trading activities are primarily bilateral rather than facilitated through exchanges.
Montenegro’s strategic geographic position enhances its potential for regional integration through its connection to Italy via a 1,000 MW submarine cable—one of Southeast Europe’s crucial cross-border projects. However, limited domestic liquidity coupled with complex administrative procedures poses challenges for traders navigating multiple jurisdictions.
North Macedonia has made incremental progress towards liberalizing its electricity market and facilitating exchange-based trading. With around 1 GW of lignite capacity supplemented by growing solar generation and hydropower plants, recent developments have improved price transparency; nonetheless, incomplete alignment with EU balancing market rules restricts international participation.
Serbia stands out as the largest electricity market in the Western Balkans with approximately 8.5 GW of installed capacity dominated by state-owned Elektroprivreda Srbije (EPS) operating about 4.4 GW from lignite plants. The establishment of SEEPEX aims to foster day-ahead trading; however, much activity continues through bilateral contracts rather than through formal exchanges.
Ukraine’s electricity system is notably significant within the Energy Community framework with over 50 GW of installed capacity prior to conflict disruptions. Its grid synchronization with Europe in March 2022 marked a pivotal moment for integration; however, ongoing infrastructure damage limits trading volumes considerably.
Moldova plays an essential role in regional energy flows despite its smaller system size, heavily relying on imports primarily from Romania and Ukraine as it progresses through market reforms aimed at enhancing balancing structures.
Georgia operates mainly on hydroelectric power—over 80% of its generation—and experiences seasonal variations affecting trade patterns significantly. While reforms are underway to improve integration with European platforms, substantial barriers remain.
The overarching challenge across these regions is the absence of complete EU market coupling mechanisms that allow for efficient cross-border price signal responses through automated systems—an approach already established within EU member states’ day-ahead markets. Instead, Energy Community nations primarily utilize bilateral arrangements that limit responsiveness to price signals across borders due to existing transmission constraints that frequently operate at technical limits during peak demand periods.
The lack of developed balancing markets further complicates cross-border optimization as discrepancies in design hinder effective resource allocation among traders operating across different jurisdictions. Low liquidity levels persist as many regional power exchanges are still nascent with limited participation from international players.
Moreover, administrative complexities arise as traders must navigate diverse licensing requirements and reporting obligations when operating across multiple countries—further increasing operational costs.
Despite these considerable challenges facing regional integration efforts within the Energy Community framework, there remains a strategic commitment from the European Union towards enhancing cooperation in electricity trading as renewable generation expands alongside rising demand for energy resources across Southeast Europe.
The report underscores that addressing regulatory barriers while expanding transmission infrastructure and implementing effective market coupling strategies will be crucial steps toward achieving a fully integrated electricity market throughout Southeast Europe.
