Serbia’s electricity system is approaching a moment of structural tension that is no longer a distant or speculative threat. It is unfolding now, in real time, in the daily dispatch decisions of operators, in the widening gap between generation capabilities and system needs, and in the increasingly visible fragility of balancing mechanisms that once seemed adequate. For decades, Serbia’s energy stability depended on a predictable cycle of coal baseload, hydropower flexibility and moderate, seasonally tied consumption patterns. That balance has fractured. The conditions that once underpinned the system have eroded, yet the new conditions that should replace them — large-scale renewable balancing capacity, storage, modernized grid architecture and diversified flexibility assets — remain underdeveloped.
The burden of navigating this unstable equilibrium falls overwhelmingly on Elektroprivreda Srbije (EPS). The company is trying to maintain reliability in an era defined by volatility, uncertainty and the rapid growth of renewable energy. But EPS is contending with forces that cannot be offset through operational improvisation alone. The system is shifting from a stable, vertically integrated model into a dynamic, partially liberalized and increasingly unpredictable terrain. And EPS, long accustomed to a role defined by steady thermal output and hydropower modulation, now finds itself exposed to pressures it was not designed to withstand.
At the heart of the problem is a simple but consequential truth: Serbia’s traditional balancing model is breaking down. The coal fleet, especially TENT and Kostolac, is aging, unreliable and frequently constrained by maintenance cycles, unforeseen outages or fuel-quality limitations. Hydropower, once the country’s reliable shock absorber, is increasingly diminished by climate-induced drought cycles, most recently manifesting in projections that 2025 will deliver one of the weakest hydrological years in Serbia’s modern energy history. Meanwhile, renewable energy — particularly wind generation in Vojvodina — is expanding quickly, creating new patterns of variability that require a flexible system capable of absorbing sudden surges and responding to abrupt declines.
EPS is therefore fighting on three fronts simultaneously: unpredictable thermal performance, volatile hydrology and intermittent renewable output. Each of these challenges would be significant on its own. Together, they form a structural imbalance.
The interplay of these pressures is felt most acutely in Serbia’s balancing market, which has become a barometer of system stress. In periods of high wind generation, EPS must reduce hydropower output or adjust coal dispatch to prevent oversupply and manage congestion. In periods of low wind or drought, the company must ramp thermal units or turn to imports. The constant toggling between surplus and deficit, between renewable abundance and renewable drought, creates a rhythmic instability that strains the entire system. As analysts from serbia-energy.eu have noted, Serbia is entering an energy era in which balancing is no longer a routine technical function but the defining operational challenge.
The consequences of this shift extend beyond operational discomfort. They affect the financial health of EPS, the investment climate for renewable developers and the long-term trajectory of Serbia’s energy transition. When EPS is forced to procure balancing energy from inefficient thermal units or from high-priced regional markets, costs escalate quickly. During critical episodes — especially in the winter months or during dry hydrological years — Serbia can be exposed to some of the most expensive electricity on regional exchanges. These costs erode EPS’s finances, reduce its ability to fund modernization and increase pressure on the state, which remains the ultimate guarantor of energy stability.
The unpredictability of balancing conditions also complicates renewable integration. Developers entering the Serbian market expect not only grid access but also a predictable balancing framework. When balancing prices spike or curtailment becomes more frequent due to congestion, the economic model of renewable projects weakens. Serbia’s ambition to attract billions of euros in renewable investment depends on the perception that the system can absorb new capacity without introducing excessive risk.
EPS’s balancing problem is therefore not simply a technical challenge. It is a constraint on national energy development.
To understand the roots of this dilemma, one must examine the changing character of Serbia’s electricity system. Coal units, once dependable workhorses, now operate under increasingly fragile conditions. Maintenance backlogs, mechanical failures and fuel-quality issues have become more common. Many units were built in the 1970s and 1980s and are operating far beyond their intended service life. Even when running, they are not designed for the kind of flexible ramping now required to manage renewable variability. Coal units prefer steady-state output; renewables force them into erratic patterns that reduce efficiency and accelerate wear.
Hydropower, which traditionally compensated for thermal inflexibility, is losing its reliability. As drought cycles intensify, reservoirs must be managed more conservatively. Operators must choose between generating enough to support the current year’s balancing needs and preserving water to prevent next year’s deficits. This tension becomes especially acute when hydropower is asked to balance wind variability in real time. If water levels are low, hydropower loses its ability to quickly adjust output, leaving EPS with fewer tools at precisely the moment more flexibility is required.
The growing presence of wind energy has added a new dimension to Serbia’s balancing landscape. The country’s wind farms generate most strongly during night hours and winter months, when demand is moderate and hydropower output is weakened by seasonal water patterns. This creates periods of high renewable penetration at times when the rest of the system is least prepared to absorb it. In these intervals, grid congestion in Vojvodina becomes more pronounced, forcing EPS and EMS to reduce renewable output or adjust other generation sources in ways that ripple across the system.
Adding to this complexity is Serbia’s position within the broader regional market. Electricity flows into and out of Serbia not only through country-to-country exchanges but through unmanaged loop flows originating from large renewable producers such as Hungary and Romania. Serbia is therefore affected by fluctuations in systems beyond its control. These external flows sometimes fill transmission corridors at moments when Serbia needs the space for its own balancing operations. When the system becomes saturated, Serbia must take defensive measures, often at high cost.
The cumulative effect of these pressures is a tightening balance between stability and volatility. Each year, the margin for operational error diminishes. Each drought cycle, thermal outage or wind surge tests the limits of EPS’s capacity to maintain equilibrium. The question is no longer whether the system will face balancing shortages, but how frequently and how severely these shortages will occur.
EPS is aware of this. Internally, the company has begun to discuss the need for a new strategy centered on flexibility, diversification and the gradual redefinition of its balancing responsibilities. But the legacy structure of EPS slows adaptation. The company still operates according to principles suited for a coal-hydro system, not for a system built on variability, rapid response and market-driven dynamics.
A profound structural transition is therefore approaching, and it requires Serbia to confront realities that have been deferred for too long. The first is that Serbia needs large-scale storage — not as an accessory but as a fundamental part of its electricity system. Pumped-storage hydropower projects such as Bistrica, once viewed as optional, must now be treated as strategic national infrastructure. Similarly, battery storage, while not yet deployed at scale in Serbia, will soon be necessary to manage short-term variability. Without storage, EPS will continue operating in crisis-response mode.
The second reality is that Serbia must expand its flexible generation portfolio. Fast-start gas units, for example, could provide a bridge solution while renewables grow and nuclear options are evaluated. Such assets could operate as peaking units, reducing dependence on coal ramping and hydropower depletion. The lack of flexible mid-merit generation is one of the most significant structural weaknesses in Serbia’s system.
A third reality is that EPS must overhaul its internal balancing and trading function. The company needs advanced forecasting tools for wind and solar, more sophisticated day-ahead and intra-day trading strategies, and a modern risk-management framework aligned with European market standards. Serbia will increasingly rely on cross-border and market mechanisms — not on improvisation — to manage volatility.
The final reality is political: Serbia must acknowledge that balancing responsibility cannot remain a hidden technical function. It is a central component of national energy policy, tied directly to security of supply, investment readiness and regional integration.
The coming structural break in Serbia’s power system is not an abstract concept. It is the point at which the legacy model of coal and hydropower balancing can no longer support the new reality of renewable variability, climate volatility and market interconnectedness. That point is approaching quickly. EPS, once the stable center of Serbia’s electricity system, is now operating at the edges of its structural limits.
If Serbia responds decisively — building storage, reinforcing the grid, introducing flexible generation, modernizing EPS’s balancing framework and aligning policy with the realities of a renewable-driven system — the country can navigate the transition with resilience. If these actions are delayed, Serbia will face recurring balancing crises, escalating costs and a loss of confidence among domestic and international investors.
EPS stands at the front line of this transformation. Its ability to adapt will determine whether Serbia’s energy transition proceeds through stability or through disruption. The balancing problem is no longer an internal EPS issue; it is the defining challenge of the next decade of Serbian energy policy.
