In 2024, Southeastern Europe experienced unprecedented volatility in wholesale electricity prices, which frequently surpassed €400/MWh and peaked near €1,000/MWh during certain hours. This surge reflects a deeper structural imbalance within the regional power system that has been developing for over a decade, moving beyond episodic price anomalies to a state of persistent market stress.
The transformation of Southeastern Europe from a peripheral part of the Central European electricity market into a structurally constrained zone is significant. Marginal scarcity pricing has become the norm, particularly during periods of high demand coinciding with hydrological and thermal stress. Unlike markets in Western or Nordic regions that benefit from redundancy in generation and transmission, Southeastern Europe operates with limited buffers on both fronts.
Central to this crisis is the region’s reliance on outdated thermal assets, including lignite and coal units nearing the end of their operational life. Additionally, hydropower resources are increasingly vulnerable to fluctuations in water availability. The summer of 2024 highlighted these issues as heatwaves coincided with reduced hydrological inflows, exacerbating cooling demands while thermal generation faced constraints due to maintenance and environmental regulations.
System simulations indicate that even minor deficits can lead to drastic price increases. For instance, Hungary’s grid showed that an additional scarcity of around 600 MW during peak hours could escalate prices into extreme territory. This scenario illustrates how closely the system operates near its limits; any loss of significant generation capacity or reduction in import levels can trigger widespread scarcity pricing across interconnected markets.
Traditionally considered a stabilizing mechanism, import capacity has become less reliable due to simultaneous scarcities in neighboring markets. In 2024, Central Europe also faced tight conditions during peak demand periods, which limited export capabilities into Southeastern Europe at critical moments. Consequently, rather than alleviating price pressures through market coupling, regional scarcity propagated across borders, intensifying volatility.
Network constraints further exacerbate these challenges. Despite formal integration into the Single Day-Ahead Coupling framework, actual transmission capacities often fall short of nominal levels due to congestion management practices and operational limitations. This reality leads to counterintuitive situations where regions with high prices export electricity while adjacent areas import at inflated rates.
Expanding generation capacity alone will not resolve these issues unless new additions are both substantial and strategically relevant. Simulations suggest that even a hypothetical increase of 3 GW in regional generation capacity would not have normalized prices amid the stress events experienced in 2024. This finding contradicts the assumption that incremental renewable energy additions will automatically lead to price reductions; instead, without timely and location-appropriate deployment, new capacity may merely displace existing generation during off-peak times without addressing peak shortages.
The rapid expansion of solar energy installations across Romania, Bulgaria, and Serbia further complicates matters. Price spikes typically occurred during late afternoons when solar output diminished but demand remained high. Without adequate firming capacity or storage solutions, additional solar generation does little to mitigate peak demand issues and may heighten intraday price volatility.
While some analysts have pointed to market power as a factor contributing to extreme prices, quantitative assessments indicate that it plays a secondary role. High peak prices persist even when supply bids are capped at inefficient fossil fuel production costs. This suggests that scarcity pricing results more from inadequate marginal capacity than from strategic bidding behaviors; even competitive markets would clear at elevated prices under such conditions.
The implications for stakeholders—including policymakers and system planners—are significant as Southeastern Europe enters a phase where electricity pricing is increasingly dictated by structural adequacy rather than fuel costs alone. The marginal price is now influenced more by the value of lost load than by traditional input economics related to gas or coal.
Industrial consumers are already adapting their operational strategies in response to this volatility through measures such as load shifting and self-generation initiatives. However, these individual responses do not address systemic adequacy challenges and may unintentionally reduce overall system predictability if implemented without coordination.
To effectively tackle these issues from an infrastructure standpoint, coordinated investments across three key dimensions are essential: enhancing firmed generation capacity for peak periods; increasing effective cross-border transmission capacities while addressing structural bottlenecks; and integrating flexibility resources such as storage and demand response mechanisms at scale to manage load profiles better.
If such coordinated actions are not undertaken promptly, Southeastern Europe risks entrenching itself within a high-price regime characterized by extreme spikes during adverse weather or network conditions. In this scenario, price volatility could become ingrained within the market structure rather than being viewed as a temporary phenomenon affecting investment decisions throughout the region’s industrial sectors.
The events surrounding electricity pricing in 2024 reveal not merely a failure within the market but highlight critical design gaps within the system itself. While market coupling has effectively transmitted scarcity signals across borders, it has not generated them independently. The pressing challenge for Southeastern Europe lies in whether it will respond adequately with investments aimed at enhancing adequacy and resilience or whether extreme price fluctuations will become standard fare during future periods of systemic stress.
