For much of the past decade, the dominant assumption shaping policy and market design in Southeast Europe has been that electricity market integration would follow a linear path. National markets would first converge regionally, harmonising rules and price formation across the Balkans, and only then gradually integrate into the wider European internal electricity market. The Montenegro–Italy market coupling challenges this assumption at its core. Rather than reinforcing a single regional convergence process, it exposes Southeast Europe as a space of fragmented integration paths, each aligned with different European price centres.
The core reason for this fragmentation lies in geography combined with market economics. Electricity markets do not converge simply because regulators wish them to. They converge toward the strongest price signals they are physically and institutionally connected to. In Southeast Europe, these signals are no longer uniform. Instead, they originate from multiple European centres with distinct generation mixes, demand structures and volatility profiles.
Montenegro’s coupling with Italy firmly anchors it to the Mediterranean price zone. Italy’s market is shaped by gas marginal pricing, strong summer demand, growing solar penetration and persistent congestion between north and south. These characteristics produce price dynamics that differ fundamentally from those of Central Europe. Once Montenegro couples to Italy, it absorbs these dynamics directly, regardless of what happens elsewhere in the Balkans.
At the same time, Serbia and Romania are structurally oriented toward Central Europe. Their strongest interconnections and market coupling trajectories run through Hungary and onward into Austria and Germany. Central European price formation is increasingly influenced by nuclear baseload, large-scale wind generation and deep intraday liquidity. Volatility there is driven by wind forecast errors and cross-border congestion rather than fuel scarcity. Serbia and Romania therefore converge toward a very different reference market than Montenegro.
Greece occupies yet another position. Already fully integrated into the EU internal market, it acts as a southeastern extension of the Italian and Balkan systems simultaneously. Greece’s prices often correlate with Italy during peak hours but retain local characteristics due to grid constraints and renewable penetration. This places Greece in an intermediate role, neither purely Adriatic nor purely Balkan.
These differing orientations mean that Southeast Europe cannot realistically evolve into a single, uniform electricity market with one dominant price signal. Instead, it becomes a region of overlapping corridors. The Adriatic corridor transmits Mediterranean gas-solar dynamics west to east. The Pannonian corridor transmits Central European wind-nuclear dynamics north to south. The southeastern corridor around Greece links into the Eastern Mediterranean and, increasingly, Middle Eastern energy flows.
The Montenegro–Italy coupling accelerates this fragmentation by bypassing the traditional regional integration sequence. Montenegro effectively leapfrogs internal Balkan coupling steps and embeds itself directly in an EU core market. This creates asymmetry. Montenegro achieves higher liquidity, stronger price signals and faster regulatory alignment than larger neighbours that remain partially integrated.
This asymmetry has tangible market consequences. Price correlations within SEE weaken rather than strengthen. During certain hours, Montenegro’s prices move in lockstep with Italy while diverging sharply from Serbia or Bosnia and Herzegovina. At other times, regional hydro conditions dominate, briefly re-aligning prices before divergence resumes. For traders and investors, this means that “SEE exposure” is no longer a meaningful single category. Exposure must be defined corridor by corridor.
From a system planning perspective, fragmented convergence complicates infrastructure development. Transmission projects justified under assumptions of regional price convergence may fail to deliver expected benefits if markets align in different directions. Investments increasingly need to be evaluated in terms of which European price centre they connect to, not merely how they improve regional connectivity.
Policy coordination also becomes more complex. Harmonising market rules across SEE is harder when countries are synchronising with different EU frameworks at different speeds. Montenegro’s regulatory alignment with Italy imposes constraints that may not apply in Serbia or Bosnia and Herzegovina. This creates regulatory patchwork rather than uniformity.
Yet fragmented convergence is not inherently negative. It reflects economic reality. Markets integrate where value is highest and where physical connections allow price signals to flow. The mistake would be to force artificial uniformity at the expense of efficiency. Montenegro–Italy coupling illustrates that deeper integration with Europe does not require perfect regional symmetry.
By the 2030s, Southeast Europe is likely to resemble Southern Europe more broadly: a set of interconnected but distinct markets, each responding to different marginal drivers, yet capable of trading efficiently across borders. The challenge for policymakers is to manage this diversity rather than deny it.
In this sense, Montenegro–Italy coupling is not a deviation from integration, but a more realistic expression of it. It reveals that the future of SEE electricity markets lies not in one grand convergence, but in managing multiple integration paths that coexist, overlap and occasionally compete.
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