Hydropower has always occupied a privileged position in South-East Europe’s electricity systems. Before solar and wind entered the mix, hydro served simultaneously as baseload, mid-merit and balancing capacity. It delivered firm energy during wet seasons, provided dispatchable flexibility for system operators and anchored frequency stability across weak and heavily fragmented Balkan grids. Yet as the region shifts toward ever greater shares of wind and solar, the original role of hydropower becomes contested. What used to be the single most versatile generation asset in SEE has become the cornerstone of a much more complex operational equilibrium, forced to stretch in multiple directions at once while no longer being able to fulfill all system needs.
The tension begins with the transformation of how hydropower behaves in a renewable-saturated environment. Historically, large reservoirs allowed operators to shape daily and seasonal output with ease. Hydro could run like a baseload plant during normal inflow conditions and shift into fast-ramping balancing mode when thermal units tripped or demand surged. But with wind and solar now embedding volatility on timescales ranging from seconds to seasons, hydro faces contradictory expectations. It is asked to act as baseload when solar collapses at sunset, as mid-merit when wind output fluctuates and as fast-response balancing when imbalances spike due to renewable forecast errors. This triple requirement stretches hydro beyond its natural operating envelope.
The fundamental distinction between hydro and solar or wind is predictability. Hydro depends on rainfall and seasonal inflows. Solar depends on diurnal and cloud patterns. Wind depends on atmospheric pressure dynamics that swing unpredictably across SEE geographies. When wind and solar expand rapidly, their combined variability overwhelms the stabilising role hydro once played. In SEE, hydro is not simply balancing; it is being forced into partial baseload mode to compensate for renewable intermittency at exactly the moments when reservoirs must be conserved. Hydro flexibility is thus consumed faster, and reserves diminish long before seasonal cycles are complete.
In Serbia, for example, hydropower once served as the primary balancing layer under EPS. But as wind farms in Vojvodina and solar parks across central Serbia grow, hydro’s balancing function increases precisely when annual inflows become more volatile due to climate variability. During dry winters hydro must avoid over-discharge, yet this is when solar is weakest and wind unpredictable. The system then faces a paradox: the technology best suited for balancing is least available at the moments balancing is required. Solar accelerates hydro depletion in wet years by flattening midday prices and pushing operators to store water for evening ramps, while wind causes sudden imbalance events that force hydro to release water unpredictably. Hydro therefore shifts from strategic reserve to daily firefighting.
Montenegro and Albania reveal a different hydro dynamic. In these countries hydro historically was the baseload. Large dams on the Drin and Morača rivers once produced steady output, modulated gently across the seasons. Solar and wind now disrupt this equilibrium. When solar peaks in mid-summer, hydro output is often constrained by low water levels, meaning the system faces high solar output but low hydro support for balancing. When hydro peaks in spring, solar output is simultaneously strong and load is reduced, creating midday surpluses that neither hydro nor the transmission network can fully absorb. The result is a growing need for curtailment, but also a loss of hydro’s baseline economic logic. Operators increasingly store water to shape output around renewable cycles, which reduces annual generation and raises volatility in export flows.
In Croatia and Bosnia, hydro faces a different tension. As coastal wind in Croatia and mountainous wind in BiH produce rapid ramps, hydro is expected to stabilise frequency and voltage across long, thin transmission corridors. Hydro performs this role well under moderate conditions, but when wind surges coincide with inflows, hydro must avoid overshooting maximum safe discharge. When wind collapses quickly, hydro must accelerate output even if reservoir levels are suboptimal. Across the year this produces hydrological inefficiencies that were absent when hydro balanced thermal plants rather than renewables.
Hydro’s role as balancing resource is further undermined by the evening peak problem, the most structurally significant imbalance introduced by solar growth. Solar disappears quickly at sunset, leaving the system exposed to a sharp ramp in demand minus renewable output. In thermal-heavy systems, gas plants or modern flexible coal units absorb this ramp. In SEE systems, hydro is the only technology capable of providing such flexibility. But hydro cannot meet evening peaks if reservoir inflows are insufficient, if environmental constraints limit discharge or if earlier balancing actions have already depleted storage. This mismatch increases balancing prices, widens intraday spreads and forces greater dependence on cross-border imports. Traders operating through mechanisms like electricity.trade increasingly price in hydro inadequacy during these ramp periods, creating recurring arbitrage windows.
Hydropower’s inability to function simultaneously as baseload and as balancing resource becomes particularly visible in dry years. When inflows fall, hydro retreats into conservation mode, running only when needed to prevent system instability. Yet this is precisely when wind droughts and solar seasonal weakness increase the demand for balancing energy. The SEE grid then shifts from a hydro-balanced environment to an import-balanced one. Countries such as North Macedonia and Montenegro experience multi-day shortages that require imports from Bulgaria or Greece at high marginal gas-driven prices. Hydropower retains strategic value, but it cannot satisfy the system’s new volatility profile alone.
The future role of hydropower in SEE is therefore shifting away from energy production toward flexibility provision. Hydro will not disappear as a baseload asset, but its baseload contribution will shrink as solar and wind dominate midday and seasonal energy volumes. Hydro will increasingly act as the system’s intraday stabiliser, evening-peak responder and reserve provider. This requires re-optimisation of reservoirs, recalibration of dispatch algorithms and a shift in system-operator philosophy from deterministic hydro scheduling to probabilistic hydro balancing.
The arrival of batteries and hybrid wind–solar–storage projects will accelerate this change. Hydro will no longer be asked to compensate for every forecast deviation. Storage will absorb short-term shocks; hydro will stabilise medium-term imbalances. But until storage reaches scale, SEE hydropower remains the most valuable flexibility asset in a region short of gas, lacking fast-ramping thermal capacity and structurally vulnerable to renewable synchronisation events.
Hydro is no longer the baseload foundation of SEE. It is the balancing skeleton of a renewable-dominated system. Its scarcity during critical periods will define spreads, shape imbalance settlements, determine who imports and who exports, and dictate the long-term value of every kilowatt of wind and solar. Wind and solar may supply the electrons, but hydro supplies the stability—and as the renewable fleet expands, that stability becomes the most constrained commodity in the region.
If SEE fails to protect and modernise hydro’s balancing function, systems risk entering a period of structural instability: predictable peak shortages, multi-hour imbalance spikes, forced curtailment of renewable generation and rising dependence on interconnectors and gas-linked regional volatility. If SEE succeeds, hydro becomes the cornerstone of a flexible, renewable-saturated grid—still central, but no longer alone.
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