The energy landscape in Serbia faced significant challenges throughout 2025, highlighting the country’s vulnerability to hydrological variability. According to the February 2026 report from MAT – Macroeconomic Analyses and Trends, Serbia’s electricity sector, which includes electricity, gas, steam, and air-conditioning supply, experienced a decline of 1.8% in total output for the year. This downturn underscores the critical dependence on hydropower for domestic electricity generation.
In 2025, Serbia’s hydropower production decreased by approximately 18.5% compared to the previous year. This decline was not uniform; it began in April as prolonged drought conditions affected reservoir levels and river flows across the Balkans and Central Europe. Consequently, hydroelectric output remained significantly below both the levels recorded in 2024 and the medium-term historical averages.
The drop in hydropower generation had immediate repercussions for Serbia’s electricity system. Hydropower not only contributes a substantial portion of the national energy mix but also plays a vital role in system stability by providing flexibility during peak demand periods. As hydropower output diminished, thermal power plants were called upon to fill the gap, often resulting in increased operational costs.
Despite these challenges, Serbia managed to maintain overall electricity supply stability during 2025 through heightened thermal production and gradual solar energy expansion. By mid-year, public thermal power plants ramped up their output while solar installations began contributing more significantly to the grid. However, even these efforts were insufficient to fully counterbalance the losses from hydropower, leading to an overall decline in electricity output.
As the year progressed, conditions for hydropower production showed signs of improvement toward late 2025. November recorded a year-on-year increase of 16.9% in hydropower generation, followed by an additional rise of 8.1% in December. The recovery continued into January 2026 with an increase of 11.1%, driven by improved rainfall and snowfall across Serbia and neighboring regions.
These fluctuations are indicative of how critical weather patterns are to Serbia’s industrial and energy performance. The electricity supply sector is responsible for approximately 15.3% of Serbia’s total industrial production; thus, any significant changes in electricity generation directly impact broader economic metrics.
The implications extend beyond domestic consumption; reduced hydropower capacity can increase reliance on imported electricity during high-demand periods or when thermal plant availability is compromised. This reliance can escalate costs within the energy system and influence industrial pricing structures.
In addition to these challenges, Serbia’s energy sector grappled with other industrial issues such as declining refining output in petroleum and a slowdown in European manufacturing demand. These factors collectively revealed several structural vulnerabilities within the Serbian economy.
Furthermore, hydropower volatility emphasizes a broader dilemma faced by many Southeast European nations regarding energy transition strategies. While hydropower is a renewable resource that aligns with climate policy objectives, its dependency on increasingly unpredictable weather patterns raises concerns about reliability.
The variability associated with hydropower necessitates development of complementary energy sources that can provide stability when hydro production falters. Currently, lignite-fired thermal plants play this balancing role; however, their long-term viability is under scrutiny due to environmental regulations and shifting European climate policies.
Simultaneously, solar energy capacity is expanding within Serbia’s energy mix but introduces its own set of variability linked to daylight availability and seasonal cycles. The interaction between these two renewable sources requires enhanced grid management strategies and robust energy storage solutions.
This situation is not unique to Serbia; numerous countries across Europe are encountering similar challenges as they increase renewable penetration amidst changing climate patterns. However, Serbia’s specific circumstances—including its historical reliance on lignite and hydropower—make it particularly susceptible to these dynamics.
The volatility observed in hydropower generation during 2025 should not be viewed merely as an isolated incident but rather as a structural characteristic that will likely persist moving forward. The MAT report indicates that this duality—hydrological uncertainty alongside geopolitical risks—creates a complex energy-risk landscape for policymakers.
The partial recovery of hydropower generation at the start of 2026 offers temporary relief but does not eliminate underlying vulnerabilities within the system. For effective long-term planning, stakeholders must focus on enhancing resilience against fluctuations in hydropower output through diversified generation portfolios and strengthened transmission infrastructure.
Investments in technologies such as energy storage systems and pumped-storage hydro facilities could mitigate risks associated with hydrological volatility while fostering more sophisticated market mechanisms that accommodate flexible generation responses to supply fluctuations.
Overall, the events of 2025 serve as a crucial reminder that energy security encompasses not just fuel availability but also environmental factors and system adaptability within Serbia’s evolving industrial context.
