SEE power markets are entering the third quarter under a pricing framework that is increasingly driven by physical system fundamentals rather than fuel costs alone. During Week 25, this shift became particularly evident. Although TTF gas futures declined by 14.8% to an average of €41.76/MWh, electricity prices across much of the region moved higher. This divergence highlights a market where power prices are no longer responding primarily to gas movements, but instead to the changing balance between electricity supply and demand.
Regional electricity consumption increased by 3.1%, reaching 16.34 TWh, as warmer weather and rising cooling requirements began influencing afternoon and evening demand patterns. At the same time, renewable generation weakened. Hydropower output fell by 4.7%, while wind generation declined by 4.4%. To maintain system stability, thermal generation expanded by 19.4%, underscoring the growing importance of dispatchable capacity even in an environment of lower gas prices. The result was a tighter power market despite softer fuel costs.
Looking ahead, Q3 price formation is expected to be shaped primarily by weather conditions, renewable availability and network constraints. Temperature trends, hydrological conditions, wind performance and cross-border congestion are likely to play a greater role than fuel markets in determining regional price levels. Italy is expected to remain the region’s premium market during periods of weak hydro and wind generation, while Hungary, Romania and Croatia may continue to face exposure to supply tightness originating from Central Europe. Serbia’s position will depend on the balance between its domestic coal and hydro generation portfolio and the influence of higher-priced neighbouring markets.
The key downside risks for electricity prices include strong solar generation, weaker weekend demand and a recovery in hydropower production. Conversely, the most significant upside risks stem from prolonged heatwaves, low wind output, constrained hydro resources and increasing scarcity during evening ramping periods. As the summer season progresses, the market is moving toward a structure where daily average prices provide only a partial picture of commercial exposure. The most critical pricing signal is increasingly becoming the cost of firm electricity delivery after sunset, when renewable output declines and system flexibility becomes essential.
