South East Europe is emerging as one of Europe’s key electricity-market laboratories, with fast solar growth alongside legacy coal and hydro output volatility. The region also faces constrained grids, incomplete market coupling, rising storage requirements and carbon-border pressure. The interaction of those factors is expected to shape risk and investment priorities across the 2026–2028 period.
The base-case outlook for 2026–2028 is continued volatility rather than a single direction for wholesale prices. Average prices may stay below the extreme levels recorded during the energy-crisis years, but the internal structure of prices is expected to matter more than the average. ACER’s analysis of 2024 price spikes and the persistent 2025–early 2026 SEE–Central Europe price gap supports this assessment.
Price shape: midday solar weakness and evening scarcity exposure
Midday prices are expected to weaken as solar generation expands. Evening prices are forecast to remain exposed to scarcity conditions when demand is high and flexible capacity is limited. This pattern links price volatility to both generation profiles and system flexibility availability.
The outlook implies that trading and balancing needs will be sensitive to intraday timing, not only annual or seasonal averages. It also points to a market environment where scarcity risk can persist into peak hours even if crisis-era average levels do not return.
Investment signals: storage, grid capacity and market design
The first major investment signal highlighted for the region is storage, with batteries moving from optional additions toward core infrastructure. Bulgaria’s RESTORE-backed storage push includes official support for 3,000 MWh of usable capacity and wider project approvals around 9.7 GWh. The programme is presented as evidence of how quickly flexibility investment is progressing in the market.
A second signal concerns grid value, covering transmission capacity, interconnectors, congestion management and cross-border allocation. ACER has recommended better use of available network capacity, implementation of the 70% cross-zonal capacity requirement, expanded flow-based capacity calculation and extension of market coupling to non-EU neighbors. These measures are framed as decisive for how power flows translate into market outcomes.
A third signal relates to market sophistication as trading granularity increases. The EU’s move to 15-minute day-ahead trading reflects a system in which electricity value changes within the day. South East Europe is described as needing trading, forecasting and balancing capabilities aligned with that more granular reality.
Carbon exposure and trade effects under CBAM
A fourth investment driver is carbon exposure through CBAM impacts on commercial relationships between the EU and Western Balkans. The Energy Community reported a 25% fall in commercially scheduled exchanges between the EU and Western Balkans in Q1 2026. It also reported that day-ahead prices in Contracting Parties were on average €30/MWh lower than neighboring EU markets.
This carbon-related trade shift is presented alongside the region’s broader price-shape dynamics. It contributes to how cross-border commercial volumes and pricing differentials may evolve during the period covered by the outlook.
Likely winners: flexibility assets, traders, renewables with storage and grid investors
The outlook identifies flexible assets as first winners, including batteries, pumped hydro, flexible hydro operation, demand response and fast-ramping plants. These resources are described as benefiting from price spreads and periods of system stress. Their role is linked directly to scarcity exposure in evening hours.
Sophisticated traders and optimizers are also highlighted as likely winners as markets move toward negative prices and more volatile intraday conditions. With increased reliance on 15-minute products, value shifts toward forecasting capability and flexibility management rather than simple volume-based approaches.
Renewable projects with storage, hybrid profiles or strong offtake structures are identified as another group of winners. Standalone merchant solar remains part of expected build activity, but its risk profile is described as becoming more challenging in this environment.
Industrial buyers with flexible demand are listed among likely winners as well. Companies able to shift consumption into low-price hours can convert volatility into savings through operational flexibility aligned with intraday price patterns.
The final winner category in the outlook is grid and infrastructure investors. Transmission reinforcement, substations, digital grid technologies and interconnectors are described as central to market integration across the region.
Likely losers: unhedged consumers, exposed solar profiles and aging coal
The outlook also sets out likely losers tied to exposure without mitigation tools. Unhedged consumers are expected to remain exposed to price spikes when scarcity conditions occur. Standalone solar projects without storage or shape protection may face declining capture prices under evolving intraday patterns.
Aging coal assets are described as facing rising carbon, pollution and financing pressure during the period. Utilities that delay transition planning are expected to risk losing export revenue and market position if market coupling or integration dynamics change faster than their strategies allow.
The outlook further notes that policymakers who slow market coupling could leave consumers paying for inefficient fragmentation across borders. It links this risk directly to how cross-border allocation affects both pricing outcomes and system efficiency.
Scenario drivers: hydro performance, gas volatility, outages and CBAM friction
The upside case for South East Europe depends on faster storage deployment, stronger grids, market coupling progress, better balancing markets and industrial demand response reducing scarcity events while improving renewable integration. In that scenario, the region would function as a clean-power corridor linking the EU with Western Balkans through improved integration mechanisms.
The downside case is described as equally plausible if multiple stressors coincide. A hot and dry summer combined with weak hydro output could be amplified by gas-price volatility, grid outages and CBAM-related trade friction. Together these factors could produce another period of severe price stress across the same 2026–2028 window.
The outlook frames electricity value in time-specific terms tied to location constraints and carbon sensitivity rather than treating it as a simple commodity sold by volume over short intervals. That shift is presented as central to how investment choices align with market outcomes across South East Europe.
Elevated by virtu.energy
