South-East Europe has entered the decisive phase of its energy transition, a moment when renewable expansion has become irreversible yet system adaptation remains incomplete. Across Serbia, Montenegro, Albania, Bosnia and Herzegovina, North Macedonia and Croatia, wind and solar are accelerating faster than the physical and institutional infrastructure required to support them. The result is a regional electricity system moving toward high renewable penetration while still structurally tied to coal, constrained hydropower, long-inadequate transmission networks and balancing markets designed for a previous era. In this evolving landscape the primary differentiator between countries will not be who builds the most wind turbines or solar parks, but who builds the most flexibility alongside them. Flexibility—fast ramping, storage, system inertia, interconnection management, demand-side responsiveness—is the new baseload of the Balkans.
The shift toward high renewable dependency is visible everywhere, though each country presents a different legacy, different vulnerabilities and different outlooks. The common thread is that wind and solar do not displace baseload; they displace predictability. They compress what used to be slow-moving operational dynamics into minute-by-minute imbalances. In systems historically dominated by lignite and large hydropower, that volatility reverberates through dispatch patterns, grid stability, cross-border flows and the economic logic of every megawatt-hour produced. South-East Europe now faces an unavoidable truth: the physics of renewables will dictate the future more authoritatively than policy targets. Countries that understand this—and invest in flexibility accordingly—will stabilise their systems and monetise renewable surpluses through platforms such as electricity.trade. Those that fail to anticipate these changes will experience curtailment, rising balancing penalties, system instability and recurring dependence on expensive imports during seasonal stress.
To understand how the region will evolve between now and 2040, it is necessary to examine the interplay of wind and solar, baseload resources, balancing availability and grid-access risk across all SEE markets, not as separate national stories but as interdependent pieces of a regional energy organism.
Serbia: A system caught between baseload inertia and renewable volatility
Serbia’s electricity system remains the gravitational center of the Balkans. Its lignite fleet historically delivered stable output but now exhibits increasing unreliability as mines degrade, maintenance cycles lengthen and operational stress rises. Wind capacity in the Banat zone and accelerating solar deployment introduce daily and seasonal variability that the thermal fleet is unable to follow. Coal plants were not engineered for constant cycling, and even minimal ramping can inflict mechanical and economic damage. Hydropower once compensated for these weaknesses, yet climate volatility has reduced predictability. Winter deficits and summer surpluses produce a system that oscillates between being over-supplied at midday and structurally short during evening peaks. Every megawatt of new wind and solar intensifies this mismatch.
Balancing responsibility in Serbia exposes producers to volatility-driven financial risk, because EPS often relies on expensive units for imbalance correction. As renewable penetration rises, imbalance costs rise with it. Grid-access risk forms another layer of uncertainty. Many 110 kV nodes in Vojvodina and central Serbia cannot absorb simultaneous injections from multiple new solar plants. Without large-scale storage, Serbia risks entering a cycle where renewable growth pushes the system toward curtailment faster than transmission upgrades can be executed. The long-term consequence is simple: wind and solar will expand, but their value will collapse unless flexibility investment accelerates.
Montenegro: Hydropower heritage, limited baseload, large flexibility potential
Montenegro sits on the opposite end of the structural spectrum: a small system with minimal thermal baseload, substantial hydropower and one uniquely strategic asset—the submarine cable to Italy. Hydropower provides Montenegro with natural flexibility, but its capacity is insufficient to stabilise regional renewable volatility unless paired with new storage and upgraded transmission corridors. Wind and solar in Montenegro remain modest in installed capacity, yet as they scale, the absence of firm capacity becomes visible. Montenegro often swings from surplus to deficit as inflows change and regional flows shift. The hydropower fleet cannot always ramp to match wind and solar fluctuations, nor can it absorb deep midday solar surpluses if the Italy cable is constrained or undergoing maintenance.
Montenegro’s grid access risk is less about internal congestion and more about regulatory clarity and investor visibility. While new legislation offers compensation for curtailment, the mechanisms are untested. Solar and wind investors must navigate connection queues, evolving auction schemes and the uncertainty of how system operators will prioritise renewable integration when voltage stability is at risk. Yet Montenegro also holds the potential to become a regional balancing exporter. If it builds storage, upgrades hydropower flexibility and maximises the Italy cable, Montenegro’s system could serve as a renewable shock absorber for surrounding countries. As renewable volatility spreads across the region, Montenegro’s role will grow—not due to its renewable volume, but due to its flexibility capacity.
Albania: A hydro system learning to live with non-hydro renewables
Albania has the highest hydropower share in Europe, a characteristic that creates both opportunity and structural risk. The country’s baseload is essentially rainfall, and rainfall has become erratic. Solar and wind enter a context where baseload conditions vary seasonally and unpredictably. Albania can experience deep surpluses in wet spring months, forcing it to spill water and curtail any added renewable output, then swing into near-emergency deficits during dry summers or cold winters. Solar helps offset summer deficits, yet solar’s midday generation does not address winter peaks, nor does it provide firmness when hydro falters.
Albania’s grid is not yet designed for multi-node renewable injection. Major upgrade needs exist around western coastal areas, 110 kV reinforcement corridors and mountainous wind zones. Without these reinforcements, Albania faces rising curtailment risk and increasing dependence on imports for balancing. Cross-border capacity with Montenegro, Kosovo and Greece becomes the country’s true stabilisation tool. But Albania’s connection to Greece also exposes it to Greek price volatility, which is often shaped by gas-fired generation. This risk becomes more pronounced as renewable penetration deepens and balancing resources remain hydro-dominated.
Albania’s 2030–2040 horizon is defined by one structural question: can the country diversify beyond hydro fast enough to stabilise its system? If Albania adds wind, solar and storage coherently, it can transform into a renewable-excess system that trades efficiently via electricity.trade. If it fails to add flexibility, it will remain a system defined by hydrological luck rather than energy planning.
Bosnia and Herzegovina: A coal-dominated system facing renewable pressure
Bosnia and Herzegovina remains the most coal-dependent system in the Western Balkans. Coal provides the majority of baseload, which stabilises the system but creates a technological mismatch with growing wind and solar. Coal units in BiH operate best under steady output—they cannot ramp quickly or frequently without damaging equipment. As wind projects along the Dinaric mountains and solar developments across Herzegovina grow, the country faces a balancing challenge: renewables push down midday demand for coal output, yet coal cannot flex downward without triggering start-up or stability issues. Thermal plants therefore maintain minimum load, and renewable energy is curtailed, even in cases when it could be economically dispatched.
Balancing markets in BiH are structurally complicated by the country’s political fragmentation. The balancing entity structure is functional but lacks the liquidity and transparency needed to support high renewable penetration. Grid-access risk is substantial, with thousands of megawatts of requested solar and wind capacity far exceeding the transmission system’s ability to integrate them. Unless BiH invests in grid upgrades, renewable developers face delays, curtailment and inability to export.
By 2030 Bosnia and Herzegovina will be forced into an identity choice: remain coal-centric at increasing cost or embrace flexibility development. The country’s renewable potential is extraordinary, but without storage and fast-ramping generation, it risks becoming a renewable bottleneck—a system where renewable energy exists on paper but not in operation.
North Macedonia: A shrinking thermal fleet and the rise of hybrid solutions
North Macedonia’s system is fragile because its baseload—the Bitola and Oslomej coal plants—approaches end-of-life while renewable capacity grows rapidly. Without immediate thermal replacement, the system becomes vulnerable to evening deficits, winter shortages and balancing spikes. Solar expansion around Štip and Sveti Nikole, combined with growing wind capacity, increases midday surpluses but deepens evening ramps that coal units cannot support.
North Macedonia relies heavily on cross-border imports for balancing, especially from Greece, where gas-fired marginal pricing dictates cost. When Macedonian renewables underperform, and Greece experiences simultaneous scarcity, the system becomes exposed to extreme balancing price volatility.
Grid-access risk arises from congested corridors connecting eastern solar zones with load centers. Hybrid renewable projects—solar + storage, wind + solar + storage—represent the country’s most promising solution. By 2040 North Macedonia could become a flexibility-centered system if storage deployment accelerates. Without it the system falls into chronic thermal–renewable mismatch, becoming dependent on expensive imports and vulnerable to curtailment.
Croatia: A more integrated market, still chasing flexibility
Croatia is the most structurally advanced SEE market due to EU integration, diversified generation and deeper market coupling. Yet even Croatia faces the same fundamental problem as its non-EU neighbours: renewable expansion outruns flexibility deployment. Dalmatian wind ramps challenge southern grid stability, while solar growth across Slavonia and inland regions creates midday price flattening that spreads into the coupled markets of Slovenia, Hungary and beyond.
Baseload in Croatia is anchored by the Krško nuclear plant and domestic gas units. Nuclear offers stability but not flexibility; gas offers flexibility but at high marginal cost. Hydropower contributes both energy and ramping but is increasingly constrained by seasonal variability. As renewable penetration increases, Croatia must rely more on gas flexibility unless battery storage or pumped hydro expansions materialise.
Grid-access risk manifests in the coastal areas where transmission lines are already heavily loaded. Curtailment becomes more likely as multiple wind farms push power northward along constrained routes. Despite Croatia’s strong interconnections, bottlenecks persist, particularly during high renewable output.
Croatia’s outlook to 2030 is one of growing renewable volume and moderate flexibility development. To 2040, the system bifurcates: either Croatia becomes a flexibility-rich, renewable-exporting hub aligned with EU balancing markets, or it enters a phase of rising curtailment and expensive balancing driven by imported gas during renewable droughts.
The regional synthesis: Flexibility as the new strategic currency
Across the Western Balkans one principle governs the success of the renewable transition: flexibility is more valuable than capacity. Wind and solar provide energy, but flexibility provides security. Systems built around coal or hydro dominance struggle to integrate the volatility of renewables because their baseload resources operate on fundamentally different time scales and mechanical dynamics. Baseload units resist rapid changes. Renewables demand them.
Every country exhibits the same structural progression:
wind and solar increase energy volume, undermine baseload predictability, intensify evening ramps, escalate imbalance costs, push grid infrastructure past design limits, and expose cross-border dependencies. Baseload shrinks not because policymakers remove it, but because the system cannot operate it efficiently in a renewable-heavy environment. Balancing becomes expensive because the old mechanisms—coal ramping, hydro buffering, limited reserves—cannot handle renewable uncertainty without overcompensating. Grid access becomes uncertain because the transmission system was never meant to host distributed generation.
What distinguishes these systems is their willingness and ability to invest in flexibility. Serbia requires storage to reduce imbalance exposure and cut evening peaks. Montenegro needs to modernise hydropower and maximise the Italy cable. Albania must diversify beyond hydro to stabilise seasonal risk. Bosnia and Herzegovina must build a flexibility architecture before renewable curtailment becomes systemic. North Macedonia must replace thermal capacity with hybrid renewable portfolios. Croatia must develop storage and grid reinforcement to support EU-coupled renewable flows.
Wind and solar will dominate SEE energy volumes by 2035. By 2040 the region will be renewable-heavy by necessity, not just by policy. But the winners will be those who pair renewables with flexibility—battery storage, pumped hydro, fast-ramping engines, hybrid plants, digital balancing tools and cross-border trading strategies deployed through platforms such as electricity.trade.
Flexibility will determine which country becomes a renewable exporter and which becomes a renewable curtailment zone. It will determine which markets attract investment and which repel it. It will determine where balancing costs fall, where system stability rises and where regional energy flows converge.
South-East Europe is not competing to build the most renewables. It is competing to build the most flexibility.
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