The rapid expansion of renewable energy in Southeast Europe is highlighting significant challenges related to grid infrastructure and capacity. While countries such as Serbia, Bosnia and Herzegovina, North Macedonia, Montenegro, and Albania have ambitious plans to increase their renewable electricity shares, the existing grid systems are struggling to keep pace with this growth. National targets now aim for a 40–50% share of renewables by 2030, with Serbia specifically targeting 45.2% renewable electricity.
Despite favorable conditions for a transition to renewable energy, the region’s ability to integrate this capacity into the grid is becoming increasingly critical. Current projections indicate that system adequacy remains intact; however, the real challenge lies in the operational integration of these new energy sources. As solar and wind projects proliferate, particularly in northern Serbia and eastern Bosnia, localized congestion and temporal imbalances are becoming common due to synchronous generation peaks during midday hours.
This phenomenon results in electricity being produced when it is least needed while being constrained during peak demand periods. The existing grid infrastructure, originally designed for conventional thermal and hydro generation, is ill-equipped to handle these new dynamics. In response, transmission operators in Serbia have begun linking connection procedures for variable renewable energy to system capability, indicating that demand for connections is outstripping immediate grid capacity.
As congestion shifts from an occasional issue to a structural characteristic of Southeast European electricity markets, it leads to price compression during peak solar hours and increased curtailment of renewable output. Evening demand peaks then create a reliance on dispatchable or imported power at significantly higher prices. Current intraday price spreads often range from €30 to €70 per megawatt-hour (MWh), with extreme cases exceeding €100/MWh.
Cross-border infrastructure plays a pivotal role in stabilizing the regional power system. The geography of Southeast Europe facilitates significant interconnections between countries like Serbia, Bosnia, Montenegro, and North Macedonia with Hungary, Romania, Bulgaria, Croatia, and Greece. However, much of this infrastructure was designed around historical flow patterns that do not account for today’s renewable-driven market dynamics.
To address these challenges, several key projects are planned or underway. These include the Gacko–Brezna 400 kV corridor linking Bosnia and Montenegro and upgrades along the Trans-Balkan 400 kV network connecting Serbia with its neighbors. Other initiatives focus on reinforcing the Trebinje–Podgorica axis and developing an East–West corridor between North Macedonia and surrounding systems. Such investments are essential not merely as incremental improvements but as foundational elements necessary for unlocking renewable potential and fostering regional market integration.
In addition to transmission capacity issues, flexibility within the power system has emerged as a core constraint. The traditional reliance on coal and hydroelectric power has limited the system’s ability to adapt quickly to fluctuations in renewable generation. As a result, there is an urgent need for fast-ramping capacity and short-term balancing resources alongside intraday optimization capabilities.
Battery energy storage systems (BESS) are gaining traction as a solution across Southeast Europe; however, deployment remains limited compared to what is required. For example, Albania’s planned Moglice pumped-storage extension aims for approximately 1.6 GW capacity but illustrates the scale needed for effective stabilization of renewable-heavy systems.
Moreover, distribution networks present another layer of complexity in integrating renewables into the grid effectively. Many new solar installations connect at lower voltage levels that were not designed for high levels of distributed generation or two-way power flows. This results in localized congestion even when transmission capacity exists and contributes to growing connection queues at distribution levels.
The evolving market design also lags behind physical realities in Southeast Europe’s power sector. Key gaps include limited ancillary service markets and weak price signals for flexibility resources while regulatory barriers hinder cross-border optimization efforts. Flat or regulated tariffs further diminish incentives for consumers to adjust their demand based on price signals.
The economic implications of these constraints are significant for renewable developers who may encounter curtailment during high-generation periods or face lower-than-expected capture prices due to market volatility. Consequently, project bankability assessments have shifted focus towards grid risk—once considered secondary—now emerging as a primary concern affecting financing structures.
The rise of carbon border adjustment mechanisms (CBAM) adds further pressure as energy-intensive industries seek low-carbon electricity solutions compatible with EU market standards. This creates additional demand not only for renewable generation but also for reliable supply mechanisms capable of meeting production schedules through integrated solutions combining generation with storage capabilities.
Looking ahead, coordinated investments across multiple layers of Southeast Europe’s energy system will be essential for addressing these challenges effectively. Transmission expansion must accelerate alongside increased deployment of storage technologies while market designs evolve to support stronger price signals that reflect physical constraints accurately.
Southeast Europe stands at a critical juncture in its energy transition journey where strategic planning and targeted infrastructure investment will determine the success of its shift towards a more sustainable energy landscape.
