The Western Balkans electricity sector is poised for significant transformation as it enters a critical decade from 2026 to 2035. With governments across the region actively pursuing decarbonization efforts, there is a marked increase in renewable energy capacity. However, the shift from coal-fired power generation poses substantial operational challenges, particularly regarding the availability of flexibility resources necessary to balance the increasing share of variable renewable generation.
Flexibility within a power system is essential for adjusting generation or demand in response to fluctuations in electricity supply. As wind and solar energy production is inherently variable, achieving stability in the grid requires adequate flexibility resources. The traditional reliance on coal-fired plants for this flexibility is diminishing as these facilities reduce output in line with decarbonization goals, leading to an urgent need for alternative solutions.
The scale of renewable energy projects underway highlights the magnitude of this challenge. Southeast Europe currently has over 30 GW of wind and solar projects planned, with Serbia alone aiming to add several gigawatts by 2030. This ambitious expansion necessitates innovative approaches to manage supply variability effectively.
One promising solution is the deployment of battery storage systems, which offer rapid responses to changes in supply and demand, making them ideal for short-term balancing and frequency stabilization. The cost reductions seen in lithium-ion batteries over the past decade have made them increasingly viable for large-scale implementation across various electricity markets.
Despite being at an early stage, battery storage deployment in Southeast Europe is projected to accelerate as regulatory frameworks evolve to facilitate participation in electricity markets. Such frameworks will likely enable battery projects to coexist with new renewable installations, enhancing overall system flexibility.
Pumped hydro storage also plays a crucial role in addressing flexibility needs. Unlike batteries that typically provide short-term storage solutions, pumped hydro can manage longer-duration fluctuations in renewable generation. The Western Balkans’ geographical advantages and existing hydropower infrastructure present significant opportunities for developing such facilities, exemplified by Serbia’s Bistrica pumped storage project, expected to deliver around 600 MW of capacity.
Additionally, hydropower remains a vital source of flexibility within the region. Albania’s reliance on hydropower allows it to adjust output quickly based on market conditions, enabling strategic electricity exports during peak pricing periods while importing when other regions have abundant renewable generation.
Demand-side flexibility represents another underutilized resource that could alleviate grid stress during peak demand times. Industrial consumers capable of adjusting their production schedules based on price signals can contribute significantly to balancing efforts as markets evolve towards more sophisticated demand response mechanisms.
The interconnected nature of Southeast European electricity markets facilitates cross-border trading, enhancing overall system flexibility. This interconnectivity allows countries to import power when domestic generation falls short and export excess capacity during high renewable production periods. However, effective operation of this mechanism hinges on adequate transmission infrastructure and coordinated market activities.
The term “flexibility gap” refers to the discrepancy between current flexibility resources and those needed to accommodate projected renewable capacity increases. Analysts suggest that several gigawatts of additional flexible generation and storage capacity will be necessary by 2030 to ensure reliable operations across Southeast Europe’s electricity systems.
Addressing this gap requires comprehensive investments spanning multiple sectors. Expanding transmission infrastructure is crucial for integrating new renewable generation sources and facilitating cross-border flows. Additionally, scaling up storage technologies and reforming market designs are essential steps toward enabling flexible assets to monetize their capabilities effectively.
The evolution of electricity markets will be pivotal in meeting these challenges. As renewables become more prevalent, traditional energy prices may not suffice to support investment in flexible generation assets. Mechanisms such as capacity markets and long-term contracts may be essential for attracting necessary capital into this segment.
As the Western Balkans power system transitions from merely constructing renewable capacity towards creating a fully integrated framework capable of managing wind and solar variability by 2035, strategic investments in storage technologies, demand response programs, and enhanced cross-border integration will be critical components shaping the future energy landscape.
