As Southeast Europe (SEE) approaches 2026, the landscape of thermal power generation is set to be influenced by a complex interplay of hydropower availability, CO₂ pricing, coal mining output, and regional trading dynamics. The narrative surrounding the region’s energy production will extend beyond a simplistic “coal versus renewables” debate. Instead, it will hinge on the actual hydrological conditions experienced throughout the year and how effectively coal mining operations can meet the demands of thermal power plants.
Serbia stands out as a critical player in this context, maintaining one of the highest dependencies on lignite-fired generation within SEE. With an installed lignite capacity estimated at approximately 4,390 MW, Serbia’s total electricity generation capacity from all sources reaches around 7,662 MW. The recent commissioning of the Kostolac B3 unit adds another 350 MW of capacity, reinforcing Serbia’s reliance on thermal generation during periods of low hydro performance. In 2024, the Electric Power Industry of Serbia (EPS) reported a generation output of about 32.9 TWh, reflecting a decrease from 35.5 TWh in 2023 due to factors such as hydro variability and changing demand patterns.
The relationship between hydropower and thermal generation is pivotal for forecasting Serbia’s energy landscape. Historical data indicates that fluctuations in hydro output can lead to corresponding shifts in thermal dispatch and imports. A typical annual variation of 2–3 TWh in hydropower can significantly impact lignite usage; when hydro resources fall short, thermal units must compensate by increasing output, thereby elevating operational costs and maintenance needs.
For 2026, analysts suggest a thermal generation range for Serbia that aligns with expected hydrological conditions and operational constraints. If EPS operates within its usual generation corridor of approximately 33–36 TWh annually while hydrological conditions remain stable, lignite-fired power production may stabilize between 23–28 TWh. Conversely, adverse hydrological conditions could push thermal output higher to meet domestic demands and avoid costly imports during peak periods.
Three distinct scenarios have emerged for Serbia’s thermal output in 2026 based on varying hydro conditions: under normal circumstances with no major outages, thermal generation could stabilize around 24–27 TWh. In an optimistic scenario where hydro resources are plentiful, this could drop to between 21–24 TWh as lignite is displaced by renewable sources. However, in a less favorable scenario marked by dry summer conditions, thermal output may rise significantly towards 27–30 TWh.
The sustainability of this thermal output is closely tied to coal mining operations within Serbia’s Kolubara and Kostolac basins. While EPS’s total lignite production is estimated at around 37 million tonnes annually, effective delivery from mines to power plants remains crucial for operational reliability. Recent reports indicate that even during challenging years, the Kolubara basin managed to produce about 22 million tonnes while Kostolac’s Drmno mine reached nearly 10 million tonnes in production by late 2025.
Operational challenges become more pronounced in high-demand years where increased lignite consumption leads to heightened operational intensity at mines and potential logistical bottlenecks. The economic implications are significant; higher operational expenditures (OPEX) associated with intense mining operations could limit investments in necessary infrastructure upgrades or renewable projects.
As CO₂ pricing continues to set a floor beneath thermal power costs—with projections suggesting an average price around €92 per tonne for 2026—Serbia’s import strategies will also be influenced by these dynamics. Elevated CO₂ prices increase the marginal cost of electricity imports during tight supply periods, incentivizing local lignite utilization even under adverse conditions.
The evolving role of thermal plants extends beyond mere energy production; they are increasingly valued for their ability to provide grid stability amid rising shares of variable renewables like wind and solar power across Eastern Europe. This balancing capability becomes essential during periods when hydro resources are limited or demand spikes occur during evening hours.
In broader regional terms, SEE countries like Romania are also navigating their own transitions away from coal while managing decommissioning schedules amid delays in replacement projects. Should Romania maintain its existing coal capacity longer than anticipated through mid-2026, it could help stabilize regional market prices and reduce volatility.
Looking ahead to 2026, Serbia’s reliance on lignite is expected to remain substantial within a projected range of approximately 24–27 TWh under typical conditions but may fluctuate based on hydrological performance and coal supply reliability. The key challenges lie not only in coal pricing but also in ensuring consistent mine-to-plant delivery capabilities amidst rising operational demands and environmental compliance pressures.
In conclusion, forecasts for thermal output must consider both the uncertainties surrounding coal mining performance and hydrological variability as critical factors influencing operational stability within Serbia’s energy system. Balancing these elements effectively will be essential for mitigating risks related to import dependency and maintenance-driven reliability issues across the region.
