For more than two decades, industrial electricity procurement in South-East Europe followed a relatively simple logic. Secure a long-term supply contract, prioritise price level over structure, and treat electricity as a predictable operating cost rather than a strategic risk variable. Even when liberalisation progressed and exchanges emerged, most industrial buyers continued to anchor decisions around annual or multi-year fixed prices, assuming that volatility was a short-term market artefact rather than a structural feature.
That model no longer functions.
What has broken industrial power buying in SEE is not renewable energy itself, nor market liberalisation, nor even the coal exit in isolation. What has broken it is the interaction between all three, combined with thin regional systems, limited flexibility, and a growing mismatch between industrial load profiles and how electricity is now produced and priced.
The consequence is subtle but severe: many industrial buyers believe they are hedged, green, or protected, while in reality they are increasingly exposed to cash-flow volatility, imbalance risk, and margin erosion that no longer shows up neatly in headline power prices.
The result is a procurement model that looks stable on paper, but behaves unpredictably in operations.
The illusion of stability
For years, SEE industry benefited from structural anchors that masked system risk. Coal units provided inertia and predictable marginal pricing. Hydro smoothed volatility in wet years. Imports from neighbouring markets acted as a pressure valve. Even when renewables expanded, their penetration was initially too low to meaningfully reshape price formation.
This allowed buyers to treat electricity as a price optimisation problem rather than a risk optimisation problem.
That illusion has now collapsed. Solar penetration is high enough in multiple SEE markets to suppress midday prices while amplifying evening peaks. Coal capacity is declining faster than replacement firm capacity is coming online. Cross-border interconnections increasingly transmit volatility rather than absorb it. Balancing markets, once an afterthought, have become a material cost line.
In this environment, a low average price no longer guarantees a low total electricity cost. What matters is when power is delivered, how deviations are settled, and who carries the residual system risk.
Industrial procurement structures that ignore these dimensions are structurally fragile, even if they appear competitive in tender comparisons.
Why PPAs did not fix the problem
Power purchase agreements were widely adopted as the supposed solution. For policymakers, they promised decarbonisation without subsidies. For generators, they provided bankable revenue. For industrial buyers, they appeared to offer long-term price certainty combined with green credentials.
In practice, many industrial PPAs in SEE simply repackaged volatility instead of eliminating it.
Most PPAs were designed around energy volume, not load shape. They assumed that selling a fixed annual MWh quantity at a fixed or indexed price constituted a hedge. This assumption held in systems dominated by thermal baseload. It fails in systems dominated by solar and hydro variability.
The critical flaw is that industrial demand is largely flat or evening-peaking, while PPA supply is increasingly midday-heavy. The financial settlement may net out on an annual basis, but operationally the buyer must still source power during expensive hours and sell surplus during cheap ones. The spread between those two actions is not theoretical; it shows up daily in intraday and imbalance prices.
As a result, many buyers discover too late that their “fixed” PPA price only applies to a portion of their actual exposure.
Electricity as a balance-sheet risk
This shift has profound implications for industrial finance. Electricity is no longer just an operating expense; it is increasingly a balance-sheet risk.
Volatility now manifests through:
- unpredictable monthly power costs despite fixed contracts
- collateral and margin requirements in hedging structures
- imbalance charges that spike during system stress
- intraday procurement at extreme prices during evening peaks
For CFOs accustomed to stable energy lines, this creates discomfort. For banks and credit committees, it raises questions about earnings predictability, covenant resilience, and contract robustness.
In SEE, where many industrial companies already operate with thin margins and limited financial buffers, power volatility can become a strategic constraint rather than a tactical nuisance.
This is why electricity procurement is migrating from purchasing departments to finance, risk, and executive management. It is no longer a commodity decision; it is a capital allocation and risk governance decision.
The regional factor: volatility travels faster than power
Another reason the old model is broken is that national electricity markets no longer behave independently. Market coupling has integrated SEE into a broader pricing ecosystem where marginal prices are often set outside national borders.
Hungary, Greece, Bulgaria, Romania, and Italy increasingly influence price formation across the region. Congestion, outages, and weather events in one market propagate quickly to others. For industrial buyers, this means domestic tariffs and legacy assumptions offer diminishing protection.
Cross-border price convergence does not reduce risk; it redistributes it. Volatility that once would have been absorbed locally now travels through interconnectors and surfaces in intraday markets. Buyers who ignore regional dynamics underestimate their exposure.
This is particularly acute for smaller systems, where a single large unit outage or weather anomaly can move prices sharply. In such markets, industrial load itself becomes a visible system factor rather than background demand.
Why fixed prices are becoming dangerous
The instinctive response to volatility is to lock in fixed prices for longer periods. In SEE today, this instinct can backfire.
Long-dated fixed prices embed assumptions about future volatility, fuel spreads, and system balance. In renewable-heavy systems, those assumptions are increasingly unreliable. A fixed price that looks attractive at signing can become a liability if it locks the buyer into an unfavourable shape or misaligned delivery profile.
More importantly, fixed prices do not hedge when power is delivered. They hedge an average. In systems where the spread between cheap and expensive hours is widening, the average becomes less meaningful.
The risk is not that fixed prices are wrong per se, but that they are insufficient on their own. Without complementary flexibility, they can amplify rather than dampen exposure.
The missing ingredient: flexibility
What replaces the broken model is not a single contract type, but a different philosophy. The central insight is that flexibility is now the primary hedge.
Flexibility can take many forms: load shifting, self-generation, storage, hybrid PPAs, operational curtailment, or sophisticated intraday trading strategies. What matters is not the technology, but the ability to respond to price signals rather than passively absorb them.
From a trader’s perspective, flexible industrial load is an asset. From an industrial perspective, flexibility converts volatility from a cost into an option. This convergence explains why the boundary between industrial buyer and power trader is blurring.
The most competitive industrial players in SEE over the next decade will not be those with the lowest headline PPA prices, but those with the greatest ability to adapt their consumption to system conditions.
From procurement to portfolio management
This shift implies a fundamental redesign of procurement strategy. Electricity must be managed as a portfolio, not a single contract.
A resilient portfolio combines:
- long-term energy coverage for cost visibility
- shape-aware hedging for peak exposure
- access to short-term markets for optimisation
- operational flexibility to reduce imbalance risk
Such portfolios look complex compared to legacy contracts, but they reflect the true complexity of the underlying system. Simplicity achieved by ignoring risk is no longer cheap; it is expensive.
What this means for SEE industry
For SEE industry, the stakes are high. Electricity costs increasingly determine competitiveness under CBAM, influence investment decisions, and shape export margins. Companies that cling to outdated procurement logic risk structural disadvantage.
The good news is that SEE markets also offer opportunity. Volatility creates value for those who can manage it. Flexible industry can capture spreads, negotiate better PPA terms, and align decarbonisation with financial resilience.
The transition is not optional. The question is not whether industrial power buying will change, but who adapts first and who pays for being last.
Elevated by clarion.energy