Cross-border interconnections in South-East Europe were built to improve security of supply, smooth local imbalances, and enable regional trade. For years, they largely fulfilled that role. Flows were slow, predictable, and stabilising. Imports covered outages. Exports absorbed surplus. Price differentials narrowed gradually.
That function has changed. In today’s SEE power system, interconnectors no longer primarily stabilise markets. They transmit volatility.
The reason is not the cables themselves, but the system they now connect. Renewable-driven variability, baseload erosion, and market coupling have transformed cross-border flows from residual adjustments into primary price-setting mechanisms. Directionality has become dynamic, reversible, and intraday-driven. What matters is not who exports on average, but who is marginal in a given hour.
In the legacy system, flows were largely unidirectional and seasonal. Hydro-rich systems exported in wet periods. Coal-heavy systems exported baseload steadily. Imports filled predictable gaps. Directionality reinforced national fundamentals.
In the current system, directionality flips within the same day.
During solar-heavy midday hours, power flows outward from PV-dense zones, typically south-to-north and east-to-west. Greece, Bulgaria, Romania, and Hungary push surplus electricity across borders, compressing prices simultaneously in Serbia, North Macedonia, Bosnia and Herzegovina, and Croatia. These flows are automatic. They do not wait for policy decisions or long-term contracts. They follow marginal price signals until congestion is reached.
In the evening, the same interconnectors reverse. Solar disappears. Demand remains. Baseload is insufficient. Imports rush toward scarcity. North-to-south and west-to-east flows dominate, often pulling price signals from Hungary, Austria, Italy, or Romania deep into neighbouring markets. What looked like regional abundance hours earlier becomes synchronised stress.
This intraday reversal is the defining feature of modern SEE power flows. Contracts do not reverse. Hedges do not reverse. But physics and prices do.
The most important consequence is that directionality is no longer predictable from national generation mixes. A country can be a net exporter on an annual basis and still be a price taker in its most expensive hours. Conversely, a net importer can set marginal prices during stress if it controls scarce flexibility or transmission capacity.
Congestion has become the silent multiplier in this process. When interconnectors are unconstrained, prices converge quickly. When congestion appears, price zones decouple violently. The difference between unconstrained and constrained flow can be hundreds of euros per megawatt-hour within hours. In such moments, interconnectors do not smooth volatility. They concentrate it.
This is why congestion increasingly behaves like a pricing factor rather than a technical limitation. It determines which system’s scarcity sets the marginal price and which systems must absorb it. In a tightly coupled region with uneven baseload decline, congestion events become focal points for regional price stress.
Baseload erosion intensifies this dynamic. When firm capacity disappears in one country, imports compensate until neighbouring systems become tight themselves. At that point, scarcity pricing spreads outward through the grid. What begins as a domestic reliability issue becomes a multi-country price event within a single trading day.
Hydropower interacts with flows in a similarly strategic way. Hydro-rich systems no longer function as passive stabilisers. They act as optionality providers, exporting when prices are attractive and withholding when scarcity premiums rise. This behaviour is rational, but it means that hydro does not automatically flow toward regional need. It flows toward regional value. Directionality becomes opportunistic rather than supportive.
Market coupling accelerates all of this. Price coupling ensures that the marginal unit in one zone sets prices in another as long as transmission is available. In practice, this means that price formation is often external. Serbian prices reflect Hungarian scarcity. Bulgarian prices reflect Greek evening ramps. Romanian wind shortfalls propagate into Hungary and beyond. Domestic fundamentals lose explanatory power.
For industrial buyers, this creates a dangerous illusion. Electricity appears domestically sourced, domestically contracted, and domestically regulated. In reality, its price behaviour is increasingly imported. Procurement strategies built on national assumptions fail because exposure is regional.
For traders, directionality is the map. Reading the system means understanding not just where generation sits, but where stress will flow next. A tightening in one zone signals price movement in another. Interconnectors become tradeable assets not because they move power, but because they move marginal pricing authority.
What makes SEE particularly sensitive is scale. Many national systems are small relative to the flows they exchange. A single large unit outage or weather deviation can overwhelm domestic balance and immediately pull on neighbours. Directionality shifts faster than operational response.
This creates a market where stability is conditional on uninterrupted connectivity. When connectivity fails or congests, volatility is no longer shared; it is trapped. Prices spike harder, hedges break faster, and imbalance costs explode locally.
The long-term implication is that cross-border flows have become the backbone of price formation in SEE. They no longer sit at the margin of the system. They are the system. Electricity prices are increasingly determined by where power can move, not just where it is generated.
In this environment, there is no such thing as a purely domestic power market. There are only positions within a regional flow network whose direction changes hour by hour. Understanding that directionality — not just capacity, not just demand, not just renewables — is what separates resilient strategies from exposed ones.
Interconnectors were built to connect markets. In today’s SEE system, they connect risks.
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