In a system where natural gas serves as the primary source of flexibility, balancing the gas network is no longer a background operational task. It has become a central determinant of electricity market stability. What once appeared as a technical issue confined to pipeline pressures and storage levels now directly shapes power prices, dispatch decisions, and cross-border flows. In South-East Europe, this transformation is especially pronounced.
Gas balancing traditionally aimed to ensure that supply and demand within the gas network remained aligned over daily and seasonal horizons. Deviations were corrected through storage withdrawals, linepack adjustments, or short-term market transactions. These mechanisms assumed that gas demand patterns were relatively stable and predictable. That assumption has been undermined by the power sector’s growing reliance on gas for real-time balancing.
As renewable generation fluctuates, gas-fired power plants are increasingly called upon to respond within hours or even minutes. This creates sharp, unpredictable swings in gas demand that gas networks were not originally designed to accommodate. When multiple power plants ramp simultaneously in response to a renewable shortfall, gas demand spikes locally, stressing pipelines and compressor capacity. The resulting imbalance is no longer confined to the gas market; it feeds directly into electricity prices and availability.
In South-East Europe, gas infrastructure is often less redundant than in larger Western markets. Storage capacity is unevenly distributed, pipeline routes are limited, and alternative supply options can be constrained. Under these conditions, a local gas imbalance can quickly escalate into a regional issue. Gas prices rise, power plants face higher marginal costs or reduced availability, and electricity prices respond accordingly. What began as a balancing challenge becomes a power-market shock.
Cross-border dynamics amplify this effect. Gas networks in the SEE region are interconnected, as are electricity systems. When gas balancing stress emerges in one country, it affects neighbouring markets through both fuels simultaneously. Higher gas prices in one zone raise power prices there, attracting electricity imports from adjacent systems. These imports, in turn, shift generation patterns and gas demand elsewhere, spreading the imbalance. The system effectively transmits gas stress via power flows.
The timing of these interactions is critical. Gas balancing operates on daily cycles, while electricity markets clear intraday and in real time. When a gas imbalance develops unexpectedly, power markets may already have cleared positions based on outdated assumptions. Generators then face the choice of operating at a loss, curtailing output, or bidding prices sharply higher to reflect new fuel costs. Each option contributes to volatility and undermines market confidence.
Financial and regulatory frameworks often lag behind these realities. Gas balancing costs are frequently socialised or settled after the fact, while power markets reflect stress immediately. This temporal mismatch distorts price signals and complicates risk management. Market participants struggle to hedge exposure when gas and power imbalances manifest on different timescales but converge in pricing outcomes.
For system operators, the challenge is operational as much as economic. Coordinating gas and power balancing requires information sharing, aligned incentives, and compatible market timelines. In practice, such coordination remains limited, particularly across borders. National operators optimise within their mandates, while the system as a whole absorbs the consequences of misalignment. The result is a tendency toward reactive rather than preventive management.
The implications for South-East Europe are significant. As renewable penetration increases and gas remains the primary balancing tool, the frequency with which gas imbalances translate into power-market stress is likely to rise. Without additional sources of flexibility, such as storage, demand response, or improved interconnection management, the system becomes increasingly sensitive to gas-side disturbances.
From a market perspective, recognising this linkage is essential. Gas prices and balancing conditions are no longer background variables for power traders and industrial consumers; they are leading indicators of electricity market behaviour. Conversely, power market stress can signal emerging gas imbalances before they become visible in gas-specific metrics.
Elevated by clarion.energy