For decades, Europe’s energy debate was organised around sectors. Electricity policy was discussed in terms of generation mix and grid stability. Gas was treated as a supply-security problem, shaped by contracts, pipelines, and storage levels. Oil belonged to a different universe altogether, dominated by geopolitics, shipping routes, and global benchmarks. Each sector had its own experts, its own institutions, and its own risk models. That structure mirrored a reality in which energy flows were relatively linear and predictable. It no longer does.
What has replaced the sectoral model is not simply tighter coordination between markets, but a systemic framework in which outcomes are shaped by interactions rather than by isolated fundamentals. In such a system, no single fuel can be analysed independently, because its behaviour is increasingly determined by constraints and signals originating elsewhere. Prices, flows, and risks are now the product of feedback loops rather than standalone balances.
The most important driver of this shift has been the transformation of electricity from a largely self-contained sector into the central clearing mechanism of the entire energy system. Power markets now internalise variability that originates far beyond generation itself. Weather patterns influence renewable output, which alters gas dispatch. Gas availability depends on global LNG competition, which is shaped by oil-linked shipping economics and geopolitical risk. Carbon prices influence dispatch choices, feeding back into fuel demand. Electricity prices sit at the intersection of all these forces, translating system-wide conditions into a single, visible signal.
This evolution has rendered traditional sector-based metrics increasingly inadequate. Installed capacity, once a reliable indicator of system strength, tells little about actual resilience if flexibility is lacking. Gas storage levels, historically a cornerstone of supply analysis, lose predictive power when LNG flows can change direction within days. Oil inventories may appear comfortable, yet logistics bottlenecks or refinery outages can still propagate stress into gas and power markets. The system no longer fails where it is weakest on paper, but where interactions are least understood.
South-East Europe exemplifies this transition from sectors to systems because of its structural position within the European energy landscape. The region combines high import dependence with rapidly growing renewable capacity and limited domestic flexibility. Serbia, Hungary, Romania, Bulgaria, Croatia, Greece, and Italy are connected through a dense web of interconnectors, pipelines, and transit routes, yet their regulatory frameworks and market designs remain nationally focused. This creates a situation in which physical interdependence far exceeds institutional coordination.
In a sectoral mindset, such interdependence is viewed as a vulnerability to be minimised. In a systemic framework, it is recognised as a defining feature that must be managed. Cross-border power flows are not anomalies; they are integral to price formation. Gas transit is not merely a logistical issue; it shapes regional power spreads. Oil flows through Adriatic and Mediterranean routes influence LNG competitiveness and, indirectly, electricity prices across the Balkans. Each sector feeds into the others, whether policymakers acknowledge it or not.
The growing dominance of renewables has further accelerated this systemic shift. Wind and solar do not behave like traditional generation assets. They do not respond to price signals in the same way, nor do they provide inherent flexibility. Their integration therefore forces the rest of the system to adapt. Gas-fired plants become balancing tools rather than energy providers. Hydro assets shift from baseload roles to intraday stabilisers. Storage, both electrical and gaseous, becomes a strategic asset rather than a seasonal buffer. These adaptations cannot be understood within a single sector; they emerge from system-wide optimisation under constraint.
Market behaviour reflects this reality with increasing clarity. Correlations between power and gas prices have strengthened, particularly during periods of stress. Oil-related shocks, once filtered slowly through inflation or transport costs, now influence energy markets almost immediately through freight rates, LNG arbitrage, and risk sentiment. Volatility clusters across fuels, undermining the assumption that diversification across energy assets provides protection. What traders experience on desks is what analysts must now model: a system that moves together when it matters most.
The transition from sectors to systems also changes how risk accumulates. In a sectoral world, risks were largely additive. A problem in gas could be mitigated by power imports; an oil shock could be absorbed by alternative fuels. In a systemic world, risks are multiplicative. A gas constraint coinciding with low renewable output and high oil-linked shipping costs does not merely add stress; it amplifies it. The result is non-linear price behaviour that traditional models struggle to capture.
Regulation, however, still lags behind this transformation. Market rules, capacity mechanisms, and strategic reserves are designed with sector-specific objectives in mind. Electricity market design assumes gas will be available when needed. Gas policy assumes predictable power-sector demand. Oil security frameworks focus on physical supply, often ignoring financial and logistical linkages. This fragmentation creates blind spots where systemic risk can accumulate unnoticed until it materialises abruptly.
For South-East Europe, these blind spots are particularly dangerous. The region lacks the depth of liquidity and flexibility found in larger Western European markets, making it more sensitive to system-level shocks. At the same time, it plays a disproportionate role in transmitting those shocks across the continent due to its geographic position. Treating energy challenges as sectoral issues therefore underestimates both the risks faced by the region and the signals it sends to the wider European system.
Moving from sectors to systems is not merely an analytical exercise; it is a prerequisite for effective decision-making. Investors assessing energy assets, industrial consumers managing procurement, traders structuring hedges, and policymakers designing interventions all operate within the same integrated framework, whether explicitly or not. The question is not whether the system exists, but whether its dynamics are recognised before they are stress-tested by the next shock.
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