The South-East Europe (SEE) electricity market has evolved from a loosely connected collection of national grids into a highly interdependent, volatility-driven system. Once considered a stable region with predictable energy flows and price patterns, SEE is now experiencing the growing pains of renewable energy integration, baseload erosion, and cross-border spillover effects. This transformation is not just changing how power is produced; it is reshaping who controls the price, who bears the risk, and how volatility flows across borders.
The end of isolation in SEE power markets is marked by increasing coupling with neighbouring regions and the unpredictable nature of renewable energy. Solar and wind power, once marginal sources of generation, now dictate price formation across the region. At the same time, baseload power is disappearing faster than it is being replaced, and grid connections between countries are transmitting volatility instead of stabilising it.
This article explores how interconnected risks are transforming the SEE power system, moving it away from the traditional notion of isolated national markets into a single, regional volatility zone. It also discusses why this shift matters to industrial buyers, traders, and policymakers alike.
The rise of interdependence in SEE power markets
Historically, SEE’s national power systems were mostly self-contained, with electricity generation, consumption, and pricing largely determined within national borders. Power exchanges like SEEPEX (Serbia), OPCOM (Romania), and HUPX (Hungary) served as trading platforms, but they were more about internal pricing and balancing than about true cross-border risk integration.
However, over the last decade, market coupling has dramatically increased. With the expansion of cross-border interconnections and regional price coupling schemes (such as the CEER and ENTSO-E initiatives), the SEE power market has moved from isolated price zones to a shared grid. This integration has exposed the region to a new kind of systemic risk: interdependent price volatility.
Today, power markets in SEE no longer function independently. A generation imbalance or weather anomaly in Greece can influence prices in Romania. Similarly, solar abundance in Bulgaria can compress prices in Serbia, leading to spillover effects across the region. In this interconnected environment, regional interdependencies shape price movements as much as — if not more than — domestic generation and consumption.
The solar-wind-grid nexus: How renewables have reshaped the game
The most significant change in SEE’s power market has come from renewable energy integration. Solar and wind are no longer niche players. They are market drivers, setting price formation patterns across multiple countries.
Solar: The midday collapse and evening scarcity
SEE’s solar capacity has grown substantially, especially in Greece, Bulgaria, and Romania. This increase has led to the phenomenon of midday price suppression, where solar generation pushes prices close to zero during peak sunlight hours. These low prices spill over to neighbouring markets, creating artificially low price signals in otherwise stable systems.
However, this benefit is time-limited. As soon as the sun sets, solar generation falls off, and the system faces increased volatility. Evening price spikes become more pronounced, as solar’s absence is not compensated by other generation sources, especially in coal-exit systems where flexibility is limited.
Wind: Amplifying volatility
Wind energy behaves differently. While it does not create the same predictable patterns as solar, it has volatility amplifying effects. Wind availability in SEE is highly dependent on weather systems that span several countries. When wind generation surges in Romania or Croatia, it can flood the regional grid, causing price collapses in the early morning hours. Conversely, low wind during high-demand periods can spike prices dramatically.
This intermittent behaviour means wind forecast errors can propagate across borders. When wind is predicted to be strong but falls short, the entire region is exposed to upward price shocks.
Baseload: Erosion of stability
In parallel with renewable growth, SEE is losing its baseload capacity, as coal-fired power plants are gradually being decommissioned across the region. Once considered the foundation of price stability, coal now represents an increasingly unreliable source of generation. As older plants retire and are not replaced with firm, dispatchable capacity, the region’s power system becomes more fragile, vulnerable to sudden price spikes.
The loss of baseload means the region must rely more heavily on renewable sources, which are subject to intermittency and volatility. This creates a structural mismatch: industrial buyers locked into PPAs based on “baseload” assumptions face unpredictable costs when the system is in a shortage or ramp-up mode.
Spillover effects: How cross-border flows transmit risk
One of the most critical elements of SEE’s evolving power market is how volatility now spills over from one country to another. In a market where power generation and consumption are increasingly coupled across borders, price changes in one country can quickly influence neighbouring countries, even if they are not directly involved in the generation.
Cross-border solar spillover
The price effect of solar oversupply is a classic example of spillover. When solar generation in Greece or Bulgaria floods the grid during midday hours, these low prices ripple through the interconnected system. Serbia, for instance, can experience price suppression even without increasing its own solar capacity.
However, this spillover effect is not without its downsides. When solar energy availability in the region drops — such as during overcast days or the winter months — price spikes occur, and industrial buyers in countries that were once insulated from solar’s volatility are now exposed to higher prices due to cross-border reliance.
Evening ramping and price shocks
In the evening, when solar output drops off and the system experiences a sharp ramp-up in demand, volatility can spill over from countries like Greece and Romania to Serbia, Bosnia, or North Macedonia. This is exacerbated by hydro generation (often constrained by regional weather) and coal generation (which is already in decline). During these hours, interconnections become the transmission channels for price shocks across SEE.
The impact of interconnections: Price formation and volatility transmission
SEE’s grid interconnections — such as those between Serbia and Hungary, Bulgaria and Greece, or Romania and Ukraine — now play a dominant role in price formation. These interconnections have transformed the market coupling process, meaning that price-setting marginal units may not necessarily come from the domestic system.
- Hungary and Romania, with relatively large gas and solar portfolios, increasingly set the marginal price for SEE as their systems become net exporters.
- Serbia and Bulgaria, with a mix of hydro and coal, remain price-takers in many cases, especially as renewable generation fluctuates across borders.
In this environment, even countries with limited renewable generation must contend with market price fluctuations dictated by their neighbours’ weather patterns or generation mix.
The future of SEE: Interdependence, volatility and opportunities
The SEE power market is moving toward a future where the interdependence of national systems is not just a technical reality but a central determinant of risk. The rise of renewable energy, the decline of baseload generation, and the increasing importance of cross-border flows will continue to reshape price patterns in ways that industrial buyers and traders must be ready to anticipate.
For industrial buyers, the key takeaway is simple: there is no such thing as a purely national price anymore. To secure stable procurement strategies, industrial buyers must:
- Recognise cross-border volatility as a central risk factor
- Rethink procurement models to accommodate shape and timing risk
- Invest in flexibility and regional market awareness
For traders, this interconnected system presents an opportunity: to arbitrage volatility, forecast regional imbalances, and provide liquidity where the system is most fragile.
The future of SEE’s electricity market is no longer about isolated price setting but about regional interconnected risk management.
Elevated by clarion.energy