Balkan Power Prices Surge Above €700/MWh as Heat and Drought Cut Supply

Wholesale electricity prices across south-east Europe climbed sharply during a period of extreme heat, as stronger air-conditioning demand coincided with drought, low river levels and reduced output from hydroelectric, nuclear and thermal generators.

The most pronounced spike came on August 3, during the evening shift from solar generation to conventional supply. Slovenia’s day-ahead market reached €717/MWh for a 15-minute interval, while Croatia climbed to around €650/MWh and Serbia to €550/MWh.

Prices during the same period reached approximately €535/MWh in Romania and €510/MWh in Hungary. Bulgaria and North Macedonia recorded substantially lower levels of around €290/MWh and €217/MWh, respectively.

A further increase followed on August 4, when Serbian electricity reached €497/MWh. Slovenia again recorded the regional high at €573/MWh, followed by Croatia at about €538/MWh.

These figures represent short settlement-period prices rather than daily averages. Serbian day-ahead electricity traded at average prices between €83/MWh and €153/MWh from August 7 to August 11, according to SEEPEX. SEEPEX market data

Low River Levels Reduce Regional Generation

The combination of low river flows and elevated water temperatures affected several major generating facilities simultaneously.

Hungary’s 2GW Paks nuclear power plant reportedly reduced production to approximately 230MW after insufficient cooling water became available from the Danube. Under normal conditions, Paks accounts for almost half of Hungary’s electricity generation and around one-third of electricity consumption.

Romania also reduced output at the Cernavodă nuclear plant, which normally supplies about one-fifth of the country’s electricity. Authorities responded by sinking barges in the Danube to increase water levels near the plant’s intake.

The Krško nuclear plant reduced generation after the Sava became too warm and shallow to accommodate cooling-water discharge within environmental limits. Slovenia and Croatia divide Krško’s output equally.

Hydropower production declined at the same time. Serbia’s Đerdap 1 facility was operating at approximately 20% of normal output, while Đerdap 2 was producing about 30%, according to regional market analysis. Montenegro’s Pljevlja coal-fired plant was also temporarily unavailable.

The simultaneous reduction in dependable generation removed several gigawatts of supply from an interconnected regional market. Countries turned to imports, transmitting both the shortage and elevated prices across national borders.

Evening Solar Decline Amplifies Price Volatility

Electricity demand increased by 5% to 20% during the heatwave as households and businesses relied more heavily on air conditioning.

The most expensive periods occurred later in the day, between approximately 7:30pm and 8:30pm, rather than during the hottest afternoon hours.

Solar generation helped meet cooling demand during daylight hours and could push prices sharply lower when production was abundant. As the sun set, however, solar output fell rapidly while consumption in homes, hotels, offices and shops remained elevated.

The system consequently had to replace several gigawatts of solar generation within a short period. Where hydroelectric reservoirs, gas and coal units and imports could not respond sufficiently quickly, prices were determined by the last available generator or importer.

This evening ramp can produce very low or even negative prices during sunny periods followed by extreme prices after sunset.

Serbia introduced negative pricing on SEEPEX in May as part of its alignment with EU electricity-market rules. In June, SEEPEX prices fell to minus €45.50/MWh during excess generation. By August, the market reached €550/MWh during a period of constrained supply.

Bulgaria Benefits From Storage and Nuclear Availability

Bulgaria recorded significantly lower prices during the regional spike, supported by its combination of solar generation, battery storage and nuclear capacity.

The country has approximately 6GW of solar capacity and 3.7GW of battery capacity, while Greece has around 9GW of solar and 1GW of batteries.

Storage systems can charge when solar production pushes electricity prices down and discharge after sunset as photovoltaic generation declines. This can reduce the amount of power required from higher-cost imports during the evening peak.

Bulgaria also benefited from continued production at the Kozloduy nuclear plant. Unlike Paks and Cernavodă, its cooling arrangements allowed generation to continue despite low Danube levels.

The combination helped keep Bulgarian peak prices below those recorded in Serbia, Hungary, Croatia and Slovenia. Bulgaria was also able to export electricity, limiting the severity of the regional supply shortage. Regional exchange analysis

North Macedonia benefited from interconnections with Bulgaria and Greece. Its lower prices demonstrated the role of cross-border access to markets with available generation and storage.

That advantage remains dependent on transmission capacity. When interconnectors become congested, cheaper electricity cannot fully reach higher-priced markets and price differences persist.

Serbia Increases Reliance on Power Imports

Serbia imported more than 1.8GW during the afternoon of August 1, according to data cited by Danas.

On August 8, opposition party SRCE said state utility EPS was importing 1,568MW at €146.05/MWh, implying an hourly purchasing cost of approximately €229,000.

The figures illustrate the financial exposure created when domestic generation falls while neighbouring markets face simultaneous shortages.

Cross-border electricity trading enables countries to rely on imports rather than maintaining costly reserve capacity for every potential contingency. The cost rises sharply when several neighbouring systems require additional electricity at the same time.

EPS’s hydropower facilities normally provide relatively low-cost and flexible generation. Drought reduces both characteristics by limiting available water and forcing the utility to decide whether to use reservoir capacity immediately or conserve it for later periods of peak demand.

Serbia’s lignite fleet supplies substantial domestic generation but has limited flexibility and has experienced operational problems. Ageing generating units may require maintenance at the same time that heat and drought reduce available reserve capacity across the region.

Household exposure is partly limited because residential electricity tariffs are regulated rather than directly linked to SEEPEX prices on an hourly basis. EPS initially absorbs the difference between regulated retail revenues and the cost of more expensive marginal supply.

For industrial consumers, the exposure can be more immediate where electricity contracts are indexed to exchange prices or renewed during periods of market volatility. Energy-intensive manufacturers may reduce production when electricity costs exceed the margins available from their products.

Batteries Provide a Short-Term Flexibility Option

Utility-scale battery storage represents one potential response to Serbia’s evening price peaks.

Batteries can absorb electricity during periods of high solar production or weak demand and release it during evening peaks. They can also respond within seconds, providing frequency support and helping reduce balancing requirements.

Storage cannot replace energy lost during a prolonged drought. A battery designed for two or four hours of discharge can smooth the solar evening ramp but cannot compensate for several weeks of weak hydroelectric or nuclear generation.

Its economic value increases when intraday prices vary substantially. Serbia’s recent market conditions have produced both negative or low daytime prices and evening prices several times higher.

Storage regulation therefore needs to allow operators to generate revenue through multiple services, including energy arbitrage, balancing, reserve capacity and congestion management.

Network-fee treatment also affects project economics. Charging a battery as both a consumer and producer can expose storage facilities to duplicate charges and affect investment decisions.

Location is another consideration, as batteries positioned near congested substations or major demand centres can provide greater system value than equivalent capacity connected to areas with stronger grid conditions.

Serbia has planned solar projects incorporating storage, but its operating battery fleet remains significantly smaller relative to system size than Bulgaria’s.

Pumped Storage Projects Offer Longer-Duration Capacity

Serbia already operates the Bajina Bašta pumped-storage plant and is considering larger developments at Bistrica and Đerdap 3.

The planned Bistrica project has a capacity of approximately 628MW. The proposed Đerdap 3 facility could range from 1.2GW to 2.4GW, depending on its final design.

Pumped storage uses lower-cost electricity to move water into an upper reservoir before releasing it through turbines when demand and prices rise. The technology can provide longer-duration storage than many battery installations while supporting grid stability through synchronous generation.

Water conditions remain relevant, however. A closed or partly closed storage cycle is less dependent on ongoing river inflows than conventional hydropower, but evaporation, reservoir management and environmental restrictions still affect operations.

Large pumped-storage schemes also require extensive construction, permitting and financing. Đerdap 3 would additionally require coordination with Romania over the Danube system.

The projects therefore cannot address power shortages over the next several summers. Batteries and pumped storage serve different requirements, with batteries suited to shorter peaks and pumped storage capable of shifting larger electricity volumes over longer periods.

New Generation Must Be Matched With Flexibility

Serbia requires additional renewable generation, but the timing and composition of that capacity will influence its value to the power system.

Additional solar generation could reduce daytime prices and imports. Without storage or flexible demand, however, more solar could increase the amount of generation that disappears when the sun sets and consequently intensify the evening ramp.

Wind power can diversify the generation profile because production can occur overnight and during winter, although wind generation remains weather-dependent. Geographic diversification can reduce the likelihood that all facilities experience the same conditions simultaneously.

Modern gas-fired plants could provide flexible backup but would increase Serbia’s exposure to imported fuel costs and carbon charges. New coal capacity would conflict with decarbonisation commitments and become increasingly costly as Serbia aligns its carbon framework with EU requirements.

Nuclear power could provide large volumes of low-carbon electricity, but new facilities require substantial capital, specialist regulation and long development periods. Their cooling systems would also need to account for hotter rivers and more frequent drought conditions.

Demand-side flexibility provides another option. Large electricity consumers can be compensated for reducing or shifting consumption during extreme price periods. Commercial cooling, water heating, industrial processes and electric-vehicle charging can potentially respond without requiring broad reductions in economic activity.

Retail tariffs that provide no incentive to move consumption away from evening peaks leave some of this flexibility unused. Any reform would require smart meters and protections for households that cannot easily alter their consumption patterns.

Cross-Border Networks Remain Critical

The wide price differences between Bulgaria, North Macedonia, Serbia and Croatia show that transmission capacity and market coupling have not fully equalised regional electricity prices.

Serbia has aligned SEEPEX price limits with the EU framework and is working towards integration with the EU internal electricity market. Market coupling is intended to allocate cross-border capacity more efficiently, increase liquidity and improve access to lower-cost generation. Energy Community Secretariat

Market integration cannot eliminate high prices when an entire region is short of electricity, but it can reduce situations where available power is prevented from reaching higher-priced markets by trading constraints.

New interconnectors and grid reinforcement therefore remain important alongside new generation. Serbia can benefit from Bulgarian battery storage, Greek solar generation, Romanian wind power or central European electricity only where sufficient transmission capacity is available.

Regional interdependence can also create pressure on governments to restrict exports during shortages, potentially weakening confidence in cross-border electricity trade.

The August price spike combined drought, extreme heat, reduced plant availability and strong evening demand. The resulting price range—from negative daytime electricity prices to €550/MWh in Serbia—highlights the growing importance of storage, flexible demand, transmission and reliable generation alongside additional renewable capacity.