Serbia’s electricity balance received support from hydropower in the first part of 2026, according to a MAT analysis. After a difficult period driven by drought and weak hydro output, generation from hydroelectric plants moved closer to its medium-term average in the first quarter. The improvement also helped stabilise the electricity, gas, steam and air-conditioning supply sector, which had been under pressure since late 2023.
The MAT analysis said the power-supply sector, at around 15% of industrial production, had shown a pronounced downward trend from December 2023. Signs of recovery emerged from the middle of last year. The March trend level remained slightly below the previous-year average, while higher hydropower generation followed abundant rain and snow across Serbia’s region and Central Europe.
Hydropower generation trends across late 2025 and early 2026
Hydropower production was below both last year’s level and the medium-term average for much of 2025. November delivered the first improvement, and December continued that recovery. The first quarter of 2026 benefited from stronger hydrological conditions.
In March, hydro generation was around 7% higher year-on-year. For the first four months, hydro output was still about 13% higher year-on-year even after a weaker April. The month-to-month shift reflected changing hydrological conditions rather than a steady upward pattern.
Implications for imports, thermal generation and system flexibility
The analysis said hydropower affects Serbia’s power system beyond being a generation source. It functions as a balancing asset, a cost buffer and a market stabiliser. Higher hydro output can reduce the need for electricity imports and lower pressure on thermal generation.
Stronger hydro availability can also soften wholesale price exposure and support system flexibility during peak periods. In a market where coal, gas, refinery-linked fuels and imported energy prices carry risk, improved hydro conditions strengthen the operating position of the power system.
Industrial supply backdrop and limits from weather dependence
The short-term macro effect described in the analysis is linked to industrial electricity supply. Better hydropower generation reduces import dependence and can ease cost pressure on the wider economy. It also supports recovery in the electricity sector after a long declining trend.
The limitation is that hydro remains weather-dependent, so early strength does not remove risk for later months. April already showed a year-on-year decline of 6.6%, indicating that hydro recovery can reverse quickly.
Investment relevance for renewables, storage and demand response
The MAT analysis pointed to implications for investors in renewables and storage. While strong hydro output can reduce short-term price pressure and lower immediate import needs, volatility in hydrology increases the value of diversified flexibility. Wind, solar, batteries, demand response, pumped storage and grid reinforcement become more relevant when hydro conditions are uncertain.
The analysis also described how hydrology interacts with industrial competitiveness through power costs and supply reliability. Energy-intensive manufacturers are sensitive to both factors, with stronger hydro years supporting margins and reducing volatility. Weaker hydro years can raise import needs and expose industry to regional electricity prices.
The first-quarter recovery provided near-term breathing room by supporting the electricity balance and improving the industrial energy backdrop. It also reduced stress in the short term for Serbia’s power system. However, it was characterised as relief rather than a transformation of supply risk across the rest of the year.
Serbia’s power-sector resilience still depends on investment in generation diversity, grid flexibility and risk management covering hydrology as well as coal, gas and renewable integration.
