Serbia’s industrial recovery is increasingly being shaped by the gap between stronger manufacturing activity and weaker domestic electricity production. In May 2026, the manufacturing index reached 105.2, compared with 103.7 a year earlier, while the electricity, gas and steam supply index declined to 74.1 from 81.1 in May 2025.
Mining activity also remained under pressure, with the sector index standing at 88.4 in May. The divergence highlights a growing constraint for industrial companies: production capacity is recovering, but the domestic energy system is showing weaker performance at a time when manufacturers require stable and competitively priced electricity.
Electricity supply becomes a factor for industrial competitiveness
Lower domestic power generation can increase Serbia’s dependence on electricity imports, particularly during periods when regional markets are affected by high temperatures, weak hydrological conditions or reduced thermal availability.
Higher electricity imports can affect both the country’s external balance and industrial operating costs. Manufacturing companies may face greater exposure to market-price volatility, while the electricity system may incur additional costs to secure supply.
Serbia’s power sector remains largely dependent on Elektroprivreda Srbije (EPS), with lignite-based generation and hydropower representing the main sources of domestic electricity production. System performance depends on coal quality, mining productivity, availability of generating units, hydrological conditions and maintenance schedules.
Renewable projects and grid capacity gain importance
The gap between manufacturing performance and electricity output increases the importance of additional generation capacity, including renewable energy projects. Wind and solar projects provide different system benefits. Wind generation generally offers a higher capacity factor and can provide greater value during winter and evening demand periods. Solar capacity can be developed more quickly but produces electricity mainly during daylight hours and is increasingly exposed to lower or negative midday market prices.
Battery storage can help manage short-term imbalances and reduce curtailment risks, but it cannot replace firm seasonal generation capacity. Grid expansion, balancing reserves, improved forecasting systems and flexible hydro or thermal assets remain necessary parts of the electricity system.
Industrial exporters face higher energy compliance requirements
Manufacturers are also entering a more demanding phase of the European Union’s Carbon Border Adjustment Mechanism (CBAM) regime. The emissions intensity of electricity consumption and the ability to document carbon performance will affect the competitiveness of industries including metals, fertilisers, cement and other exposed sectors. Industrial companies are increasingly considering renewable power purchase agreements, guarantees of origin and transparent metering systems as part of their future market position.
For new energy projects, installed capacity alone is not sufficient to determine commercial viability. Investment decisions depend on grid connection availability, potential curtailment, electricity price patterns, balancing expenses and the financial strength of buyers.
Grid connection delays of 12 to 18 months can significantly affect project economics by increasing interest costs during construction and postponing revenue generation. Serbia’s manufacturing indicators show continued industrial demand, but weaker electricity output highlights the energy system limitation that could restrict further expansion. Energy investment has become directly linked to maintaining industrial competitiveness and export capacity.
