South-East Europe’s electricity markets operate under formally liberalised and largely EU-aligned frameworks, while real-world outcomes continue to reflect structural fragilities compared with deeper and more liquid parts of Europe. Limited system size, persistent import dependence, thin trader participation and constrained interconnections contribute to results that are legally compliant but economically distortive. Since 2024–2025, these weaknesses have been increasingly visible through cross-border capacity pricing, particularly in daily auctions. The value effects have been described as shifting from consumers and industrial users toward a narrow set of market participants.
One public case involved electricity imports into Kosovo, where the Kosovo Transmission System and Market Operator flagged anomalous outcomes in cross-border capacity auctions involving Elektroprivreda Srbije and the trader Noa Energy Trade. The episode was presented as part of a broader pattern rather than an isolated deviation from regional norms. Similar conditions have been described as recurring when structural import needs intersect with daily auction mechanics and concentrated participation. In that setting, daily capacity pricing can reflect urgency rather than competitive discovery.
Kosovo cross-border capacity auctions and reported transmission costs
In much of 2025, daily cross-border capacity auctions into Kosovo were repeatedly cleared by only two participants. With limited bidder depth, the auction outcome was described as reflecting the marginal buyer’s urgency. Historical data cited by KOSTT indicated that on certain days the transmission cost component of imported electricity reached levels as high as €800 per megawatt-hour. The reported explanation in the source material linked these outcomes to repeated structural conditions including limited participation and the absence of alternative physical routes.
Across systems such as Kosovo, Montenegro and North Macedonia, imports are described as operationally essential because domestic generation cannot reliably cover demand across a significant share of hours. In those circumstances, imports are not treated as discretionary volumes driven by arbitrage opportunities. The source material states that this operational dependence shapes price formation for cross-border access. When electricity must be imported regardless of price, the cost of securing cross-border capacity can become a lever for extracting scarcity rents even without explicit collusion or rule-breaking.
Montenegro intraday and balancing price spikes during stress
Comparable dynamics were described for Montenegro, where intraday and balancing markets in 2022 and 2023 showed price outcomes above neighbouring benchmarks during periods of hydrological stress or grid constraints. Montenegro’s small system size and limited domestic flexibility were cited as factors that can turn modest interconnection constraints into a price-setting environment dominated by one or two counterparties. Prices cleared at levels described as having little relationship to marginal production costs in the wider region while remaining formally compliant with market rules. The same mechanism was linked to thin liquidity at short time horizons.
In Serbia and Romania, the source material describes parallel effects in balancing markets during 2023 and 2024. Balancing prices were said to spike sharply during stress events not due to absolute shortages of generation capacity but because a small number of units or traders set the marginal price repeatedly. For Serbia, where coal and lignite units remain structurally central, balancing prices at times were described as reflecting constraint rents rather than true marginal costs. Romania was described as seeing similar effects when limited participation converged with operational constraints.
Balancing market concentration and liquidity effects
The source material notes that these balancing-market episodes were not cross-border capacity auctions in the strict sense, but it describes the economic mechanism as the same. Thin liquidity at short time horizons allows a narrow set of actors to determine prices for the entire system. This pattern is presented as consistent with how concentrated participation can translate into system-wide price outcomes during stress periods. The reported emphasis is on short-horizon trading conditions rather than on specific auction formats alone.
Bulgaria was cited as another example where market monitoring exercises between 2021 and 2023 highlighted how long-term bilateral contracting and concentration of generation ownership suppressed liquidity in day-ahead and intraday markets. Although no auction abuse was formally established, persistent volatility and price spreads were described as exceeding what fundamentals alone would justify. The source material frames this as evidence that structural dominance can produce economic effects similar to those observed in cross-border capacity pricing in smaller systems. In this account, liquidity suppression is tied to concentration rather than to explicit misconduct.
Daily auctions, scarcity pricing inputs and operational constraints
The source material groups these cases under structural vulnerability rather than illegality. It describes South-East Europe’s electricity markets as formally liberalised but functionally thin, with trading time horizon becoming decisive for outcomes. Annual and monthly capacity auctions are described as allowing participants to hedge, diversify and absorb risk over time. Daily auctions are described as compressing uncertainty, urgency and physical constraints into a single clearing event.
When imports are operationally necessary, daily demand for capacity becomes highly inelastic because buyers must secure access immediately or face imbalance, curtailment or system risk. The source material describes daily auctions as structurally weak points because liquidity collapses at short horizons. It states that borders may have around a dozen registered participants at annual level but see only two or three active bidders in daily auctions, sometimes only two. Under those conditions, clearing prices are described as reflecting how much the marginal buyer is willing or forced to pay to keep the system balanced.
Operational factors are also described as amplifying these effects through transmission outages, maintenance works, N-1 security margins and internal grid bottlenecks that reduce usable capacity with little notice. When constraints emerge close to real time, daily auctions are described as pricing scarcity immediately without scope for arbitrage or alternative sourcing. Capacity acquired cheaply on longer horizons can then be reoffered into daily windows where urgency increases its value. The source material characterises this sequencing behaviour as potentially compliant with formal rules while producing economic effects similar to scarcity rent extraction.
Quantified value transfers from excess congestion pricing
The source material provides conservative modelling examples for value transfers through these mechanisms based on assumed volumes of import capacity priced above competitive levels. It states that if a structurally import-dependent border effectively prices up 150 megawatts across the year, this corresponds to approximately 1.31 terawatt-hours of electricity. An excess congestion price of €5 per megawatt-hour applied to 0.8 terawatt-hours is described as producing an annual transfer of roughly €4 million. The source material adds that this level is often absorbed quietly within system costs.
It also describes medium-stress conditions more commonly prevailing across South-East Europe in its account. An excess price of €25 per megawatt-hour applied to 1.2 terawatt-hours is described as producing an annual transfer of around €30 million on a single border. During prolonged stress periods, excess pricing of €80 per megawatt-hour on similar volumes is described as implying transfers approaching €96 million. These figures are presented as embedded in tariffs, supplier margins and procurement costs.
The source material further describes short-lived extreme events as potentially more damaging even if they dominate public perception less consistently in its framing. It states that if 200 megawatts of capacity clear at an excess of €300 per megawatt-hour for just ten days, the resulting transfer exceeds €14 million within that window alone. It also states that such episodes can shape annual cost outcomes and drive risk premiums after the event ends.
Industrial cost impacts from congestion risk and balancing exposure
The source material links congestion-related pricing dynamics to industrial tariff outcomes through wholesale price formation incorporating congestion risk as a permanent premium rather than a temporary anomaly. When base wholesale prices sit around €70 per megawatt-hour, it describes an additional €6–10 per megawatt-hour linked to congestion and cross-border risk representing a 9–14 percent increase in the energy component of industrial tariffs. It states suppliers respond by shortening contract tenors, widening margins and embedding explicit congestion adjustment clauses.
Balancing and profile costs are also described as rising alongside energy-component impacts when cross-border flexibility tightens for industrial loads with variable consumption profiles. In such conditions, balancing prices are said to spike more easily, while suppliers add €2–5 per megawatt-hour risk layers to contracts to cover exposure they cannot hedge efficiently. The source material presents this adjustment range as part of how contract terms respond to tighter flexibility conditions.
The competitiveness impact is presented through energy-intensive processes consuming 80–200 kilowatt-hours per tonne, including cement, metals and chemicals. It states production costs increase by €0.8–€2.0 per tonne for every sustained €10 per megawatt-hour uplift in electricity prices under its stated assumptions. For large industrial users consuming 200–500 gigawatt-hours per year, it describes even a €10 per megawatt-hour increase translating into €2–5 million additional annual cost.
Curtailment risk and limits on regulatory enforcement evidence
The source material states that beyond price levels, reliability risk compounds impacts when borders bind and domestic flexibility is limited. It says system operators resort to emergency imports at any price, industrial demand response or outright curtailment under those conditions described in its account. It also states that the economic cost of a single curtailment event—through lost production, equipment stress and contractual penalties—frequently exceeds annual congestion rent itself according to the same framing used earlier in the text.
The regulatory section describes enforcement challenges across South-East Europe under existing frameworks where high prices alone do not constitute proof of manipulation without evidence of intent or rule-breaking beyond outcomes appearing economically excessive. It states most cases conclude without sanctions even when economic harm is substantial because enforcement regimes require evidence beyond market results alone. Structural fixes rather than punitive action are characterised within the source material as the only durable solution approach it describes.
The final portion reiterates that the core issue is framed around market depth and resilience rather than liberalisation status alone within its account. It says that without greater liquidity, broader participation, alternative physical routes and redesigned short-term capacity mechanisms, daily auctions will continue concentrating market power in small systems where price formation reflects urgency instead of competition. It also repeats that legal compliance does not guarantee competitive outcomes across cases cited including Kosovo, Montenegro, Serbia, Romania and Bulgaria within the same factual scope provided earlier.