South-East Europe’s battery storage market is expanding rapidly, but investors are split on how projects should be financed. The key issue is whether Balkan storage should operate as fully merchant BESS exposed to market volatility or rely on regulated support and contracted revenue mechanisms. By 2026, the dispute is described as one of the defining financial battles shaping the region’s energy transition.
Batteries are no longer treated as niche infrastructure. Across Serbia, Greece, Romania and Bulgaria, gigawatt-scale storage pipelines are emerging alongside rising renewable penetration and more volatile electricity markets. Unlike traditional generation assets, storage economics are highly dependent on market design, which affects both project outcomes and investor participation.
The financing framework selected now is expected to influence which projects proceed, which investor groups gain influence, and how quickly South-East Europe develops a functional flexibility economy. The merchant case is gaining traction as volatility increases across multiple market drivers. In this view, storage value grows directly from the conditions created by variable renewables.
Volatility drivers and merchant revenue pathways
In Greece and Bulgaria, accelerating solar deployment has been linked to weaker midday prices during high-irradiation periods. In Serbia and Romania, wind generation can create sudden balancing swings. Cross-border congestion intensifies during synchronized renewable events, widening the spread between low-price and high-price hours.
Batteries can monetize these patterns through arbitrage and system services. A merchant battery would absorb cheaper electricity during oversupplied periods and discharge during balancing shortages or evening peaks. Revenue sources cited include arbitrage, ancillary services, balancing participation and congestion management rather than fixed tariffs or capacity-style payments.
The argument for merchant-only operation rests on the idea that a sufficiently volatile market can support storage commercially without heavy regulatory backing. Commodity traders, infrastructure funds and some utilities are described as increasingly favoring merchant BESS models in SEE markets. Their position is that deeper volatility from rising renewable penetration will make flexibility more valuable.
Country examples: Serbia, Greece and Romania
Serbia is presented as a key testing ground for merchant economics. EMS agreements connected to roughly 4.54 GWh of planned storage are cited as an indicator that the market is preparing for structurally higher volatility. Wind growth in Vojvodina, expanding solar pipelines and Serbia’s transmission role between Central Europe and the Balkans are listed among factors that could enable batteries to capture intraday and balancing value.
For investors pursuing higher exposure, batteries located near congestion zones or renewable clusters are described as capable of operating like a physical trading desk. The cited capabilities include arbitraging volatility, supporting balancing needs and optimizing renewable output dynamically. If volatility continues rising, merchant storage revenues could become substantial under this model.
Greece is described as reinforcing the same logic through its solar-heavy system profile. Widening intraday spreads are linked to midday solar oversupply weakening prices while evening balancing demand creates sharp ramps. Batteries are described as fitting this structure by converting solar timing mismatches into tradable value.
Romania is characterized as more diversified due to nuclear baseload, hydropower, wind and future offshore wind development. Multiple layers of volatility and balancing opportunity are cited across these resources. Batteries connected near strategic interconnectors toward Hungary, Serbia and Bulgaria may gain additional value through congestion management and cross-border optimization.
Lender concerns over merchant exposure
The merchant case relies on an assumption that volatility will keep increasing faster than market saturation. Despite this, many lenders remain cautious about financing structures tied primarily to uncertain market outcomes. Traditional project finance is described as preferring predictable revenue streams supported by earlier contracting approaches.
Wind and solar projects have historically relied on feed-in tariffs, contracts for difference or long-term PPAs to provide visibility for lenders. Merchant batteries instead depend on uncertain future spreads, balancing prices and market conditions. This mismatch between financing preferences and expected revenue variability is described as creating tension in project bankability.
Infrastructure funds and trading-oriented investors may accept merchant exposure if they expect flexibility scarcity to rise. Commercial banks and conservative lenders are described as more likely to prefer partially contracted structures that reduce volatility risk. This difference in risk tolerance shapes how projects are structured across the region.
Regulated or semi-regulated support mechanisms
Regulated-storage models enter the debate by offering more stable revenue support under regulated or semi-regulated arrangements. The support forms cited include capacity payments, ancillary-service contracts, TSO-backed procurement frameworks or hybrid revenue guarantees. The rationale given is that storage provides system stability and resilience benefits that may be difficult to monetize fully through merchant markets alone.
Supporters argue that without clearer long-term revenue certainty, SEE markets could underbuild storage at the same time renewable volatility accelerates. This concern is linked to the region’s still-developing balancing architecture. Intraday liquidity is described as uneven, with differences in ancillary-service frameworks across countries.
TSO coordination is characterized as incomplete, while revenue stacking is often unclear. Grid fees and charging rules are also cited as factors that can materially alter project economics. Under these conditions, pure merchant exposure may be viewed as too risky for large-scale financing by some lenders.
Hybrid structures and regional infrastructure factors
The debate extends beyond finance into how batteries should be treated within power-system roles. Questions raised include whether batteries should behave like infrastructure utilities supporting system stability or like market assets monetizing volatility through trading opportunities. Western Europe is referenced as showing examples of both approaches.
The UK and parts of Germany are described as having seen aggressive merchant battery deployment driven by balancing needs and intraday spreads. Other markets in Western Europe are described as relying more heavily on capacity mechanisms or regulated support structures instead of full merchant exposure. SEE’s decision is framed as occurring under more fragile market conditions.
The outcome may differ between countries based on their volatility profiles and market development paths. Greece’s profile is described as increasingly supportive of merchant economics due to solar-driven spreads already present in the system dynamics. Serbia may initially require hybrid frameworks while balancing markets mature; Romania may support mixed structures combining merchant optimization with ancillary-service contracts.
A hybrid approach is also described as increasingly favored by investors seeking reduced financing risk while keeping upside from volatility growth. Mixed revenue models combine merchant arbitrage with contracted balancing or ancillary-service components. Hybrid renewable-storage portfolios are also cited as following similar logic by combining contracted renewable revenues with merchant battery optimization.
The location of storage relative to transmission constraints is identified as another factor affecting value capture. The Trans-Balkan Corridor linking Greece–Bulgaria links along with wider SEE interconnections are cited as increasingly determining where storage becomes most valuable. A battery near a strategic congestion node or interconnector may generate higher revenues than a poorly located asset because it can monetize regional balancing spreads more effectively.
Hydropower flexibility interaction and cross-border market signals
Hydropower adds additional context for how flexibility can be stacked across technologies in parts of the region. Albania, Montenegro and Romania are cited as already having substantial flexibility through reservoir systems. Batteries are described as complementing rather than replacing hydro balancing by covering shorter-duration volatility while hydro manages longer-duration balancing needs.
This interaction is noted as potentially reducing reliance on heavy regulated storage support in some markets where flexibility scarcity becomes structurally monetizable through layered resources. The Energy Community’s latest data is also referenced for regional electricity economics changes tied to structural pressures affecting trading behavior.
Q1 2026 commercial electricity exchanges between the EU and Western Balkans fell significantly despite substantial price differences, according to the data cited. Carbon exposure, congestion and balancing constraints are highlighted among factors influencing market behavior in that period. The trend is described as strengthening the case for storage amid rising renewable penetration and more volatile cross-border flows.
Even with growing demand signals for flexibility assets, uncertainty remains around long-term monetization pathways for storage revenues in SEE markets. The biggest risk identified is not insufficient storage demand but uncertainty about how revenues will be realized over time under existing frameworks. Without clearer long-term rules for monetization, investors may hesitate when flexibility infrastructure needs intensify.
Batteries are described as moving beyond peripheral renewable-support tools into core market infrastructure affecting whether renewable-heavy systems remain stable, tradable and commercially functional. In this context, the financing battle between merchant versus regulated storage models is presented as shaping more than battery deployment alone across South-East Europe’s electricity market over the next decade.
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