South-eastern Europe has a power problem – CESEC can help solve it

Author: Maike Kirsch, Policy Advisor, E3G

This summer, South-eastern Europe saw electricity price spikes not experienced since the 2022 gas crisis, exposing a discrepancy between the region and the rest of the European Union. What drove these price surges was an interplay of dynamic factors. Heatwaves caused an increase in evening power demand and a reduction of hydropower production.

Outages at nuclear power plants, interconnector flow issues, and an increase in exports to Ukraine added to the challenge. With little storage capacity for solar energy, gas generation, which saw higher running costs due to increased fuel costs, was ramped up as a result. The complex situation leaves stakeholders in the region and Brussels searching for solutions.

The price spikes already made it onto the agenda of EU energy ministers last month, but this week’s meeting of the Central and South-Eastern Europe Energy Connectivity (CESEC) Initiative was the one that can really drive regional cooperation and structural solutions. The recent electricity price spikes are a wake-up call to speed up collaboration on energy infrastructure, market integration, and the diversification of renewable sources. Without it, the region is at risk of energy security disturbances, high electricity bills and falling behind in Europe’s competitiveness race.

Diversify renewable energy supply

A key factor of this summer’s price spikes was the region’s lack of a diversified energy mix. Heatwaves hampered hydropower output, and peak prices occurred in the evenings when solar power and storage were insufficient, leading to reliance on costly gas to provide flexibility. More renewables, coupled with non-fossil storage solutions, are the key to stability and flexibility, not susceptible to volatile gas prices, and achieving long-term electricity price reductions.

The renewables mix itself needs to be rebalanced. Solar capacity has been growing faster than wind, largely due to falling costs. Between 2017 and 2021, photovoltaics accounted for 58% and wind 25% of total installed renewable power capacity additions. Yet, both onshore and offshore wind investments are crucial to a well-rounded renewable energy supply.

Greater cross-border cooperation on renewable energy build-out offers untapped potential, with current renewable energy capacity sitting at 58.4 GW against a cost-competitive potential of 130 GW, and vast opportunities in non-EU countries. According to the International Renewable Energy Agency, the technically feasible potential is even bigger, with onshore wind having double the potential (800 GW) than solar power (400 GW).

By stepping up collaboration to build renewable energy sources together with cross-border infrastructure, the region could pocket up to 19% in cost savings. The European Commission has even identified the most promising cross-border areas for renewable energy deployment, offering a framework for regional cooperation on investment and infrastructure planning. The Connecting Europe Facility, a key funder for CESEC-driven projects, is expanding its investments to renewable energy sources with cross-border implications. This is an opportunity that shouldn’t be missed.

Strategically build out interconnections

In a complement to renewables expansion, the region must ramp up efforts to build interconnectors that can balance geographic variations in wind and solar generation. Interconnectors would also help the region minimise its severe grid congestion and curtailment caused by a lack of grid flexibility and electricity storage. High renewable curtailment and grid connection queues highlight the region’s grid challenges, with over 50 GW awaiting connection in Romania, 40 GW in Bulgaria, and 30 GW blocked in Poland between 2015 and 2021.

Cross-border interconnections stabilise supply, reduce price volatility, and boost electricity market competitiveness. The International Renewable Energy Agency has pinpointed transmission projects to address borders with high renewable electricity curtailment, enabling countries to fully utilise renewable generation. With these opportunities in sight, CESEC has the chance to significantly upgrade the region’s power grid.

Advance electricity market integration

Realizing cross-border electricity projects and improving electricity flows will help reduce both prices and price volatility this decade. It will be even more critical with a view of 2050.

CESEC needs to seize this moment to push forward market integration efforts. When cheap renewables are expanded, market integration allows the wider region to benefit from the lowest-cost resources available. The initiative has shown leadership by encouraging countries to pinpoint key congestion issues, work towards meeting the EU’s targets for electricity trading availability and align market rules between EU and non-EU countries. Breaking down prevailing barriers to the region’s market integration and implementing common ambition will be essential to establishing smoother electricity flows across borders.

CESEC needs laser focus to unlock the opportunities of a diversified renewable energy mix, strategic power grid interconnection, and efficient trade. Central and South-eastern Europe can draw inspiration from regional cooperation across Europe, such as the Iberian Peninsula’s push for a net zero power system by 2035. They demonstrate the potential of regional cooperation to unlock cheap renewable energy and secure affordable electricity for their citizens and businesses.