Serbia’s coal plants rack up outages, underscoring reliability risk for a power system still built on lignite

Serbia’s thermal power sector is showing signs of mounting structural strain, with a sharp rise in unplanned outages highlighting the fragility of an electricity system that still relies heavily on aging coal generation. For investors and policymakers alike, the key issue is not just lost output in any single month, but whether the country can maintain reliability while it tries to integrate more renewables and meet European decarbonization expectations.

Outage surge points to capacity losses during critical moments

ENTSO-E data covering 1 January to 12 May shows that breakdowns, technical failures and unexpected operational interruptions made as much as 1,865 MW of generation capacity unavailable at certain moments. Over the same period, Serbia’s coal-fired power plants recorded 79 unplanned outages since the beginning of 2026.

The scale becomes clearer when set against the size of Serbia’s thermal fleet. EPS thermal power plants have installed capacity of about 4.8 GW, meaning that at times nearly 40% of available thermal generation capacity was simultaneously affected by outages, maintenance issues or technical failures.

Aging assets meet heavier operating demands

The growing number of failures points to deeper problems rooted in how much of Serbia’s coal infrastructure has aged. Much of the country’s lignite generation was built decades ago, with several major units in the Kolubara and Kostolac systems operating beyond the age profile considered optimal for stable baseload production. The article links current instability to years of underinvestment in modernization and delayed revitalization cycles, alongside operational strain following Serbia’s energy crisis in 2021–2022.

In thermal power operations, an “outage” is not simply a drop in efficiency; it is described as a sudden and unplanned shutdown triggered by equipment failure, protection system activation, network disturbances or mechanical breakdowns. Frequent outages can force rapid compensation for missing generation through imports, hydro balancing or reserve activation—an operational challenge that also carries financial consequences.

Multiple pressures are converging

The report identifies several overlapping drivers behind the instability:

Fleet age and condition: Older lignite units—particularly within Nikola Tesla and Kostolac complexes—were designed under earlier technological standards. Many components have reportedly extended their service life through partial overhauls rather than full modernization, with analysts warning that maintenance cycles were often postponed during periods of financial stress inside EPS.

Operational overloading: After domestic production collapsed during the 2021 energy crisis, thermal units have been pushed into more intensive regimes. Coal plants built for steadier baseload operation increasingly face cycling pressure tied to renewable fluctuations, seasonal import dependence and changing regional market conditions. That operating pattern accelerates wear on boilers, turbines, cooling systems and auxiliary infrastructure.

Coal quality variability: Serbia’s reliance on lignite from Kolubara and Kostolac mines exposes plants to variations in calorific value, moisture content and excavation conditions. Poorer coal quality can increase mechanical stress and raise failure risk.

A more volatile market environment: Southeast Europe’s electricity system is becoming more volatile due to higher renewable penetration, stronger interconnection and larger intraday price swings. Coal plants that previously operated under relatively predictable dispatch conditions now face more dynamic balancing requirements and are increasingly required to respond to variable renewable output from neighboring markets such as Romania, Hungary and Greece.

Profit improvement does not remove the investment gap

The outage surge arrives even as EPS reports improved financial performance. EPS announced first-quarter 2026 profits of approximately €129 million, supported by lower operating costs and more stable production compared with earlier crisis periods. However, profitability does not resolve the underlying infrastructure problem because long-term revitalization would require multi-billion-euro investment programs.

The transition dilemma: keeping reliability while cutting coal dependence

The situation also raises questions about Serbia’s energy transition strategy. While Serbia continues expanding renewable capacity, it still depends overwhelmingly on coal-fired generation for system stability and winter security. Thermal plants remain important not only for electricity supply but also for balancing intermittent renewable output and maintaining grid reliability.

This creates a policy contradiction: Serbia faces pressure from the European Union and Energy Community to reduce coal dependency, improve emissions standards and accelerate decarbonization at a time when it cannot realistically stabilize its near-term power system without functioning thermal assets.

Kostolac B3 highlights both ambition and criticism

The recently commissioned Kostolac B3 unit illustrates this tension. The 350 MW coal-fired block was developed with Chinese financing and EPC support from CMEC and was presented as a strategic pillar for Serbia’s future energy security. At the same time, critics argue that the country remains burdened by an aging fleet that requires extensive rehabilitation while Europe moves toward coal phaseout frameworks.

Reliability risks could intensify as renewables expand

From a cost perspective, frequent outages can increase balancing costs, raise import dependence during peak periods and expose EPS to volatile regional electricity prices. In tight supply periods across the region, unexpected thermal failures can also force Serbia into expensive electricity imports from neighboring markets.

As wind and solar capacity grows, grid reliability risks may become sharper because additional flexible backup generation—and adequate storage or balancing infrastructure—will be increasingly important. If coal units continue experiencing technical instability before sufficient alternatives are deployed, the system could face greater operational vulnerability.

A widening “transition gap” becomes visible

Overall, the report frames Serbia’s challenge as a transition gap: trying to preserve aging coal infrastructure while integrating renewables, modernizing the grid and aligning with European environmental obligations—all while maintaining affordable electricity prices and energy security. With thermal outage numbers rising quickly enough to show technical limits in real time, investors will be watching whether new capacity plans can be matched by rehabilitation needs fast enough to protect reliability during a period of changing market dynamics.