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Balancing and ancillary services are becoming a financial pillar for South-East Europe’s power market
In South-East Europe, investors have long focused on the visible price signals of day-ahead markets, cross-border flows and long-term contracts. But a fast-growing “second layer” is increasingly determining how projects perform financially: balancing and ancillary services, procured by transmission system operators to keep frequency, voltage and overall stability intact as renewables add variability.
Beneath the surface of day-ahead prices, the region’s operators—including EMS Serbia, Transelectrica Romania, ESO Bulgaria, IPTO Greece and CGES Montenegro—are expanding reserve procurement. What used to be treated primarily as a technical requirement is now moving toward mainstream project economics, with growing implications for how developers model returns and how lenders assess risk.
A market expanding with volatility
The scale of balancing activity is rising alongside system variability. Across the region, balancing volumes are estimated at 5–10% of total electricity demand, implying continuous procurement of several gigawatts of upward and downward reserves. In Greece—where renewable penetration is higher and intraday volatility has been most pronounced—balancing costs have exceeded €300–500 million annually in recent periods. Romania and Bulgaria run smaller but still significant markets, with annual balancing expenditures in the range of €150–300 million.
Reserve products become more standard—and more valuable
Reserve procurement is also evolving toward greater standardisation aligned with European frameworks. Frequency containment reserve (FCR) provides immediate response within seconds, while automatic frequency restoration reserve (aFRR) and manual frequency restoration reserve (mFRR) address imbalances over longer timeframes. Prices differ by market conditions, but they have risen as flexibility becomes scarcer.
In Romania and Greece, aFRR capacity prices can reach €20,000–40,000 per MW per year. Energy activation prices can add further income depending on utilisation—an important distinction because it links earnings not only to availability but also to performance during dispatch events.
Diversified revenue stacks reshape participation choices
For traditional generators, these markets can supplement income through both capacity payments and activation revenues—particularly for gas-fired plants that are suited to provide upward reserves. Yet the expansion of storage is changing who can participate effectively.
Batteries offer near-instantaneous response times that align well with FCR delivery needs as well as aFRR services. The article describes battery systems often competing on cost efficiency and precision compared with conventional units.
A 100 MW battery system, according to the figures cited, can generate €2–5 million annually from reserve capacity payments alone, with additional revenue from activation events. When combined with arbitrage revenues of €10–20 million, this diversified stack supports equity IRRs of 12–16%, even where energy price spreads are moderate. In Greece specifically—where both volatility and balancing demand are high—the same type of system could earn more than €20–30 million per year, pushing returns toward the upper end of the range.
The link—and divergence—between day-ahead pricing and balancing costs
The relationship between balancing markets and day-ahead pricing is becoming more visible as renewables drive faster changes in generation patterns. During periods of high renewable output, operators need more downward reserves to manage rapid fluctuations. That dynamic can suppress day-ahead prices while lifting balancing prices—creating divergence between what participants see in forward-style trading versus what they face in real-time corrections.
The opposite pattern can occur when supply tightens or demand peaks: upward reserve prices may spike, reinforcing high day-ahead levels while amplifying overall volatility.
Bulgaria highlights cross-border complexity; Serbia shows gradual build-out
Bulgaria illustrates how interconnection can transmit price pressure across borders. With strong links to Greece and Romania, its balancing market reflects both domestic conditions and cross-border influences. During periods when Greek prices run high, upward reserve demand increases; in extreme cases this has pushed balancing prices above €200/MWh. At other times—such as when midday solar output creates surplus conditions—downward reserves become necessary and prices fall.
This duality creates opportunities for flexible assets but also raises system complexity for participants managing portfolios across different operating regimes.
Serbia’s balancing market is smaller but evolving as renewable capacity expands—especially solar projects in central and southern regions. EMS is increasing reserve procurement to maintain stability. While Serbia’s prices remain lower than those seen in Greece or Romania, they are trending upward as capacity payments alongside activation revenues become more material for flexible assets. Integration into broader European balancing platforms is expected to align pricing further while increasing liquidity.
An investment shift: ancillary revenues move from “uncertain” to modeled cash flow
The financial implications for renewable projects are significant because ancillary revenues historically were not included in project models: access was limited and outcomes uncertain. That approach appears to be changing as hybrid designs become explicitly geared toward participation in balancing markets.
The article points to hybrid projects combining generation with storage adding a third revenue stream beyond energy sales (and arbitrage). For a 100 MW solar + 200 MWh battery project, ancillary services can contribute €2–6 million annually, improving overall project economics while stabilising cash flows.
Lenders are beginning to recognise these revenues too—though cautiously. Energy sales remain the primary basis for debt sizing, but ancillary income is increasingly incorporated into upside scenarios and sensitivity analyses. As markets mature alongside regulatory frameworks stabilising, part of this income may become bankable over time, potentially supporting higher leverage or improved financing terms.
Regulatory alignment—and aggregation—determine how scalable it gets
A key enabler remains regulation governing participation rules for aggregation and settlement. Progress differs by country: Greece and Romania have made significant strides integrating storage technologies into their markets, while other jurisdictions continue adapting their frameworks.
The article also highlights harmonisation efforts with European platforms—including integration pathways involving aFRR and mFRR—to improve efficiency and enable greater cross-border participation.
A new optimisation layer for traders—and data-driven dispatch capability
Beyond physical providers such as generators or batteries, traders increasingly treat balancing markets as another dimension within broader optimisation strategies. By managing portfolios spanning generation assets, storage positions and capacity rights—from day-ahead through real-time adjustments—they aim to capture value across multiple layers of the system rather than relying on one pricing channel alone.
This environment depends heavily on data quality and analytics. Platforms like Electricity.Trade provide insights into balancing prices, reserve volumes and system conditions so participants can anticipate market movements while optimising dispatch decisions amid increasing granularity—from hourly intervals toward sub-hourly or real-time timing requirements that demand more sophisticated tools.
A structural change in what “value” means on power grids
The growth of balancing markets reflects a fundamental shift: as renewable penetration increases across South-East Europe, variability becomes defining—and flexibility turns scarce enough that it commands explicit compensation through reserves rather than being priced only indirectly via energy trades.
The article argues that this makes electricity value less about supply-demand equilibrium at any single moment than about an asset’s ability to respond quickly when conditions change rapidly. In South-East Europe specifically—where renewable growth combines with uneven infrastructure development—balancing markets are emerging as both an operational mechanism for stability and an economic opportunity tied directly to monetisable flexibility.
