Coal plants are becoming financially unstable across the Western Balkans

Coal is no longer only an environmental liability in the Western Balkans. It is increasingly a financial stability problem for utilities, governments and energy markets, as aging lignite and coal-fired assets struggle to deliver reliable output while policy language shifts toward renewables, storage and grid integration.

The first half of May 2026 underscored how exposed the region remains. Coal generation across the broader HU+SEE system fell by about 260 MW, yet prices rose sharply. Serbia’s SEEPEX averaged €101.61/MWh, Montenegro’s BELEN stood at €98.76/MWh, Bulgaria’s IBEX reached €104.98/MWh, and Romania’s OPCOM climbed to €115.88/MWh.

This matters because it points to a system losing cheap firm capacity faster than replacement flexibility can fully absorb the gap. Coal plants remain politically important, but their operational and financial quality is deteriorating—turning what was once treated as baseload security into a growing contingent liability.

RiTE Ugljevik: operational disruption turns into financial strain

The clearest example is RiTE Ugljevik in the Republic of Srpska. The plant returned online in early May after months of inactivity linked to coal-supply and operational problems. Its financial position then deteriorated sharply: the company reported an €18.3 million loss in the first quarter of 2026 after revenue dropped from €18.8 million a year earlier to only €2.2 million, while expenses remained above €20 million.

The report frames this as more than a cyclical downturn. When mining preparation, overburden removal or fuel supply fails, a coal plant cannot operate as baseload and instead becomes a liability that can draw in public support.

That risk is visible in state action: the Republic of Srpska decided to acquire Comsar Energy RS and its Ugljevik Istok 2 concession for more than €120 million, illustrating how large-scale intervention may be required to keep coal infrastructure alive—shifting generation security toward fiscal exposure.

Gacko and Pljevlja: thinner buffers leave less room for shocks

RiTE Gacko shows a softer but still significant deterioration. The company posted only around €50,000 net profit in the first quarter of 2026, down from €440,000 in the same period last year, despite revenue of €24.3 million. Expenses rose to roughly €24.2 million, leaving almost no earnings buffer.

Such thin margins increase vulnerability to additional shocks—ranging from equipment failures and coal-quality deterioration to environmental costs, wage pressure, carbon-related trade impacts, fuel logistics disruptions or forced outages.

Montenegro faces similar pressures through Pljevlja. The coalmine recorded significantly lower profit in 2025, while EPCG reported a €92 million loss in 2025 before returning to stronger profitability in the first quarter of 2026. The mixed performance highlights tension within hydro-coal utility systems: strong hydrology can improve earnings even as coal exposure remains structurally difficult.

Serbia’s central reliance keeps transition risk alive

For Serbia, the challenge is larger because coal remains central to the national power system. EPS reported higher profit in 2025 and €129 million profit in the first quarter of 2026; however, the broader direction still points toward rising pressure on lignite-based generation. In this framing, current profitability does not eliminate transition risk ahead.

A four-layer problem: technical decline, financing needs, regulation and market structure

The report describes four reinforcing layers behind Western Balkan coal instability.

First: technical issues. Many plants are old and maintenance-heavy and depend on mines with declining operational efficiency. Outages increasingly have regional consequences because firm capacity is still needed during low hydro periods, low wind conditions or evening peak demand.

Second: financial requirements. Coal assets need continuous capital just to stay operational—covering mine expansion and overburden removal as well as environmental upgrades, spare parts, workforce costs and debt restructuring—all competing with investment needs for renewables, storage and grid development.

Third: regulatory pressure. EU accession efforts, Energy Community obligations and environmental compliance are narrowing the commercial comfort zone around coal-heavy systems; CBAM-linked trade effects also weigh on the environment for coal-dependent activity.

Fourth: market-based change. As solar expands, utilization weakens during midday periods even though coal remains needed during evening and winter scarcity windows—reducing operating predictability even if capacity must stay available.

Why investors should treat it as a managed-decline issue

The economics described are difficult by design: baseload coal works best when plants run steadily at high load factors, but systems with growing solar and wind require flexibility—ramping capability and reserve services—that old lignite units were not built to provide.

The consequences extend beyond power companies:

For governments, coal utilities often sit close to public balance sheets; when plants fail states may step in via guarantees, concession acquisitions or liquidity support—so energy transition risk can become fiscal risk.

For banks, even indirect exposure through utilities or industrial off-takers tied to coal systems carries transition risk as cash flows become harder to justify under declining utilization prospects or higher compliance costs.

For electricity traders, instability can raise volatility: sudden outages at major lignite units can tighten regional supply quickly when nuclear or hydro output is also weak—the May data reflecting lower firm generation alongside higher gas generation and rising prices despite weaker demand.

For renewable developers, declining coal reliability can strengthen the case for new renewable capacity plus battery storage and flexible resources; but weak grid planning or slow replacement of firm capacity can also increase system risk through curtailment and balancing costs.

No single fix: replacement must cover energy plus system services

The report cautions that replacing coal with solar alone is too narrow for Western Balkan systems. It argues that coordinated replacement portfolios are needed—covering wind, solar, storage (including batteries), hydro optimization, grid reinforcement (and related transmission upgrades), demand response (where applicable), flexible gas where necessary, and industrial power purchase agreements where they fit system needs.

This is tied to why storage and flexible hydro are gaining strategic importance: historically coal provided inertia, voltage support, reserve capacity and dispatchability that renewables do not automatically replicate without grid-forming inverter capabilities (or equivalent technical measures), storage deployment at scale (and advanced control systems) plus stronger transmission networks.

The political economy constraint—and why delay may raise costs

The political challenge remains that coal plants still support employment and local economies; mines and thermal plants are often among the largest employers in their regions. The report emphasizes that any serious transition requires social and financial planning—not only energy modeling.

At the same time, delaying transition does not remove cost; it may increase it by raising the probability of emergency imports, forced public support or politically difficult tariff adjustments when underinvestment leaves insufficient replacement flexibility available during outages or mining failures—or when environmental liabilities are ultimately priced into decisions about asset life extension versus replacement.

Taken together—the financial instability at Ugljevik after operational disruption; margin compression at Gacko; volatility around Pljevlja; and Serbia’s ongoing reliance on coal-heavy systems—the picture is one where Western Balkan coal is moving from security asset toward a managed decline problem rather than an indefinitely stable foundation for power supply. The key question now is whether governments use remaining operating windows to finance credible replacement capacity or spend those windows keeping old assets alive until failures become more expensive than transition itself.Elevated by Energy.Clarion.Engineer