Gas plants in South-East Europe shift from mid-merit to peaking as renewables reshape dispatch

Gas-fired power plants across South-East Europe are moving away from mid-merit generation toward a more peaking and balancing function, even as near-term conditions improve. The change matters for investors because it alters how and when thermal assets can earn money, while also increasing the operational and revenue uncertainty that comes with running fewer hours.

Better spreads, but weaker output

In week 16, gas prices at the CEGH hub fell to €44.9/MWh. That helped lift clean spark spreads by roughly €24.6/MWh versus the prior week, which—under traditional market dynamics—would normally be expected to support higher gas-fired generation.

Instead, production stayed muted at about 3,144 MW, close to multi-month lows. The gap between improved economics and restrained dispatch underscores how renewable output is increasingly displacing thermal units from the merit order.

Renewables increasingly set prices

The source points to solar and wind generation playing a larger role in setting prices during substantial portions of the day. As renewables cover more of the demand curve, gas plants are left operating mainly during peak demand periods or when renewable generation is insufficient.

This shift is expected to reduce utilisation rates. Many plants are forecast to run at only 10–20% capacity factors in the coming years, reflecting a system that relies on flexibility rather than continuous thermal output.

Revenue models become more concentrated—and riskier

Alongside lower utilisation, the economics of ownership are changing. Rather than depending on steady participation in energy markets, gas generators are increasingly reliant on capturing value during a small number of high-price intervals.

Concentrating returns into fewer hours can increase volatility for asset operators and raise risk around earnings predictability.

Greece remains an exception—but not immune

The transition is not uniform across the region. In some markets—particularly Greece—gas remains more central due to the structure of the generation mix and LNG infrastructure. Even there, however, rising renewable penetration is gradually reducing gas’s role.

Flexibility needs point to capacity remuneration questions

The long-term outlook described in the source suggests gas-fired generation will continue to be important for reliability. But its economic function is expected to shift away from baseload power toward providing flexibility during peak periods.

That raises key policy and investment questions about whether capacity remuneration mechanisms will be needed to ensure sufficient supply when demand peaks and renewable output cannot fully cover system needs.