In South-East Europe, transmission corridors have overtaken generation assets as the primary determinants of price formation. While installed capacity figures still dominate political discourse, trading outcomes increasingly hinge on whether electricity can physically traverse a handful of constrained interfaces at the precise hours when system stress materialises. This shift marks a fundamental change in how value is created and destroyed in SEE power markets. Seasonal stress modelling by ENTSO-E has long pointed in this direction; recent market behaviour confirms it decisively.
The region’s core transmission structure consists of a limited number of high-voltage axes linking Central Europe to the Balkans and the eastern SEE system to the Adriatic zone. The most critical corridors are the north–south chain running through Hungary–Serbia–North Macedonia–Greece, and the east–west routes connecting Romania through Serbia and Bosnia toward the Adriatic. While aggregate cross-border technical capacity across SEE exceeds 20 GW, commercially available capacity during winter stress often falls below 40–50 % of that figure due to N-1 security constraints, internal bottlenecks, and simultaneous maintenance.
These reductions have direct price consequences. When a corridor binds, marginal prices decouple instantly, regardless of underlying generation costs. A market clearing at €70–80/MWh can spike above €200/MWh within hours if isolated during a cold spell, while a neighbouring system with higher nominal costs remains comparatively stable simply because it retains flow access. Such outcomes are no longer exceptional. Over the past two winter seasons, traders have observed corridor-driven price separations exceeding €100/MWh on peak hours across multiple SEE interfaces.
The north–south corridor illustrates the mechanism clearly. Hungary’s winter peak demand frequently exceeds 7.0 GW, while southern Balkan systems experience simultaneous heating load surges. When Serbian internal balance holds, southbound and northbound flows remain manageable. When it does not, the corridor saturates rapidly. Commercial transfer capacity that may average 1.5–2.0 GW under normal conditions can collapse to 500–700 MW during stress, forcing abrupt price separation. For traders, this corridor behaves less like a pipeline and more like a digital switch—either open or binding, with little gradation.
East–west corridors show similar behaviour, amplified by hydrological volatility. Bosnia and the Adriatic zone rely heavily on hydro, which can fluctuate by 20–30 % year-on-year in winter output. When inflows weaken, these systems draw on eastern neighbours. If Romanian margins are simultaneously tight, east–west corridors saturate, and Adriatic prices diverge sharply. The trading signal is not fuel cost but reservoir levels and maintenance schedules, variables that were once secondary.
Congestion rents quantify the economic weight of these corridors. Annual congestion income on key SEE interconnectors has risen into the tens of millions of euros, with winter quarters contributing a disproportionate share. In some cases, a single cold week can generate congestion rents comparable to an entire summer season. These rents are the market’s way of signalling scarcity—not of energy, but of transfer capability.
The investment response has lagged the signal. New 400 kV transmission lines in the region typically cost €0.8–1.2 million per kilometre, with full corridor reinforcement programmes requiring €300–600 million over multi-year horizons. Yet such projects often struggle to secure approval because benefits accrue across borders while costs are borne nationally. From a trading perspective, this underinvestment preserves volatility and sustains congestion premiums, effectively taxing regional consumers and rewarding those positioned correctly.
Transmission corridors also influence forward curve shape. Markets increasingly price deliverability risk into Q1 and Q4 contracts. Peak products exhibit convexity because traders assign probability to corridor failure during stress. Baseload prices, by contrast, remain anchored closer to average marginal costs. The widening spread between peak and baseload—often exceeding €40–50/MWh in winter quarters—reflects the value of being able to deliver power when corridors are scarce.
Intraday markets magnify corridor effects. As flow forecasts update, prices reprice in minutes. A corridor approaching saturation triggers rapid bid-stack reshuffling, with intraday spreads widening by €50–100/MWh in extreme cases. Liquidity thins, imbalance exposure rises, and balancing prices spike. These dynamics reward desks with real-time grid intelligence and penalise static hedging strategies.
Flexibility assets located near constrained corridors derive outsized value from this environment. A 100 MW battery positioned at a binding interface can capture balancing prices exceeding €300–400/MWh during stress events, even if its average utilisation remains low. Pumped hydro units capable of rapid ramping similarly monetise corridor scarcity, earning in hours what baseload assets earn over days. For investors, these assets are not energy producers but congestion arbitrage instruments.
Carbon convergence adds a timing dimension. As coal exits accelerate and carbon costs rise, corridor stress frequency increases unless grid reinforcement keeps pace. Markets are already pricing this mismatch. Longer-dated forwards embed higher uncertainty premiums, reflecting the risk that corridors will become binding more often before new lines are commissioned. This is visible in widening bid-ask spreads and declining liquidity beyond Y+2 products.
In this environment, transmission corridors are no longer passive infrastructure. They are the assets that decide who clears at scarcity prices and who does not. For traders, mastering SEE markets now means mastering corridor behaviour—understanding not just nominal capacities, but how those capacities collapse under stress. For investors, it means recognising that grid CAPEX is market-shaping CAPEX. And for the region as a whole, it means acknowledging that without accelerated reinforcement, price volatility will remain a structural feature rather than a temporary phase.