The same gas shock produces very different electricity outcomes depending on where it lands. In Central Europe, gas price movements tend to pass through into power prices in a measured, relatively predictable way. In South-East Europe, identical gas signals often translate into outsized, abrupt electricity price responses. This elasticity gap—the difference in how gas tightness converts into power prices—has become a defining feature of regional markets and a primary source of mispriced risk for both traders and industrial electricity buyers. Seasonal risk framing by ENTSO-E captures the structural backdrop; observed market behaviour explains why outcomes diverge so sharply.
At a system level, the elasticity gap is rooted in depth and redundancy. Central European markets such as Germany and Austria operate with large, diversified gas fleets, extensive storage, multiple import routes, and dense transmission meshes. When gas prices move, power prices respond—but the response is cushioned by alternatives. South-East Europe, by contrast, operates with thinner dispatchable layers, fewer gas-fired units, and more fragile interconnections. When gas becomes marginal there, it does so abruptly and without buffers.
The quantitative difference is visible in pass-through ratios. In Central Europe, a €10/MWh change in gas benchmarks typically results in €8–12/MWh movement in peak power prices during winter conditions. In South-East Europe, the same gas move can trigger €25–60/MWh changes in peak electricity prices under stress. This is not because gas sets the price more often in SEE, but because when it does, it sets it alone.
Country structures explain the divergence. Hungary, though geographically adjacent to SEE, sits closer to the Central European model, with gas-fired capacity above 3 GW, access to multiple storage sites, and relatively strong north–west transmission links. Serbia and Bulgaria, by contrast, rely on far smaller gas fleets—typically <1 GW of effective gas-fired capacity—and depend more heavily on hydro and imports for flexibility. When those options are exhausted, gas is not one marginal option among many; it is the last option standing.
This structural asymmetry means that gas marginality in SEE is episodic but extreme. Gas does not set prices every day, but when it does, prices jump sharply because the system transitions from surplus to constraint in a narrow band of hours. During recent winter stress events, Central European peak prices cleared in the €120–160/MWh range while adjacent SEE markets spiked above €250–300/MWh once gas-fired units became marginal. The divergence occurred despite similar gas price inputs, underscoring the elasticity gap.
Transmission topology reinforces the effect. Central Europe benefits from dense internal grids that redistribute stress. South-East Europe relies on a limited number of corridors linking Hungary–Serbia–North Macedonia and Romania–Bulgaria–Greece. When gas marginality coincides with binding power corridors, elasticity compounds. A gas-driven marginal cost increase of €20/MWh can translate into €70–100/MWh electricity price separation once interconnectors saturate. In Central Europe, the same gas shock is dispersed across a wider mesh and rarely produces such discontinuities.
For traders, the elasticity gap invalidates simple cross-regional hedges. Using Central European power or gas instruments to hedge SEE exposure assumes comparable pass-through. In reality, correlation collapses during stress. Markets that normally move together decouple precisely when protection is needed. Traders who rely on historical correlations find themselves under-hedged in SEE during cold spells, while over-hedged in Central Europe.
Intraday behaviour highlights the contrast. In Central Europe, intraday price adjustments to gas news are often incremental, with spreads of €10–30/MWh during volatile periods. In SEE, intraday repricing of €50–100/MWh within hours is increasingly common when gas tightness emerges. Liquidity thins faster, and balancing prices escalate more sharply. The same information produces different market reactions because the underlying systems absorb stress differently.
For industrial electricity buyers, the elasticity gap explains why procurement strategies copied from Central Europe fail in SEE. Buyers operating plants in Serbia, Romania, or Bulgaria often benchmark contracts against German or Austrian outcomes, assuming similar risk profiles. Yet a fixed-price structure that performs adequately in Central Europe can leave buyers exposed to extreme peak pricing in SEE, because gas shocks propagate more violently. The result is budget volatility that appears “unexpected” only because the elasticity gap was ignored.
Cost concentration magnifies the effect. In SEE, winter peak hours can account for 25–30% of annual electricity costs, compared with 15–20% in more buffered Central European systems. When gas marginality hits during those hours, buyers experience disproportionate cost escalation. Negotiating a €5/MWh lower average price offers little protection against €40–60/MWh peak spikes driven by gas tightness.
Carbon convergence will likely widen the elasticity gap before it narrows. As coal exits accelerate in Romania and Bulgaria, gas will become marginal more frequently in SEE, while Central Europe deploys more storage, grid reinforcement, and flexibility. During this transition phase, SEE markets will remain more sensitive to gas shocks, even if absolute gas prices fall. Elasticity, not price level, will drive volatility.
Strategically, the implication is unified. Gas–power elasticity is not a universal constant; it is a system property. Traders must model it explicitly, treating SEE as a high-elasticity region where conditional exposure dominates. Industrial buyers must design procurement around stress behaviour rather than averages, prioritising peak caps, flexibility, and load management over marginal €/MWh savings.
The market signal is clear. South-East Europe converts gas stress into power price volatility faster and more violently than Central Europe because it lacks buffers. Until grids are reinforced, storage scaled, and dispatchable depth rebuilt, this elasticity gap will persist. Those who recognise it can price risk accurately; those who ignore it will continue to be surprised—often at the worst possible time.