Drivers of High Energy Prices in Southeastern Europe

Summary

During the summer of 2024, Southeastern Europe saw high electricity prices. The Hungarian TSO, MAVIR, wanted to better understand the formation of these prices to take strategic actions.

In this case study, you will find out more about:

1. The reasons behind the raised wholesale prices in the summer of 2024 in Southeastern Europe and Hungary in particular.

2. How the effect of additional network capacity compares to additional local power generation, and how these high prices are truly driven by regional scarcity.

3. The conclusion drawn by N-SIDE about the unlikely exertion of market power within Hungary.

Introduction

In 2024, Southeastern Europe experienced an unusually long period with considerable price spikes in the day-ahead electricity spot market. These frequently exceeded 400 EUR/MWh and occasionally soared to around 1000 EUR/MWh. The Hungarian TSO MAVIR tasked N-SIDE to compare the main drivers contributing to this situation.

Customer Challenge

The prices in the wholesale electricity market were very high. This happened in the summer and early fall of 2024. It was especially true in Southeast Europe, particularly in Hungary.

For MAVIR, the Hungarian TSO, it is important to understand the market dynamics that drive prices. This knowledge helps guide decisions in developing market liquidity and network capacity through grid investments.

Solution/Approach

High electricity market prices typically relate to scarcity in power supply, scarcity in nominal network capacity, and scarcity in available network capacity (e.g. flow-factor competition happens when the network’s physics prevent some cross-border flow combinations in Europe).

N-SIDE utilized SDAC simulations to model hypothetical scenarios and evaluate various sensitivities:

• Increasing the available capacity of structurally binding network elements (to 70% Remaining Available Margin (RAM) and higher).
• Capping supply bid prices in Hungary and other Southeastern European markets, evaluating the potential exercise of market power.
• Introducing additional renewable or peaker plant supply nationally and regionally.

Whereas other studies investigated more individual price drivers, our simulations allowed for a quantitative comparison of the drivers. [1] [2]

These simulations were supported by analysis based solely on the bid curves. This helped them understand the sensitivities better. It also allowed us to measure the additional import or generation required to lower prices.

[1] ACER, “Transmission capacities for cross-zonal trade of electricity and congestion management in the EU, 2025 Monitoring Report”, September 2025

[2]ICIS, “Security of supply in Eastern Europe: Will the events of this summer be seen again?”, November 2024

Implementation

The quantitative results feed the discussion on finding a balance between:

• Enduring future price peaks as an investment signal for building additional supply
• Reinforcing the grid to increase network capacity for cross-zonal trade
• Introducing (local or regional) policy measures to actively develop liquidity.

Key Findings

The supply scarcity is clearly a regional issue, and the price formation is driven by all the aspects above:

1. Hungary alone needs 600MW additional supply or imports to keep prices below 400 EUR/MWh. On a regional level, the need is even larger.
2. Introducing additional generation assets in the region as a mitigating measure needs to happen at scale, as the scarcity is regional. Adding 3 GW of additional supply doesn’t reduce prices below 400 EUR/MWh. (see Figure)
3. Network capacity increased to the standard 70% RAM reduces prices, but cannot avoid all high prices as an isolated measure. Relaxing the binding CNECs beyond 70% RAM has a limited or no effect on the price.
4. Capping the Hungarian supply bid prices to the production cost of inefficient fossil production units did not reduce the price peaks. It is therefore considered unlikely that market power was exerted within Hungary.
5. Structural counter-intuitive flows were identified on the border with Croatia and Romania.

Conclusion, Outcome, and Results

The project concluded in September 2025 and showed how scarcity in power supply, scarcity in nominal network capacity, and flow-factor competition drove the Hungarian wholesale market price up in the summer of 2024. Through these insights and strategic recommendations by N-SIDE, MAVIR is equipped to navigate ongoing challenges while fostering a more resilient and efficient energy market for the future. This provides a foundation for a broader discussion concerning long-term adequacy measures for the Southeastern European region.