Serbia’s state energy company, EPS, enters 2026 under conditions that are no longer temporary disturbances but structural failures. Electricity imports are climbing again, especially in the winter months, while domestic generation remains insufficient to cover rising demand. Hydropower output is below plan. Coal units are aging and inefficient. Renewable projects exist mostly on paper. And the investments that were supposed to modernize Serbia’s energy backbone have faced years of delay.
Energy analysts and local media have documented a decade-long stagnation in EPS’s investment capacity. Key modernization projects — the overhaul of Kostolac, upgrades to major units in the Nikola Tesla thermal complex, revitalization of hydropower plants on the Drina, and increased capacity for pumped storage — have been postponed repeatedly. The result is a system that struggles to balance supply even under normal conditions. When water levels are low or multiple units require maintenance, EPS is forced to rely on expensive electricity imports.
Imports, once a seasonal necessity, have become structural. This poses significant risks for public finances because European electricity prices fluctuate dramatically based on geopolitical tensions, gas availability and weather conditions. EPS is increasingly exposed to price swings in regional markets, which in turn impacts Serbia’s fiscal architecture. Despite lower prices than during the 2022 crisis, uncertainty alone forces EPS to operate in reactive mode, unable to plan long-term cost structures.
Organizationally, EPS is in a state of transition. A newly appointed supervisory board and a company assembly, guided heavily by the Ministry of Energy, aim to introduce performance discipline. But EPS’s problems are institutional. A decade of political interference, inconsistent procurement procedures, insufficient strategic planning and underinvestment in workforce capacity created a system where even basic modernization efforts take far longer and cost far more than they should.
This institutional stagnation meets the global imperative of energy transition — a challenge Serbia is not prepared for. To align with European energy goals, Serbia must build gigawatts of new renewable capacity, invest in large-scale energy storage, modernize its grid and stabilize baseload generation. EPS cannot finance these requirements alone. The country needs new models of public investment, partnerships and possibly partial restructuring, but any such decisions remain politically sensitive.
Serbia now finds itself at a strategic breaking point. The cost of doing nothing is rising dramatically. Electricity imports drain public resources. Delayed investments increase risks of system instability. And the energy transition becomes harder with each year of inaction. EPS, once considered the most reliable pillar of Serbia’s public-sector economy, has become one of its biggest structural risks — to industrial competitiveness, fiscal stability and overall energy security.
In 2026, Serbia no longer has the luxury of postponing decisions. EPS must modernize or risk dragging the entire economy into an energy-constrained decade. The company has survived crisis after crisis, but survival is no longer a sufficient strategy. Serbia needs a functional, future-ready EPS — and the window for achieving it is rapidly narrowing.
