Serbia’s electricity balance received a useful, if not permanent, cushion from hydropower in the first part of 2026. After a difficult period marked by drought and weak hydro output, production from hydroelectric plants returned closer to its medium-term average in the first quarter. The improvement helped stabilise the electricity, gas, steam and air-conditioning supply sector, which had been under pressure since late 2023.
The MAT analysis notes that the power-supply sector, which accounts for around 15% of industrial production, had experienced a pronounced downward trend from December 2023 before showing signs of recovery from the middle of last year. The March trend level was still slightly below the previous-year average, but the improvement was linked to higher hydropower generation after abundant rain and snow in Serbia’s region and Central Europe.
Hydropower production had been below both last year’s level and the medium-term average for much of 2025. November brought the first better result, December continued the improvement, and the first quarter of 2026 benefited from stronger hydrological conditions. In March, hydro generation was around 7% higher year-on-year. For the first four months, even after a weaker April, hydro output was still around 13% higher year-on-year.
This matters for Serbia because hydro is more than a generation category. It is a balancing asset, a cost buffer and a market stabiliser. Stronger hydro output can reduce the need for electricity imports, lower pressure on thermal generation, soften wholesale price exposure and support system flexibility during peak periods. In a market where coal, gas, refinery-linked fuels and imported energy prices all carry risk, hydro availability improves the operating position of the power system.
The short-term macro benefit is clear. Better hydro generation supports industrial electricity supply, reduces import dependence and can ease cost pressure on the wider economy. It also helps the electricity sector recover from a long declining trend. For EPS and the broader Serbian energy system, hydropower provides operational flexibility that is difficult to replace quickly with other resources.
The limitation is equally clear. Hydro is weather-dependent. A strong first quarter does not remove hydrology risk for the rest of the year. April already showed a year-on-year decline of 6.6%, reminding the market that hydro recovery can reverse quickly. Serbia’s energy planning therefore cannot rely on hydropower as a structural solution to supply risk. It can provide relief, but not a permanent answer.
This is important for investors in renewables and storage. Strong hydro output can reduce short-term price pressure and lower the immediate need for imports, but volatility in hydrology strengthens the long-term case for diversified flexibility. Wind, solar, batteries, demand response, pumped storage and grid reinforcement all become more valuable when hydro conditions are uncertain. The Serbian system needs a portfolio response, not dependence on one weather-sensitive source.
Hydro also interacts with industrial competitiveness. Energy-intensive manufacturers are sensitive to power costs and supply reliability. A stronger hydro year can support margins and reduce volatility. A weak hydro year can increase import needs and expose industry to regional electricity prices. That makes hydrological conditions a quiet but important industrial variable.
The first-quarter hydro recovery gives Serbia breathing room. It supports the electricity balance, improves the industrial energy backdrop and reduces near-term stress. But the recovery should be read as a cushion, not a transformation. Serbia’s power-sector resilience still depends on investment in generation diversity, grid flexibility and better risk management across hydrology, coal, gas and renewable integration.
