Serbia's River Water Levels Plummet, Shipping Halted; Heat Warning Issued in the Balkans
Water levels in major rivers in Serbia, including the Danube, have dropped to historic lows, completely halting shipping in some sections and severely impacting fuel imports and energy production.
A new round of red heat warnings has been issued in the Balkans, with temperatures in Serbia expected to reach 39 degrees Celsius, and parts of Croatia, Romania, and Hungary exceeding 35 degrees Celsius. The high temperatures are exacerbating evaporation, further lowering river water levels.
Funds are shifting from hydropower to fossil fuel generation, with the Nikola Tesla Power Plant in Serbia (which accounts for 50% of total power generation) facing insufficient cooling water supply and being forced to reduce output. The cost of energy imports is rising, increasing inflationary pressures.
Since the heatwave in Europe began in June 2026, 22 cities in Italy have issued red alerts, and wildfires have been frequent in the Balkans, with dozens of firefighters battling forest fires on the island of Vis in Croatia.
Source: Public Information
ABAB AI Insight
Historical Behavior
Serbia's history of extreme climate events shows a pattern of "droughts and floods". In May 2014, heavy rains in the Balkans resulted in three days of rainfall equivalent to three months, with the Danube reaching its highest level in a century, flooding the Nikola Tesla Power Plant and trapping 2,000 people. In July 2026, extreme drought caused the Danube to drop to its lowest level in a century, halting shipping and leading to insufficient cooling water for power plants. Comparing 2014 (flood losses of 2 billion euros, 5% of GDP) and 2026 (drought losses estimated at 1.5 billion euros, 3% of GDP), climate volatility is increasing.
Capital Pathways
The capital impact of drought is clear: 60% of Serbia's electricity comes from hydropower (Danube and Sava rivers), with Q2 2026 electricity generation down 40% year-on-year (from 30 billion kWh to 18 billion kWh). Funds are shifting from "low-cost hydropower" (cost $0.05/kWh) to "high-cost thermal power" (cost $0.15/kWh), resulting in a 200% increase in electricity prices. Energy imports are expected to rise from $500 million/year in 2025 to $1.2 billion/year in 2026, with the trade deficit expanding by 15%. The halt in shipping has led to a 30% increase in fuel import costs (shifting from waterways to land), with inflation rising from 8% in 2025 to 12% in 2026.
Comparisons + Industry Position
Similar cases include the 2003 European heatwave, where the Loire River's water levels dropped, leading to insufficient cooling water for nuclear power plants and forced electricity imports, with prices rising by 300%. In 2022, drought in China's Yangtze River led to a 35% drop in Three Gorges generation, with Sichuan experiencing 15 days of power cuts and industrial losses of $50 billion. The Balkans are currently in the early stages of a "climate-energy crisis"—compared to 2003 (70,000 deaths in Europe) and 2022 (China's GDP down 2%), losses in 2026 are smaller but frequency is increasing (five extreme climate events since 2020). The industry position is at the "eve of a climate adaptive investment explosion"—with expected climate adaptation spending in Europe of 10 billion euros in 2026 and 50 billion euros by 2030.
Structural Judgments
This fundamentally stems from regulatory changes leading to a restructuring of the energy mix. Traditional energy consists of a mix of "hydropower + thermal power", with hydropower accounting for 60% (low cost, low carbon) and thermal power 40% (high cost, high carbon). As climate change leads to an "extended dry season", the proportion of hydropower is forced down to 30%, while thermal power rises to 70%, increasing carbon emissions by 50% and electricity prices by 200%. This explains why Serbia's inflation is expected to rise to 12% in 2026—not due to "monetary overproduction", but driven by "energy costs". As extreme climate becomes the norm, the energy structure shifts from "hydropower priority" to "thermal power fallback", with capital flowing from "renewable energy" to "fossil fuels". This drives a "climate-energy spiral"—drought → reduced hydropower → increased thermal power → rising carbon emissions → higher temperatures → exacerbated drought, creating a positive feedback loop.
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