Montenegro is advancing towards a more market-oriented balancing system aimed at incorporating batteries, demand response, generators, and aggregated portfolios into its energy reserve framework. This initiative follows the draft terms established by the transmission operator CGES.
The proposed system encompasses various types of reserves, including frequency containment reserves and both automatically and manually activated frequency-restoration reserves. It lays out guidelines for prequalification, capacity procurement, energy activation, settlement processes, monitoring, and penalties related to non-performance.
This draft aligns with Montenegro’s 2026 legislation concerning cross-border electricity and gas exchanges, facilitating eventual integration into regional and European balancing markets.
A significant aspect of the reform is the introduction of aggregation capabilities for generation, consumption, and storage facilities within designated scheduling areas. This provision enables smaller assets that might not qualify on their own to consolidate their resources under a single balancing-service provider.
The reform opens pathways for industrial demand response, distributed battery systems, renewable energy plants, and collections of smaller generation units. Previously, balancing relied heavily on established utility-scale resources and bilateral operational agreements.
According to the new rules, providers must complete a prequalification process to demonstrate their ability to deliver contracted services. This includes requirements for data exchange, metering accuracy, activation capability, control performance, and coordination with CGES and the distribution system operator when necessary.
The framework differentiates between balancing capacity—reserved ahead of time to ensure availability—and balancing energy, which incurs costs only when reserves are activated to restore system equilibrium.
This distinction holds significance for investors. For instance, batteries or flexible hydro units may generate revenue based on their availability even if they are activated infrequently. Total returns will depend on auction prices, activation frequency, energy constraints, and penalties for non-compliance.
The draft also addresses energy-limited resources such as storage systems that cannot maintain peak output indefinitely. This consideration is particularly relevant for batteries since their ability to provide reserves is contingent on their charge state and service duration requirements.
Montenegro’s power infrastructure is conducive to a competitive flexibility market. The EPCG’s Perućica and Piva hydropower plants can adjust their output effectively. Additionally, the country is expanding its wind and solar capacities while exploring battery project opportunities. Demand response may also become pertinent for larger commercial and industrial consumers.
The urgency of these reforms is amplified by renewable energy expansion. Variability in solar and wind generation necessitates enhanced balancing capabilities; fluctuations can lead to periods of surplus followed by shortages. Insufficient flexible capacity may result in higher imbalance costs or increased dependence on neighboring systems.
The new regulations could alter the financial dynamics of future renewable projects. Developers will need to determine whether to offer flexibility directly, engage with a balancing-responsible entity, or participate in an aggregated portfolio. The development of batteries alongside wind and solar projects may help mitigate imbalance risks while enabling participation in reserve markets.
Nevertheless, formal access does not guarantee competition within the market.
Montenegro’s electricity system is relatively small with a limited number of large flexible assets. If only one or two providers qualify for specific reserve products, procurement risks becoming concentrated. To address this concern, the draft includes procedures for scenarios where market competition is lacking or auctions fail to attract sufficient participants.
The design of settlement processes will also play a crucial role. Transparent pricing mechanisms, accurate activation records, and penalties are essential for instilling investor confidence regarding the predictability of balancing revenues. The rules reference market price benchmarks such as the Hungarian HUPX day-ahead price in relevant calculations to reflect Montenegro’s regional pricing exposure.
This framework further sets the stage for cross-border balancing service exchanges. Accessing larger markets could enhance liquidity and lower procurement expenses but necessitates compatible products, reliable telecommunications infrastructure, and sufficient interconnector capacity.
For CGES, this reform represents both a market initiative and an operational technology upgrade. Reserve providers must be visible and controllable in real-time while ensuring that metering and settlement data are accurate enough to withstand commercial disputes.
The draft offers clearer legal pathways for batteries and aggregators; however, investment decisions will hinge on final auction regulations, procurement volumes, contract durations, and potential revenue outcomes.
Historically reliant on flexible hydropower for system balance, Montenegro now has an opportunity to transform its operational capabilities into a transparent market framework—potentially determining whether future flexibility comes from large power plants or numerous smaller assets working collaboratively.
