Montenegro is initiating a two-tier electricity flexibility market aimed at enabling aggregators, industrial consumers, and distributed energy assets to generate revenue from both national balancing and local distribution-grid services. This development is supported by the transmission system operator, CGES, which is updating balancing rules to allow a combination of generation, consumption, and storage portfolios to qualify as balancing service providers. This change is designed to provide smaller assets access to markets typically controlled by larger power plants.
At the distribution level, CEDIS has implemented rules for non-frequency ancillary services. The regulatory framework in Montenegro permits the distribution operator to acquire flexibility as an alternative to traditional network reinforcement methods. These initiatives mark the establishment of two distinct markets for electricity flexibility.
CGES will focus on procuring flexibility necessary for balancing the national electricity system, while CEDIS will seek flexibility solutions specifically addressing distribution-grid constraints. This differentiation is significant due to the varying economic implications of these services.
For instance, an industrial facility capable of reducing consumption by 5 MW may hold value for CGES when there is a national electricity shortfall. Conversely, this facility could provide additional benefits to CEDIS by alleviating congestion or supporting voltage levels at a specific location within the network. Thus, flexibility can possess both national and locational value.
The new CGES framework allows for the inclusion of multiple production units, consumers, and storage installations into a single balancing portfolio. This lowers barriers for individual assets that may not qualify on their own. Various facilities such as hotels, industrial plants, water systems, and refrigeration units could be aggregated into larger portfolios capable of meeting minimum technical and operational standards.
The aggregator will manage critical functions including forecasting, telemetry, dispatch, and settlement. As a result, industrial consumers can transition from merely reducing consumption to offering their capacity as a market commodity. Revenue streams could emerge from payments for maintaining available capacity as well as for actual balancing energy utilized.
At the distribution level, CEDIS’s regulations encompass non-frequency ancillary services that include capabilities like voltage support and reactive power. Montenegrin regulations mandate that distribution planning considers flexibility options alongside conventional grid investments. This approach opens up possibilities for a local flexibility market.
Rather than immediately upgrading infrastructure such as transformers or feeders that experience occasional overloads, CEDIS might incentivize customers to adjust their consumption or production during peak times. This creates an economic comparison between costly network upgrades and potentially less expensive flexibility contracts.
Flexibility could serve as a non-wire alternative to traditional network enhancements. Market participants may find value in these services even when national electricity prices remain stable or unremarkable since the issues being addressed are localized.
The distinction between national balancing and distribution flexibility underscores the importance of location in determining service value. A flexible megawatt in one area may not resolve congestion issues elsewhere, potentially leading to localized pricing structures.
The value of resources such as industrial loads or renewable generators will depend not only on responsiveness but also on their geographical connections within the grid. Consequently, project valuations will need to consider local flexibility procurement opportunities alongside traditional factors like grid-connection costs and curtailment risks.
The two-tier model introduces coordination challenges; a flexible asset cannot simultaneously commit its capacity to both CGES and CEDIS if both require it concurrently. Effective management of dispatch priorities and contractual obligations becomes essential.
An aggregator operating across both markets must maintain real-time awareness of asset availability and existing commitments to optimize value without overcommitting resources. This situation necessitates advanced digital infrastructure including telemetry systems and optimization software.
While Montenegro’s small electricity market may limit liquidity and competition among service providers, it also presents opportunities for aggregation across commercial buildings, industries, and flexible infrastructures. The evolving regulatory framework aligns with this aggregation model.
The next phase involves commercial implementation where CEDIS will signal specific flexibility requirements detailing necessary capacities and associated costs. For CGES, the challenge will be ensuring that finalized balancing rules facilitate consistent procurement that aggregators can rely upon for investment decisions in control technologies.
If both markets successfully develop in Montenegro, they could set a precedent within the Western Balkans by enabling flexible assets to earn revenue from both system-wide balancing and local grid services. The next significant asset in Montenegro’s power market may not be another generation facility but rather existing industrial or commercial loads capable of adapting their electricity consumption for dual-market benefit.
