Montenegro’s state-owned electricity provider, Elektroprivreda Crne Gore (EPCG), in collaboration with the Abu Dhabi-based renewable energy firm Masdar, is targeting a construction commencement in 2027 for their inaugural jointly owned solar power facility. This timeline hinges on the successful completion of essential engineering, permitting, and financing tasks.
This initiative marks a significant test of the viability of a politically significant energy partnership as it seeks to evolve into operational generation assets. The two companies have earmarked the 115 MW Štedim and 35 MW Krupac solar projects located near Nikšić as the initial components of a broader strategy aimed at achieving up to 2 GW of renewable energy capacity.
Milutin Đukanović, chairman of EPCG’s board, indicated that construction could commence once the technical designs are finalized and administrative protocols are adhered to, alongside an agreed-upon capital structure. The projects will be developed through a company jointly owned 50:50 by EPCG and Masdar, with project financing models under consideration.
This partnership enables EPCG to leverage Masdar’s extensive experience in equity, debt arrangements, engineering, and long-term commercial strategies for large-scale renewable projects. Conversely, Masdar benefits from EPCG’s established dominance in Montenegro’s electricity generation landscape and its connections with governmental bodies and grid institutions.
While the proposed 2027 construction start is promising, it does not signify a definitive investment decision. The partners must still formalize the joint venture, finalize a shareholders’ agreement, establish governance structures, complete necessary environmental and technical documentation, ensure grid capacity availability, and devise an electricity sales strategy.
EPCG and Masdar formalized their joint investment agreement on April 22, 2026, in Tivat. Subsequently, on July 27, they executed project-development agreements for Štedim and Krupac while also outlining a framework for evaluating over 400 MW of pumped-storage hydropower potential.
The combined planned capacity for the two solar projects stands at 150 MW. Their photovoltaic-module capacity is estimated at approximately 190 MWp—140 MWp from Štedim and 50 MWp from Krupac—reflecting a common practice of installing more direct current panel capacity than what is delivered through inverters to the grid.
This oversizing strategy aims to enhance connection utilization and boost production during periods of lower sunlight availability. However, it may also result in some output being curtailed during peak solar hours. The ultimate commercial viability will depend on factors such as equipment configuration, generation forecasts, connection terms, and market conditions for electricity sales.
While neither the final construction budget nor the specific debt-equity allocation has been disclosed yet, preliminary estimates from EPCG suggest an initial investment requirement of around €150 million for solar projects at Štedim, Krupac, and Slano. The final costs will depend on various factors including project scope, module pricing, substation needs, transmission infrastructure, and financing conditions.
A conventional project finance approach would necessitate the joint venture to secure debt based on anticipated cash flows from the plants. Lenders would closely examine construction contracts, grid connection rights, permitting status, output projections, and sales strategies for electricity. Equity contributions from EPCG and Masdar would follow their ownership stakes unless alternative funding arrangements are agreed upon.
The key commercial consideration remains whether the solar facilities will operate as merchant assets or secure long-term power-purchase agreements while balancing contracted sales with market-driven sales. Given Montenegro’s relatively modest electricity demand compared to the ambitious 2 GW target of this partnership, regional trading and exports will be crucial to making the investment feasible.
The proposed development of over 400 MW of pumped-storage hydropower represents a strategically vital component accompanying the solar initiative. Utility-scale solar generation can reduce daytime imports while enabling EPCG to conserve water resources in its reservoirs. Additionally, it could lead to lower wholesale prices during sunny hours as both Montenegro and neighboring markets expand their photovoltaic capacities.
However, selling exclusively into the spot market might yield maximum production during times when electricity prices are lowest. Pumped storage would facilitate using surplus or low-cost electricity to elevate water into an upper reservoir for later power generation during peak demand periods. This capability could transform part of the solar portfolio into dispatchable energy while generating extra revenue from ancillary services.
Masdar brings valuable experience through its acquisition of TERNA ENERGY in Greece in 2025; this company is developing a 680 MW pumped-storage project that could inform similar initiatives in Montenegro’s mountainous regions.
Despite these advantages, pumped-storage facilities entail complex economics due to extensive civil works requirements along with necessary water rights and environmental approvals. Their profitability largely depends on price differentials between low- and high-demand periods as well as regulatory frameworks governing storage operations.
The framework agreement for studying over 400 MW offers an option for future flexibility rather than a commitment to immediate construction. Nevertheless, incorporating storage solutions into the investment strategy enhances the commercial rationale behind developing solar capacity beyond Montenegro’s current daytime consumption needs.
Montenegro’s subsea interconnector with Italy offers access to a larger electricity market but does not guarantee favorable pricing outcomes for new solar plants. Export capacity must be commercially acquired while price disparities may diminish as transmission infrastructure evolves alongside increased renewable generation.
The optimal configuration would integrate domestic supply with regional sales while optimizing hydro resources and selectively exporting excess generation to Italy. This approach could mitigate Montenegro’s vulnerability during dry hydrological years where reliance on hydropower becomes critical amid fluctuations in inflows or thermal plant outages that may necessitate increased electricity imports.
While solar generation cannot fully replace services provided by dispatchable hydro or thermal plants, it can diversify production profiles and reduce dependency on costly summer purchases when demand surges across Southeast Europe.
The partnership with Masdar complements EPCG’s ongoing investment program that is progressing toward commissioning approval. The Montenegrin government has authorized borrowing up to €64.22 million for ten renewable projects totaling approximately 95.87 MWp capacity with an expected annual output around 124.5 GWh.
EPCG has invested about €25 million from its own funds into this portfolio which includes advanced solar installations at Kapino Polje designed to achieve operational status by late 2026 along with additional projects anticipated for completion by mid-2027.
These developments aim to equip EPCG with essential experience regarding construction processes as well as operational integration before larger-scale projects with Masdar commence. They also create opportunities for local suppliers while ensuring competitive procurement practices remain intact to avoid inflated costs.
EPCG’s Gvozd wind farm recently commenced trial operations producing approximately 26.2 GWh by early August following its activation in May 2026; full commercial operations are expected before year-end upon completing associated transmission lines.
A planned extension at Gvozd aims to add another 21 MW supported by financing from the European Bank for Reconstruction and Development while collectively generating around 78 GWh during 2027 alongside other operational installations prior to Masdar’s initial project coming online.
EPCG is also developing battery storage solutions intended for deployment within its Nikšić steelworks complex offering combined power capabilities of 60 MW alongside storage capacities reaching up to 240 MWh which would allow effective management of generated solar power throughout varying demand cycles.
Battery systems can typically be permitted faster than pumped-storage options although their economic viability relies heavily on cycling strategies along with market access considerations; thus both approaches should complement one another rather than compete directly against each other within EPCG’s broader energy portfolio strategy aimed at addressing weather-related volatility challenges effectively.
The swift progression from intergovernmental cooperation towards actionable projects signifies substantial momentum within this partnership framework established between Montenegro and Abu Dhabi since initial agreements were signed in late 2025 through parliamentary ratifications leading up through joint-investment arrangements finalized earlier this year followed by subsequent asset selections made shortly thereafter.
This advancement has reduced strategic uncertainties but development risks remain prevalent until governance structures are solidified alongside comprehensive financing plans ensuring durable permits alongside credible contractual obligations governing all aspects related towards successful implementation across both parties involved throughout future endeavors ahead.
