The Ministry of Energy in Montenegro plans to ask privileged electricity producers from renewable sources, primarily private wind farms and small hydropower plants, to hand over their entire production to the state-owned company Elektroprivreda Crne Gore (EPCG) at domestic prices starting next year. This measure aims to offset the electricity losses in the system caused by the planned shutdown of the Pljevlja Thermal Power Plant (TPP) for reconstruction.
In return, these producers will have their period of eligibility for renewable energy subsidies extended by another year, with guaranteed purchase agreements from EPCG at the agreed prices.
Negotiations are expected to begin in late November or early December. The ministry highlighted that privileged producers have a special status, with the state obligated to purchase their entire production at the prices defined in the contracts. For 2023, the mandatory purchase of electricity from these privileged producers cost Montenegro—specifically EPCG and its citizens—nearly 48 million euros, for just over 400 GWh of electricity.
EPCG paid 42 million of this amount, while the remaining portion was covered by consumers. This arrangement could potentially reduce costs for EPCG by around 42 million euros.
Price of electricity and market shifts
Privileged producers, which include large private wind farms on Možura and Krnovo, 32 small hydropower plants, and five solar farms, were initially granted this status to encourage the generation of electricity from renewable sources. They are entitled to government incentives, including guaranteed purchase prices from EPCG, irrespective of market rates. However, in recent years, international market prices have often exceeded the prices these producers receive, prompting some to cancel their contracts and sell directly on the market.
Currently, the shutdown of TPP Pljevlja in 2024 will create a shortage of around 600 GWh of electricity, which will need to be compensated for, with privileged producers contributing about 450 GWh. EPCG will need to purchase the remaining 150-200 GWh from international markets. Therefore, the negotiations with privileged producers could have an impact on electricity prices for consumers in 2025.
Energy security and price adjustments
EPCG recently purchased 50 GWh of electricity on the international market for approximately 100 euros per MWh, a deal that will help cover part of the electricity shortfall during the shutdown of TPP Pljevlja. However, EPCG sells electricity to consumers at a lower rate, around 50% less than the purchase price. As a result, EPCG is facing a loss on these transactions, which could influence future electricity price adjustments for consumers.
Additionally, Minister Mujović has mentioned that Montenegro, as part of its EU accession process, is obligated to transition to market-based electricity pricing by 2027, with measures in place to protect vulnerable populations. The Ministry plans to increase electricity prices by 6% annually until market prices are reached, as part of the reform agenda approved by the European Commission.
Despite the ongoing challenges with energy supply and market volatility, the Ministry aims to balance energy security with the financial impact of maintaining renewable energy reserves, ensuring long-term stability for both producers and consumers.
