The development of the energy market in Montenegro in recent years has been marked by significant steps toward integration into the European energy system. One of the most important projects in this process is the connection of the Montenegrin electricity market with Italy through an undersea power cable. This strategic project not only enables the physical connection of Montenegro with the unified European market but also has far-reaching significance—it opens the door for increased trade volume, price stabilization, attracting investments in renewable energy sources, and creating a favorable environment for integrating Montenegrin producers into the broader European context.
The Montenegrin electricity market is in a phase of continuous development. Compared to regional markets, Montenegro still has a considerable amount of work ahead, particularly in terms of further investments in infrastructure to support the full development and integration of renewable sources into the system, as well as in enhancing the legal and regulatory framework. However, significant progress is being made in this area. Currently, the day-ahead and long-term markets are operational, and there are plans to launch an intraday (continuous and auction) market, along with connecting the day-ahead and intraday markets to the unified European market via the interconnection with Italy. It is also essential to note that the Montenegrin market will be fully harmonized with the European market, meaning that any European product concerning the wholesale energy market will be available in Montenegro as soon as integration is completed.
The Montenegrin energy market is undergoing harmonization at technical, legal, and regulatory levels with European standards, and this collaborative effort involves almost all key energy entities in the country, including the Montenegrin Transmission System (CGES) and the Regulatory Agency for Energy and Utilities.
Key achievements of the Montenegrin Energy Exchange (BELEN) include the launch of the long-term market in December 2020, the day-ahead market in April 2023, and obtaining the NEMO (National Electricity Market Operator) status in July 2024. Additionally, BELEN has gained observer status in European institutions that deal with market development, coordination, and interconnection, such as the Market Coupling Steering Committee and the All NEMO Committee. These milestones facilitate access to essential technical documentation and provide opportunities for continuous knowledge transfer from countries that have already successfully integrated into the unified EU market, which is crucial for Montenegro, as it is not yet an EU member.
BELEN has fostered strong and constructive relationships with several regional exchanges, including SEEPEX, CROPEX, and others in Slovenia (BSP), France (EPEX SPOT), Italy (GME), Bulgaria (IBEX) and North Macedonia (MEMO). These collaborations facilitate the exchange of experiences, technical knowledge, and the standardization of procedures.
Montenegro has a favorable geographical position in the region and already plays an important role as a transit point in the electricity grid. The commissioning of the undersea cable connecting Montenegro and Italy is crucial not only for physical connectivity but also for connecting the Montenegrin market to the broader European market. This will expand supply and demand, enabling Montenegrin offers to access a significantly larger market, which will provide price signals for electricity traded in Montenegro and increase the likelihood that offers will be closed within the European market. This connection will also provide investors with a stable price signal, making it more attractive to invest in the energy sector in Montenegro and the broader region.
However, for this connection to be stable and efficient, further market interconnections at other borders are necessary, which would increase energy security and attract additional investments in infrastructure in neighboring countries.
BELEN supports the integration of renewable energy sources by enabling the trading of electricity generated from renewable sources on its wholesale market platform. The goal is to establish a stable price signal, which, after market integration with Italy, will serve as a reference for energy projects in Montenegro, including for Power Purchase Agreements (PPAs). This will provide investors with a higher degree of certainty in terms of investment return.
One of the main challenges currently faced by BELEN is reduced liquidity, due to lower activity among sellers on the market. However, this indicates that every megawatt-hour (MWh) offered for sale on the exchange has a guaranteed buyer, as nearly all offered energy is sold. This issue has mainly arisen due to unusual hydrological conditions and maintenance of certain power plant units. However, it is expected that this challenge will diminish once the market is connected with Italy, as European regulations require reserving 70% of capacity at the Italy-Montenegro border for market connection, which will significantly improve liquidity.
The high energy prices in Europe also affect electricity trading in Montenegro. Energy prices are influenced by numerous factors, and comparisons between future prices (futures) and realized day-ahead prices often reveal discrepancies. Futures prices are speculative and based on analysis, while transactions are made much earlier than the actual delivery. Additionally, price variations may arise from anomalies in weather conditions, regional or global crises, or changes in supply-demand balances that are not accounted for in futures prices. The availability of capacity from EU markets to Montenegro impacts the price, as the “cost of the route” from the EU to Montenegro must be paid. When there is no congestion, prices in the EU and Montenegro are typically aligned, but in cases of congestion, the capacity price significantly affects the price difference.
BELEN’s primary focus in the coming years is to complete the market connection with Italy, fulfilling the obligations set forth in Chapter 15 of the EU accession negotiations and the European Commission’s recommendations. This is expected to significantly increase market volume and liquidity. Furthermore, BELEN aims to continue developing the market by implementing an intraday market, which will offer new opportunities, particularly for renewable energy sources. The introduction of 15-minute profiles and block products will provide more precise trading options for all market participants in line with EU standards.
BELEN also plans to organize workshops and seminars to educate participants and the broader public on the functioning of the local market, how prices are formed, and how financial transactions are conducted in the energy sector. These initiatives will increase market awareness and transparency.
Currently, there are 28 participants in Montenegro’s electricity market. Before the launch of the day-ahead market, only six participants were registered, but this number increased to 23 in 2023. It is expected that the number of participants will soon reach 30. Notably, only nine companies are from Montenegro, while the rest are foreign participants who have recognized the potential of the Montenegrin market, even though it is currently isolated. Expectations are high for the connection with Italy, which is expected to be implemented by the end of 2026.
