Montenegro’s electricity balancing framework is set for broader market participation under draft rules adopted by transmission system operator CGES, covering batteries, demand response, generators and aggregated portfolios.
The proposed system would govern frequency containment reserves, automatically and manually activated frequency-restoration reserves, and replacement reserves. It sets requirements for prequalification, capacity procurement, energy activation, settlement, monitoring and penalties for providers that fail to deliver contracted services. The draft is based on Montenegro’s 2026 law governing cross-border electricity and gas exchanges and is designed to support future integration with regional and European balancing markets.
Aggregation Opens Market Access for Smaller Assets
A key change is the proposed ability to aggregate generation, consumption and storage facilities within a scheduling area. Smaller resources that cannot independently meet qualification requirements could combine their flexibility through a single balancing-service provider. The framework could provide market access for industrial demand response, distributed batteries, renewable power plants and portfolios of smaller generators, while Montenegro’s balancing arrangements have historically relied largely on established utility-scale resources and bilateral operational arrangements.
Before participating, a provider would have to complete prequalification and demonstrate its ability to deliver the relevant service. Requirements cover data exchange, metering, activation capability, control performance and coordination with CGES, as well as with the distribution system operator where required.
Capacity and Energy Receive Separate Treatment
The proposed rules separate balancing capacity from balancing energy. Capacity is procured in advance to ensure that reserves remain available to the system operator, while energy is remunerated when reserve capacity is activated to restore system balance. For market participants, the distinction creates separate potential revenue streams. A battery, flexible hydropower facility or industrial consumer could receive payment for maintaining availability even when activation is limited. Overall revenue would depend on auction prices, activation frequency, energy constraints and penalties for non-performance.
The framework also covers energy-limited resources, including storage systems that cannot maintain maximum output indefinitely. This provision is particularly relevant to batteries because their ability to provide reserves depends on their state of charge and the duration of an activation requirement.
Renewable Growth Increases Flexibility Requirements
Montenegro already has flexible generation through EPCG’s Perućica and Piva hydropower plants, while the country is expanding wind and solar generation and considering battery projects. Large commercial and industrial consumers could also participate through demand-response services. The expansion of renewable generation increases the need for balancing flexibility. Forecasting deviations from wind and solar output can increase reserve requirements, while rapid changes in generation can create short periods of surplus followed by periods of scarcity.
Without adequate flexible resources, those deviations can result in higher imbalance costs or increased dependence on neighbouring electricity systems. The proposed market could also affect the structure of future renewable investments. Developers would have to consider whether to provide flexibility themselves, work with a balancing-responsible party or participate in an aggregated portfolio. Batteries could be installed alongside wind and solar facilities to manage imbalance exposure while also participating in reserve markets.
Competition and Auction Rules
Market access, however, would not necessarily result in broad competition. Montenegro has a relatively small electricity system and a limited number of large flexible resources. If only one or two providers qualify for a particular reserve product, procurement could remain concentrated. The draft therefore provides procedures for circumstances in which competition is unavailable or an auction does not produce a successful result.
The settlement framework will also determine how balancing revenues can be assessed. Reference prices, activation records and non-performance penalties need to provide sufficient transparency for participants to calculate potential revenues and costs. The draft refers to market price benchmarks, including the Hungarian HUPX day-ahead price for defined calculations, reflecting the connection between Montenegro’s electricity market and wider regional pricing.
Framework for Cross-Border Balancing
The proposed rules also establish a basis for future cross-border balancing-service exchanges. Access to larger regional markets could increase liquidity and reduce procurement costs, while requiring compatible products, reliable telecommunications infrastructure and sufficient interconnector capacity. For CGES, implementation will require both market mechanisms and operational systems. Reserve providers will need to be identifiable and controllable in real time, while metering and settlement information must meet accuracy requirements for commercial transactions and potential disputes.
The draft provides batteries and aggregators with a defined framework for participation. Investment decisions will depend on the final auction rules, procurement volumes, contract duration and achievable revenues. Montenegro’s electricity system has traditionally relied on flexible hydropower for balancing, while the proposed framework would establish market mechanisms through which additional flexibility could be supplied by large generators as well as aggregated smaller resources.
