Montenegro’s renewable-energy strategy is entering an implementation phase as Masdar and Elektroprivreda Crne Gore (EPCG) develop a joint platform targeting solar, pumped storage and potentially up to 2GW of renewable capacity, while the country expands transmission infrastructure and electricity-market links with Italy.
The two companies agreed in April 2026 to establish a 50:50 renewable-energy joint venture. By July, the partnership had identified a 150MW solar project, was examining more than 400MW of pumped-storage capacity and had outlined a potential portfolio of up to 2GW. The portfolio remains a target rather than a financed construction schedule. EPCG contributes land, local development expertise, generation assets and its relationship with the state balance sheet, while Abu Dhabi-owned Masdar brings project-development, procurement and financing experience.
Montenegro’s power system also has hydropower flexibility and a 600MW submarine electricity connection to Italy, providing access to a larger neighbouring electricity market.
Renewable projects move from planning into operation
The 54.6MW Gvozd wind farm entered trial operation in May 2026. The project is expected to generate about 150GWh annually following investment of approximately €82 million. Its commissioning will provide an operating test for renewable forecasting, balancing requirements and the transition from construction to commercial generation.
Montenegro’s first 250MW solar auction produced a different outcome. All four submitted bids reportedly failed the compliance review, leading to cancellation of the procedure and plans for a reset. The cancelled auction leaves qualification requirements, land readiness, grid assumptions and bidder preparation as issues for the renewed process. A credible re-run is also relevant to renewable developers outside the Masdar-EPCG partnership. Transmission and distribution investments are also progressing. CGES secured a €15 million state-guaranteed EBRD loan for a regional transmission upgrade, while CEDIS obtained €35 million from the EBRD for digitalisation and distribution investment.
The financing amounts are significantly smaller than the infrastructure requirements associated with multi-gigawatt renewable development. Generation projects therefore require connection milestones and associated network-reinforcement costs alongside capacity announcements.
The Italy connection creates a larger electricity market
Montenegro and Italy have signed a memorandum on electricity-market coupling, advancing the integration of cross-border electricity capacity and energy trading under European rules. The existing submarine interconnector has 600MW of transfer capacity. A proposed second cable could increase the connection to 1.2GW around 2031, with reported investment of approximately €500 million. The timing and economics of the second cable remain subject to regulated cost recovery and contracting arrangements.
Market coupling would reduce trading friction and allow Montenegro’s hydropower and renewable generation to access Italian electricity prices. It would also expose the domestic market to price movements in Italy. The interconnector can serve both exports and imports. During periods of low water availability or outages, Montenegro may require the same infrastructure to secure electricity supplies. Pumped storage could increase the commercial use of the connection by moving lower-priced solar generation into higher-priced periods and providing balancing services. The more than 400MW of pumped-storage capacity being examined by Masdar and EPCG therefore forms part of the wider system strategy.
The proposed projects remain capital-intensive and environmentally sensitive, with their economics dependent on electricity-price spreads over extended periods. Feasibility work must distinguish overall system requirements from the revenues individual facilities can capture.
Grid access becomes central to renewable investment
Renewable projects require secure grid connections, land and environmental rights, market access and verifiable renewable attributes before their investment economics can be established. The Masdar-EPCG partnership can generate returns from project development and generation. CGES and CEDIS can receive regulated returns on network investment, while traders can capture cross-border price differences. Municipalities and landowners can receive rents and taxes, and lenders can earn financing margins.
The distribution of those benefits creates a need for transparent rules governing network access, balancing and infrastructure costs.
Montenegro is expected to establish a public grid-connection queue, use competitive procedures where network capacity is scarce, transpose the EU electricity-integration package and complete electricity-market coupling. State-to-state or state-backed projects would also be subject to disclosure of their core economics under the proposed approach, alongside private developments.
Power-purchase agreements and contracts for difference can provide revenue support for renewable investment, while their potential contingent costs would need to be reflected in public reporting. The Masdar-EPCG partnership, the Gvozd wind farm, the solar auction and the planned expansion of the Italy connection are therefore developing alongside changes to Montenegro’s electricity infrastructure and market framework.
