Montenegro is developing a two-level electricity flexibility framework that could enable aggregators, industrial consumers and distributed energy assets to generate revenue through both national balancing and local distribution-grid services. Transmission system operator CGES is preparing new balancing rules under which portfolios combining generation, consumption and storage could qualify as balancing service providers. The framework would provide smaller electricity assets with access to markets traditionally served by larger generating units.
At the distribution level, CEDIS has established rules covering non-frequency ancillary services. Montenegro’s regulatory framework also enables the distribution operator to procure flexibility as an alternative to conventional network reinforcement. The two mechanisms would address different system requirements. CGES would procure flexibility to balance the national electricity system, while CEDIS could procure flexible capacity to address specific constraints within the distribution network.
Their different functions also create separate economic opportunities. A factory capable of reducing demand by 5 MW could provide value to CGES during periods when Montenegro’s electricity system is short of power. The same facility could provide an additional service to CEDIS if reducing consumption helps relieve congestion or supports voltage at a particular location. Flexibility could therefore carry both national and location-specific value.
Aggregation Opens Balancing Access to Smaller Assets
The emerging CGES framework would allow balancing portfolios to combine multiple generation units, consumers and storage facilities and operate them as a single resource. This would reduce the participation barrier for assets that are individually too small to enter the balancing market.
Potential portfolios could include hotels, industrial facilities, water systems, refrigeration installations and, eventually, commercial electric-vehicle fleets, provided they can meet the required technical and operational conditions. Aggregators would be responsible for forecasting, telemetry, dispatch and settlement across these portfolios.
Flexible electricity consumption could consequently become a marketable service rather than being used solely to reduce a customer’s electricity costs. An industrial consumer could sell its ability to modify demand as a flexibility product. Revenue could consist of payments for maintaining available capacity and payments for balancing energy when that capacity is activated. This structure would create a mechanism through which existing electricity consumption can function as a flexibility asset.
Distribution Services Create a Separate Revenue Opportunity
At the distribution level, CEDIS rules cover non-frequency ancillary services, including voltage support, reactive power, system restoration capabilities and other technical services required for secure grid operation. Montenegro’s regulatory framework also requires distribution planning to consider flexibility, demand response and storage as potential alternatives to conventional network investment.
This creates the basis for local flexibility procurement. Instead of immediately replacing a transformer or reinforcing a feeder that experiences overload for only a limited number of hours each year, CEDIS could potentially contract customers to modify electricity consumption or production during those periods. The economic comparison would be between conventional network investment and flexibility procurement. Where a network constraint occurs relatively infrequently, a flexibility contract could provide an alternative to capital-intensive reinforcement. For market participants, such services could have value even when national electricity prices and balancing conditions remain unchanged because the underlying requirement would be associated with a specific local network problem.
Network Location Could Influence Asset Value
Distribution flexibility differs from national balancing because the location of the flexible resource is relevant. A flexible megawatt connected in one part of Montenegro cannot necessarily resolve congestion or voltage problems in another part of the network. Local procurement could therefore result in differences in the value assigned to flexibility according to network location.
The value of an industrial load, battery, renewable generator or controllable commercial facility would depend not only on its response speed but also on where it connects to the grid.
This could add another consideration to project valuation. Developers traditionally assess grid-connection costs, available MW and curtailment risk. Commercial procurement of local flexibility could introduce an additional revenue opportunity linked to the project’s network position.
A resource located near a constrained substation could consequently have greater value than an otherwise comparable asset connected in an unconstrained area.
Coordination Required Between the Two Markets
The two-tier structure also creates a requirement for coordination between CGES and CEDIS. A flexible asset could not offer the same capacity simultaneously to both operators if both might require that capacity at the same time. Dispatch priority, metering and contractual control would therefore become important elements of the market structure.
An aggregator participating across both markets would need real-time information on asset availability, previously sold obligations and the value of different activation requests, while ensuring that one commitment does not breach another. This increases the importance of digital systems. The infrastructure required for flexibility markets would include not only electrical equipment but also telemetry, communications, baselining and optimisation software. An aggregator’s ability to manage a portfolio accurately would determine whether multiple services could be offered without double-counting the underlying MW capacity.
Market Size Remains a Constraint
Montenegro’s electricity market is relatively small, which could limit liquidity and make some flexibility services more difficult to procure competitively if the number of eligible providers remains limited. At the same time, aggregation could allow commercial buildings, industrial facilities, distributed generation and other flexible infrastructure to be combined into portfolios large enough to support competition beyond traditional utility participants.
The regulatory framework increasingly accommodates this model, with the next stage involving its commercial implementation.
For CEDIS, a key element would be the publication of specific flexibility requirements identifying where capacity is required, the MW volume needed, the duration of the service and the applicable price. For CGES, the implementation of final balancing rules would determine whether aggregators and industrial customers have sufficiently regular procurement opportunities to justify investment in telemetry and control equipment. If both mechanisms develop, flexible assets in Montenegro could participate in system-wide balancing and local distribution-grid services, creating two potential markets for the same underlying flexibility capacity.
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