Montenegro’s 600 MW electricity interconnector with Italy provides direct access to a major European electricity market, but the commercial value of exports increasingly depends on compliance with the European Union’s Carbon Border Adjustment Mechanism (CBAM) and the evidence supporting emissions claims.
The 445-kilometre high-voltage direct-current (HVDC) link entered commercial operation in 2019 and enables electricity flows in both directions. It allows Montenegrin generators to access the Italian electricity price zone without relying exclusively on transmission routes through the northern Balkans. The existence of the physical connection does not automatically qualify renewable electricity transmitted through the cable for installation-specific actual-emissions treatment under the current CBAM electricity rules.
Interconnector access does not establish emissions eligibility
The transmission link confirms the interconnection of the Montenegrin and Italian electricity systems, but it does not independently demonstrate that a specific wind, solar or hydropower installation supplied a particular quantity of imported electricity.
Eligibility for actual-emissions treatment requires evidence covering the producer, physical power purchase agreement (PPA), electricity nominations, production intervals, transmission route and independent verification. The authorised CBAM declarant must demonstrate that all applicable conditions have been met. The physical supply contract must directly connect the electricity producer and declarant or use a coherent tripartite agreement where an intermediary participates.
The generating installation must also meet the applicable fossil-origin emissions ceiling. Production and firm nominations must correspond to the same period, which cannot exceed one hour. In addition, the transmission route must satisfy the applicable direct-connection or no-physical-congestion condition, and the supporting evidence must undergo independent verification.
Montenegrin independent power producers can continue to use traders for balancing, scheduling, market access, guarantees and settlement. The commercial arrangements must ensure that electricity, payments and emissions documentation remain consistent with the legal structure supporting the claim.
First-quarter trading data show the impact of carbon costs
The financial implications were evident in the first quarter of 2026, when the day-ahead electricity price spread between Montenegro and southern Italy was approximately EUR 43/MWh, favouring exports.
At the same time, the default-based CBAM cost used in the corresponding analysis was approximately EUR 73.78/MWh. Energy Community monitoring also recorded a decline of roughly 2,100 MWh per day in scheduled Montenegro-to-Italy electricity flows and around 1,400 MWh per day in physical flows during the period examined.
These figures illustrate the importance of calculating the full export margin rather than relying on the difference between wholesale electricity prices.
The relevant netback must account for the Italian sales price, Montenegrin electricity acquisition cost, interconnector capacity, balancing, transmission losses, collateral, verification expenses and applicable carbon costs. Where actual emissions can be substantiated for electricity from a renewable installation, the commercial outcome may differ substantially from the default-based calculation. If the evidence is insufficient, the applicable carbon-cost fallback can eliminate the expected export premium.
Italian importers and contractual arrangements become central
The identity and arrangements of the Italian importing entity must be established as part of the export transaction. The PPA counterparty, EORI number, CBAM account, customs representation, capacity allocation and nomination responsibilities need to be aligned before electricity deliveries begin. Changes to the purchasing affiliate or CBAM declarant may require reviews of contracts, data authorisations and allocation arrangements, even if the electricity continues to flow through the same interconnector.
These requirements also affect project financing. Lenders assessing Montenegrin renewable energy investments need to determine whether Italian offtake arrangements can withstand trader default, whether the project retains reliable access to relevant metering and scheduling data, and who bears the carbon cost if an emissions claim is rejected. Revenue dependent on annual verification cannot be treated in the same way as a firm payment for base electricity because its realisation depends on the acceptance of the relevant evidence.
Proposed EU reforms could change electricity import requirements
The European Commission’s pending COM(2025) 989 proposal could simplify electricity imports by allowing broader verifiable intermediary chains, removing the current congestion condition and modifying nomination requirements in cases where capacity is allocated implicitly. The proposal also envisages an average-grid approach to electricity default emissions values.
These potential changes are relevant to the Montenegro-Italy electricity corridor, but they remain a legislative proposal as of the reference date and cannot be treated as an existing entitlement.
The interconnector already provides Montenegro with access to the Italian electricity market. Securing a low-carbon export premium, however, requires the producer, trader, CGES, records on the Italian transmission system operator’s side involving Terna, the Italian importer and the independent verifier to substantiate the same electricity quantity. The commercial assessment of the 600 MW Adriatic interconnector therefore depends not only on its transmission capacity, but also on the ability to demonstrate compliance across the entire chain connecting the generating installation to the EU importer.
By Virtu.Energy
