Montenegro’s ambition to become a regional electricity hub is centred on expanding renewable generation, strengthening transmission infrastructure, adding battery storage capacity and improving access to European electricity markets. The country’s hydropower resources, growing solar and wind potential, regional interconnections and the 600MW Montenegro–Italy submarine cable provide the foundation for a broader energy strategy, according to Remon Zakaria, head of the European Bank for Reconstruction and Development (EBRD) office in Montenegro.
The EBRD identifies Elektroprivreda Crne Gore (EPCG) as the main domestic partner in the energy transition, with the Gvozd wind farm representing the most advanced example of new renewable generation development.
Gvozd Wind Farm Becomes Key EPCG Renewable Project
The EBRD initially provided €82 million for the Gvozd wind farm in 2023 and later approved an additional €26 million to increase the project capacity from 55MW to 75MW. The expanded wind facility is expected to generate approximately 186GWh annually, enough to supply more than 35,000 households. Commissioning is scheduled by the end of 2026. Gvozd represents EPCG’s first major new generation facility in more than 40 years and the utility’s first wind project. The project is also expected to provide a model for future investments in wind, solar and storage projects through its procurement, construction and financing structure.
Transmission Network Creates Regional Export Potential
Montenegro’s energy hub strategy relies heavily on existing cross-border infrastructure. The 600MW Montenegro–Italy interconnector, linking Lastva with Villanova, provides direct access to the Italian electricity market. Montenegro is also connected with Serbia, Bosnia and Herzegovina, Albania and Kosovo. Electricity transit through Montenegro’s transmission system reached approximately 5,410GWh in 2024, demonstrating the country’s existing role as a regional electricity corridor.
The potential expansion of the Italy connection remains part of future transmission planning. The Montenegrin Electricity Transmission System (CGES) retains the possibility of adding a second 600MW HVDC pole, which could increase total Italy–Montenegro capacity to 1.2GW. Such an expansion would depend on broader regional grid reinforcement, stronger internal networks and coordinated development involving CGES, Terna and neighbouring transmission operators.
Electricity Supply Remains Exposed to Hydrology and Plant Availability
Montenegro’s annual electricity consumption is approximately 3,000GWh, while domestic production remains dependent on hydrological conditions and the availability of the 225MW Pljevlja thermal power plant. Electricity generation totalled approximately 3,447GWh in 2024, down 15% due to weaker hydrological conditions.
The vulnerability became more visible in 2025, when Pljevlja was unavailable for extended environmental reconstruction and hydro production was lower. EPCG imported around 1,341GWh of electricity, spending approximately €142 million on purchases. The company moved from an €11 million profit in 2024 to a reported €92 million loss in 2025, while short-term and long-term borrowing increased to finance electricity imports.
Hydropower Provides Flexibility for Renewable Expansion
Montenegro’s hydropower fleet remains a key element of the planned energy transition. EPCG operates the 307MW Perućica and 342MW Piva hydropower plants, which provide flexibility that differs from variable renewable sources such as solar and wind. Hydropower production can be adjusted within operational and water constraints, allowing electricity generation to shift towards periods of higher demand and prices. As solar capacity expands, hydro resources can preserve water during low-price midday periods and increase output during evening demand peaks.
Wind Capacity Expansion Requires Grid and Financing Certainty
Montenegro’s existing wind portfolio includes the 72MW Krnovo and 46MW Možura wind farms, while the planned 75MW Gvozd project will add further capacity. New wind developments generally require higher investment and longer preparation periods than solar projects, but strong locations can achieve capacity factors of approximately 32–40%.
Indicative wind investment costs range from €1.3 million to €1.7 million per MW, with higher costs possible for mountainous locations, difficult transport conditions, extensive grid works and complex foundations. A 200MW wind portfolio could therefore require approximately €260 million to €340 million, excluding major transmission upgrades. Projects supported by auctions, long-term corporate power purchase agreements or floor-price mechanisms could target equity returns of around 9–13%, depending on leverage, resource quality and connection risks.
Solar Development Expands Through EPCG and Auctions
Solar energy represents the fastest-deployment renewable technology in Montenegro.
EPCG’s direct development pipeline includes approximately:
- 221MW of utility-scale solar capacity
- 209MW of rooftop and prosumer solar installations
Montenegro has also prepared its first competitive auction for approximately 250MW of solar PV, as part of a broader plan to publish a three-year auction programme covering at least 400MW of renewable capacity by 2027.
Utility-scale solar investment costs are estimated at approximately €650,000 to €850,000 per MW, depending on land conditions, grid connections, terrain, equipment and environmental requirements. Developing 400MW to 600MW of solar capacity could require approximately €260 million to €510 million, before major transmission reinforcement costs.
Storage Identified as Missing Element in Energy System
Battery storage is considered a key component for balancing increased renewable generation. EPCG previously planned procurement of two battery systems with a combined capacity of 60MW/240MWh, representing four hours of storage. The estimated investment requirement was approximately €48 million to €59 million, but the procurement was cancelled following financing and approval challenges. A second tender received no bids.
EPCG later signed a cooperation memorandum with Japan’s PowerX targeting up to 500MWh of battery capacity over three years. The planned storage programme would require feasibility studies, procurement arrangements, financing structures and identified revenue sources from electricity arbitrage, balancing services, ancillary services and renewable integration.
Current market estimates place four-hour battery storage costs at approximately €180 to €280 per kWh.
This corresponds to:
- €43 million to €67 million for a 240MWh system
- €90 million to €140 million for a 500MWh system
EPCG Portfolio Includes More Than 600MW of Projects
EPCG’s direct development portfolio has been estimated at approximately 639MW/MWp, with projected investment of around €646.5 million and expected annual production of approximately 1,024GWh.
The portfolio includes:
- utility-scale solar projects
- rooftop solar systems
- the Gvozd wind farm
- hydropower projects
- 60MW of battery storage power capacity
When potential private-sector and strategic partnerships are included, the broader project pipeline exceeds 4.6GW, although many projects remain at earlier development stages. A potential joint venture between EPCG and Abu Dhabi-based Masdar could include solar, wind, hydropower, battery storage and hybrid renewable projects. The proposed cooperation also identifies the Italy interconnector as a potential route for green electricity exports.
Investment Programme Could Reach €1.5 Billion by 2030
A realistic base-case development scenario through the end of the decade includes approximately 600MW to 1,000MW of new renewable generation and storage projects reaching construction or operation.
The potential investment envelope is estimated at approximately €700 million to €1.5 billion, including:
- €260 million to €510 million for solar
- €195 million to €425 million for wind
- €50 million to €150 million for storage
- €200 million to €400 million for transmission, distribution and connection infrastructure
A larger development scenario could involve 1.5GW to 2.5GW of renewable generation capacity by the early 2030s, supported by 800MWh to 1,600MWh of storage and stronger regional transmission links. Such an expansion could require between €1.7 billion and €3.9 billion in investment.
Grid Development and Market Integration Remain Critical
The expansion of renewable capacity requires significant investment in Montenegro’s electricity network. CGES would need to develop new substations, strengthen 400kV and 110kV transmission corridors, improve reactive power management, expand digital control systems and increase forecasting capabilities. Distribution infrastructure will also require upgrades as rooftop solar and smaller renewable projects increase local network pressures.
The Montenegro–Italy cable provides access to European markets but does not represent dedicated export capacity for domestic generators. New projects must consider available transfer capacity, congestion costs and regional electricity flows. Market integration will expose producers to European price volatility, including periods of low or negative electricity prices during renewable production peaks.
Carbon Requirements Affect Export Potential
Electricity exports to the European Union will require reliable documentation of renewable origin. Montenegro will need source-specific metering, Guarantees of Origin, transparent scheduling and systems capable of distinguishing renewable electricity from generation linked to Pljevlja or imported regional electricity.
The requirements are increasingly important due to the EU Carbon Border Adjustment Mechanism (CBAM) and Montenegro’s planned integration with the European electricity market.
EBRD Supports Energy Transition Projects
The EBRD has invested more than €1 billion across 100 projects in Montenegro and supports infrastructure development through financing, policy engagement and technical assistance. The bank’s involvement does not replace the need for project preparation, including land rights, environmental assessments, grid studies, procurement procedures, construction agreements and operational planning. Montenegro’s energy strategy depends on combining solar generation, wind capacity, hydropower flexibility, battery storage, transmission expansion and access to regional electricity markets.
