Montenegro is strengthening its position as a potential electricity trading corridor between the Western Balkans and Italy, supported by its submarine interconnector, expanding renewable generation and plans for integration with the EU electricity market. The opportunity could increase transmission revenues and trading activity, while exposing the country to greater price volatility, grid congestion and EU Carbon Border Adjustment Mechanism (CBAM) requirements.
Electricity prices highlight growing market volatility
Montenegro’s MEPX day-ahead market recorded an average baseload price of €158.45/MWh in September, with hourly prices ranging from approximately €84.80/MWh around midday to €245.86/MWh in the evening. The spread reflects lower prices during solar-rich hours and higher costs after renewable output declines.
CGES procurement auctions for transmission-system losses also recorded rising prices during October. Baseload procurement increased from around €179/MWh to €183–185/MWh, then €214–220/MWh, and approximately €258–259/MWh across successive weekly procurement periods. These smaller-volume auctions are not direct wholesale-market indicators but illustrate the higher short-term procurement costs facing system operators.
Montenegro’s Energy Balance projected electricity production of 3,798 GWh, around 57.6% above the estimated previous-year level, with an annual surplus of approximately 398 GWh. The expected increase was linked to the return of the Pljevlja thermal power plant following environmental reconstruction and higher solar output. The plan envisaged approximately 215 MW of solar capacity and total available generation capacity of around 1,320 MW. Projects including the 54 MW Gvozd wind farm, EPCG solar developments and private solar plants could increase renewable output, but also intensify hourly fluctuations between periods of surplus and shortages.
Serbia–Montenegro–Italy corridor offers new revenue opportunities
Serbia’s larger electricity system and expanding portfolio of wind and solar independent power producers could increase demand for access to Italy through Montenegro. Electricity can travel across Serbia’s transmission network, enter Montenegro and reach the Italian market through the submarine interconnector.
The commercial benefits extend beyond electricity produced domestically. CGES recorded €50.3 million in congestion revenues, an increase of €8.3 million compared with the previous year, and net profit of €21 million. The company has identified international-market revenues, including electricity transit and commercial use of the Italy cable, as important contributors to its financial performance.
The interconnector has 600 MW of physical capacity, although not all capacity is continuously available through ordinary public auctions. CGES has also curtailed 400 MW of Montenegro-to-Italy long-term transmission rights to zero for six daytime hours because of operational security limitations associated with the HVDC Monita system. A further 400 MW was curtailed for eight hours during a separate period.
These restrictions demonstrate that transmission capacity is both a source of commercial value and a constraint. Higher regional flows can increase congestion revenues, but insufficient capacity can limit electricity sales, complicate long-term power purchase agreements and prevent renewable producers from reaching higher-priced markets.
Storage and flexibility become more important
Growing solar generation is expected to increase the frequency of low daytime prices and expensive evening periods. In this environment, solar projects will need to assess their capture prices, rather than relying only on annual baseload prices in financial models.
Wind can complement solar through a different production profile, while hydropower can generate greater value when water is retained for higher-priced hours. Battery storage could also become more commercially relevant by shifting electricity from cheaper periods into evening peaks.
Italy is experiencing similar volatility, with several market zones recording negative day-ahead prices. Future Montenegro–Italy trading will therefore depend increasingly on hourly price differences and flexible generation, rather than the assumption that Italian electricity is consistently more expensive.
EU market coupling could reshape trading
Montenegro has completed the legislative transposition required to advance towards EU electricity-market integration. Full market coupling could be achieved once compliance verification and the contractual and technical implementation process are completed. Italy has been identified as Montenegro’s initial natural market-coupling partner because of the submarine connection.
Market coupling would allow trading algorithms to optimise electricity transactions and cross-border capacity together, potentially increasing liquidity and making flows more responsive to price differences. It should also gradually narrow price gaps between markets, reducing the reliability of simple cross-border arbitrage and increasing the importance of storage, forecasting, intraday trading and physical renewable power purchase agreements. Market coupling is also among the prerequisites associated with a potential future electricity exemption from CBAM, although it does not guarantee such an exemption.
Serbian grid expansion could increase regional flows
Planned sections of the Trans-Balkan Electricity Corridor are expected to strengthen connections from Serbia towards Višegrad and Pljevlja. The planned connection towards Pljevlja could reinforce the high-voltage route carrying electricity from Serbia and the wider region towards Montenegro’s coastal system and the Italian interconnector.
Serbian wind and solar generation, hydropower from the wider Drina system, Bosnian electricity and Montenegro’s own renewable output could increasingly compete for access to the same southward corridor. The resulting flows could strengthen Montenegro’s role as a regional electricity junction, provided domestic and cross-border transmission capacity keeps pace with generation growth.
CBAM raises requirements for cross-border electricity sales
Commercially scheduled exchanges between Energy Community markets and neighbouring EU countries fell 25% during the first quarter of 2026, despite day-ahead prices in Contracting Parties averaging around €30/MWh below those in neighbouring EU markets. The Energy Community linked part of the decline to CBAM and the difficulty renewable producers face in demonstrating the actual emissions of exported electricity.
Electricity produced in Serbia does not become Montenegrin electricity for CBAM purposes simply by passing through Montenegro. Renewable producers may need to provide a physical power purchase agreement, hourly generation and nomination matching, metering evidence, transmission documentation and independent verification.
Montenegro could capture additional value by developing the market and technical infrastructure needed for verifiable cross-border green-electricity transactions, including supplies to Italian industrial consumers seeking renewable power with an auditable origin. The market’s development will depend on growing domestic renewable capacity, hydropower flexibility, storage, EU market coupling and regional grid reinforcement. The Montenegro–Italy cable remains central to linking these developments with European demand, while the scale of the opportunity will depend on the grid’s ability to transmit and integrate regional electricity reliably.
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