The recently adopted Law on the Use of Renewable Energy is designed to accelerate Montenegro’s energy transition, optimize the utilization of available resources and lower electricity production costs through competitive auctions, according to officials from the Ministry of Energy.
Zvjezdan Vujović, the acting director general of the Directorate for Electricity, highlighted that the primary goals of the law include reducing carbon dioxide emissions and increasing the share of energy generated from renewable sources.
“With this legislation, Montenegro has made significant strides in aligning its energy laws with EU standards, thereby establishing a framework for achieving national energy objectives,” Vujović stated.
The new law will facilitate a shift towards a modern incentive system based on market premiums, moving away from the previous feed-in tariff model, which will now only apply to small facilities and demonstration projects.
“The legislation mandates a three-year incentive plan, serving as a crucial tool for government planning in the development of renewable energy sources. This plan will guide the auctions for allocating market premiums,” Vujović explained.
These auctions aim to secure the lowest possible electricity prices and the market premium system operates in both directions, allowing the government to profit when market prices exceed auction prices.
Additionally, the law introduces the concept of citizen energy through prosumers and enables the establishment of Renewable Energy Communities, empowering citizens to actively engage in electricity production and benefit financially from it.
The legislation also covers aspects related to guarantees of origin and future valuation opportunities for these guarantees.
Furthermore, the law outlines procedures for obtaining temporary and privileged producer statuses, as well as mechanisms for international cooperation. Vujović emphasized the potential for statistical transfers, which allow for the purchase or sale of necessary shares from other countries to meet national goals, including targets for renewable energy in transportation and heating sectors.
“Importantly, the law opens the door for strategic partnerships, meticulously regulating everything from public calls to bidding processes and establishing strict criteria to be met. This could greatly enhance the future development of Montenegro’s energy sector and facilitate large-scale projects,” Vujović added.
When asked about the implications of this law for Montenegro’s energy sector, Vujović indicated that it would expedite the energy transition, ensure maximum utilization of renewable energy resources, reduce electricity production costs via auctions, and ultimately help meet the national goal set by the Energy Community of achieving a 50% share of renewable energy in total final consumption by 2030.
He noted the transition away from feed-in tariffs and guaranteed purchases towards a market premium mechanism. This shift will occur after a transitional period, concluding with the integration of Montenegro’s electricity market into the unified European market, no later than December 31 of the following year.
“Market premiums, an incentive mechanism used in the EU, base incentives on market dynamics, specifically the difference between the auction price and the market price or reference exchange price,” Vujović clarified.
These market premiums are expected to foster competition, with the overarching goal of achieving the lowest possible electricity prices.
“If the auction price exceeds the market price, the privileged producer will receive the difference as a market premium. Conversely, if the auction price is lower, the privileged producers must pay the difference to the state, specifically to the authorized contracting party designated by this law as the Montenegrin electricity market operator,” Vujović concluded.
