Montenegro is preparing a broader, more market-based balancing system that would allow batteries, demand response, generators and aggregated portfolios to compete in providing reserves, according to draft terms adopted by transmission operator CGES.
The proposed framework covers frequency containment reserves, automatically and manually activated frequency-restoration reserves and replacement reserves. It establishes rules for prequalification, capacity procurement, energy activation, settlement, monitoring and penalties for non-performance.
The draft is based on Montenegro’s 2026 law governing cross-border exchanges of electricity and gas and is intended to support eventual regional and European balancing-market integration.
The most important commercial change is the explicit ability to aggregate generation, consumption and storage facilities within a scheduling area. This could allow smaller assets that cannot qualify individually to combine their flexibility under one balancing-service provider.
That creates a potential route to market for industrial demand response, distributed batteries, renewable plants and portfolios of smaller generation units. Until now, balancing has largely depended on established utility-scale resources and bilateral operational arrangements.
Under the proposed rules, a provider would first need to complete prequalification and demonstrate that its resource can deliver the contracted service. Requirements include data exchange, metering, activation capability, control performance and coordination with CGES and, where necessary, the distribution system operator.
The framework distinguishes between balancing capacity and balancing energy. Capacity is reserved in advance so that it remains available to the system operator. Energy is paid when the reserve is activated to restore system balance.
That distinction is important for investors. A battery, flexible hydro unit or industrial consumer may earn revenue for being available even if it is activated only occasionally. Its total return would depend on auction prices, activation frequency, energy limitations and the consequences of failing to perform.
The draft also recognises energy-limited resources, including storage systems that cannot sustain maximum output indefinitely. This is particularly relevant for batteries, whose ability to provide reserve depends on their state of charge and the duration of the required service.
Montenegro’s power system is well suited to a more competitive flexibility market. EPCG’s Perućica and Piva hydropower plants can adjust output, while the country is adding wind and solar capacity and considering battery projects. Demand response could also become relevant for large commercial and industrial consumers.
Renewable expansion makes the reform more urgent. Solar and wind forecasting errors increase balancing requirements, while steep changes in output can produce short periods of surplus followed by scarcity. Without sufficient flexible capacity, those deviations translate into higher imbalance costs or greater reliance on neighbouring systems.
The rules could also change the economics of future renewable projects. Developers will need to decide whether to provide flexibility directly, contract with a balancing-responsible party or join an aggregated portfolio. Batteries may be developed alongside wind and solar plants to reduce imbalance exposure and bid into reserve markets.
However, formal access does not automatically create competition.
Montenegro is a small electricity system with a limited number of large flexible assets. If only one or two providers pass prequalification for a particular reserve product, procurement may remain concentrated. The draft therefore includes procedures for cases in which market competition is absent or an auction is unsuccessful.
Settlement design will be equally important. Transparent reference prices, activation records and penalties are needed to give investors confidence that balancing revenue can be modelled and financed. The rules refer to market price benchmarks, including the Hungarian HUPX day-ahead price in defined calculations, reflecting Montenegro’s exposure to wider regional pricing.
The framework also prepares the ground for cross-border exchange of balancing services. Access to larger markets could improve liquidity and reduce procurement costs, but it would require compatible products, reliable telecommunications and available interconnector capacity.
For CGES, the reform is therefore both a market project and an operational technology project. Reserve providers must be visible and controllable in real time, while metering and settlement data must be sufficiently accurate to withstand commercial disputes.
The draft gives batteries and aggregators a clearer legal opening. Whether they invest will depend on the final auction rules, procurement volumes, contract duration and achievable revenue.
Montenegro has long relied on flexible hydropower to balance its system. The new rules could begin turning that operational capability into a transparent market—and determine whether the next unit of flexibility comes from another large plant or thousands of smaller assets acting together.
