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06 October 2020

A Legislative Boost to the Energy Sector in Montenegro

The Law on Amendments to the Energy Act entered into force on 14 August 2020. It encompasses a set of changes aiming to simplify the existing procedures and to promote the development of the Montenegrin energy sector, especially in the context of the pending alignment of Montenegrin laws with the EU's acquis, as required under the negotiation chapter no. 15.

  • Renewable energy sources
    The principal aim of the Amendments is to enable the further expansion of the energy produced from renewables. The legislator stipulates the adoption of a new National Energy and Climate Plan (replacing the existing Energy Development Strategy) that will define the sources and scope of use of energy produced from renewables, based on the General Guidelines for Energy Policy and other relevant legislation referring to energy efficiency and the reduction of greenhouse gas emissions. The Ministry of Economy will determine the calculation methods of (i) total energy consumption for traffic purposes, (ii) energy produced in hydropower and wind power farms, (iii) the impacts of biofuels, bioliquids and comparable fossil fuels on the emission of greenhouse gases, and (iv) energy produced in heat pumps.

    By February 2021, the Ministry of Economy and the Energy and Water Regulatory Agency of Montenegro ("REGAGEN") will adopt a set of documents relating to the energy produced from renewables and the calculation methods of different shares of energy in the total energy production. Furthermore, within the same deadline, the National Energy and Climate Plan and the Action Plan for Development and Usage of the Distant Cooling and/or Heating and High-Efficiency Cogeneration will be adopted.
  • Bilateral electric energy market
    A bilateral electric energy market has been introduced. It is a market in which the purchase and sale of electric energy is performed without intermediaries, i.e. solely by the two market participants concluding a bilateral electric energy purchase and sale agreement.
  • Project of mutual interest
    A project of mutual interest is designated as a particular type of project that connects Montenegro with one or more contracting parties of the Energy Community and/or one or more EU Member States and which is in their mutual interest and implemented voluntarily, without being on the list of projects of interest of the Energy Community.
  • Regulatory allowed revenue, prices and charges
    The application for determining the regulatory allowed revenue, prices or charges to the transmission/distribution system operator, gas storage operator, liquefied natural gas ("LNG") facilities operator, and market operator will be submitted under the procedures determined by REGAGEN not later than within four months before the expiration date of the valid decisions on the determined prices. The entities concerned will make the applications for determining the regulatory allowed revenue and prices or charges on the grounds of (i) energy quantities, and (ii) business plans for the next regulatory period with accompanying clarifications of the differences to the achievements from the previous period.
  • Energy licences
    In contrast to the previous legal solution, REGAGEN might issue licences for performing energy-related activities on request of a business entity or a natural person who can prove that it employs staff possessing adequate professional certificates or provides evidence of a signed contract with a natural person with an adequate professional certificate or a legal entity that has staff possessing the necessary professional certificates for technical management, maintenance, exploitation and operation of energy facilities.

    The list of the energy activities which might be performed without a licence has been extended to (i) managing gas facilities for own purposes, and (ii) production, distribution and supply of thermal energy for distant cooling and/or heating.
  • Self-generation of renewable electricity
    The Energy Act provides that the end customer who produces electric energy from renewables or high-efficiency cogeneration for its own needs with the occasional transfer of the produced surplus to the distribution system, in the plants of installed power that do not exceed the value of connected power of the end customer, has the right to (i) consume the produced electric energy for its own needs, and (ii) store and sell the surplus, individually or through aggregation with other customers.
  • Guarantee of origin
    The issuing authority, the register, and the contents of the guarantees of origin have been amended to achieve compliance with the widely accepted European practices. The guarantee of origin is envisaged as an electronic document, and the register of guarantees of origin has been transferred from REGAGEN to the market operator.

    The Amendments provide that the Government will adopt detailed conditions and the manner of issuing, transferring, using and withdrawing the guarantees of origin by November 2020. Furthermore, the market operator will adopt the rules on the guarantees of origin by May 2021.
  • Organised sale and purchase on the electric energy market
    The Amendments specify that the organised electric energy market will include (i) balancing electric energy market, managed by the transmission system operator, and (ii) electric energy market stock exchange managed by a legal entity established under Montenegrin corporate law. The list of electric energy market participants is correspondingly extended to include (i) a stock exchange that matches the supply and demand of electric energy and does not own its handover point (which will be fully functional by March 2021), (ii) a closed distribution system operator that purchases electric energy to cover losses of the closed distribution system, to satisfy its own needs and to supply the end customers in a closed distribution system, and which possesses its own handover point, and (iii) other entities temporarily connected to the transmission or distribution system for functional testing during the functional test.
  • Connection to transmission or distribution system
    The main modification concerning the connections to the transmission or distribution system is the replacement of the consent to connection with a particular connection contract. In addition, a set of new rules concerning the construction of the connection infrastructure at own expense and the temporary connection to the electricity or gas transmission or distribution system of have been introduced.
  • Expected digitalisation
    The Amendments provide that by August 2022 the following registers and records will be available in electronic form: (i) licence register; (ii) energy permits register; (iii) register of guarantees of origin; (iv) register of the privileged producers; (v) electric energy distribution operator's records; (vi) market operator's records; (vii) gas transmission system operator's records; (viii) system operator for gas storages' records; (ix) LNG system operator's records; and (x) records of the competent local authorities in charge of the distribution and supply of the thermal energy for distant cooling and/or heating.