Montenegro is resetting a 250 MW solar auction after cancelling its first tender. The government said the cancellation followed the submission of bids that did not meet all legal and technical requirements. A revised market-premium auction is being prepared for the same 250 MW of solar capacity.
The Ministry of Energy is working with the European Bank for Reconstruction and Development on new documentation. Officials have not set a replacement launch date. They are prioritising changes to the legal, spatial-planning and grid-connection framework.
July 2025 auction design and contract structure
The first auction was launched in July 2025. It was structured around 12-year two-way contracts for difference. Developers competed by offering the lowest strike price.
Under the model, the state would compensate successful projects when the market price fell below the strike level. Generators would repay excess revenue when prices moved above that level. The auction outcome reflected bid compliance rather than a lack of interest in solar development.
Compliance package gaps behind tender cancellation
The tender failed because submitted projects could not satisfy the complete compliance package. Deficiencies included documentation, spatial-planning status and network-connection criteria. Officials described these as fundamental bankability conditions rather than administrative formalities.
With indicative development and construction costs of €0.6-0.8 million per MW, a fully awarded 250 MW programme would imply an estimated capital envelope of €150-200 million, excluding major transmission reinforcement. Equity requirements could reach €35-60 million, depending on leverage, construction contingencies and lender requirements.
Two-way CfD bankability depends on land, permits and grid access
The two-way contract model can support project-finance debt by stabilising revenue. However, it depends on land status, permits, grid access and curtailment rules being sufficiently clear. A nominal 12-year support period can lose value if grid energisation is delayed or if compensation does not cover curtailment.
A connection delay of 12-18 months could reduce equity returns by several percentage points. The mechanism cited includes additional development expenditure, interest during construction and the loss of early operating cash flow. The impact would be particularly severe where procurement starts before enforceable connection milestones are obtained.
2026-2028 incentive programme includes separate solar and wind auctions
Montenegro’s 2026-2028 incentive programme covers 450 MW. It comprises 250 MW of solar and 200 MW of wind. The wind auction was planned separately from the solar round.
The separation reflects different capacity factors, production profiles and system value during non-solar hours. Officials said the wind process should not be treated as an extension of the solar auction.
Lenders’ focus for revised market-premium terms
The revised auction is intended to test whether Montenegro can convert renewable potential into projects that are legally executable and financeable. Strong irradiation and high regional electricity prices are expected to attract developers.
Lenders are expected to focus on grid capacity, dispatch rights, curtailment compensation, completion deadlines and whether the market-premium agreement is enforceable. These elements are presented as key factors for bankability under the revised framework.
