Montenegro is developing a regulatory framework for a two-level electricity flexibility market that would enable the same class of aggregators and flexible consumers to support both national balancing needs and local distribution-grid constraints. The transmission and distribution layers are being addressed through separate rulebooks and procurement approaches.
CGES balancing-service rules allow aggregated providers
Transmission system operator CGES has drafted new balancing-service rules that explicitly permit aggregation of demand, electricity storage and generation facilities within a scheduling area for qualification as balancing service providers. The framework covers frequency containment reserves, automatic frequency restoration reserves, manual frequency restoration reserves and replacement reserves. It also sets out qualification requirements, capacity procurement, balancing-energy activation, settlement arrangements and penalties for non-performance.
CGES adopted the draft in May and opened it to consultation. The change is intended to create an entry route for smaller resources into markets that have historically been dominated by larger generating units. A commercial building or industrial load may be too small or operationally unsuitable to qualify on its own, so an aggregator could combine multiple consumers, generators or other flexible assets into a portfolio meeting CGES technical requirements.
The draft distinguishes between balancing capacity and activated balancing energy. That separation allows providers to potentially earn both for keeping flexibility available and for electricity actually activated by the system operator.
CEDIS non-frequency ancillary services define local flexibility needs
Below the transmission grid, distribution operator CEDIS published rules governing non-frequency ancillary services on March 6. Montenegro’s Energy Law provides for distribution-system procurement of flexibility services, including congestion management, under transparent and market-based procedures. The legislation also opens non-frequency ancillary-service provision to distributed generators, renewable resources, demand response, storage operators and aggregators.
The regulatory design points to two different flexibility markets with different requirements. CGES requires resources capable of supporting balancing of the national electricity system, while CEDIS can require flexibility at specific parts of its network. A factory reducing demand by 5 MW may be valuable to CGES if Montenegro is short of power nationally, while the same reduction could provide additional value to CEDIS if it relieves congestion or supports network operation at a particular distribution node.
The location dimension becomes more relevant as renewable generation and active consumers expand across the distribution network. National balancing value depends primarily on when flexibility is available, while distribution flexibility depends additionally on where it is located. A megawatt in Nikšić cannot necessarily resolve a voltage or congestion issue on a feeder elsewhere in Montenegro.
Non-frequency services extend beyond balancing energy
Montenegro’s electricity legislation also recognises non-frequency services that become more important as power systems incorporate inverter-connected resources and change how conventional synchronous generation operates. These services can include voltage and reactive-power support, system restoration functions and other capabilities needed to keep networks stable that are not conventional energy or frequency-balancing products.
The legislation frames the commercial opportunity as distinct from selling additional electricity energy. An asset may have value based on what its inverter, motor, generator or controllable load can deliver to the network even when prevailing electricity prices are not particularly attractive.
Transmission and distribution operators are required to cooperate when procuring and activating such services due to the risk that one operator’s actions could create problems for the other. The coordination requirement is expected to become more significant if the same portfolios begin serving multiple markets simultaneously.
Aggregators coordinating multiple markets require metering and dispatch controls
An aggregator could control industrial demand, distributed generation and other flexible resources and offer part of that capability into CGES balancing. If CEDIS simultaneously needs flexibility from assets at a particular location, the same portfolio could potentially access another value stream. However, the same megawatt cannot be promised twice for conflicting purposes.
Metering, baseline calculation, asset availability and dispatch priority therefore become as important as physical flexibility itself. This is described as a shift in operational requirements for aggregators beyond acting as electricity traders. It includes real-time visibility of individual assets, contractual rights to dispatch them, communications with system operators and software able to determine which market provides the highest available value without breaching other commitments.
Distribution planning can treat flexibility as an alternative to reinforcement
The DSO market approach could also affect Montenegro’s grid-investment model. Distribution operators traditionally address rising load or generation constraints by reinforcing cables, transformers and substations. Flexibility introduces another option if a network bottleneck occurs only for a limited number of hours each year.
In such cases, paying consumers or generators to modify their behaviour during those periods may be cheaper than immediately reinforcing infrastructure. Montenegro’s regulatory framework requires distribution planning to assess potential use of flexibility services, demand management, storage and other resources as alternatives to conventional network development. That approach is treated as a potential non-wire investment.
A new transformer is defined as a regulated capital asset, while a flexibility contract is treated as an operating service that can be compared in cost terms by the DSO alongside network reinforcement options. For market participants, local flexibility may generate revenue even when the national system is balanced and wholesale prices are unremarkable.
Market size constraints increase reliance on aggregation mechanisms
Montenegro’s small system creates both opportunities and constraints for participation in flexibility markets. A limited number of large flexible generators could help new entrants improve competition, but the market may also struggle to attract enough independent providers for every service required by procurement processes.
CGES’s draft includes arrangements for situations where competition is insufficient or market procurement fails. Aggregation is positioned as a way to combine assets that are individually too small to participate directly in services offered under CGES rules.
Potential aggregated sources include large hotels, shopping centres, water systems, industrial facilities, commercial refrigeration and eventually electric vehicle fleets containing controllable electricity demand. Distributed renewable plants could also participate where technical capability and contractual arrangements allow.
The investment needed for aggregation is increasingly digital rather than purely electrical, including smart metering, telemetry, control equipment, baselining and optimisation software. Montenegro therefore does not yet have a mature two-tier flexibility market because CGES’s balancing framework remains under development while CEDIS procurement depth has still to emerge.
The next step depends on whether CEDIS starts publishing specific flexibility requirements covering location, MW requirement, duration and price. It also depends on whether the final CGES framework results in regular competitive procurement that aggregators can finance against . If those conditions develop as described in current plans, portfolios of existing customers whose electricity use becomes tradable at both national and local grid level could represent future flexible capacity rather than additional generating units.
