Montenegro is laying the regulatory foundations for a two-level electricity flexibility market that could allow the same emerging class of aggregators and flexible consumers to serve both national balancing needs and local distribution-grid constraints.
Transmission system operator CGES has drafted new balancing-service rules that explicitly allow aggregation of demand, electricity storage and generation facilities within a scheduling area so they can qualify as balancing service providers.
The framework covers frequency containment reserves, automatic and manual frequency restoration reserves and replacement reserves, alongside qualification, capacity procurement, balancing-energy activation, settlement and penalties for non-performance. CGES adopted the draft in May and subsequently opened it to consultation.
The change would give smaller resources a route into markets historically dominated by larger generating units.
An individual commercial building or industrial load may be too small or operationally unsuitable to qualify independently. An aggregator could combine several consumers, generators or other flexible assets into a portfolio whose aggregate response meets CGES technical requirements.
The draft also distinguishes between balancing capacity and activated balancing energy, allowing providers potentially to earn for keeping flexibility available as well as for electricity actually activated by the system operator.
But the more significant development is occurring below the transmission grid.
Distribution operator CEDIS published rules governing non-frequency ancillary services on March 6, while 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.
That creates the outline of two different flexibility markets.
CGES requires resources capable of helping balance the national electricity system.
CEDIS can require flexibility at a particular part of its network.
Those are not the same product.
A factory reducing demand by 5 MW may be valuable to CGES if Montenegro is short of power nationally. The same factory could have additional value to CEDIS if its reduction relieves congestion or supports network operation at a specific distribution node.
The distinction becomes important as renewable generation and active consumers spread through the distribution network.
National balancing value depends primarily on when flexibility is available.
Distribution flexibility depends additionally on where it is located.
A megawatt in Nikšić cannot necessarily solve a voltage or congestion problem on a feeder elsewhere in the country.
That could eventually create locational prices for flexibility.
Beyond balancing energy
Montenegro’s electricity legislation also recognises non-frequency services that are increasingly important as power systems incorporate more inverter-connected resources and operate conventional synchronous generation differently.
These services can include voltage and reactive-power support, system restoration functions and other capabilities required to keep electricity networks stable but which are not conventional energy or frequency-balancing products.
The commercial opportunity is different from selling another MWh.
An asset may have value because of what its inverter, motor, generator or controllable load can do for the network even when active electricity prices are not particularly attractive.
The legislation requires transmission and distribution operators to cooperate when procuring and activating such services, reflecting the risk that one operator’s flexibility action could create a problem for the other.
That coordination will become crucial if the same portfolios begin serving several markets.
An aggregator could theoretically 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 portfolio could potentially access another value stream.
But the same MW cannot be promised twice for conflicting purposes.
Metering, baseline calculation, asset availability and dispatch priority therefore become as important as the physical flexibility itself.
This is where the aggregator becomes more than an electricity trader.
It needs real-time visibility of individual assets, contractual rights to dispatch them, communications with system operators and software capable of deciding which market provides the highest available value without breaching another commitment.
Local flexibility could defer network spending
The DSO market could also alter Montenegro’s grid-investment model.
Distribution operators traditionally solve rising load or generation constraints by reinforcing cables, transformers and substations.
Flexibility creates another option.
If a network bottleneck occurs only for a limited number of hours each year, paying consumers or generators to modify their behaviour during those periods may be cheaper than immediately reinforcing infrastructure.
Montenegro’s regulatory framework explicitly requires distribution planning to assess the potential use of flexibility services, demand management, storage and other resources as alternatives to conventional network development.
That turns flexibility into a potential non-wire investment.
A new transformer is a regulated capital asset.
A flexibility contract is an operating service.
The DSO can compare the cost of both.
For market participants, this creates a different type of revenue opportunity because local flexibility may be valuable even when the national system is balanced and wholesale prices are unremarkable.
The customer is effectively being paid for helping avoid or delay infrastructure investment.
Small market could favour aggregation
Montenegro’s small system creates both opportunities and constraints.
A limited number of large flexible generators means new entrants could potentially improve competition.
But the market may also struggle to attract enough independent providers for every service.
CGES’s draft therefore includes arrangements for situations in which competition is insufficient or market procurement fails.
Aggregation could help address that problem by combining assets that are individually too small to participate.
Large hotels, shopping centres, water systems, industrial facilities, commercial refrigeration and eventually EV fleets could all contain controllable electricity demand.
Distributed renewable plants could also participate where their technical capability and contractual arrangements allow.
The investment required is increasingly digital rather than purely electrical: smart metering, telemetry, control equipment, baselining and optimisation software.
Montenegro therefore does not yet have a mature two-tier flexibility market.
CGES’s balancing framework remains under development, while the commercial depth of CEDIS procurement has still to emerge.
But the institutional pieces are beginning to line up.
The next decisive step will be whether CEDIS starts publishing specific flexibility requirements — location, MW requirement, duration and price — and whether the final CGES framework produces regular competitive procurement that aggregators can finance against.
If that happens, Montenegro’s next flexible power asset may not be another generating unit.
It could be a portfolio of existing customers whose electricity use becomes tradable at both national and local grid level.
