Montenegro is developing regulatory foundations for a two-level electricity flexibility market that would allow the same class of aggregators and flexible consumers to support both national balancing needs and local distribution-grid constraints.
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 draft framework covers frequency containment reserves, automatic and 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 afterwards, with the stated effect of creating an entry route for smaller resources into markets historically dominated by larger generating units.
CGES balancing services: aggregation, reserve types and settlement
The rules address cases where a single commercial building or industrial load may be too small or operationally unsuitable to qualify on its own. In those situations, an aggregator could combine multiple consumers, generators or other flexible assets into a portfolio that meets CGES technical requirements.
The draft also distinguishes between balancing capacity and activated balancing energy. This separation would allow providers to potentially earn for keeping flexibility available as well as for electricity actually activated by the system operator.
CGES requires resources capable of supporting balancing of the national electricity system, defining the role of aggregated portfolios within the transmission-level scheduling area.
CEDIS non-frequency services and distribution-level flexibility procurement
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. This regulatory design creates an outline of two different flexibility markets with distinct requirements.
CEDIS can require flexibility at specific parts of its network, meaning the product value depends on location rather than only on national system needs. The source material cites an example where a factory reducing demand by 5 MW could be valuable to CGES if Montenegro is short nationally, while the same reduction could also support congestion relief or network operation at a particular distribution node.
The distinction is expected to become 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 additionally depends on where it is located.
Non-frequency capabilities beyond balancing energy
Montenegro’s electricity legislation recognises non-frequency services that become increasingly important as power systems incorporate more inverter-connected resources and change how conventional synchronous generation operates. The services can include voltage and reactive-power support, system restoration functions and other capabilities needed to keep networks stable.
The legislation frames these services as separate from conventional energy or frequency-balancing products. It also requires transmission and distribution operators to cooperate when procuring and activating such services due to the risk that one operator’s action could create issues for the other.
This coordination is described as becoming crucial if the same portfolios begin serving several markets simultaneously. An aggregator could control industrial demand, distributed generation and other flexible resources offered into CGES balancing, while potentially accessing another value stream if CEDIS needs flexibility from assets at a particular location.
The framework notes that the same MW cannot be promised twice for conflicting purposes. Metering arrangements, baseline calculation methods, asset availability and dispatch priority are therefore treated as key elements alongside physical flexibility.
Flexibility contracts as alternatives to network reinforcement
The DSO market approach could also affect Montenegro’s grid-investment model. Distribution operators traditionally address rising load or generation constraints through reinforcement of cables, transformers and substations.
If a network bottleneck occurs only for a limited number of hours each year, paying consumers or generators to modify behaviour during those periods may be cheaper than immediate infrastructure reinforcement. Montenegro’s regulatory framework requires distribution planning to assess flexibility services, demand management, storage and other resources as alternatives to conventional network development.
This is described as turning flexibility into a potential non-wire investment option. A new transformer is treated as a regulated capital asset, while a flexibility contract is treated as an operating service that a DSO can compare against transformer costs.
Aggregation drivers in Montenegro’s smaller system
The source material links Montenegro’s small system size to both opportunities and constraints for market participation. It notes that a limited number of large flexible generators could improve competition for new entrants in some cases.
At the same time, it says the market may struggle to attract enough independent providers for every service. CGES’s draft includes arrangements for situations where competition is insufficient or market procurement fails.
Aggregation is presented as a way to combine assets that are individually too small to participate directly. The text lists controllable-demand sources including large hotels, shopping centres, water systems, industrial facilities, commercial refrigeration and eventually EV fleets.
CEDIS-linked participation could also extend to distributed renewable plants where technical capability and contractual arrangements allow. The investment requirements are described as increasingly digital rather than purely electrical, including smart metering, telemetry, control equipment, baselining and optimisation software .
Status of two-tier market implementation steps
The source material states that Montenegro does not yet have a mature two-tier flexibility market. It adds that CGES’s balancing framework remains under development while the commercial depth of CEDIS procurement has yet to emerge.
The next step identified is whether CEDIS publishes 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 are met, the next flexible power asset described in the source could be a portfolio of existing customers whose electricity use becomes tradable at both national and local grid level .
