Recent research shows that Montenegro has a high hydro-energy potential with a noteworthy index of cost-effectiveness of investments and favorable ecological and social environments. The estimated theoretical hydro potential on the main water courses totals 9,846 GWh/year. Out of this capacity, less than 1,800 GWh, or only 17%, has been harnessed so far.
Over the last decade, Montenegro has implemented various reforms in the energy sector, and notable changes have been made to the applicable legal and regulatory framework. Some of the new legislation has already been adopted, while other important acts are in the preparation phase or in the process of adoption.
In addition, important international agreements have been ratified in accordance with the Montenegrin Constitution. The most important parts of the national legislative framework in the energy sector are the Law on Ratification of the Treaty establishing the Energy Community between the European Community and Montenegro and the Law on Ratification of the Kyoto Protocol to the United Nations Framework Convention on Climate Change. The legislative and regulatory framework that facilitates the implementation of projects in the field of renewable energy is represented by the Energy Law and comprehensive set of by-laws, which closely define the following:
- The types and classification of electricity production plants from renewable energy sources and plants for high efficiency cogeneration;
- The methodologies for issuance, transfer, and cancellation of guarantees of origin, and the data required to request issuance of a guarantee of origin;
- The tariff system for incentive prices for electricity produced in power plants using renewable energy sources and high efficiency cogeneration power plants;
- The criteria for issuance of energy permits, content of requests, and registry for energy permits;
- The level of fee required to encourage the production of electricity from renewable energy sources and cogeneration.
The new Energy Law, which entered into force on January 28, 2016, is in significant compliance with the relevant Directives of the European Union and significantly contributes to a higher level of protection for end customers. In principle, this Energy Law determines energy activities, regulates the conditions and manners of their performance for the purpose of providing a quality and secure supply of energy to end customers, encourages the production of energy from renewable sources and high efficiency cogeneration, organizes and manages the electricity and gas markets, and deals with other issues of importance for the Energy sector.
Renewable Energy Sources, High Efficiency Cogeneration, and Incentive Measures are closely defined under Chapter 3 of the Energy Law.
The scope of use of energy from renewable sources is determined by the Government and is set forth in the “Action Plan for the Use of Energy From Renewable Sources,” developed in compliance with the Energy Development Strategy and Regulations on Energy Efficiency and reduction of the greenhouse gas emissions.
“High Efficiency Cogeneration” is defined as generation that saves at least 10% of primary energy in comparison to the reference values for separate production of heat and electricity and cogeneration in small and micro-cogeneration facilities providing primary energy savings.
As regards the incentive measures, the competent government authority, working in cooperation with the organization responsible for the regulation of energy and with local governments, is obliged to provide appropriate information necessary to inform citizens of the benefits and practical aspects of both the development and usage of energy from renewable sources.
The development of the Energy Sector is defined by the Energy Development Strategy of Montenegro To 2025, which was adopted in December 2007. This Strategy is considered a key strategic document which identifies primary investment needs and opportunities in the energy sector of Montenegro in the specified period. The main objective set by the Strategy is to ensure a sustainable, safe, and competitive supply of energy together with energy efficiency measures and increased utilization of renewable energy sources.
By implementing the Strategy through key investments made in collaboration with international strategic partners (e.g., private investors and international financial institutions) and through the active support and participation of domestic institutions, Montenegro shall make a large step towards integrating into the neighboring energy systems and markets for power and gas.
By Sasa Vujacic, Partner, Vujacic Law Office
This Article was originally published in Issue 3.3 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.