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A New Decade for Montenegro’s Energy Sector

A New Decade for Montenegro’s Energy Sector

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Change is brewing in Montenegro. The country finds itself exposed to both unprecedented internal and external factors, turning the gears and taking Montenegro in an uncharted direction. The COVID-19 pandemic has, for the last eighteen months, been putting pressure on economies, health systems, and the people themselves, forcing humanity to combat a deadly adversary through measures unseen in modern history. Montenegro was no exception and had to adjust to the new situation adopting preventive measures in order to mitigate the negative effects of the pandemic. An external factor, the virus, was not the only thing that shook things up for the Montenegrin people. There has been a large upset in the political scene, with the parliamentary election being narrowly won by the opposition, removing the Democratic Party of Socialists from power. The new government is faced with many challenges, including continuing the development of the energy sector through innovative and appropriate legislative, regulatory, and strategic action.

The previous Government had adopted the third socio-economic package, as the means of reducing the negative effects of the pandemic, ensuring that energy companies in Montenegro are willing to invest over EUR 1 billion, of which EUR 734.6 million within the next four years, in order to improve the state of the energy sector. Three state-owned companies, Elektroprivreda Crne Gore, Crnogorski Elektrodistributivni Sistem, and Crnogorski Elektroprenosni Sistem, will be the largest investors in the following period. Investments, such as new photovoltaic panels on the roofs of households, increasing the amount of solar energy harvested, and reducing other, less efficient and environmentally harmful, ways of producing energy have been announced. Additionally, the construction of new solar (Briska Gora), wind (Gvozd), and hydro (Komarnica) power plants have been planned and announced.

Another topic of high importance is the construction of small hydropower plants. In December 2020, the procedure of approving the construction of these plants has been halted, while the previously concluded concession contracts are under revision. For example, the approval process for the construction of the Slatina hydropower plant, in the Kolasin municipality, has been stopped until the contract can be reviewed. The Government established a task group with the sole purpose of reviewing said contracts. On December 29, 2020, just twelve days after the group was formed, concession contracts for seven small hydropower plants have been terminated. The construction of small hydropower plants remains a burning topic not just in Montenegro but in neighboring countries as well, especially in Serbia.

The European Union has adopted a policy of reducing and hopefully eliminating carbon dioxide emissions. Montenegro, a country seeking EU membership, has to adapt its coal-dependent energy-producing facilities. A new energy strategy is underway, which will focus on renewable energy sources and look to achieve a complete coal phase-out. The Montenegrin National Energy and Climate Plan (NECP), once completed, will prescribe a deadline by which the coal phase-out will have to be achieved. The legal basis for the development and adoption of the NECP was included in the Law on Energy in July 2020. However, this will be a difficult task to accomplish. One of the largest power plants and thus largest producers of electricity is the thermal power plant in Pljevlja, which is coal-fired. This makes TTP Pljevlja, consequentially, a major carbon dioxide emitter. Shutting down TTP Pljevlja would mean a significant strain on the state’s budget, as many people would lose their jobs, prices would go up for both citizens and companies, and the stability of the entire system would be endangered, at least until new, climate-neutral, capacities have been constructed (the previously mentioned solar and hydropower plants and wind farms). As a token of its commitment, Montenegro joined the Powering Past Coal Alliance (PPCA), which promotes coal phase-out and the transition to clean energy, and announced it would stop using coal by 2035 at the latest.

However, things are not going smoothly, as TTP Pljevlja has breached the 20,000 operating hours allowed under the coal opt-out mechanism, which resulted in the conduction of an infringement procedure against Montenegro. Innovative new projects, designed to further improve the energy sector, such as the construction of the first floating solar power plant, have attracted attention from foreign investors.

Entering the new decade, Montenegro has shown serious dedication to improving its energy sector and participating in the global attempt to reduce harmful emissions by transitioning to clean and renewable energy sources in the future. Hopefully, the planned changes will actually be implemented, and Montenegro will serve as a shining example for the other regional countries.

By Igor Zivkovski, Partner, Zivkovic Samardzic

This Article was originally published in Issue 8.8 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.

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