Podgorica, Montenegro—The U.S. Energy Association and the United States Agency for International Development (USAID) have structured a landmark agreement that supports development of a regional electricity market among transmission system operators (TSOs) and market operators (MOs) in 8 countries Contact online >>
Podgorica, Montenegro—The U.S. Energy Association and the United States Agency for International Development (USAID) have structured a landmark agreement that supports development of a regional electricity market among transmission system operators (TSOs) and market operators (MOs) in 8 countries in Southeast Europe.
Under the new Electricity Market Initiative (EMI), the countries'' TSOs and MOs would share generation, transmission and market data to optimize the regional grid and invite international investment into countries that have otherwise relied on resources within their borders to meet a growing electricity demand.
The EMI builds on 25 years of grid modernization following the fall of the Berlin Wall, and the recent turnover of the celebrated Southeast Europe Cooperation Initiative Transmission System Planning Project (SECI) to the European Network of Transmission System Operators of Electricity (ENTSO-E).
"The region is thriving, but it requires a strong regional electricity market and diversity of resources to continue growing. This cooperation among the countries creates transparency and is an exercise in diplomacy that portends prosperity and harmony across a region that has seen decades of war, economic uncertainty and limited energy access," said Will Polen, senior director at USEA in charge of the project.
Polen added, "Western Balkan countries are waking up from the legacy of centrally planned economies to a region now dedicated to reforms intended to enable EU membership. The energy sector has a significant role, and the EMI is a critical step."
The electricity market is where electricity is bought and sold, similar to how other commodities like oil or gas are traded. In this market, prices are determined by supply and demand, with various factors influencing costs like weather, production methods (renewable or non-renewable energy), and overall electricity consumption.
Electricity markets exist to efficiently match supply and demand of electricity. Unlike most commodities, electricity cannot be stored in large quantities, so it must be produced and consumed in real time. This dynamic nature requires a transparent, regulated system where prices reflect current conditions.
By allowing multiple producers and distributors to participate in the market, prices are determined more by supply and demand. This creates an open competetive market environment to develop innovative solutions for power generation that yield in best efficiency, favoring the production of electricity with lower upfront costs and reduced operational expenses. Eventually leading to a market where energy producers with lowest margins can thrive.
Day-ahead data refers to electricity prices that are determined one day in advance. Participants submit their bids for how much electricity they plan to buy or sell for each hour of the upcoming day. Based on supply and demand forecasts, the market sets prices for every hour of the next day. This allows electricity producers, distributors, and consumers to plan ahead, ensuring they are prepared for the expected energy costs and consumption levels.
Electricity prices are often published in megawatt-hours (MWh), but for everyday consumers, it''s more practical to think in kilowatt-hours (kWh). For example, a typical oil radiator might have a power rating of 2000W (or 2kW). If the radiator runs continuously for one hour, it will consume 2kWh of electricity.
Our electricity price graph displays the cost in cents per kilowatt-hour (cents/kWh). So, if your oil radiator consumes 2 kWh of electricity and the current price is 10 cents per kWh, the total cost for running the radiator for one hour would be:
Montenegro’s Ministry of Energy has recently initiated the process of connecting its day-ahead electricity market to the unified European energy market, in line with the country’s commitments to the Energy Community. This move, according to the Montenegrin Electricity Exchange, promises to unlock new business prospects for market participants while bolstering efficiency, competitiveness, and service standards. The integration of markets is a prerequisite outlined in Chapter 15 – Energy of Montenegro’s negotiation process.
“The primary objective of this integration is to harmonize our market prices with those of Europe, thus extending the reach of Montenegro’s market into the broader European arena. This synchronization enables seamless matching of supply and demand, facilitating optimal trading conditions and ensuring competitive market prices,” explained Dragana Radulović, spokesperson for the Montenegrin Electricity Exchange.
Projections indicate that Montenegro’s market could achieve integration with the European market by the first quarter of 2026, though this timeline is contingent on the complexity of adapting algorithms and ensuring continuity with existing EU markets.
“Transitioning from hourly intervals to fifteen-minute bidding and aligning with Europe’s focus on integrating the intraday market represent additional factors shaping our timeline. Moreover, the integration process is pivotal for effectively incorporating renewable energy sources into our energy system,” added Radulović.
The introduction of the day-ahead electricity market last April marked a significant milestone, enhancing transparency and efficiency within Montenegro’s domestic market. This market mechanism, based on best practices from EPEX SPOT and BSP Southpool, facilitates daily electricity trading through auction-based price formation, fostering a more liquid and transparent marketplace.
Radulović disclosed that Montenegro’s day-ahead market turnover for 340 delivery days amounted to 35.05 million EUR, demonstrating substantial trade activity. Currently, the market boasts 23 registered participants, with ongoing registration processes for two more entities, comprising a mix of domestic and international stakeholders.
In addition, Radulović underscored the significance of the submarine energy cable, emphasizing its role in stimulating regional electricity market growth within Southeast Europe.
“The connection with Italy extends our market reach, allowing Montenegrin offers to access a broader market, thereby influencing pricing dynamics and facilitating greater market integration across Europe,” Radulović concluded.
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