At a time when European markets are facing energy uncertainties, it has become clearer than ever that long-term stability cannot rest on short-term measures and reactions, but rather on a decentralised energy model based on renewable sources, energy storage, and smart grids. Examples of good practice from the most advanced European renewable energy markets show that such an approach is already delivering tangible results. In Germany, initiatives such as the Grenzland Pool demonstrate that local ownership, strategic partnerships, and joint investments can simultaneously secure clean energy and generate broad social benefits, ranging from infrastructure modernisation to support programs for the most vulnerable households. In Portugal, the Agra do Amial project confirms that carefully structured energy communities in social environments can reduce bills, increase energy autonomy, and encourage wider citizen participation through a model of shared energy production and consumption.
These examples are significant not only because of their social dimension, but also because they show how large international investors can organically integrate into local communities when there is a clear regulatory framework, stability, and the possibility of structuring projects that simultaneously protect investment and bring real benefits to citizens.
In recent years, Montenegro has made a major step forward in the field of renewable energy by adopting the new Law on the Use of Energy from Renewable Sources (“Official Gazette of Montenegro” no. 82/24), which entered into force on August 31, 2024. The law introduces the first comprehensive system of auctions, market premiums, guarantees of origin, and clearer administrative procedures, with full transposition of EU Directive 2018/2001 (RED II). Particularly important is the legal solution concerning the introduction of a single contact point for issuing permits and clearly defined deadlines for procedures, as this resembles the practice of EU member states, reducing administrative barriers for both domestic and foreign investors.
Parallel to the development of the renewable energy sector, the issue of legal certainty in long-term energy contracts in Montenegro is also emerging—an element crucial for any serious investment decision. In this context, it is important to recall the basic contractual mechanisms that form the backbone of modern energy projects.
A Power Purchase Agreement (PPA) represents a long-term electricity offtake contract, which provides the producer with stable revenue through guaranteed demand, while the buyer gains security of supply from renewable sources. A Contract for Difference (CFD), on the other hand, functions as a state support mechanism based on the settlement between the market price and the reference price, thereby reducing exposure to market fluctuations and ensuring the financial stability of the project.
In the context of the new auctions and market premiums that Montenegro is introducing, these instruments become crucial for the financial viability of projects and the long-term sustainability of solar, wind, and battery energy storage system (BESS) investments.
Market premiums emerge as the central mechanism for promoting renewable energy, based on the logic of the two-sided CFD model applied in advanced energy markets such as the United Kingdom and Denmark. In this system, the producer sells energy on the market, while the state, through the market premium, “settles” the difference between the achieved revenue and the reference price. When the market price falls below the expected level, the state compensates the difference, while in periods when the market price exceeds the achieved revenue, the producer returns the surplus, known as the negative market premium.
At the same time, the Government sets the maximum price that investors may offer in auctions, taking into account investment and operating costs, lifespan, planned production, and reference market indicators, thereby introducing transparency and standardisation in line with the practices of developed EU markets. The system also ensures legal certainty in situations where the system operator limits electricity delivery; in such cases, the investor is entitled to compensation for the energy that could have been delivered had there been no restrictions—an element of particular importance for financiers and banks.
Additional stability is provided through annual indexation of the achieved price relative to eurozone inflation, thereby protecting the real value of revenues throughout the entire incentive period. The market premium is based on the reference market price, with clear rules for handling situations when that price is negative or temporarily unavailable, while the Agency prescribes substitute values to be applied during such periods.
Auctions may be organised for predetermined or unspecified locations, allowing for a balance between the state’s strategic planning and investor flexibility. Taken together, all these provisions form a sophisticated European model of market support that is predictable and fully aligned with the practices of countries leading in renewable energy development.
An additional regulatory challenge will be the full implementation of the Carbon Border Adjustment Mechanism (CBAM) as of January 1, 2026, which introduces mandatory emissions verification, the purchase of CBAM certificates, and alignment with ETS prices (European Emissions Trading System). This regime is already reshaping the way PPA/CFD structures are viewed, as guarantees of origin, emission coefficients, and ESG reporting are becoming indispensable components of every long-term energy arrangement.
When considering the current regulatory framework and market dynamics, it is clear that the success of future renewable energy projects in Montenegro will largely depend on the consistent application of new deadlines and the functionality of the “one-stop shop” model, as well as on how methodologically clear and transparent the auction processes will be. Equally important will be better alignment of spatial documentation with energy planning, as well as further strengthening of grid infrastructure—without which large projects cannot be efficiently integrated into the system. In addition, ESG standards and mandatory audits for large legal entities will become an unavoidable part of the investment cycle. These elements will determine whether investors have confidence to build their long-term, capital-intensive projects in Montenegro and whether the domestic market can offer stability and predictability comparable to developed EU energy markets.
Montenegro has a realistic potential to become a regional example of a successful energy transition, but the decisive factors will not only be the existence of natural resources or infrastructural starting points, but also the level of legal certainty, regulatory consistency, and clearly defined ESG standards that provide projects with long-term stability and credibility.
For us as lawyers, this is the moment when we can make the greatest contribution—through precisely structured PPA/CFD contracts, clear permitting strategies, and legally regulated relations between the public sector and investors. Our expertise can be the key element that ensures large projects proceed without legal uncertainty or infrastructural delays, while at the same time serving as proof that Montenegro can be a reliable, predictable, and competent partner to global energy companies seeking security, transparency, and long-term sustainability for their investments.