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Montenegro´s internal electricity generation comes from three main power plants. The total generation in power plants (excluding electricity produced for the use of the plants) was 3185,7 GWh, in 2004.

Generation breaks down in the following way:

• Coal-Fired Thermal power plant "Pljevlja" produced approximately 1,1 TWh
• Hydro Power plant "Perucica" produced approximately 0,7 TWh
• Hydro Power plant "Piva" produced approximately 0,4 TWh
• Various Small hydro power plants produced less than 0,02 TWh

Montenegro currently imports approximately one-third of its power needs.  The power supply situation in Montenegro, as with much of the Western Balkans and Europe more generally, is anticipated to continue tightening significantly.  

The imports/exports balance by energy source in 2007 was as follows (all units ktoe):
Solid Fuel: 951.2 / 45.4
Oil and Products: 4090.1 / 61.5
Natural Gas: 1824.9 / 0.0
Electricity: 779.4 / 786.7
 

According to the AEA (Austrian Energy Agency), nearly all Montenegrin households are electrified and metered.

While electricity demand is growing fast in Montenegro, production is hampered by old structures, limited investments, and the run down assets in the state-owned electricity company, Electric Power Company of Montenegro (EPCG), which has reported annual losses of about 1 percent of GDP since 2002.  Significant capacity additions with high investment costs will be required to meet the growing energy demand in the country.

In Montenegro the share of renewable electricity sources as a percentage of gross electricity consumption reached 39.8% in 2006 (1,876 GWh).  This figure is misleading since Montenegro is highly dependent on electricity imports, as domestic production amounts to only about two thirds of gross consumption; therefore the share of renewable electricity generation in terms of domestic production is significantly higher than in the case of consumption, reaching 63.6%.

Montenegro’s renewable electricity generation is dominated by hydro generation, which is the only renewable source currently used. Large hydro plants have an installed capacity of 649 MW, while small hydro plants only amount for 9 MW.

Montenegro does not have an official renewable target for 2020 and is highly dependent on electricity imports; however, it has significant potential in local renewable energy sources to reduce this dependence.  Key renewables in Montenegro are hydro, wind, biomass and solar energy.

The largest potential is that of hydro, with approximately 11 TWh/year hydro generation potential; while the current utilization level is about 17%. Potential for small HPP generation is approximately 400 GWh, with potential sites being characterized by relatively small flows and high slopes.

Wind energy potential is relatively low in Montenegro. Wind speeds in excess of 5 m/s are only present in the central and coastal regions of the country.

Except for traditional uses, biomass has not been adopted as a power source. However, the resource potential in Montenegro is good, with 42% of the country being forested.

Based on the studies that are supporting the National Energy Strategy, Montenegro has one of the greatest potentials for solar energy in South East Europe, with direct solar irradiation accounting for 17-18% of annual time. Average energies of  4.45 kWh/m2 have been recorded at seaside towns in the country.

The only study into the geothermal potential of Montenegro was undertaken in the territory of the capital, Podgorica. Underground waters of 12-13 degrees Celsius were found, which could be used for summer cooling.
 

The energy sector in Montenegro is characterised by high-energy intensity in comparison to EU and other developed countries, which is basically due to high consumption in heavy industry. The energy intensity factor in 2003 was 3.3 times higher than in the EU, indicating significant potential for energy rationalization.

The most significant problem is the very high share of the electric energy use for space heating (over 50%). There is significant unexploited potential of Renewable Energy sources in Montenegro, especially high-quality hydropower potential. It is economically justified for Montenegro to double the current use of RE sources (small HE, solar and wind energy, biomass). However, only a very small percentage of the economic potential of RE sources is expected to be realized without special measures.
 

Power sector
The power sector in Montenegro operates via two enterprises:

• FC PRENOS EPCG. It is temporarily the Transmission Operator TSO-EPCG (http://www.tso-epcg.com/eng/novosti.php). A process is envisaged to transform this entity into a legislatively separate enterprise. Main activities: electricity transmission, transmission system control and organization of the electricity market.
• Elektroprivreda Crne Gore (http://www.epcg.co.me/enindex.html). In 1999, it was transformed from a state owned company into a joint-stock company with main business activities in electricity production, transmission and distribution, managing of electricity system, export-import of electricity. It is the electricity utility. The company runs its business in accordance with Montenegrin Energy Law. The total (net) capacity of EPCG’s electric power generating facilities is 868 MW.

There is one vertically integrated electricity company (EPCG). By the end of 2005 it was financially and functionally unbundled into four subjects: generation, transmission, distribution and supply.

The Energy Law left to the Agency decisions on the terms for legal unbundling.

Large consumers (110kV) directly purchase one third of their electricity abroad.
 
The EPCG purchases for tariff consumers one third of their consumption from abroad.

Until the Agency determines that a competitive market for electricity exists, generators are obliged to supply tariff customers only. The threshold is set at 25 GWh in electricity, 50 million m3 of natural gas, and 5000 GJ of heat.
 

The basis of the energy policy is included in the proposed Montenegrin Energy Laws.

Energy Policy of the Republic of Montenegro was adopted in April 2005.  In June 2007 the document “Energy Development Strategy of Montenegro by 2025” was prepared.  The next step following the adoption of the Energy Development Strategy was the preparation of its implementation through the development of the Action Plan for the first 5 years (2008-2012).
“The Energy Development Strategy of Montenegro by 2025” functions as the starting point for a European model of a sustainable and strategic development of its energy sector and the enactment of other necessary legislation, and the institutional support for a successful implementation of Montenegro’s energy policy on its way to European and broader international integrations, and certainly as a support to the Government of Montenegro and other government institutions in the preparation of other energy program documents.

Montenegro has developed an Energy Efficiency Action Plan 2008–2012 to promote more efficient use of energy across economic sectors. The Montenegro Energy Efficiency Project will finance improvements in heating systems, insulation, thermostatic valves, heat substations and networks, and other installations in buildings such as schools and hospitals.
 

http://www.serbia-business.com/index.php?option=com_content&view=article&id=605:energy-management-to-help-serbia-save-energy-&catid=43:market-news-a-opportunities&Itemid=55

The Ministry for Economic Development (http://www.minekon.gov.me/en/ministry?alphabet=lat) – section for energy monitors Montenegro’s energy sector and prepares plans for energy development in Montenegro. Has prepared the Strategy for the development of small hydro power plants in Montenegro.

The Ministry of Environmental Protection and Physical Planning develops general environmental policies.
 

The Regional Environmental Centre for Central and Eastern Europe (REC) operates in Serbia and Montenegro as an international organization, following the Memorandum of Understanding signed by REC and the Ministry of Foreign Affairs of FR Yugoslavia, in June 2001.

Regional Centres for Energy Efficiency were established after establishing SEEA in 2002. Supported by Norwegian Government in terms of financial and technical assistances, main objectives of these centres are implementation of the energy policy in the area of energy efficiency, RES and environmental protections.
 

The Regulatory Energy Agency of the Republic of Montenegro (http://www.regagen.co.me/) was founded in 2004, according to the Energy Law.

The agency monitors and controls the operations of subjects within the energy sector.
 

The Regulatory Energy Agency of the Republic of Montenegro is independent and a non-profit organization with public authorization. The agency runs a budget, independent from the state budget. Most of funds arise from incomes for issuing licenses.

Montenegrin parliament appoints the members of the board. The president of the board is appointed each year among the three members of the board. Their mandate is 4 + (4) years. ERA consists of 17 staff members. The director and deputy director are appointed by the board and their mandate lasts 4 + (4) years.
 

The Montenegrin Energy Policy as yet does not afford a framework for sustainable energy regulation, although priorities are identified for the need to increase renewable generation capacity.

The main activities include:

• Developing regulations and rules needed for the obligations arising from Energy Law.
• Implementation of Energy Law; revision and approval of market regulations, grid codes, conditions and terms for connecting and access to grid.
• Issues licenses within energy sector (production, generation, distribution and sale of electricity).
• Creates tariffs and prices in accordance to Energy Law.
• Participates in preparation and implementing regulations within the energy sector.

Energy and Metallurgy Association works under Montenegrin Chamber of Commerce. The scopes of its work are the same as the Energy society of Serbian Chamber of Commerce.

A part of domestic energy regulation Montenegro has incorporated resolutions from the second package of European Parliament and Council on common rules for internal electricity market in 2003. However, in order to provide the intensive development the Montenegrin energy market requires, compliance of legal and secondary regulation must be checked in detail.