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NewsMontenegro, three companies left the system of incentives for the production of...

Montenegro, three companies left the system of incentives for the production of electricity from renewable energy sources

As of January 1 of this year, three companies that are the owners of 10 small hydropower plants (MHPs) left the system of incentives for the production of electricity from renewable energy sources. In the coming period, it is expected that more producers will do this, and considering that this method of calculating income based on the sale of electricity on the market differs from the existing model, it is necessary with all producers who leave the incentive system to make an adequate agreement on the method of calculation of concession fees.

This is stated in the information adopted by the Government at yesterday’s session.

Namely, the information states that the program to encourage the production of electricity from renewable energy sources in Montenegro ultimately led to the realization of 33 new small hydropower plants (MHP) for the production of electricity with a total installed capacity of 52.6 MW and a planned annual production of 182.3 GW.

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With the construction of MHP, the concessionaire acquires the conditions for the calculation of the concession fee, which represents a part of the income generated from the sale of electricity, and which, by the nature of the matter, represents compensation for the use of natural resources.

– Pursuant to the legal basis, electricity producers who achieved the status of privileged producer sold their energy to the Montenegrin operator of the electricity market (COTEE) at incentive prices. The concession fee was calculated as a percentage of the realized income, which was calculated as the product of realized amounts of electricity in each individual MHE facility and incentive prices determined for a specific facility, in accordance with the regulation of the Government of Montenegro – it was clarified.

The Law on Energy Namely stipulates that COTEE buys electricity produced from privileged producers and sells it to suppliers and self-supplier customers. In this case, the supplier with whom COTEE has contracts for the sale of electricity from privileged producers is Elektroprivreda Crne Gore (EPCG).

– Until the end of 2022, the sale of electricity produced in MHP facilities was realized through COTEE. However, COTEE informed the Ministry of Capital Investments that a number of producers, owners of MHP used the opportunity to exit the system of incentive measures, that is, they announced the sale of electricity on the market without the right to incentive measures. As of January 1, 2023, three concessionaires, who are the owners of ten MHP facilities, left the incentive system. In addition to these MHPs, in the coming period, more MHP producers can be expected to exit the incentive system – it is stated in the information.
Exiting the system of incentive measures reduces the need to provide funds from the end customers of electricity and part of the funds provided from the budget.

As stated in the document, the main reasons that led these producers to leave the incentive system are based on the fact that the market price of electricity is higher than the incentive price at which they sold their energy until now.

– Due to the expected achievement of a higher price of electricity than the one that the producers had based on the contracts signed with COTEE, there will be an increase in the base for calculating the concession fee, and thus to higher budget revenues based on the calculated concession fees – it was clarified.

However, due to the newly created circumstances, there was a need to define a new method and methodology for the calculation of concession fees.

– Namely, the producers who started to sell their electricity from MHP on the market have already signed contracts on the sale of electricity, which defined the fixed price and the variable part of the electricity. The aforementioned contracts prescribe the method of calculation and distribution of both the fixed and the variable part of the income. Given that this method of calculating income based on the sale of electricity on the market differs from the existing model, it is necessary to make an adequate agreement with all producers who exit the incentive system on the method of calculating concession fees – the document says.

The aforementioned agreement would regulate the manner and deadlines for the calculation of the concession fee, which ultimately includes a percentage share of the revenues generated based on the sale of electricity from MHP facilities in the amount defined by the already concluded concession agreements.

The agreement should also define the method of measuring and calculating electricity, as well as the relevant sources for data and indicators needed for the calculation of the concession fee for the use of the hydropower potential of watercourses.

– As the competent authority is the Ministry of Capital Investments, which, on behalf of the Government of Montenegro, undertakes all the necessary activities in order to realize the Concession Agreement, and taking into account the newly created circumstances, the need to regulate the obligations of both the line ministry and the concessionaire through the conclusion of the agreement – it was stated.

This department is in charge of drawing up agreements on the method, methodology and form of calculation of concession fees, which will define all relevant elements for their calculation, respecting the provisions defined in concession contracts that treat the calculation of concession fees and submit them to the Government for consideration and acceptance.

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