energy development strategy of montenegro … 2016/action_plan_2016_-_2020_eng.pdfenergy development...

ENERGY DEVELOPMENT

STRATEGY OF

MONTENEGRO BY 2030

Podgorica, December 2015

ENERGY DEVELOPMENT STRATEGY OF MONTENEGRO BY 2030 – ACTION PLAN 2016 - 2020

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ENERGY DEVELOPMENT STRATEGY

OF MONTENEGRO BY 2030

-------------------

ACTION PLAN 2016 – 2020

MINISTRY OF ECONOMY

Rimski trg 46, 81000 Podgorica

Ministry of Economy

Podgorica, December 2015

Any requests for reproduction of all or a part of this publication must be addressed to the Ministry of Economy!


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ABBREVIATIONS

AC Alternating current

AGC Regulation of active power and frequency and monitoring of system reserves

AH Administration for Hydrocarbons

AP Action Plan

BAT Best available technology

BE Balkan Energy

CANU Montenegrin Academy of Science and Art

CC Core Content

CDM Clean Development Mechanism

CGES Montenegrin Electricity Transmission Company

CHP Combined Heat and Power

COTEE Montenegrin Electricity Market Operator

COWI-IPF COWI-IPF Consortium

CRPS Central Register of Commercial Court

CSE Central Stockholding Entity

DC Direct current

DCF Discounted Cash Flow

DIAP Department for Implementation of Action Plan

DSO Distribution System Operator

DSP Detailed Spatial Plan

DTE Discontinuing transport equipment

EAR European Agency for Reconstruction

EBRD European Bank for Reconstruction and Development

EC European Commission

EE Energy Efficiency

EEAP Energy Efficiency Action Plan

EIA Environmental Impact Assessment

EIB European Investment Bank

EL Energy Law

EMS Electronic monitoring system

EnCT Treaty establishing the Energy Community

ENTSO European Network of Transmission System Operators

EPA Environmental Protection Agency

EPC Energy Performance Contract

EPCG Electric Power Company of Montenegro

ERA Energy Regulatory Agency

ESCO Energy service company

EU European Union

EUROSTAT Statistical Office of the European Communities

FA Forest Administration

FMIS Financial Management Information System

FU Functional Unit

GDP Gross Domestic Product


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GHG Greenhouse Gases

GIZ Deutsche Gesellschaft für Internationale Zusammenarbeit GmbH

HPP Hydro Power Plant

HVDC High Voltage Direct Current

IA Inspection Administration

IAP Ionian – Adriatic Pipeline

ICT Information communication technology

IFI International Financial Institutions

IHMS Institute of Hydrometeorology and Seismology

IPA Instrument for Pre-Accession Assistance

IPP Independent Power Producer

IRR Internal Rate of Return

ISSP Institute for Strategic Studies and Prognoses

JSC Joint Stock Company

KfW Kreditanstalt für Wiederaufbau (German Development Bank)

LEE Law on Energy Efficiency

LEPH Law on Exploration and Production of Hydrocarbons

LG Local Government

LNG Liquefied Natural Gas

LPG Liquefied Petroleum Gas

MARD Ministry of Agriculture and Rural Development

MBA Montenegro Business Alliance

ME Ministry of Economy

MED Ministry of Education

MEF Montenegrin Employers Federation

MF Ministry of Finance

MFAEI Ministry of Foreign Affairs and European Integrations

MH Ministry of Health

MONSTAT Statistical Office of Montenegro

MontBon Montenegro Bonus

MS Ministry of Science

MSDT Ministry of Sustainable Development and Tourism

MTMA Ministry of Transport and Maritime Affairs

NDC National Dispatching Centre

NGO Non-governmental organizations

NPV Net Present Value

OP Open pit

PAH Polycyclic Aromatic Hydrocarbons

PKCG Chamber of Commerce of Montenegro

PPP Public-Private Partnership

PR Public relations

PUC Public Utility Company

PV Photo voltaic

RES Renewable Energy Sources

RUB Coal mine Berane

RUP Coal mine Pljevlja


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SCADA Supervisory Control And Data Acquisition

SEA Strategic Environmental Assessment

SEE South East Europe

SHPP Small Hydro Power Plant

SPV Special Purpose Vehicle

SS Substation

SUP Spatial Urban Plan

TAP Trans Adriatic Pipeline

TERNA Italian Transmission System Operator

TOR Terms of reference

TPP Thermal Power Plant

TSO Transmission System Operator

UCG University of Montenegro

UNDP United Nations Development Programme

UNESCO United Nations Educational, Scientific and Cultural Organization

UNFCCC United Nations Framework Convention on Climate Change

UNIDO United Nations Industrial Development Organisation

WA Water Administration

WB World Bank

WBIF Western Balkans Investment Framework

WPP Wind Power Plant


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TABLE OF CONTENTS

1. INTRODUCTION ..................................................................................................... 9

2. ACTION PLAN OBJECTIVES AND CONTENT .....................................................11

3. SUMMARY OF KEY RECOMMENDATIONS OF ENERGY POLICY AND ENERGY DEVELOPMENT STRATEGY OF MONTENEGRO ................................................12

3.1. THE PRIORITIES OF THE ENERGY POLICY OF MONTENEGRO .......................12

3.2. KEY STRATEGIC COMMITMENTS OF THE ENERGY POLICY OF MONTENEGRO .....................................................................................................12

4. EXPLANATION OF METHODOLOGY FOR PREPARATION OF MECHANISMS FOR ACTIVITY IMPLEMENTATION ......................................................................15

4.1. GENERAL REQUIREMENTS AND METHODOLOGY FOR PREPARATION OF ACTION PLAN (AP) ...............................................................................................15

4.2. AP AND EU ENERGY POLICY ACTIVITY RELATION ..........................................17

5. MECHANISM STRUCTURE FOR ACTIVITY IMPLEMENTATION ........................22

5.1. LEGISLATIVE-REGULATORY FRAMEWORK .....................................................22

5.2. INSTITUTIONAL-ORGANISATIONAL FRAMEWORK ..........................................22

5.2.1. International obligations ..........................................................................................24

5.2.2. Laws and regulations ..............................................................................................26

5.3. MONTENEGRIN ENERGY SECTOR STAKEHOLDERS .......................................27

6. OVERVIEW OF PROGRAMMES AND PROJECTS ACTIVITIES ..........................29

7. ACTION PLAN IMPLEMENTATION TIMELINE .....................................................40

8. FUNDING POSIBILITIES FOR ACTION PLAN IMPLEMENTATION .....................46

9. MECHANISMS FOR MONITORING AND FOLLOW-UP OF THE IMPLEMENTATION OF THE ACTION PLAN ........................................................59

9.1. DEPARTMENT FOR IMPLEMENTATION OF ACTION PLAN ...............................59

9.2. PLANNED ACTIVITIES AND REPORTING PROCEDURES .................................60

9.3. ACTION PLAN UPDATES .....................................................................................62

10. PROGRAMMES AND PROJECTS ........................................................................63

10.1. CC1: INCREASE THE ENERGY EFFICIENCY OF EXISTING GENERATION, TRANSMISSION AND DISTRIBUTION FACILITIES (SUPPLY SIDE) ...................63

10.1.1. Project for revitalisation of HPP Piva.......................................................................63

10.1.2. Project for revitalisation of HPP Perućica ................................................................65

10.1.3. Project for revitalisation of TPP Pljevlja ...................................................................67

10.1.4. Project for revitalisation of small HPPs ...................................................................69

10.1.5. Project of undersea cable for connection with Italy and with it related projects of construction of new substations and transmission lines ........................................................71

10.1.6. Projects of construction of new substations 110/x kV ..............................................73

10.1.7. Projects of construction of new 110 kV transmission lines ......................................75


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10.1.8. Projects of new interconnections with neighbouring systems ..................................78

10.1.9. Projects of reconstruction of transmission facilities .................................................79

10.1.10. Projects of secondary systems (NDC, protection, management, communication) ...82

10.1.11. Develop documentation for route selection for the construction of new transmission lines 84

10.1.12. Project of estimation of the capacity of the power system for connection of RES (hosting capacity) and analysis of the possibility of connection of small HPP, WPP and PV power plants in the power system in terms when they will be built ........................................85

10.1.13. Projects of construction and reconstruction of the primary distribution network .......87

10.1.14. Projects of the secondary distribution network ........................................................89

10.1.15. Projects of managing and automation of the distribution network ............................90

10.1.16. Development Programme of concept of the distribution network and the introduction of modern ICT, measurement systems and smart grid solutions ..........................................91

10.1.17. Project of distribution system capacity estimations for connection of RES (hosting capacity) ...............................................................................................................................93

10.2. KS 2: RENEWABLE ENERGY SOURCES ............................................................95

10.2.1. Programme of the evaluation and competitiveness of certain renewable energy sources as well as recommendations for the introduction based on the natural capacities and economic assessment ..........................................................................................................95

10.2.2. Programme of the research and study for the possible realization of offshore wind farms, photovoltaic power plants and biomass projects (for electricity and/or heat generation) and accelerated dynamics of onshore wind farms ................................................................97

10.2.3. Programme of construction of small hydropower plants / additional research of hydro potential 99

10.2.4. Project of hydropower plants on the Morača river ................................................. 101

10.2.5. Project of hydropower plants on the Komarnica river ............................................ 104

10.2.6. Projects for construction of wind farms ................................................................. 107

10.3. CC3: THE CLEANER AND MORE EFFICIENT ENERGY PRODUCTION FROM FOSSIL FUELS .................................................................................................... 109

10.3.1. Project of rehabilitation and expansion of the coal mine in Pljevlja for the needs of the existing TPP Pljevlja I and the new TPP Pljevlja II ........................................................ 109

10.3.2. Project of association of business entities of Coal mine Pljevlja and TPP Pljevlja (and later Pljevlja II) into a single legal entity ...................................................................... 111

10.3.3. Project of the ash and slag landfill for the purposes of the block I and II of TPP Pljevlja 113

10.3.4. Programme of district heating/cooling by locations - biomass, gas, heat pumps, municipal waste, high efficient cogeneration plants ............................................................ 115

10.3.5. Programme for developing Study of introducing district heating system in local communities in the municipalities in the north part of Montenegro (Kolašin, Berane, Žabljak and Plužine) as well as in other cities of Montenegro (Nikšić, Bijelo Polje, Cetinje, Podgorica) for the use of biomass or waste heat from industrial processes and implement Projects if studies show their justification ............................................................................................ 117

10.3.6. Project of heating system for town Pljevlja ............................................................ 119


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10.3.7. Project for construction of the new TPP Pljevlja II ................................................. 121

10.3.8. Programme of gasification of the country .............................................................. 124

10.3.9. Project for introduction of LPG as a replacement for petroleum products and coal and electricity in services (tourism) and in households in areas which will not be covered by gasification ......................................................................................................................... 126

10.4. CC 4: INCREASE OF THE ENERGY EFFICIENCY (DEMAND SIDE) ................. 128

10.4.1. Programme of measures by sector (households, public sector, commercial services/industry, transport) ............................................................................................... 128

10.4.2. Programme of the investment Projects of EE in public lighting, water supply systems and waste water treatment and other utility services .......................................................... 131

10.4.3. Programme of informing, education and training ................................................... 133

10.5. CC5: DEVELOPMENT OF THE ENERGY MARKET ........................................... 135

10.5.1. Programme of development of the market in accordance with EU regulations, good practice and specificities of Montenegro, harmonization with the third package (also in the field of gas) ......................................................................................................................... 135

10.5.2. Project of development and implementation of information technology and measurement infrastructure as technological support to the functioning of the electricity market and its subsequent inclusion in the regional processes........................................... 137

10.5.3. Project of competition increasing in the market of petroleum products .................. 139

10.5.4. Monitoring Programme of introduction and operation of non-discriminatory energy market (electricity, gas) ...................................................................................................... 141

10.6. CC6: ENVIRONMENTAL PROTECTION AND CLIMATE CHANGES ................. 143

10.6.1. Programme of monitoring of the fulfilment of international obligations regarding climate change ................................................................................................................... 143

10.6.2. Programme for coal consumption reduction .......................................................... 145

10.7. CC7: LONG-TERM ENERGY DEVELOPMENT OF MONTENEGRO .................. 147

10.7.1. Programme of Study development for hydro potential use and river basin management for all rivers in Montenegro (in the main stream and the tributaries) and preparation of the feasibility studies for selected objects .................................................... 147

10.7.2. Programme of agreement with neighbouring countries on the optimal use of mutual hydro potential and water management .............................................................................. 149

10.7.3. Project of analysis, research work and feasibility study to ensure sufficient quality basic data for making investment decisions for the eventual construction of HPP Boka and / or HPP Kruševo after year 2030 ......................................................................................... 151

10.7.4. Project of coal exploration in area of Pljevalja and Berane .................................... 153

10.7.5. Project of hydrocarbon exploration in Montenegro offshore .................................. 155

10.7.6. Project of Ionian-Adriatic pipeline .......................................................................... 157

10.7.7. Project to establish the CSE and 90-day reserves of petroleum products ............. 159

10.7.8. Programme of analyses and studies for preparation of municipal solid waste incineration Project in Montenegro (waste potential, the plat location etc.) ......................... 161

10.8. CC8: REGULATORY FRAMEWORK ................................................................... 163


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10.8.1. Programme of prompt monitoring of current EU legislation and harmonization of the regulatory framework of Montenegro .................................................................................. 163

10.8.2. Programme to create a regulatory conditions for public private partnership .......... 165

10.8.3. Programme to support the investments in RES with sustainable financial criteria . 167

10.8.4. Programme for development of Regulatory Energy Agency .................................. 169

10.8.5. Programme of monitoring of fulfilling the international obligations in relation to the organization of the Energy Sector ...................................................................................... 171

10.9. CC9: MONITORING AND FOLLOW-UP OF THE AP IMPLEMENTATION .......... 173

10.9.1. Programme of monitoring and follow-up of the AP implementation ....................... 173

ANNEX – Detailed timeline............................................................................................... 174


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List of Figures

Figure 5-1: Structure, role and interest of certain stakeholders in Montenegrin energy sector .....................................................................................................................................28

Figure 7-1: Action Plan timeline ............................................................................................45

Figure 8-1: Donors and IFIs present in Montenegro .............................................................47

List of Tables

Table 4.1: CCs relevant for Montenegro in comparison with the planned measures in the EU .....................................................................................................................................17

Table 4.2: List of core contents, Programmes and Projects of Action Plan ...........................18

Table 6.1: Overview for all activities of Programmes and Projects ........................................30

Table 8.1: Necessary financial resources for Programmes and Projects by years (€) ...........49

Table 8.2: Programme and Project financing by Government and investors – by sources (€) .....................................................................................................................................54

Table 9.1: Parameters for AP implementation monitoring .....................................................61


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1. INTRODUCTION

The energy sector has a special significance for the economic and long-term development of Montenegro, which, although it has significant coal reserves and a very large hydro potential, as well as the great potential of wind and other renewable energy sources (potential reserves of oil and natural gas are in the research phase), suffers the consequences of the current account deficit caused by energy imports.

On the other hand, the Energy Development Strategy of Montenegro by 2030 "White Paper", May 2014 (hereinafter the "Strategy") requires a relatively large investments, which could and should be implemented. Therefore, the development of energy sector in Montenegro should be systematically programmed and managed process in order to achieve the desired objectives, provide as less as possible energy dependence with enough energy at affordable prices and to enable development of Projects in various other sectors (tourism, transport, agriculture, ...).

The Government of Montenegro in accordance with the Energy Policy of Montenegro by 2030 (hereinafter the "Energy Policy"), which takes into account three main priorities (security of energy supply, the development of a competitive energy market and sustainable energy development in the country) and twenty key strategic determination, in accordance with the structural and technological changes, the environment and the current situation in Montenegrin energy sector, with this Strategy updated Energy Development Strategy of Montenegro until 2025 and it determined:

long-term development goals and guidelines for the development of supply and for meeting energy demand while taking into account technological and economic criteria, in accordance with the requirements of environmental protection

directions for the development of energy infrastructure and measures to encourage the use of renewable energy sources and increased energy efficiency

long-term projection of total energy balance of the country, the dynamics and way of achieving and monitoring of development objectives, and evaluating their effects

other important objectives and elements for establishing and implementing the Energy Policy and

tentative financial resources for the implementation of the Strategy.

In line with the commitment of the European Union, the objectives of Montenegro in the energy sector are:

increasing security of energy supply

increasing the use of renewable energy

improving energy efficiency

attracting investments and development of market competition.

In accordance with the economic development of Montenegro, energy practices and standards for the candidate countries for accession to the European Union, as well as Energy Policy and Strategy, the need to establish an appropriate framework and upgrade the existing legislative and regulatory and institutional-organizational frameworks is particularly emphasizes. The need to improve the system of financing, planning, monitoring and controlling the implementation of the Energy Policy and Strategy, which are a precondition for sustainable development of the energy sector is emphasizes. Implementation of the Strategy should ensure that the energy sector of Montenegro is being developed as a system which is open for investments in line with the Energy System of the European Union and the Energy Community.


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The commitment of Montenegro to continue and expedite the initiated process of integration with the European Union requires a responsible, comprehensive and complex development approach. This is especially true in the energy sector, which is one of the main carriers of the overall development of the State, in economic, social and environmental aspects. As such, the energy sector development is of great, and maybe crucial for overall long term development of Montenegro.

The Action Plan (AP) follows logically from and is complementary with the Strategy since

both documents share the same goal: concretisation of the vision of energy development and

identifying ways in which this vision will be realized.

The AP concretisation is reflected primarily in the definition of activities, which should be

carried out during the following five-year period (2016-2020), in the methods of

implementation and in the provisions of insights into the implementation processes of

Strategy objective. Considering that numerous organisations (Government institutions,

international organisations, professional associations, economic entities, NGOs etc)

combined with other segments of the society, shall be involved in the implementation

process, the AP provides the basis for efficient communication, while emphasizing the

responsibility of the stakeholders for achieving the requested communication levels and

fulfilling the aspired objectives.

The Strategy provides road maps and required measures to which Montenegro shall adhere

during the implementation of the adopted Energy Policy objectives, whereas the AP provides

the Strategy execution plan and the necessary steps to be undertaken consistently with the

Strategy road maps. The AP contains numerous specific Programmes and Projects whose

implementation will lead to the accomplishment of the Strategy objectives.

The energy sector is very dynamic and constantly changing. Therefore such a situation represents a special challenge for defining the AP and imposes the need for efficient control and flexibility while considering the most efficient options, that is, regular evaluations of the achieved results.

Therefore, the AP takes into consideration the distinguishing features of Montenegro, the powerful dynamics and the immanent priorities of its overall development, and gives solutions for achieving the Strategy objectives in accordance with available energy resources in Montenegro.

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Pursuant to Montenegrin legislation, the Ministry of Economy (ME) drafts and proposes the hereby provided AP for adoption to the Government of Montenegro.


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2. ACTION PLAN OBJECTIVES AND CONTENT

The main AP objective is to (i) lay down specific Programmes and Projects to be

implemented in the period 2016-2020, (ii) define the preconditions and the very

implementation process with regard to activities, responsibility, timelines, funding, sources of

funding, ecological and social effects, and (iii) propose mechanisms for the AP

implementation monitoring and follow-up. In addition, the AP provides the basis for the

creation of specific and viable implementation mechanisms based on the appropriate

organisation of human resources and implementation methods of the targeted activities. The

AP objectives are furthermore extended by the creation of conditions for the continuation of

activities after the initial five-year period envisaged in this AP.

The road map to accomplishment of these objectives is presented in the following eight

chapters of this document.

The third chapter gives an overview of the concluding recommendations set out in the

Energy Policy and the Strategy.

The fourth chapter provides a detailed explanation of the methodology in defining

mechanisms for the implementation of activities and their clustering in Core Contents,

Programmes and Projects aimed at efficient implementation of the AP, with additional

explanations provided to its beneficiaries.

The fifth chapter gives the structure of mechanisms for the implementation of AP

activities and the preconditions for a successful instituting of this mechanism, such as

the legislation and institutional-organisational issues.

The sixth chapter gives a summary of all Programme and Project activities with the

main parameters of significance for their implementation: dynamics, funding,

objectives and responsibility.

The seventh chapter is dedicated to the AP Timeline through the presentation of the

basic Gantt chart.

The eighth chapter contains an overview of potential ways of financing the AP

implementation with the funding sources and dynamics.

The ninth chapter shows the mechanisms for AP implementation monitoring and

follow-up with a view to defining the basis for a transparent monitoring of the AP

implementation and gives possibility for the AP innovation if needed in accordance

with new requirements.

The tenth chapter provides descriptions of individual Programmes and Projects

containing the basic information relevant for the AP implementation follow-up, with

detailed activity timeline of each Programme and Project.

The Annex contains detailed activity timeline of each Programme and Project.


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3. SUMMARY OF KEY RECOMMENDATIONS OF ENERGY POLICY AND ENERGY DEVELOPMENT STRATEGY OF MONTENEGRO

3.1. The priorities of the Energy Policy of Montenegro

Energy Policy of Montenegro by 2030 identifies three main priorities and includes twenty key strategic commitments.

The main priorities of the Energy Policy of Montenegro by 2030 are as follows:

Priority 1: Security of energy supply

Security of energy supply means permanent, secure, quality and diversified energy supply in

order to balance supply with customer’s requirements.

Priority 2: Development of a competitive energy market

The development of a competitive energy market means securing liberalized, non-

discriminatory, competitive and open energy market on the basis of transparent conditions

and allowing free market competition in the non-monopolistic activities (production and

supply of electricity and natural gas), pricing policy for energy based on market principles, as

well as creating conditions for free entry of new participants in the market (independent

energy producers, suppliers, traders).

Priority 3: Sustainable Energy Development

Sustainable energy development means providing energy development based on

accelerated but rational use of own energy resources while respecting the principles of

environmental protection, improving energy efficiency (EE) and greater use of renewable

energy sources (OIE), and the need for socio-economic development of Montenegro.

3.2. Key strategic commitments of the Energy Policy of Montenegro

The Key strategic commitments and recommendations on which Energy Policy of Montenegro by 2030 is based are as follows:

1. Maintenance, rehabilitation and modernization of existing and construction of new

infrastructure for production, transmission and distribution of energy on the principles of

fulfilment of international technical standards, energy efficiency, reduction of losses and

its negative impact on environment

2. Gradual reduction of energy import dependence by following measures:

reducing the specific consumption of final energy

increasing the energy production (primary and secondary) by use of own

resources and

reducing the energy losses from production to end consumption.

From the current net importer of electricity Montenegro plans to become a net exporter of electricity after 2020.

3. Reviewing the existing barriers for activation of all long-term energy development options.

4. Energy efficiency represents a priority in Montenegrin energy policy:


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Provision of institutional conditions and financial incentives with the purpose to

improve EE and reduce energy intensity in all sectors, from production to end

consumption of energy

Montenegro shall reach the indicative target of EE increase, which represents

saving in the amount of 9% of the average final energy consumption in the

country (without Aluminum Plant Podgorica) until 2018. In the 2nd APEE, it is

planned that the transitional target amounts to 19.6 ktoe (final consumption of

primary energy) of energy that should be saved by the end of 2015, which

represents about 3% of the average amount of final energy consumption by the

Directive. This target was set based on an analysis of the expected results of the

EE improvement in the period from 2013 to 2015. Therefore the greatest burden

in terms of implementation of the indicative target is planned for the period 2015-

2018, which amounts to 4% of the average amount of final energy consumption

by the Directive.

Rational use of energy in transport and promotion of EE measures (improved

public transportation including the railway transport, promotion of energy efficient

and low-emission vehicles, and integration of EE criteria in the transport

infrastructure projects)

5. Utilization of RES represents a priority in the Montenegrin energy policy:

Creating a favourable environment for development and utilization of RES and

reaching the national target regarding the RES share in the gross final

consumption of energy;

Continued researches on RES potentials and study work on researching the

possibilities to use remaining available RES potentials;

Increased share of RES utilization in transport aimed at securing the achievement

of RES share in overall consumption of energy in transport, in accordance with

the obligations of the state;

6. Improved heating and/or cooling systems in buildings by: (i) substitution of direct

transformation of electricity into heat and (ii) use of new technologies acceptable from the

environmental aspect, which implies increased use of RES and use of high-efficient

cogeneration.

7. Realization of strategic 90-days stocks of petroleum products in accordance with the EU

energy policy.

8. Exploration of oil and gas in the Montenegrin undersea and in continental area, as well as

of coal in Pljevlja and Berane basin.

9. Proactive role of the policy of the State of Montenegro in the endeavours to provide

access to the systems of natural gas through the international projects (Ionian-Adriatic

gas pipeline and others), development of natural gas system (including the construction

of regional gas pipelines and plants for utilization of natural gas).

10. Increased operational efficiency of energy companies by reducing the operational costs,

technical and commercial energy losses, with justified return on investments.

11. Continued restructuring of EPCG AD and CGES AD in accordance with the principles of

relevant EU energy legislation and duly issuing of plans for further development.

12. Sustainable development of energy sector in relation to the environment protection and

international cooperation in this field, especially regarding the reduction of gas emission

with greenhouse effect.

13. Pursuant to the verification of Kyoto protocol, being the country outside the annex of

developed countries at least until 2012, provision on support to investors and provision of


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conditions for implementation of projects of so called Clean Development Mechanism

(CDM).

14. Incentives for researches, development, transfer and application of ecologically

sustainable new technologies in the energy sector; increased investments in education

and scientific-research projects and incentives for the international cooperation in the

field of ecologically sustainable new technologies in the energy sector, as well as

introduction of lectures on energy in the educational system.

15. Harmonization of legislative-regulatory framework in accordance with the EU

requirements and ensuring support for development and accelerated implementation of

programs and projects on RES usage and implementation of EE measures, substitution

of energy-generating products and development of local energy industry (combined

generation of electricity and heat).

16. Creating appropriate legislative, regulatory, institutional and financial framework to

encourage private sector involvement and investments in energy.

17. Securing social protection for endangered (vulnerable) energy consumers, as well as for

labour surplus within the process of changes in the energy sector that might have impact

to their social position.

18. Reaching the agreement with neighbouring countries in relation to the optimal utilization

of joint hydro-potential and water management, as well as planning and construction of

new electric power interconnecting overhead lines for connection between these

countries.

19. Improvement of the regulatory process and professional independence of the Regulatory

Energy Agency, aimed at continuous development of predictable and clear regulatory

framework and favourable environment for investments into Montenegrin energy sector.

20. Active international cooperation in the energy sector.

The Strategy defined key Programs and Projects to a significant extent on which the long-

term balance in energy production and consumption in Montenegro is based. As well the

overview of effects of the energy sector development in the field of environmental protection

and social status of the population is considered. This kind of overview had a significant

impact on defining the framework for the AP drafting and singling out specific Programs and

Projects consistent with the main Strategy objectives and recommendations.


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4. EXPLANATION OF METHODOLOGY FOR PREPARATION OF MECHANISMS FOR ACTIVITY IMPLEMENTATION

4.1. General requirements and methodology for preparation of Action plan (AP)

During the preparation analysis for the AP conception, the basic requirements for the

preparation were as follows:

1. AP as a part of Strategy is public and official document available and designed for the

Montenegrin Government, its institutions, international subjects and all segments of

the Montenegrin society.

2. AP shall define all the main activities in the five-year period (2016-2020).

3. AP shall be specific and pragmatic – exclusively implementation oriented.

4. AP shall be consistent with EU requirements in its methodological approach,

simultaneously reflecting the specific requirements in relation to the environment

protection in Montenegro.

5. In order to accurately monitor, evaluate and document the results of individual

Programs and Projects that have been proposed in the AP, the implementation

mechanism must be clear and transparent.

6. AP shall provide clear delegation of responsibilities to all energy sector stakeholders

and define forms of organisation with an aim of successful and efficient launching of

Programmes and Projects.

7. AP shall be prepared in form of Gantt chart (in electronic form as well) which gives a

possibility of fast and efficient implementation monitoring and follow-up and eventual

innovation of AP when required.

8. Since the monitoring and follow-up of the implementation of the Programme and

Project proposed in AP is very important for the realization of the objectives of the

Strategy, the AP should define the modalities in which this could be achieved.

Based on the Strategy recommendations and the aforesaid requests, the AP has defined the

implementation mechanism with the following main components:

Identification and detailed elaboration of Programmes and Projects planned for

completion within the following five-year period, with the descriptions of activities and

parties responsible for their implementation.

Summary implementation timeline for all Programmes and Projects supplemented by

detailed individual implementation timeline for each Programme and Project.

The assessment of various resources and requirements for the implementation of

Programmes and Projects (financial and human resources, adequate organisational

structure etc.).

Ecological and social impact.

Monitoring and follow-up as well as innovation.

Preconditions for successful implementation of Programmes and Projects

(establishment of legislative and institutional-organisational frameworks, as well as

other measures).

Thus the AP consolidates all the selected Programmes and Projects into one common

management system for the implementation of the Strategy in the period 2016-2020. This

enables (i) a project approach to the AP implementation and (ii) the use of computer


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supported project management technology for Programmes and Projects, which means an

automated monitoring and full control of the implementation of each and individual

Programmes and Projects. The project management technology enables the monitoring of

immediate activities of each Programme and Project, that is, a continuous follow up of

implementation and timely correction.

For the purpose of the AP preparation, the following terms were used:

Programmes Programmes represent a set of activities, oriented towards the preparation, initiation and support of specific actions, which materialize after the implementation of activities and projects which precede them. According to the Law on Strategic Environmental Assessment for individual Programmes and Projects identified in the AP (using hydro potential, the development of renewable energy sources etc.), which provide a framework for future implementation of the specific individual Projects that may have a significant impact on the environment and for which the Law on the Environmental Impact Assessment stipulates the implementation of the EIA procedure, the SEA is required. For all other Programmes that are defined in the AP (education, public relations, market opening and social policy, etc.) that do not provide a framework for the implementation of specific individual Projects that may have a significant impact on the environment and for which Law on the Environmental Impact Assessment stipulates the implementation of the EIA procedure, the SEA is not required. In a formal sense, the Programmes are processed and described using the same methodology as Projects.

Projects

Projects are the basis for the energy sector development with immediate results in

Montenegro’s energy balance. Projects may vary substantially, from the preparation

of energy audits or energy saving to complex Projects for construction of hydro power

plants. However, regardless of their differences, they have common elaboration

methodology in AP.

Activities

Activities are actions undertaken within Programmes and Projects and present their

interconnections through the work breakdown structures (WBS). Activities are

presented with their duration, including the start and end of activities. Activities are

presented in bigger groups, on the level of elaboration of individual Programmes and

Projects, and by responsibilities for implementation. Through implementation, they

will be further broken down as needed.

Core Contents In order to provide better overview of efficiency and integrity of the AP in relation to harmonization with EU Energy Policy objectives, all defined Programmes and Projects are defined through Core Contents (CC), which are defined on the basis of EU Energy Policy, and which in a large extent represent concrete groups of Programmes and Projects that respond to the challenges and goals of the Energy Policy and Strategy. This approach does not have direct impact on the process of implementation of Programmes and Projects, but associates activities from AP with EU Energy Policy and its methodology, which enables a direct comparison and demonstrates compatibility.


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4.2. AP and EU Energy Policy activity relation

The EU Energy Policy defines three strategic objectives:

(1) Reduction of greenhouse gasses (GHG) emissions and locally produced more clean

energy

(2) Reduction of the instability of supply risk and increased prices of imported energy

(3) Establishing a competitive energy market in EU which will initiate technology

development and new jobs.

In line with the commitment of the EU, objectives of Montenegro in energy field are as follows:

(1) The increase in security of energy supply.

(2) Increasing the use of renewable energy.

(3) Improving energy efficiency.

(4) Attracting investments and development of market competition.

The EU intends to achieve these objectives by implementing ten measures, of which seven are relevant for Montenegro. The CCs for Montenegro which contain concrete Programmes and Projects on one hand, and the EU Energy Policy envisaged measures, on the other hand, are presented in Table 4.1. Therefore, the implementation of Programmes and Projects represent a simultaneous implementation of the EU Energy Policy and the Strategy objectives.

Table 4.1: CCs relevant for Montenegro in comparison with the planned measures in the EU

Envisaged measures in the European Union Core Content (Montenegro)

(1) Measure 3.4 – An ambitious programme of energy efficiency measures at EU, national, local and international level

CC1: Increase of the energy efficiency of existing generation, transmission and distribution facilities (supply side)

CC4: Increase of the energy efficiency (demand side)

(2) Measure 3.3 – A long-term commitment to greenhouse gases reduction and the EU Emissions Trading System

CC2: Renewable sources of energy

(3) Measure 3.7 – Towards a low CO2 fossil fuel future

CC3: The cleaner and more efficient energy production from fossil fuels

(4) Measure 3.1 – The Internal Energy Market CC5: Development of the energy market

CC8: Regulatory framework

(5) Measure 3.5 – A longer term target for renewable energy

CC6: Environmental protection and climate changes

(6) Measure 3.2 – Solidarity between EU Member States and security of supply for oil, gas and electricity

CC7: Long-term energy development of Montenegro

(7) Measure 3.10 – Effective monitoring and reporting

CC9: Monitoring and follow up of the implementation of the AP

Table 4.2 displays a list of core contents, Programmes and Projects proposed in the Action Plan.


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Table 4.2: List of core contents, Programmes and Projects of Action Plan

PROJECT/PROGRAMME

CC1: Increase the energy efficiency of existing generation, transmission and distribution facilities (supply side)

1.1 Project for revitalisation of HPP Piva

1.2 Project for revitalisation of HPP Perućica

1.3 Project for revitalisation of TPP Pljevlja

1.4 Project for revitalisation of small HPPs

1.5 Project of undersea cable for connection with Italy and with it related projects of construction of new substations and transmission lines

1.6 Projects of construction of new substations 110/x kV

1.7 Projects of construction of new 110 kV transmission lines

1.8 Projects of new interconnections with neighbouring systems

1.9 Projects of reconstruction of transmission facilities

1.10 Projects of secondary systems (NDC, protection, management, communication)

1.11 Develop documentation for route selection for the construction of new transmission lines

1.12 Project of estimation of the capacity of the power system for connection of RES (hosting capacity) and analysis of the possibility of connection of small HPP, WPP and PV power plants in the power system in terms when they will be built

1.13 Projects of construction and reconstruction of the primary distribution network

1.14 Projects of the secondary distribution network

1.15 Projects of managing and automation of the distribution network

1.16 Development Programme of concept of the distribution network and the introduction of modern ICT, measurement systems and smart grid solutions

1.17 Project of distribution system capacity estimations for connection of RES (hosting capacity)

CC2: Renewable energy sources

2.1 Programme of the evaluation and competitiveness of certain renewable energy sources as well as recommendations for the introduction based on the natural capacities and economic assessment

Make additional estimation of the availability of biomass in Montenegro and prepare feasibility study under the current conditions in order to determine economic potential of using biomass in concrete Projects

Prepare feasibility studies on the possible use of mixed municipal waste for energy purposes for the adoption of Waste Management Policy and investment decisions

Continue research and study work on the possibility of production and use of biofuels in Montenegro in terms of sustainable development

Intensify research works for the micro-locations and capacity of industrial plants for the possible use of combustible fraction of municipal and industrial waste

2.2 Programme of the research and study for the possible realization of offshore wind farms, photovoltaic power plants and biomass projects (for electricity and/or heat generation) and accelerated dynamics of onshore wind farms

2.3 Programme of construction of small hydropower plants / additional research of hydro potential

2.4 Project of hydropower plants on the Morača river

2.5 Project of hydropower plants on the Komarnica river

2.6 Projects for construction of wind farms


3.1 Project of rehabilitation and expansion of the coal mine in Pljevlja for the needs of the existing TPP Pljevlja I and the new TPP Pljevlja II


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PROJECT/PROGRAMME

3.2 Project of association of business entities of Coal mine Pljevlja and TPP Pljevlja (and later Pljevlja II) into a single legal entity

3.3 Project of the ash and slag landfill for the purposes of the block I and II of TPP Pljevlja

3.4 Programme of district heating / cooling by locations - biomass, gas, heat pumps, municipal waste, high efficient cogeneration plants

3.5 Programme for developing Study of introducing district heating system in local communities in the municipalities in the north part of Montenegro (Kolašin, Berane, Žabljak and Plužine) as well as in other cities of Montenegro (Nikšić, Bijelo Polje, Cetinje, Podgorica) for the use of biomass or waste heat from industrial processes and implement Projects if studies show their justification

3.6 Project of heating system for town Pljevlja

3.7 Project for construction of the new TPP Pljevlja II

3.8 Programme of gasification of the country

Develop a Master plan for gasification of Montenegro with a list of priority investment Projects with the objective of determining the Development Strategy of distribution gas pipelines.

3.9 Project for introduction of LPG as a replacement for petroleum products and coal and electricity in services (tourism) and in households in areas which will not be covered by gasification


4.1 Programme of measures by sector (transport, public sector, industry and households)

4.2 Programme of the investment Projects of EE in public lighting, water supply systems and waste water treatment and other utility services

4.3 Programme of informing, education and training

CC5: Development of the energy market

5.1 Programme of development of the market in accordance with EU regulations, good practice and specificities of Montenegro, harmonization with the third package (also in the field of gas)

5.2 Project of development and implementation of information technology and measurement infrastructure as technological support to the functioning of the electricity market and its subsequent inclusion in the regional processes

5.3 Project of competition increasing in the market of petroleum products

5.4 Monitoring Programme of introduction and operation of non-discriminatory energy market (electricity, gas)


6.1 Programme of monitoring of the fulfilment of international obligations regarding climate change

6.2 Programme for coal consumption reduction


7.1 Programme of Study development for hydro potential use and river basin management for all rivers in Montenegro (in the main stream and the tributaries) and preparation of the feasibility studies for selected objects

7.2 Programme of agreement with neighbouring countries on the optimal use of mutual hydro potential and water management

7.3 Project of analysis, research work and feasibility study to ensure sufficient quality basic data for making investment decisions for the eventual construction of HPP Boka and / or HPP Kruševo after year 2030

7.4 Project of coal exploration in area of Pljevalja and Berane

7.5 Project of hydrocarbon exploration in Montenegro offshore

7.6 Project of Ionian-Adriatic pipeline

7.7 Project to establish the CSE and 90-day reserves of petroleum products

7.8 Programme of analyses and studies for preparation of municipal solid waste incineration Project in Montenegro (waste potential, the plat location etc.)


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PROJECT/PROGRAMME


8.1 Programme of prompt monitoring of current EU legislation and harmonization of the regulatory framework of Montenegro

8.2 Programme to create a regulatory conditions for public private partnership

8.3 Programme to support the investments in RES with sustainable financial criteria

8.4 Programme for development of Regulatory Energy Agency

8.5 Programme of monitoring of fulfilling the international obligations in relation to the organization of the Energy Sector

CC9: Monitoring and follow-up of the AP implementation

9.1 Programme of monitoring and follow-up of the AP implementation

Projects and Programmes are broken down by activities (attributes: content, responsibility, timeline and cost), which are the essential elements of the monitoring and follow-up of implementation of Projects and Programmes proposed in the AP, creating the basis for efficient management and follow-up of the execution of Projects and Programmes, with defined responsibilities and available resources, make a complete mechanism for the implementation of the AP. Individual Projects and Programmes (Chapter 10) are processed according to the following scheme (AE):

A. Project/Programme description

B. The necessary activities to achieve the objective

C. Project/Programme timeline

D. Economic and financial data

E. Ecological and social effects

After the description (A), all the individual Projects and Programmes are broken down at

point B in a certain number of activities. Timeline of each Project and Programme is

processed in point C, and all Projects and Programmes together give overall dynamics of

implementation of the AP, which is called the AP Timeline (Chapter 7).

In point D AP cost allocation is given which can serve as guideline for providing own finances

and grants (budget and / or credit and / or donation) for financing primarily preparatory

activities of Projects and Programs for which the country is responsible. For financing the

facilities, Projects and Programs for which the country is not responsible, individual investors

and contractors are responsible.

Projects and Programmes financing have not proposed commitment modalities and sources

of funding, as this is specific to individual Projects and Programmes and the subject of matter

and the decision of each investor.

Point E processes environmental and social impact, which is primarily providing information

on the level of legal requirements for the assessment of environmental impact when it comes

to Programmes that are subject to the preparation of the SEA, as well as individual Projects

which require the implementation of EIA process or preparation of studies evaluating the

impact of a particular Project on the environment. This is followed, where relevant, by the

elaboration on social impact of individual Project and Programme.

An indicative economic analysis has been prepared for certain Projects and Programmes

containing sufficient data, covering the following:


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Net Present Value - NPV1

Internal Rate of Return - IRR2

Discounted Cash Flow – DCF presented in Projects and Programmes graphs for

which the calculations have been made.

For the purpose of economic analysis, the electricity prices and tariffs for the transmission

and distribution are used which are under the jurisdiction of the ERA. The method of

determining electricity prices and tariffs for use of transmission and distribution networks are

defined with methodologies.

The price of electricity for distribution customers for year 2014 ERA has set at 36,9744 €/MWh.

The fee for the capacity engagement of the transmission system (transmission network tariff) is determined by the planned load (power in MW) and for the year 2014 was determined in the amount of 1,7181 €/kW/month.

The fee for the capacity engagement of the distribution system (distribution network tariff) is determined by the planned load (power in MW) and for the year 2014 was determined in the amount of 14,6041 €/kW/month.

By voltage levels, the fee is determined as follows:

35 kV – 5,1794 c€/kWh

10 kV – 6,5432 c€/kWh

0,4 kV with power metering – 9,9844 c€/kWh

0,4 kV without power metering – 8,4064 c€/kWh

The growth of prices for the next five-year period cannot be predicted because, as defined in the new draft of Energy Law the prices will be defined by market with some restrictions. Therefore, the increase of annual electricity prices (in the period 2016-2020) is estimated to 1.5 %3.

In terms of estimation of fixed costs of power plants, ERA does not regulate the production

and does not have in possession any of actual data and therefore are taken the following

values:

Estimated annual fixed costs for:

TPP: 6 % of TPP investment value4

HPP: 3 % of HPP investment value 5

Assumed facility lifetime in analysis for HPP is 80 years and for TPP is 40 years.

Annual discount rate is estimated at 8 %6

The summary Table 6.1 in Chapter 6 gives the main envisaged results of Projects and

Programmes.

Projects and Programmes are processed using computer packages (MS Project), which is an

integral part of the AP. MS Project file was made in electronic form, which is shown in the

form of a Gantt chart in the Annex of the AP. Such an approach enables additional

consideration of the AP implementation activities (primarily through the Timeline analysis),

and also provides the capability to automatically support the monitoring and follow-up of

implementation of the AP, and if necessary, a possible innovation of AP.

1 NPV – a sum of future net Project revenues reduced to present value (year of the initial investment) discounted

at the selected rate. 2 IRR – a discount rate that results in NPV of zero.

3 Source: Author’s assessment

4 Source: Author’s assessment 5Izvor: procjena obrađivača

6 Source: Office of Management Bureau, SAD


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5. MECHANISM STRUCTURE FOR ACTIVITY IMPLEMENTATION

The AP implementation mechanism is defined by:

a) legislative-regulatory framework,

b) institutional-organisational framework,

and also by:

c) financial resources,

d) timeline and

e) system for implementation monitoring and follow-up.

The last three elements are processed in details in Chapters 7 – 9.

5.1. Legislative-regulatory framework

In order to implement Projects and Programmes special attention should be given to

preparation and adoption of the necessary legislation, which is a precondition for efficient

and time-dependent AP implementation.

In the year 2010 Montenegro adopted the aforementioned Energy Law (EL) and Law on Energy Efficiency (LEE). With these acts Montenegro did the following:

LE transposed responsibilities from the second energy package (2003/54/EC and 2003/55/EC for electricity and gas) of EU legislation, as well as specific obligations under the Directive on Renewable Energy Sources (2001/77/EC and 2009/28/EC, except in relation to biofuels), cogeneration (2004/8/EC) and partly on reserves of oil and petroleum products (2009/119/EC).

LEE transposed requirements of the Directive on Energy Efficiency in final consumption and energy services (2006/32/EC) and the Directive in the field of energy performance of buildings (2002/91/EC), on the labelling of the energy consumption of household appliances (92/75/EEC) and on establishing a framework for defining requirements for eco-design of energy-using products (2005/32/EC).

Directive for encouraging the use of biofuels and other renewable fuels in transport (2003/30/EC) or part of the Directive on encouraging the use of energy from renewable sources (2009/28/EC) have not yet been transposed to the legal system of Montenegro. The Regulation in the field of strategic reserves of petroleum products is in the preparation phase.

In year 2010 the Law on the exploration and production of hydrocarbons (LEPH) has been adopted. The Law is harmonized with the EU Directive (94/22/EC) and with its adoption Montenegro has created the preconditions to future production of hydrocarbons in a transparent manner and in accordance with best international practice. Directive on the safety of offshore activities (2013/30 / EU) has not been transposed into the legal system of Montenegro.

5.2. Institutional-organisational framework

The Ministry of Economy (ME) is the Ministry responsible for energy, according to the EL especially for Energy Policy and Strategy of the State, as well as for legislation and key secondary legislation preparation in this sector. In ME energy field is covered by three Directorates: Energy Directorate, Energy Efficiency Directorate and the Directorate for Mining and Geological Research.


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Administration for Hydrocarbons was formed by the Government of Montenegro in January 2015, and will become operational in early 2016. Administration for Hydrocarbons performs administrative and professional tasks in the field of exploration and production of hydrocarbons.

The Energy Regulatory Agency (ERA) was established in the year 2004 as autonomous, functionally independent and non-profit organization that carries out its public authorizations based on EL for the purpose of regulating the Energy Sector of Montenegro. The current EL has kept core concept of doing the regulation on a non-discriminatory and transparent manner in accordance with EU Directives. The EL also specified duties and responsibilities of the ERA in terms of reinforcement of its role in the control of the energy undertakings functioning.

Statistical Office of Montenegro (MONSTAT) has a very important role in Montenegro's energy sector because it represents the official producer of energy statistics. MONSTAT is responsible for making historical energy balance, while the ME is responsible for preparation of the planned energy balances.

Elektroprivreda Crne Gore (EPCG) is the holder of three licenses for: (i) production, (ii) distribution of electricity and distribution system operator, and (iii) electricity supply. At the moment EPCG has the status of a public supplier of electricity in Montenegro. Current ownership structure of EPCG is as follows: Country - 57.0176%, A2A (Italy) - 41.7477%, minor shareholders - 1.2347%.

Crnogorski elektroprenosni sistem (CGES) was unbundled from EPCG in 2009. After the capital increase of CGES which was done in January 2011, the current ownership structure is as follows: Country - 55%, the transmission system operator of Italy (Terna) - 22%, other legal entities and individuals - 23%. CGES has two licenses: license for the electricity transmission and the license for the transmission network operator. In addition CGES provides wholesale services of operator access, renting fiber optics and other infrastructure to telecommunications operators, which in the case of interest can start offering the services of signal transmission via NG SDH network.

ZETA ENERGY LTD Danilovgrad is a result of the concluded agreement on foundation of "Zeta Energy" in April 2010, which began with operation in October 2010, when the ERA issued the license for electricity production. The ownership structure is: EPCG - 51% and NTE (Norway) - 49%. EPCG gave as a founding stake two small hydropower plants ("Glava Zeta" and "Slap Zeta") with a total capacity of 6.56 MW and 1.2 MW.

Montenegrin Electricity Market Operator (COTEE) started with operation after the completion of the process of setting up a new company in August 2011 based on the decision of the Government of Montenegro in December 2010 that that energy activity is unbundled from the CGES. COTEE operates as a new legal and energy entity and is 100% state-owned. Since December 2011, COTEE has a license for the electricity market operator.

Coal Mine Pljevlja (RUP) is in the mixed ownership and its ownership structure is as follows: Country - 31%, company Alfa Invest - 23%, a London fund Monte Cristo - 15%, and other legal entities and individuals - 33%.

The "Brown Coal Mines" Podgorica (brown coal mine Berane) began with production of mineral raw materials in 2015, while according to the concession agreement the defined annual production is 20,000 tons.

In the hydrocarbons sector, where petroleum products and liquefied petroleum gas (LPG) are fully imported, the main energy entities are:

Jugopetrol AD Kotor - stock company for exploration, exploitation and trade of oil and oil products. After privatization in 2002, the Greek company Hellenic Petroleum International AG became the owner of 54.5% of the shares of the


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Company. In the period 2006-2009. Jugopetrol has achieved an average annual trade of petroleum products of 231,972 tons.

Montenegro Bonus doo Cetinje - state-owned company is engaged in trade of petroleum products, trade and supply of electricity. Montenegro Bonus doo was nominated by the Government of Montenegro for gas transmission operator and is responsible for the development of part of the IAP pipeline through Montenegro. In the period 2006-2009 Montenegro Bonus doo has achieved an average annual trade of petroleum products of 25,574 tonnes.

5.2.1. International obligations

According to the Law on ratification of the Treaty establishing the Energy Community –

(EnCT) adopted in 2006 by Montenegro and based on the decisions of the Council of

Ministers of the Energy Community since of the signing of EnCT to date, obligations of

Montenegro from the Acquis Communautaire (electricity, natural gas, environmental

protection, competition, renewable energy sources, energy efficiency, energy statistics) are

the following:

I. Electricity

Directives and Regulations from Third package are following:

Commission Regulation 543/2013 on submission and publication of data in electricity

markets and amending Annex I to Regulation (EC) No 714/2009

Directive 2009/72/EC 13 July 2009 concerning common rules for the internal market

in electricity and repealing Directive 2003/54/EC

Regulation (EC) No 714/2009 of 13 July 2009 on conditions for access to the network

for cross-border exchanges in electricity and repealing Regulation (EC) No

1228/2003

With the Decision of the Council of Ministers of the Energy Community of October 6, 2011,

the proposal of the European Commission C (2011) 2013 (final) has been adopted which

acquired a legal basis for the implementation of the so-called Third legislative package for

the internal energy market (EU). With that, the Directive 2009/72/EC 13 July 2009 on

common rules for the internal market in electricity which repeals Directive 2003/54/EC and

Regulation (EC) No 714/2009 became the obligation of Montenegro under EnCT, but with

some adjustments and longer implementation timeline.

II. Hydrocarbons

Directives and Regulations from Third package are following:

Council Directive 2009/119/EC on imposing an obligation on Member States to

maintain minimum stocks of crude oil and/or petroleum products

Directive 2009/73/EC of 13 July 2009 concerning common rules for the internal

market in natural gas and repealing Directive 2003/55/EC

Regulation (EC) No 715/2009 of 13 July 2009 on conditions for access to the natural

gas transmission networks and repealing Regulation (EC) No 1775/2005

From the Third package of legislation for the internal energy market of the Council of

Ministers of the Energy Community, Directive 2009/73/EC of 13 July 2009 on common rules

for the internal gas market, which repeals Directive 2003/55/EC and Regulation (EC) No

715/2009 became the obligation of Montenegro, but with some adjustments and longer

implementation timeline.


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III. Environment

Directive 2011/92/EU of the European Parliament and of the Council of 13 December 2011 on the assessment of the effects of certain public and private projects on the environment – codified version

Directive 2003/35/EC of 26 May 2003 providing for public participation in respect of the drawing up of certain plans and programmes relating to the environment

Directive 1999/32/EC of 26 April 1999 relating to a reduction in the sulphur content of certain liquid fuels and amending Directive 93/12/EEC.

Directive 2001/80/EC of 23 October 2001 on the limitation of emissions of certain pollutants into the air from large combustion plants

Article 4 (2) of Directive 79/409/EC of 2 April 1979 on the conservation of the wild birds

Directive 92/43/EEC of 21 May 1992 on the conservation of natural habitats and of wild fauna and flora

Note: Directive 2010/75/EU on industrial emissions, which from 1 January 2016 is repealing

Directive 2001/80/EC of 23 October 2001 on the limitation of emissions of certain pollutants

into the air from large combustion plants is still not obligation of Montenegro within EnCT.

IV. Competition

Articles 81, 82 and 87 from Annex III of EnCT

V. Renewable energy sources

Directive 2009/28/EC of 23 April 2009 on the promotion of the use of energy from renewable sources and amending and subsequently repealing Directives 2001/77/EC and 2003/30/EC has become the obligation of Montenegro within EnCT since 18 October 2012, when the 10th Ministerial meeting of the Energy Community was held (Budva)

VI. Energy efficiency:

Directive 2006/32/EC of 5 April 2006 on energy end-use efficiency and energy services and Directive 2012/27/EU of 25 October 2012 on energy efficiency

Directive 2010/30/EU of 19 May 2010 on the indication by labelling and standard product information of the consumption of energy and other resources by energy-related products and implementation legislation for certain product groups

Directive 2010/31/EU of 19 May 2010 on the energy performance of buildings repealing Directive 2002/91/EC

Directive 2012/27/EU on energy efficiency

VII. Oil:

Directive 2009/119/EC on minimum stocks of crude oil and/or petroleum products

VIII. Energy statistics

Directive 2008/92/EC on a Community procedure to improve the transparency of gas and electricity prices charged to industrial end-users

Regulation (EC) 1099/2008 on energy statistics, updated and amended with Regulations from 2010, 2013 and 2014


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5.2.2. Laws and regulations

Montenegro ratified the Kyoto Protocol and the United Nations Framework Convention on

Climate Change (UNFCCC).

Besides EL, LEE, LEPH and Law for ratification of EnCT and the Kyoto Protocol, the

remaining Laws with the recognized importance for the updated and supplemented Strategy

are:

Law on the Protection of Cultural Property

Law on National Parks

Law on Waters

Law on Waste Management

Law on Strategic Environmental Impact Assessment

Law on Environmental Protection from Noise

Law on Air Quality

Law on Mining

Law on Environment

Law on Concessions

Law on Nature Protection

Law on Air Protection

Law on Environmental Impact Assessment

Law on Forests

Law on Marine Property

Law on Spatial Design and Object Construction

Law on Integrated Pollution Prevention and Control

Law on Protection against Ionizing Radiation and Radiation Safety

Law on Efficient Use of Energy

Law on Hydrocarbon Taxes

Law on Safety of Maritime Navigation

Law for the Prevention of Pollution from Ships (in the context of the implementation of the Offshore Safety Directive)

In addition to these Laws the relevance of the following development documents and plans of

Montenegro is identified (listed in chronological order):

Water Master Plan of Montenegro (2001)

Waste Management Strategy of Montenegro by 2030 (2015)

National Waste Management Plan for the period 2015-2020 (2015)

Declaration on the Protection of the Tara River (2004)

The National Strategy for Sustainable Development of Montenegro (2007)

Ministerial Declaration on the Ionian-Adriatic Pipeline (2007)

Spatial Plan of Montenegro by 2020 (2008)

First National Report of Montenegro on Climate Change to the UNFCCC (2010)

The National Strategy on Climate Change by 2030 (2015)

The National Strategy of Biodiversity with an Action Plan 2010-2015 (2010)

Regional Development Strategy of Montenegro 2010-2014 (2010)

The Program of Economic Reforms (PER) for Montenegro for the period 2015-2017 (2015)


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5.3. Montenegrin energy sector stakeholders

The main domestic stakeholders in the Montenegrin energy sector and thus in the

implementation of the Strategy and AP, can be divided in four groups:

i. Government institutions, state agencies and institutions: Ministry of Economy

(ME), Ministry of Finance (MF), Ministry of Agriculture and Rural Development

(MARD), Ministry of Sustainable Development and Tourism (MSDT), Ministry of

Health (MH), Administration for Hydrocarbons (AH), Energy Regulatory Agency

(ERA), Water Administration (WA), Forest Administration (FA), Environmental

Protection Agency (EPA), Ministry of Foreign Affairs and European Integration

(MFAEI), Statistical Office of Montenegro (MONSTAT), Institute for

Hydrometeorology and Seismology (IHMS), Institute for Geological Research

(IGR) and local governments, which act upon the mission and within their

authority prescribed in laws and regulations of Montenegro on their field.

ii. Energy companies (regardless of their ownership structure): EPCG, CGES,

COTEE, Coal Mine Pljevlja, Coal Mine Berane, Jugopetrol, Montenegrobonus and

many other smaller companies.

iii. Educational and research institutions: the Montenegrin Academy of Science

and Art (CANU), the University of Montenegro (UCG), the Institute for Strategic

Studies and Prognoses, and other institutions.

iv. Associations and NGOs: Chamber of Commerce of Montenegro, the

Montenegrin Employers Federation, MANS, Green Home, Expeditio, Montenegro

Business Alliance, NGO network Zeleni krug, and others.

Other stakeholders are international organisations and donors (EAR, GIZ, UNIDO, UNDP,

bilateral donors) and international financial institutions - IFIs (EBRD, EIB, KfW, WB) as

respectively presented and discussed in more details in Figure 4 and Chapter 8. Last, but not

least important, are private investors that are continuously identified but cannot be listed in

the AP.

Based on interviews of the major stakeholders and a general analysis of their activities in the

past and the future activities until 2020, the existing interest of stakeholders in certain

Montenegrin energy sectors are presented in detail in Figure 5-1. The role and/or interest of

stakeholders are separated in three levels: “major, medium and minor”:

“Major” stakeholders are entities that are statutory or legally responsible for an

individual sector and/or policy and strategy in certain areas.

“Medium” stakeholders are entities that have a strategic cooperation with the “major”

stakeholders and give substantial contribution to certain areas.

“Minor” stakeholders are those who strategically monitor the energy sector activities

and take part in them when required and in accordance with their current interest.

It is rather important to emphasize that interest of donors and IFIs may change over time,

depending on political will and assistance opportunities of foreign entities, as well as on

Montenegro’s economic situation, its needs and interest for cooperation.


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STAKEHOLDERS:_

Government institutions, state agencies and institutions Energy companies Education and research Associations and NGOs

ME MSDT MARD, WA, FA

MH MF ERA AH EPA MFAEI MONSTAT LG EPCG CGES COTEE RUP RUB, BE Jugopetrol MontBon CANU UCG IHMS ISSP PKCG EF MANS Green Home

Expeditio MBA Zeleni krug

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29

A) SECTOR

1 Coal 2 Hydrocarbons 3 RES: small HPP 4 RES: wind energy 5 RES: solar energy 6 RES: geothermal energy 7 RES: biomass and waste 8 RES: municipal waste 9 Electro-energy: generation (large HPP)

10 Electro-energy: generation (TPP) 11 Electro-energy: transmission 12 Electro-energy: distribution 13 Electro-energy: supply 14 District heating (including CHP) 15 Energy efficiency

B) POLICY AND STRATEGY (in sector)

1 Energy market 2 European integration 3 Environmental protection 4 UNFCCC (Kyoto protocol, CDM etc.) 6 Water and forest administration 7 Spatial planning and construction 8 Project funding 9 International cooperation

10 Legislation and regulations 11 Education, research and development

12 Other Social. aspect Statistics Makro

.ekon.

List of abbreviations:

- “major” stakeholder - „medium“

stakeholder - „minor“ stakeholder

ME – Ministry of Economy MONSTAT – Statistical Office of Montenegro UCG – University of Montenegro MSDT – Ministry of Sustainable Development and Tourism

MFAEI – Ministry of Foreign Affairs and European Integration

IHMS – Institute for Hydrometeorology and Seismology

MARD – Ministry of Agriculture and Rural Development

LG – local governments ISSP – Institute for Strategic Studies and Prognoses

WA – Water Administration EPCG – Elektroprivreda Crne Gore PKCG – Chamber of Commerce of Montenegro FA – Forest Administration CGES - Crnogorski elektroprenosni sistem EF – Employers Federation

MH – Ministry of Health COTEE - Crnogorski operator tržišta električne energije

MBA – Montenegro Business Alliance

MF – Ministry of Finance RUP – Coal mine Pljevlja TPP – Thermal power plant CHP – Combined Heat and Power

ERA – Energy Regulatory Agency RUB Coal mine Berane BE – Balkan Energy

LPG - Liquid Petroleum Gas HPP – Hydro power plant

AH – Administration for Hydrocarbons MontBon – Montenegrobonus LNG – Liquid Natural Gas NGO – Non Governmental Organization

EPA – Environmental Protection Agency CANU – Montenegrin Academy of Science and Art

CDM – Clean Development Mechanism RES – Renewable energy sources

Figure 5-1: Structure, role and interest of certain stakeholders in Montenegrin energy sector


Page: 29

6. OVERVIEW OF PROGRAMMES AND PROJECTS ACTIVITIES

With all the preconditions having been fulfilled, the AP is implemented through concrete Programmes and Projects. The Programmes and Projects which are responsibility of ME, are implemented through the Directorate for Energy and the Directorate for Energy Efficiency. For the Programmes and Projects which are not responsibility of ME, Directorate for Energy delegates responsibilities and duties to the responsible stakeholders who will participate in the implementation of the Action Plan and specific Programmes and Projects.

Table 6.1 further on gives an overview for all activities of Programmes and Projects selected in accordance with the performed analyses and immediate insight into the required implementation of the Energy Policy and Strategy objectives.


Page: 30

Table 6.1: Overview for all activities of Programmes and Projects

PROGRAMME / PROJECT RESPONSIBILITY BEGINNING

AT ENDING AT

FUNDING 2016-2020

(€) ENVISAGED RESULTS

REFERENCE TO AP (PAGE)

NOTE


1.1 Project for revitalisation of HPP Piva EPCG FU Generation

1.1.2016 31.12.2020 62.700.000

Reconstruction/replacement of hydro mechanical and electrical aggregate equipment, reconstruction/replacement of low and medium-voltage auxiliary power supply system, reconstruction/replacement of HV cable connections of 220 kV, reconstruction of the injection curtains on the left and right side of the dam, reconstruction/replacement of the monitoring system of the dam, reconstruction of telecommunication system, deepening of the river bed.

63


EPCG FU Generation

1.4.2016 31.12.2020 44.000.000

Reconstruction of aggregates number 5, 6 and 7 and installation of aggregate number 8, reconstruction and construction of telecommunication information system, reconstruction and installation of hydrological hydraulic measurement equipment, replacement of measuring high voltage equipment and switching equipment, transmission protection and facility control system at local and remote level.

65


EPCG, TPP Pljevlja 1.1.2016 31.12.2020 64.500.000

Development of studies, projects, tenders and selection of consultants for TPP Pljevlja revitalization, installation of equipment to reduce emissions (SO2, NOx and dust particles) on the permissible limits.

67


EPCG, ZETA Energy 1.1.2016 31.12.2018 20.250.000

Preparation of project documentation and tender for revitalization of small hydro power plants, reconstruction and replacement of mechanical, electrical equipment and auxiliary equipment.

69


CGES, TERNA 1.1.2016 31.12.2017 183.460.000

The construction of submarine cable for connection with Italy and with it related projects of construction of new substations and transmission lines.

71


Page: 31


AT ENDING AT

FUNDING 2016-2020



NOTE


CGES, EPCG, Government/ highway investor, WPP Krnovo investor

1.1.2016 31.12.2020 34.120.000 Construction of new SS 110/x kV. 73

Projects continue after 31.12.2020, but activities, timeline and funding after that are dependent on the future situation.


CGES, highway investor

1.1.2016 31.12.2020 20.331.000 Construction of new 110 kV overhead lines. 75

Projects continue after 31.12.2020, but activities, timeline and funding after that are dependent on the future situation. The implementation costs for the 110 kV overhead line Vilusi - Herceg Novi for the period after 2020 amount € 6,787,000.


CGES, EMS, Elektroprijenos BiH

1.7.2016 31.12.2020 13.050.000 Construction of new 400 kV overhead lines interconnections with neighbouring power systems.

78


CGES 1.1.2016 31.12.2020 12.543.000 Replacement of high-voltage equipment in substations and reconstruction of 110 kV overhead line.

79



CGES 1.1.2016 30.6.2019 9.161.000 Reconstruction of secondary systems (NDC, protection, management, communication).

82


CGES, ERA, ME, MTMA, MARD, MSDT

1.1.2016 31.12.2020

The funds were included in the cost estimates of each transmission line in particular

Develop documentation for route selection of new transmission lines.

84



CGES, ERA, ME 1.10.2016 31.12.2017 106.000

Preparation of a study on the estimation of the capacity of the power system for connection of RES and operating analysis of the power system in terms when WPP, small HPP and PV power plants will be built.

85


Page: 32


AT ENDING AT

FUNDING 2016-2020



NOTE


EPCG FU Distribution

1.1.2016 31.12.2020 23.172.230 Construction and reconstruction of distribution OHL and SS.

87




1.1.2016 31.12.2020 19.472.609 Construction and reconstruction of secondary distribution OHL and SS.

89




1.4.2016 31.12.2018 2.125.210 Automation of the distribution network. 90

1.16 Development Programme of concept of the distribution network and the introduction of modern ICT, measurement systems and smart grid solutions


1.1.2016 31.12.2020 49.009.818 Development of the distribution network concept and introduction of modern ICT, measurement systems and smart grid solutions.

91


EPCG FU Distribution, CGES, ERA, ME

1.10.2016 31.12.2017 126.000 Preparation of study on distribution system capacity estimations for connection of RES (hosting capacity).

93



Contractor, MSDT, ME, FA

1.4.2016 31.12.2017 310.000 Develop a comprehensive study of evaluation of the possibilities and integration economy of RES in the energy sector of Montenegro.

95


ME, CGES, ERA; contractor

1.4.2016 30.9.2019 572.000

Develop comprehensive studies for the realization of offshore wind farms, photovoltaic power plants and biomass projects for electricity and/or heat generation.

97


Page: 33


AT ENDING AT

FUNDING 2016-2020



NOTE

2.3 Programme of construction of small hydropower plants/additional research of hydro potential

ME, WA, IHMS, EPA, local government, EPCG FU Distribution, contractors which have received permission from ME, contractor

1.1.2016 31.12.2020 101.420.000 Construction of small hydro power plants from project preparation, defining the conditions, tender for concession to final construction.

99



ME, Government, MSDT, WA, CGES, concessionaire

1.1.2016 31.12.2020 369.400.000 Construction of HPP on Morača river from project preparation, defining the conditions, tender for concession to final construction.

101

HPP on Morača river will not be completed by 2020. Of the total € 493.71 million, by the 2020, € 369.4 million will be invested. This means that beyond 2020, for the completion of construction of the HPP Morača, € 124.31 million should further be invested.


ME, Government, MSDT, EPCG, Elektroprivreda Srbije, WA, concessionaire

1.4.2016 31.12.2020 41.600.000 Construction of HPP on Komarnica river from project preparation, defining the conditions, tender for concession to final construction.

104

HPP on Komarnica river will not be completed by 2020. Of the total € 178 million, by the 2020, € 41.6 million will be invested. This means that beyond 2020, for the completion of construction of the HPP Komarnica, € 136.4 million should further be invested.


ME, ERA, CGES, investor

1.1.2016 30.6.2020 192.300.000

Construction of wind farms Krnovo and Možura. Measurements and concession award for additional 33 MW of wind farms.

107


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AT ENDING AT

FUNDING 2016-2020



NOTE



RUP, EPA, IA 1.1.2016 31.12.2020 59.809.710

Preparatory phase of the DTE system resettlement to internal dump

reconstruction and start of operation of DTE system

Kutlovača internal dump elevation

relocation of crushing facility to a new location

protective measures for OP Potrlica from surface and ground water

supply and replacement of equipment

plan implementation for overburden and coal excavation.

109



RUP, EPCG, new entity

1.7.2016 31.10.2019 440.000 Improve the overall efficiency and cost optimization of RUP and TPP.

111

Proposed activity schedule is approximate and depends on decisions of management or owners of both companies. In the case of creation of special company (Special Purpose Vehicle-SPV) for TPP Pljevlja II Project implementation, the integration process of RUP and SPV could happen after the construction of TPP Pljevlja II.


EPCG, CGES, RUP 1.1.2016 30.9.2020 32.350.000 Continuation of the electricity generation from coal in TPP Pljevlja, and therefore the continued operation of the Coal mine.

113


ME, local community

1.1.2016 31.12.2020 460.000

Comprehensive assessment of the national potential for the application of high efficiency cogeneration and efficient district heating and cooling in accordance with Directive 2012/27/EU, Project implementation on reducing barriers for rapid development of production and modern biomass market.

115

Reducing barriers for rapid development of modern biomass production and market (pellets, briquettes, etc.) in the Montenegro continues after 2020.


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AT ENDING AT

FUNDING 2016-2020



NOTE


ME, local community

1.1.2016 31.12.2020 14.710.000

Prepare study of introducing district heating system in local communities in the municipalities in the north part of Montenegro (Kolašin, Berane, Žabljak and Plužine) as well as in other cities of Montenegro (Nikšić, Bijelo Polje, Cetinje, Podgorica) for the use of biomass or waste heat from industrial processes and implement Projects if studies show their justification

117

Programme continues after 31.12.2020, but activities, timeline and funding after that are dependent on the future situation.


Government, Pljevlja Municipality, EPCG, RUP, Vektra-Jakić, EPA, contractor

1.1.2016 31.12.2020 5.200.000

To supply the town of Pljevlja via district heating pipes, through modern centralized system for thermal energy supply, through the central energy source (new plant), enabling the combined production of heat and electricity with all economic, energy and environmental benefits.

119


EPCG/SPV, Government, MSDT, EPC contractor, EPA, EPCG

1.1.2016 31.12.2019 338.500.000 Construction of the new TPP Pljevlja II. 121


ME, ERA, Parliament, Government, contractor

1.1.2016 31.12.2017 2.520.000

Completion of gasification Study, preparation and adoption of the Law on cross-border electricity and natural gas exchange, preparation of bylaws, gas network designing.

124



ME, distributors 1.7.2016 31.12.2020 3.240.000

Preparation of the Regulation on the LPG facility construction and storage and pouring operations of LPG, study of replacement potentials of petroleum products, coal and electricity in services and households with LPG, construction of necessary infrastructure for the possibility of LPG using

126

Project continues after 31.12.2020, but activities, timeline and funding after that are dependent on the future situation.


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AT ENDING AT

FUNDING 2016-2020



NOTE



ME,MTMA, public administration bodies, local governments, large consumers, entities in charge of public buildings, contractor

1.1.2016 31.12.2020 69.270.000

Completion and harmonization of the entire legislation that regulates the field of energy efficiency. In parallel it is necessary to consistently implement LEE and its bylaws.

128

Programme continues after 31.12.2020, but activities, timeline and funding after that are dependent on the future situation. The deadline for transposition of Directive 2012/27/EU is 15 October 2017, so some measures related to this Directive may move in 2017.


ME, Government, Parliament, local government, PPP or ESCO companies

1.1.2016 31.12.2020 6.430.000

Prepare and adopt the Law on Public-Private Partnerships, prepare and adopt bylaws, establish the Investment Agency, PPP Project register creation, analysis of the existing situation, perform energy audits, prepare feasibility studies, implementation of Projects through various investment models.

131



ME, MED, MS, UCG, NGO, local government, MSDT, contractor

1.1.2016 31.12.2020 2.800.000 Informing and education of people in terms of efficient use of energy.

133




COTEE, ERA 1.1.2016 31.12.2020 120.000

Development of the market in accordance with EU regulations, good practice and specificities of Montenegro, harmonization with the third package (also in the field of gas).

135

Monitoring of European legislation and the electricity market functioning analysis in Montenegro is a permanent task even after 2020.


COTEE 1.1.2016 30.6.2018 2.000.000

Development and implementation of information technology and measurement infrastructure as technological support to the functioning of the electricity market and its subsequent inclusion in the regional processes.

137


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AT ENDING AT

FUNDING 2016-2020



NOTE


ME, MF, ERA, Government, Parliament

1.1.2016 31.12.2020 160.000 Competition increasing in the market of petroleum products.

139

Creating a favourable business environment, simplification of company registration procedures and licence issuing is a permanent task even after 2020.


ME, ERA, DSO, suppliers

1.1.2016 31.12.2020 25.000

Monitoring of fulfilment of international obligation about introduction and operation of non-discriminatory energy market (electricity, gas).

141 Monitoring is a permanent task even after 2020.



MSDT, ME 1.1.2016 31.12.2020 2.702.000 Monitoring of fulfilment of international obligations regarding climate change.

143

Implementation of EU legislation in the field of climate changes is a permanent task even after 2020.


MSDT, ME, local government

1.1.2016 31.12.2020 725.000 Coal consumption reduction. 145

Raising public awareness about the positive effects of the transition to district heating is a permanent task even after 2020.



MSDT, MARD, ME,WA, relevant Ministries of neighbouring countries

1.1.2016 31.12.2020 14.000.000 Studies dealing with the possibility of production, river basin management and valorisation of tourism.

147



ME, WA, MARD, relevant Ministries of neighbouring countries, Government of Montenegro and Governments of neighbouring countries

1.7.2016 30.6.2018 590.000 Optimal use of mutual hydro potential. 149


Page: 38


AT ENDING AT

FUNDING 2016-2020



NOTE


EPCG, ME, MSDT, Elektroprivreda Republike Srpske, relevant Ministry of BiH

1.7.2016 31.12.2020 4.000.000

Research works, preparation Conceptual Design and Feasibility Study, DSP and SEA for implementation of Projects HPP Kruševo and HPP Boka.

151

Project continues after 31.12.2020, but activities, timeline and funding after that are dependent on the future situation.


ME, concessionaire 1.1.2016 31.12.2019 25.965.000 Determination of the amount of coal in the Maoce and Mataruge basins and Berane region.

153


ME, AH, concessionaire

1.1.2016 31.12.2020 135.190.000 Hydrocarbon exploration in Montenegro offshore.

155

All research costs will be borne by the future concessionaires. Project continues after 31.12.2020, but activities, timeline and funding after that are dependent on the future situation.

7.6 Project of Ionian-Adriatic pipeline ME, contractor, Montenegrobonus

1.1.2016 31.12.2020 62.770.000 Construction of Ionian-Adriatic pipeline. 157

Project continues after 31.12.2020, but activities, timeline and funding after that are dependent on the future situation. As the project continues after the 31.12.2020, only costs that could happen in the period between 2016 and 2020 are presented. The funds needed for realization after 2020 amount to € 60 million.


ME, MF, AH, ERA, Monstat, CSE

1.1.2016 31.12.2017 545.000 Establish the CSE and 90-day reserves of petroleum products.

159


ME, MSDT, PUC

1.4.2016 31.12.2020 430.000 Municipal solid waste incineration in Montenegro.

161




ME, ERA, Parliament, energy entities

1.1.2016 31.12.2020 500.000 Prompt monitoring of current EU legislation and harmonization of the regulatory framework of Montenegro.

163 Continuous monitoring of European legislation continues even after 2020.


Page: 39


AT ENDING AT

FUNDING 2016-2020



NOTE


ME, MF, Parliament, Government

1.1.2016 31.12.2020 225.000 Create a regulatory conditions for public private partnership

165

Continuous establishing of communication and cooperation with the interested investors continues even after 2020.


ME 1.1.2016 31.12.2020 75.000 Investments in RES. 167



Government, Parliament, ERA

1.1.2016 31.12.2018 150.000

Development of the Energy Regulatory Agency, harmonization of the scope of competences with the EC Treaty and providing the necessary conditions for operations in accordance with the Law.

169


ME, Parliament, ERA, CGES, EPCG, energy entities

1.1.2016 31.12.2020 50.000 Fulfilling the international obligations in relation to the organization of the Energy Sector.

171



ME, later DIAP 1.1.2016 31.12.2020 1.000.000 Monitoring and follow-up of the AP implementation.

173



Page: 40

7. ACTION PLAN IMPLEMENTATION TIMELINE

Figure 7-1 shows the AP Timeline as per individual Programmes and Projects in the period 2016 - 2020. Each Programme and Project in this plan is presented as a single activity. Activities of individual Programmes and Projects are separated in the main groups of activities that are described in detail in timelines of individual Programmes and Projects in Chapter 10.

Even more details, where possible, have been elaborated in the electronic file behind the Timeline. This file has been prepared in the programme tool MS Project and will serve as the basis for further elaboration of the Programmes and Projects and as automatic support for monitoring and follow-up of individual Programmes and Projects and AP as a whole. The tool and the prepared initial database will be primarily used by the DIAP, but also by other participants in the AP implementation, if required.

Detailed timeline is presented in the Gantt chart of the electronic format of this document, within the AP Annex.


Page: 41


Page: 42


Page: 43


Page: 44


Page: 45

Figure 7-1: Action Plan timeline


Page: 46

8. FUNDING POSIBILITIES FOR ACTION PLAN IMPLEMENTATION

The implementation of Programmes and Projects, as well as the very functioning of the DIAP, require substantial financial resources.

The actual access to the sources of funding is confirmed through the interest of private and commercial investors, international community and EU institutions that are already present in the Montenegrin energy sector development to a large extent. In addition to these sources, Montenegro has certain financial potential of its own (through the regular budget and additional funds, e.g. planned increase of capital of EPCG) which can be efficiently used for the preparation and implementation of Programmes and Projects.

There are basically two potential sources of financing Programmes and Projects:

Government and

other investors.

Investors can secure the funds from a loan or from their own available resources, and the Government from the budget, loans or donations.

Financial engineering, aimed at securing the necessary financial resources for the implementation of the Programme and Project, generally speaking, has a number of alternative models in completing the financial structure:

Use of financial potential of the existing power plants (access to capital) for financing construction of new electricity generation facilities;

Investments by energy companies from capital increase funds, own sources and support from financial institutions;

Independent Power Producer (IPP);

Financing through concession agreements;

Use financing technology through public and municipal bond issues;

Attracting private investments in the Montenegrin energy sector;

Active development of the concept and terms and conditions for applying Public-Private Partnership (PPP) scenarios;

Direct government investments (as supported by development banks) in Programmes and Projects of the highest priority and with a relatively lower rate of return;

Credit lines from IFIs.

It can be concluded that the continuation of active cooperation with international donation community and IFIs is of great importance for a successful AP implementation. Efficient and proactive attitude of the ME in applying for, coordinating and contracting incentive funds from international sources therefore represents one of the first priorities of the ME.

Figure 8-1 gives an overview of activities and recognized interest of donors and IFIs for future support to the Montenegrin energy sector, structured by individual sectors and thematic areas in accordance with the classification in Figure 5-1.


Page: 47

Stakeholders: Donors and international financial institutions (IFI)

EAR EBRD EIB EU* GIZ KfW UNIDO UNDP WB Italy Norway Slovenia Spain

1 2 3 4 5 6 7 8 9 10 11 12 13

A) SECTOR 1 Coal 2 Oil (including LPG) 3 Gas (natural and LNG) 4 RES: small HPP 5 RES: wind energy 6 RES: solar energy 7 RES: geothermal energy 8 RES: biomass and waste 9 RES: municipal waste

10 Electro-energy: generation (large HPP) 11 Electro-energy: generation (TPP) 12 Electro-energy: transmission 13 Electro-energy: distribution 14 Electro-energy: supply 15 District heating (including CHP) 16 Energy efficiency

B) POLICY AND STRATEGY (in sector)

1 Energy market 2 European integration 3 Environmental protection 4 UNFCCC (Kyoto protocol, CDM etc.) 6 Water and forest administration

7 Spatial planning and construction

8 Project funding 9 International cooperation

10 Legislation and regulations

WAYS / POSSIBILITIES OF FUNDINGS

1 Donation * 2 Credit

* - Financing from special instruments and funds (eg. ISA, regional and structural funds and others)

- „major“ stakeholder - „medium“ stakeholder - „minor“ stakeholder - financing options

List of abbreviations: EAR - European Agency for Reconstruction CHP - Combined Heat and Power EBRD - European Bank for Reconstruction and Development HPP - Hydro Power Plant EIB - European Investment Bank IFI - International Financial Institutions EU - European Union NGO – Non-governmental Organization GIZ- German Society for International Cooperation RES - Renewable Energy Sources KfW - German Development Bank UNFCCC - United Nations Framework Convention on Climate Change UNIDO - United Nations Industrial Development Organisation TPP - Thermal Power Plant UNDP - United Nations Development Programme LPG - Liquefied Petroleum Gas WB - World Bank LNG - Liquefied Natural Gas CDM - Clean Development Mechanism

Figure 8-1: Donors and IFIs present in Montenegro

The comparison of investment opportunities in Montenegro with those in the South East Europe region (where substantial investments in the energy sectors is envisaged) is based on the three basic elements that determine decisions of potential investors:

Standard (general) risks of business operations: Montenegro has very good indicators of investment quality from the aspect of risks considered by investors when deciding on placing funds, as viewed in relation to political, macroeconomic and financial stability.

Level of legislative reforms (fiscal, regulatory and financial incentives to attract investments): Montenegro is very competitive from the aspect of achieved legislative reforms and fiscal incentives; it levies the lowest corporate profit tax in Europe (9%) and has adopted numerous laws that are harmonized with EU standards.


Page: 48

Level of the main operating expenses (cost of labour force, energy and other costs): A rather high level of educated labour force in comparison with countries in the region is a strategic advantage of Montenegro. Taking into account general operating expenses in the region, Montenegro has a relatively expensive labour force. However, Montenegrin labour market is competitive with regard to education, and it can be assumed that the high unemployment rate will keep labour costs at competitive levels for a longer term.

The energy sector is one of the most interesting sectors for foreign investors. Substantial investments in the period until 2025 are expected in energy sector construction, which will be mainly induced by adoption and initiated implementation of the Strategy. The main prerequisites for further development are the key investments envisaged in the Strategy, i.e. the Action Plan, which could be provided through various implementation models. In the analysis of the Montenegrin energy potential in comparison with the regional trends, the following country’s strengths clearly stand out:

Positive macroeconomic trends in the last few years (GDP, inflation, foreign investments, reduced unemployment, budget surplus, and the like);

A clear commitment of Montenegro to European integration and taking an active role in international cooperation (Energy Community South East Europe Treaty, the Kyoto Protocol, Stabilisation and Association Process, and other);

There is great potential and numerous opportunities for the use of RES, particularly hydro potential, both for domestic needs and for the regional electricity market;

Montenegro is on the crossroads of electricity transmission lines as to the neighbouring countries, as well as to Kosovo-Italy and Bosnia and Herzegovina/Croatia – Albania ;

Initiated privatisations in the energy sector;

A relatively high level of the already acquired knowledge;

There is an interest of international donors and investors in the energy sector development

Small and rather open and flexible economic system;

Whereas the opportunities are:

Explicit readiness of most energy entities to fully implement energy reforms in the shortest time possible;

Montenegro's challenge to successfully end the process of joining the European Union;

Large potential for energy saving (20%-30%) supported by energy efficiency measures;

Potentially commercial oil and gas reserves in Montenegro offshore;

Opportunity for faster connection to the system of regional gas pipelines (Ministerial Declaration on the Ionic-Adriatic gas pipeline);

Coal reserves for continued electricity generation with positive socio-economic development of the northern region and better situation regarding environmental protection;

Opportunities for an accelerated use of RES: small HPPs, wind, sun, biomass, waste, and other.

A concrete financial arrangement will be determined on the basis of the most favourable parameters and by taking into account difficulties in forecasting energy prices. The required financial resources for the implementation of Programmes and Projects are presented in Table 8-1, as per years and institutions responsible for mobilizing overall required funds.

The State budget, credits and donations are the only to be considered for covering the AP expenses with regard to the State’s obligations. Table 8-1 shows estimated funds that the State should provide for each Programme and Project and the funds expected from other investors over the period 2016-2020.


Page: 49

Table 8.1: Necessary financial resources for Programmes and Projects by years (€)

CORE CONTENT PROGRAMME/PROJECT RESPONSIBILITY 2016 2017 2018 2019 2020 TOTAL

(2016-2020)


1.1 Project for revitalisation of HPP Piva EPCG FU Generation 7.500.000 21.000.000 19.700.000 14.500.000 0 62.700.000

1.2 Project for revitalisation of HPP Perućica EPCG FU Generation 3.900.000 7.100.000 10.850.000 12.150.000 10.000.000 44.000.000

1.3 Project for revitalisation of TPP Pljevlja EPCG, TPP Pljevlja 16.000.000 47.500.000 0 0 1.000.000 64.500.000

1.4 Project for revitalisation of small HPPs EPCG, ZETA Energy 1.250.000 10.200.000 8.800.000 0 0 20.250.000


CGES, TERNA 71.960.000 111.500.000 0 0 0 183.460.000


CGES, EPCG, Government/ highway investor, WPP Krnovo investor

3.655.000 10.645.000 10.850.000 4.670.000 4.300.000 34.120.000


CGES, highway investor 1.930.000 3.761.000 6.433.000 5.817.000 2.390.000 20.331.000


CGES, EMS, Elektroprijenos BiH

20.000 2.930.000 4.200.000 4.400.000 1.500.000 13.050.000


CGES 1.632.000 3.735.000 4.328.000 1.948.000 900.000 12.543.000


CGES 2.339.000 4.789.000 1.841.000 192.000 0 9.161.000



Funding is envisaged separately for each Project for transmission line


CGES, ERA, ME 6.000 100.000 0 0 0 106.000


EPCG FU Distribution 3.676.850 3.379.020 3.728.390 5.120.890 7.267.080 23.172.230


EPCG FU Distribution 2.111.205 4.706.404 2.092.500 2.092.500 8.470.000 19.472.609


EPCG FU Distribution 25.210 1.000.000 1.100.000 0 0 2.125.210

1.16 Development Programme of concept of the distribution network and the introduction of modern ICT, measurement systems and

EPCG FU Distribution 16.209.818 16.200.000 16.200.000 200.000 200.000 49.009.818


Page: 50


(2016-2020)

smart grid solutions 1.17 Project of distribution system capacity

estimations for connection of RES (hosting capacity)


5.000 121.000 0 0 0 126.000

KS 1: TOTAL 132.220.083 248.666.424 90.122.890 51.090.390 36.027.080 558.126.867




60.000 250.000 0 0 0 310.000


ME, CGES, ERA; contractor 81.000 311.000 80.000 100.000 0 572.000


ME, WA, IHMS, EPA, local government, EPCG FU Distribution, contractors which have received permission from ME, contractor

18.165.000 23.125.000 25.060.000 20.040.000 15.030.000 101.420.000


ME, Government, MSDT, WA, CGES, concessionaire

4.400.000 45.000.000 90.000.000 120.000.000 110.000.000 369.400.000


ME, Government, MSDT, EPCG, Elektroprivreda Srbije, WA, concessionaire

1.000.000 1.200.000 1.600.000 2.300.000 35.500.000 41.600.000

2.6 Projects for construction of wind farms ME, ERA, CGES, investor 110.500.000 31.000.000 10.800.000 25.000.000 15.000.000 192.300.000

KS 2: TOTAL 134.206.000 100.886.000 127.540.000 167.440.000 175.530.000 705.602.000



RUP, EPA, IA 16.862.500 17.448.900 15.987.400 6.243.000 3.267.910 59.809.710


RUP, EPCG, new entity 240.000 200.000 0 0 0 440.000


EPCG, CGES, RUP 1.750.000 4.000.000 6.200.000 15.700.000 4.700.000 32.350.000


Page: 51


(2016-2020)


ME, local community 150.000 100.000 70.000 140.000 0 460.000


ME, local community 3.570.000 4.640.000 3.350.000 1.800.000 1.350.000 14.710.000


Government, Pljevlja Municipality, EPCG, RUP, Vektra-Jakić, EPA, contractor

1.200.000 1.500.000 1.500.000 700.000 300.000 5.200.000


EPCG/SPV, Government, MSDT, EPC contractor, EPA, EPCG

41.200.000 80.300.000 110.000.000 75.000.000 32.000.000 338.500.000

3.8 Programme of gasification of the country ME, ERA, Parliament, Government, contractor

520.000 2.000.000 0 0 0 2.520.000


ME, distributors 80.000 115.000 1.015.000 1.015.000 1.015.000 3.240.000

KS 3: TOTAL 65.572.500 110.303.900 138.122.400 100.598.000 42.632.910 457.229.710



ME,MTMA, public administration bodies, local governments, large consumers, entities in charge of public buildings, contractor

5.550.000 12.010.000 14.670.000 16.820.000 20.220.000 69.270.000


ME, Government, Parliament, local government, PPP or ESCO companies

1.750.000 1.920.000 1.370.000 770.000 620.000 6.430.000

4.3 Programme of informing, education and ME, MED, MS, UCG, 320.000 320.000 520.000 820.000 820.000 2.800.000


Page: 52


(2016-2020)

training NGO, local government, MSDT, contractor

KS 4: TOTAL 7.620.000 14.250.000 16.560.000 18.410.000 21.660.000 78.500.000



COTEE, ERA 120.000 0 0 0 0 120.000


COTEE 250.000 1.150.000 600.000 0 0 2.000.000



140.000 20.000 0 0 0 160.000


ME, ERA, DSO, suppliers 25.000 0 0 0 0 25.000

KS 5: TOTAL 535.000 1.170.000 600.000 0 0 2.305.000



MSDT, ME 854.000 469.000 489.000 205.000 685.000 2.702.000

6.2 Programme for coal consumption reduction MSDT, ME, local government

145.000 145.000 145.000 145.000 145.000 725.000

KS 6: TOTAL 999.000 614.000 634.000 350.000 830.000 3.427.000



MSDT, MARD, ME,WA, relevant Ministries of neighbouring countries

3.000.000 5.000.000 2.000.000 2.000.000 2.000.000 14.000.000


ME, WA, MARD, relevant Ministries of neighbouring countries, Government of Montenegro and Governments of neighbouring countries

70.000 480.000 40.000 0 0 590.000

7.3 Project of analysis, research work and EPCG, ME, MSDT, 0 0 500.000 1.500.000 2.000.000 4.000.000


Page: 53


(2016-2020)

feasibility study to ensure sufficient quality basic data for making investment decisions for the eventual construction of HPP Boka and / or HPP Kruševo after year 2030

Elektroprivreda Republike Srpske, relevant Ministry of BiH


ME, concessionaire 405.000 6.350.000 15.160.000 4.050.000 0 25.965.000


ME, AH, concessionaire 10.150.000 10.020.000 15.020.000 80.000.000 20.000.000 135.190.000

7.6 Project of Ionian-Adriatic pipeline ME, contractor, Montenegrobonus

600.000 1.750.000 420.000 20.000.000 40.000.000 62.770.000


ME, MF, AH, ERA, Monstat, CSE 345.000 200.000 0 0 0 545.000


ME, MSDT, PUC

50.000 80.000 150.000 150.000 0 430.000

KS 7: TOTAL 14.620.000 23.880.000 33.290.000 107.700.000 64.000.000 243.490.000



ME, ERA, Parliament, energy entities

170.000 120.000 110.000 50.000 50.000 500.000


ME, MF, Parliament, Government

225.000 0 0 0 0 225.000


ME 50.000 25.000 0 0 0 75.000



50.000 50.000 50.000 0 0 150.000


ME, Parliament, ERA, CGES, EPCG, energy entities

50.000 0 0 0 0 50.000

KS 8: TOTAL 545.000 195.000 160.000 50.000 50.000 1.000.000



ME, later DIAP 200.000 150.000 250.000 250.000 150.000 1.000.000

KS 9: TOTAL 200.000 150.000 250.000 250.000 150.000 1.000.000

TOTAL (CC 1 – CC 9)

356.517.583 500.115.324 407.279.290 445.888.390 340.879.990 2.050.680.577


Page: 54

Table 8.2: Programme and Project financing by Government and investors – by sources (€)

CORE CONTENT PROGRAMME/PROJECT GOVERNMENT INVESTOR TOTAL


1.1 Project for revitalisation of HPP Piva

62.700.000 62.700.000


44.000.000 44.000.000


64.500.000 64.500.000


20.250.000 20.250.000


183.460.000 183.460.000


34.120.000 34.120.000


20.331.000 20.331.000


13.050.000 13.050.000


12.543.000 12.543.000


9.161.000 9.161.000


Funding is envisaged separately for each Project for transmission line


106.000 106.000


23.172.230 23.172.230


19.472.609 19.472.609


2.125.210 2.125.210

1.16 Development program of concept of the distribution network and the introduction of modern ICT, measurement

49.009.818 49.009.818


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systems and smart grid solutions


126.000 126.000

KS 1: TOTAL 558.126.867 558.126.867



310.000 310.000


572.000 572.000


190.000 101.230.000 101.420.000


500.000 368.900.000 369.400.000


800.000 40.800.000 41.600.000


192.300.000 192.300.000

KS 2: TOTAL 1.800.000 703.802.000 705.602.000



59.809.710 59.809.710


440.000 440.000


32.350.000 32.350.000


460.000 460.000


Page: 56



210.000 14.500.000 14.710.000


5.200.000 5.200.000


338.500.000 338.500.000


520.000 2.000.000 2.520.000


180.000 3.060.000 3.240.000

KS 3: TOTAL 1.370.000 455.859.710 457.229.710



12.350.000 56.920.000 69.270.000


150.000 6.280.000 6.430.000


2.550.000 250.000 2.800.000

KS 4: TOTAL 15.050.000 63.450.000 78.500.000



120.000 120.000

5.2 Project of development and implementation of information technology and measurement infrastructure as technological support to the functioning of the

2.000.000 2.000.000


Page: 57


electricity market and its subsequent inclusion in the regional processes


160.000 160.000


5.000 20.000 25.000

KS 5: TOTAL 165.000 2.140.000 2.305.000



2.702.000 2.702.000


300.000 425.000 725.000

KS 6: TOTAL 3.002.000 425.000 3.427.000



7.000.000 7.000.000 14.000.000


295.000 295.000 590.000


2.000.000 2.000.000 4.000.000


30.000 25.935.000 25.965.000


90.000 135.100.000 135.190.000

7.6 Project of Ionian-Adriatic pipeline

2.770.000 60.000.000 62.770.000


545.000 545.000

7.8 Programme of analyses and studies for preparation of municipal solid waste incineration Project in

80.000 350.000 430.000


Page: 58


Montenegro (waste potential, the plat location etc.)

KS 7: TOTAL 12.810.000 230.680.000 243.490.000



500.000 500.000


225.000 225.000


75.000 75.000


150.000 150.000


50.000 50.000

KS 8: TOTAL 500.000 500.000 1.000.000



1.000.000 1.000.000

KS 9: TOTAL 1.000.000 1.000.000

TOTAL (CC 1 – CC 9)

35.697.000 2.014.983.577 2.050.680.577


Page: 59

9. MECHANISMS FOR MONITORING AND FOLLOW-UP OF THE IMPLEMENTATION OF THE ACTION PLAN

9.1. Department for Implementation of Action Plan

The AP implementation represents a complex task requiring a formal organisation of tasks and duties, engagement of sufficient resources and adequate bodies that will be able to respond to the task of managing and correcting planned activities.

The main tasks of the DIAP shall be as follows:

To plan, initiate, perform or supervise the performance of preparatory activities (analyses, measurements, studies, preparation of tender documents) for Programmes and Projects within the Government’s competence;

To communicate with the relevant participants in the implementation of Programmes and Projects and delegate them with tasks and responsibility for the implementation of certain activities in accordance with the ME procedures;

To assist in raising funds for the AP implementation (budget, grants, credits);

To define and make operable (both regarding procedures and computer support) the system for the implementation monitoring and follow-up of all Programmes and Projects and the AP in general;

Based on own assessments and/or periodic progress reports on Programmes and Projects which are not under the DIAP jurisdiction, analyse the progress of all Programmes and Projects, assess the quality of performed activities and proposes corrective measures in case of any deviations from the AP;

To propose amendments to the AP implementation mechanism (legislative-regulatory, institutional-organisational and other frameworks) with a view to providing better efficiency in the AP implementation;

To prepare periodic reports on the AP progress, with reference to potential implications for the Strategy, aimed at potential revisions of the AP, i.e. the Strategy;

To promote investments in the energy sector by the “one-stop-shop” principle, with the main objective to provide interested investors with accurate, updated and relevant information.

The DIAP establishes functional lines of communication with the relevant stakeholders that will be involved in Programmes and Projects in accordance with the procedures and when required. The AP implementation is closely connected with the efficiency of this communication and therefore this represents one of the important tasks of the DIAP and is of key importance for the AP.

The personnel requirements (staffing) for the DIAP arise from the aforesaid envisaged tasks and duties regarding the AP implementation.

The DIAP should be managed by an experienced manager of AP implementation, in cooperation with the team of at least ten experienced officers – “the key team” – from the very beginning of the DIAP establishment. A proposal of the personnel structure of the team is the following:

Programme and Project Manager – at least three officers/experts for different sectors and types of Programmes and Projects;

PR Manager – in charge of public relations, education and the provision of the DIAP service “one-stop-shop” to stakeholders;

Legal Expert – in charge of legal issues, drafting subcontractor contracts, preparation of tenders, assisting ME in negotiations with future concessionaires, interpreting laws and preparing proposals for amendments of laws and regulations relevant for the AP;


Page: 60

Financial Expert – in charge of collecting funds for the AP implementation (budget, grants, credits and other financial assistance) and coordination of the pertinent activities; candidate/prepare proposals for funds from EU tenders;

Economist - in charge of economic-financial analysis of Programmes and Projects and all other financial issues with regard to the AP and the DIAP;

Planning Expert – monitoring and follow-up on the implementation of the AP objectives and activities: pace of utilization of resources and overall progress;

Environmental Expert – in charge of environmental impact and spatial planning issues (in coordination with other authorized ministries).

Successful implementation of Programmes and Projects, i.e. the DIAP efficiency, primarily depends on quality and know-how of the DIAP personnel. This requires paying special attention and focusing the ME efforts on the selection and required additional training of the staff and competitive payroll scheme.

The Rules of procedure represent the basis of the DIAP acting and provide concrete instructions for the implementation of the AP Programmes and Projects.

The following procedures will be prepared during the process of establishing and commencement if operations of the DIAP:

Internal procedures of the DIAP functioning and administrating (including job descriptions);

Procedure for Programme and Project implementation ;

Procedure for implementation of Programme and Project individual activities;

Procedure for delegating duties and responsibilities to other participants in the AP implementation;

Procedure for Programme and Project progress reporting;

Procedure for the preparation of tender and contract documentation;

Procedure for the preparation and distribution of reports and other communication outside the DIAP;

Procedure for the revision of Programmes, Projects and the AP;

Procedure for budget drafting, financing and approving Programme and Project implementation.

9.2. Planned activities and reporting procedures

There are two main objectives of the AP implementation monitoring and follow-up. The first is to ensure implementation of the main objectives of the Strategy, and the second is to ensure the AP implementation (including appropriate corrective actions).

The follow-up system is based on the previously defined organisational parameters:

Adopted Timelines for Programmes and Projects Programmes and Projects with the pertinent timelines are considered to be

adopted with the adoption of the AP.

Adequate Human resources The selection of personnel for the DIAP is based on the detailed job

descriptions.

Defined delegation of responsibilities and powers for AP implementation The acts on establishing the DIAP will contain clearly defined responsibilities

and powers vested in these institutions.

Communication with structures, which are directly engaged in the implementation of Programmes and Projects, will be performed according to established rules of procedure of the DIAP. These procedures will precisely define the type of data that should be provided, the manner of communication, reporting frequency and obligations of the sender/recipient in the process of data transfer.


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Reports are the main DIAP manner of communication with external parties, and the two institutions are required to document the AP implementation process. These reports are of internal nature and are subject to internal control. These reports also serve as the bases for reports to be submitted to the ME.

The DIAP should prepare the following reports and submit them to the ME:

Periodic reports on AP implementation progress: to be sent to the ME on quarterly basis, being concise and containing the previously agreed content;

Annual Report on AP implementation for the Government purposes: a detailed report submitted to the Government via the ME. It shall cover:

results achieved in the previous year in comparison with the set objectives, assessment of implications to AP in the following year, proposed measures to improve the current situation and assessment of requirements for AP update and/or even the Strategy updates.

The measurement of the AP implementation effects should also include objective parameters for easier monitoring and follow-up of the AP implementation, and thus the attainment of the Energy Policy and Strategy objectives. The list of internationally recognised indicators will be applied so as to ensure the quantification of the AP implementation results, provide a fast assessment of the attainment of the main strategic objectives simultaneously enabling the comparison with other countries, primarily the EU member states.

Parameters for AP implementation monitoring are presented in Table 9.1.

Table 9.1: Parameters for AP implementation monitoring 7

Parameter Definition Unit Source/

comment

1. Energy intensity: Required primary energy/ GDP

Mtoe / EUR million

Electricity consumption / GDP GWh / EUR

million

2. Import dependence: Net imports / total primary energy consumption

%

3. Changes in final energy consumption

Change in relation to the initial year %, Mtoe

4. Renewable energy sources consumption (RES):

Total RES consumption Mtoe/a year Share of RES in primary energy (RES/Primary energy total)

%

Share of electricity generation from RES in total energy consumption (Electricity from RES/ total energy consumption)

%

5. Electricity price on the market Price EUR/MWh EUROSTAT Methodology Questionnaire

6. Parameters of energy quality in electricity supply

Parameters defined in the standard

In line with parameters set

out in IEC 50160 standard

IEC (EN) 50160

7. Total CO2 emission CO2 emission caused by energy consumption

Mil. t CO2

7 Source: Nacionalni Energetski Program Slovenije – parametri usaglašeni sa metodologijom EU (Framework of

indicators for monitoring implementation of interrelated targets of the EU Sustainable Development

Strategy)


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The periodic overviews on the AP implementation (one year, as a rule) should be carefully considered with regard to reasons for potential deviations from the AP and subsequent undertaking of appropriate measures to implement the envisaged AP objectives and timelines. Should the measured effects be insufficient or should the implementation deviate from the plan, corrective measures are to be undertaken in accordance with the newly occurred circumstances and identified problems.

9.3. Action Plan Updates

Dynamics of changes in energy sector is very fast, thus inducing changes in parameters which affect energy needs and development. Owing to this and due to potential changes in implementation that call for the change of objectives and the AP itself, the Action Plan implementation should be regularly monitored and updated, if required. If the AP changes imply long-term changes, then the Energy Development Strategy should be updated as well.


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10. PROGRAMMES AND PROJECTS

10.1. CC1: Increase the energy efficiency of existing generation, transmission and distribution facilities (supply side)

10.1.1. Project for revitalisation of HPP Piva

A. Project / Programme description

Hydro power plant Piva started operating in 1976. During the exploitation period, from inception until the end of 2014, hydro power plant Piva has produced 29,4 TWh of electricity. Record production of 1.286 GWh was produced in 2010. Record years include 1978, when produced electricity was 1.016 GWh. Following record years are 1979, when 1.044 GWh electricity was produced, and 2004, when hydro power plant Piva produced 997 GWh of electricity.

Given the number of years in operation of HPP Piva, the revitalization is required to extend its lifetime, increase working reliability and total power capacity of aggregates, increase its usefulness and utilization of hydro power plant in general. As part of revitalization, reconstruction/replacement and modernization of equipment and buildings will be made.

The Strategy envisages the rehabilitation of HE Piva to be fully completed by the end of 2019, when current installed capacity will increase from 342 (3×114 MW) to 363 MW (3x121 MW) and planned annual electricity production will increase from 762 GWh to 800 GWh. However, this deadline is not realistic and AP envisages complete rehabilitation of HPP Piva by the end of 2020.

According to previous estimates, the total cost of revitalization of HPP Piva would be around 70 million €. It is anticipated that by the end of 2015 around 8,33 million € will be spent.

B. Necessary activities to achieve the objective

Activity description Responsibility

1. Hydro mechanical equipment of the turbine-generator unit includes turbine inlet valves, turbine, turbine regulation, draft tube gate-sand other mutual or auxiliary hydro mechanical equipment. Electrical aggregate equipment contains generator, block transformer, excitation system, protection, operation system, monitoring system and other mutual or auxiliary electrical equipment. (Reconstruction of hydro mechanical and electrical aggregate equipment)

EPCG FU Generation

2. Reconstruction/replacement of low and medium voltage auxiliary power supply system: main distribution board, transformers, switch gear, protection, management system, etc. (Reconstruction of low and medium-voltage auxiliary power supply system)

EPCG FU Generation

3. Reconstruction /replacement of HV cable connection of 220 kV EPCG FU Generation

4. Reconstruction / replacement of hydro mechanical equipment and power plant drainage. (Reconstruction of hydro mechanical equipment)

EPCG FU Generation

5. Reconstruction /replacement of the monitoring system of the dam EPCG FU Generation

6. Reconstruction / replacement of the injection curtains on the left and right side of the dam (Reconstruction of the injection curtains)

EPCG FU Generation

7. Reconstruction of telecommunication system EPCG FU Generation

8. Deepening of the river bed EPCG FU Generation


Page: 64

C. Project / Programme timeline

The revitalization project in full scale, according to the Strategy, is expected by the end of 2019.

2016 2017 2018 2019 2020

Activity Responsibility Start End 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4

1. Reconstruction of hydro mechanical and electrical aggregate equipment

EPCG FU Generation

1. 1. 2016 31. 12. 2020

2. Reconstruction of low and medium-voltage auxiliary power supply system

EPCG FU Generation

1. 1. 2017 31. 12. 2019

3. Reconstruction /replacement of HV cable connection of 220 kV`

EPCG FU Generation

1.10.2018 30.9.2019

4. Reconstruction of hydro mechanical equipment

EPCG FU Generation

1.7.2016 31.12.2019

5. Reconstruction /replacement of the monitoring system of the dam

EPCG FU Generation

1.10.2016 31.12.2018

6. Reconstruction of the injection curtains

EPCG FU Generation

1.4.2016 30.9.2019

7. Reconstruction of telecommunication system

EPCG FU Generation

1.1.2017 31.12.2017

8. Deepening of the river bed EPCG FU Generation

1.7.2017 30.9.2019


Activity Responsibility 2016 2017 2018 2019 2020 Total (2016-

2020)

1. Reconstruction of hydro mechanical and electrical aggregate equipment

EPCG FU Generation

3.000.000 5.000.000 6.000.000 4.000.000 18.000.000

2. Reconstruction of low and medium-voltage auxiliary power supply system

EPCG FU Generation

1.500.000 2.000.000 1.500.000 5.000.000

3. Reconstruction /replacement of HV cable connection of 220 kV`

EPCG FU Generation

1.200.000 2.500.000 3.700.000

4. Reconstruction of hydro mechanical equipment

EPCG FU Generation

1.500.000 2.500.000 2.500.000 1.500.000 8.000.000

5. Reconstruction /replacement of the monitoring system of the dam

EPCG FU Generation

1.000.000 1.000.000 1.000.000 3.000.000

6. Reconstruction of the injection curtains

EPCG FU Generation

2.000.000 6.000.000 5.000.000 3.000.000 16.000.000

7. Reconstruction of telecommunication system

EPCG FU Generation

3.000.000 3.000.000

8. Deepening of the river bed

EPCG FU Generation

2.000.000 2.000.000 2.000.000 6.000.000

Total (1-8) 7.500.000 21.000.000 19.700.000 14.500.000 62.700.000

E. Ecological and social effect

Since we are talking about the revitalization of the existing object there are no new elements of environmental impact and the EIA should not be implemented.

The project has no direct social impact. However some new jobs will be available for domestic industries (particularly construction companies).


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10.1.2. Project for revitalisation of HPP Perućica


Perućica hydro power plant has been in operation since 1960 and it just completed 55 years of operation. For better utilization of water potential on HPP Perućica basin and that the plant can continue to operate safely, after so many years of operation, the reconstruction of power plant is required. The reconstruction and modernization of the aggregates has already started in 1992, so until today four units (1-4) have already been completed. Reconstruction of the remaining three aggregates is also required, and it is planned to install additional (eighth) aggregate with 65 MVA.

The Strategy envisages the work to be completed by the end of 2015. However, with the delay the completion of the work is predicted by the end of the year 2020.

The Strategy also envisaged the installation of an additional aggregate number 8 (installed capacity of 65 MVA / 58.5 MW, additional annual production of HPP Perućica: about 20 GWh) by 2016. This cannot be completed by then, the new deadline for completion is 2020.



1. Reconstruction of aggregates number 5, 6 and 7

EPCG FU Generation

2. Reconstruction and construction of telecommunication information system whereas the system is being implemented at the level of power plant and includes sub-systems for the operation of aggregates, facilities for own consumption, 110KV and 220KV switchgears, hydro mechanical equipment of valve chambers, operating power plants in group and secondary regulation, etc. The system will allow the management of water from the flow and the reservoir through the utilisation optimization of water resources, hydrology forecasting and optimization of planning of the power plant. (Reconstruction and construction of telecommunication information system)

EPCG FU Generation

3. Reconstruction and installation of hydrological hydraulic measurement equipment whereas all measured values will be available for use and processing within the telecommunication - information system for managing the power plant. (Reconstruction and installation of hydrological hydraulic measurement equipment)

EPCG FU Generation

4. Reconstruction of hydro-mechanical and electrical equipment on the valve chambers: Krupac, Slano, Vrtac, intake structure, surge tank valve chamber. It will include rehabilitation or replacement of mechanical equipment and complete replacement of the electrical equipment. Remote control will be enabled from the control room of the power plant. (Reconstruction of hydro-mechanical and electrical equipment on the valve chambers)

EPCG FU Generation

5. Reconstruction and elevation of Opačica channel for flow of 81,75m³/sec. Reconstruction of Moštanica channel without increasing capacity. Reconstruction of connection between compensating reservoir and intake structure. This reconstruction must be carried out in case of the installation of the eighth aggregate and because of the plant operation with a flow rate of 81.75 m³ / sec. (Reconstruction of construction objects)

EPCG FU Generation

6. Reconstruction of 110 KV and 220 KV switchgears, which will include replacement of measuring high voltage equipment and switching equipment, transmission protection and facility control system at local and remote level. (Reconstruction of 110 KV and 220 KV switchgears)

EPCG FU Generation

7. Installation of aggregate number 8

EPCG FU Generation

8. Development of project and tender documentation for the Project on optimal use of waters of Gornja Zeta which envisages the water diversion of Zeta River into the reservoir Krupac and to connect Krupac and Slano reservoirs. (Development of project and tender documentation for use of waters of Gornja Zeta)

EPCG FU Generation


Page: 66

C. Project / Programme timeline 2016 2017 2018 2019 2020



EPCG FU Generation

1. 4. 2016 31.12.2020

2. Reconstruction and construction of telecommunication information system

EPCG FU Generation

1. 4. 2016 31.12.2020

3. Reconstruction and installation of hydrological hydraulic measurement equipment

EPCG FU Generation

1. 4. 2016 31.12.2020

4. Reconstruction of hydro-mechanical and electrical equipment on the valve chambers

EPCG FU Generation

1. 4. 2016 31.12.2020

5. Reconstruction of construction objects

EPCG FU Generation

1. 4. 2016 31.12.2020

6. Reconstruction of 110 KV and 220 KV switchgears

EPCG FU Generation

1. 4. 2016 31.12.2020


EPCG FU Generation

1. 1. 2018 31.12.2020

8. Development of project and tender documentation for use of waters of Gornja Zeta

EPCG FU Generation

1.1.2017 30.6. 2019



2020)


EPCG FU Generation

1.000.000 3.000.000 4.000.000 4.000.000 3.000.000 15.000.000

2. Reconstruction and construction of telecommunication information system

EPCG FU Generation

300.000 300.000 300.000 300.000 300.000 1.500.000

3. Reconstruction and installation of hydrological hydraulic measurement equipment

EPCG FU Generation

100.000 200.000 200.000 200.000 100.000 800.000

4. Reconstruction of hydro-mechanical and electrical equipment on the valve chambers

EPCG FU Generation

1.500.000 2.000.000 2.000.000 1.500.000 500.000 7.500.000

5. Reconstruction of construction objects

EPCG FU Generation

500.000 500.000 1.000.000 1.000.000 1.500.000 4.500.000

6. Reconstruction of 110 KV and 220 KV switchgears

EPCG FU Generation

500.000 1.000.000 1.000.000 1.000.000 500.000 4.000.000


EPCG FU Generation

2.200.000 4.000.000 4.000.000 10.200.000

8. Development of project and tender documentation for use of waters of Gornja Zeta

EPCG FU Generation

100.000 150.000 150.000 100.000 500.000

Total (1-8) 3.900.000 7.100.000 10.850.000 12.150.000 10.000.000 44.000.000


Due to the construction of additional aggregate (aggregate No. 8) the EIA has to be prepared. The project does not make significant social impact.


Page: 67

10.1.3. Project for revitalisation of TPP Pljevlja


After the successful large scale rehabilitation in 2009 (replacing the operation system, electro filter and turbine facility in order to increase the power and efficiency of the facility), remaining work is on reconstruction of cooling tower, re-cultivation of landfill Maljevac, and plan to install the NSOx system, in order to meet the requirements of Directive 2001/80 EC and Directive 2010/75 / EU.

With revitalization of TPP Pljevlja capacity of thermal power plant increases from 218.5 MW to 225 MW and average production from 1.150 GWh / year to1.179 GWh / year.

The implementation of Directive 2001/80 EC, which defines the limitation of emissions of certain pollutants (SO2, NOx and dust particles) in Montenegro, as well as in other members States of the EC, should begin no later than 31 December 2017. According to the Directive all the power plants that belong to the group called existing plants (which received a building permit or a work permit before 1 July 1992) in the period from 1 January 2018 to 31 December 2023 can operate a total of 20,000 hours. After 1 January 2024, these power plants can no longer work if they don’t reach the criteria of emission limits of specified pollutants. These limits can be reached only by installing the necessary equipment.



1. Development of studies, projects, tenders and selection of consultants EPCG, TPP Pljevlja

2. Installation of equipment to reduce emissions (SO2, NOx and dust particles) on the permissible limits (Installation of equipment to reduce emissions)

EPCG, TPP Pljevlja

3. Reconstruction of cooling tower EPCG, TPP Pljevlja

4. Re-cultivation of landfill Maljevac EPCG, TPP Pljevlja


2016 2017 2018 2019 2020

Activity Responsibility Start End 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1. Development of

studies, projects, tenders and selection of consultants

EPCG, TPP Pljevlja

1.1.2016 30.9.2016

2. Installation of equipment to reduce emissions

EPCG, TPP Pljevlja

1.10.2016 31.12.2017

3. Reconstruction of cooling tower

EPCG, TPP Pljevlja

1.07.2017 31.12.2017

4. Re-cultivation of landfill Maljevac

EPCG, TPP Pljevlja

1.04.2020. 31.12.2020



2020)

1. Development of studies, projects, tenders and selection of consultants

EPCG, TPP Pljevlja

500.000 500.000

2. Installation of equipment to reduce emissions

EPCG, TPP Pljevlja

15.500.000 44.000.000 59.500.000

3. Reconstruction of cooling tower

EPCG, TPP Pljevlja

3.500.000 3.500.000

4. Re-cultivation of landfill Maljevac

EPCG, TPP Pljevlja

1.000.000 1.000.000

Total (1-4) 16.000.000 47.500.000 1.000.000 64.500.000


Page: 68


This project will have a positive impact on the environment as it will result in the reduction of emissions. NOx emissions will be lower than the maximum allowed. During the preparation of project documentation for the planned activity, EPCG Generation (TPP Pljevlja) and RUP must implement EIA procedure. With emission reduction possibility for some additional economic activities will occur. The effects on human health in the environment will also be mitigated by the project.

There is no special social impact from the revitalization of TPP Pljevlja. New employment on account of that cannot be expected, except for during the construction.


Page: 69

10.1.4. Project for revitalisation of small HPPs


The Strategy envisaged completion of the revitalization of small hydro power plants by the end of 2014, however there is some delay in the implementation of the project. Therefore, its completion is expected in first part of the period covered by the AP. The Programme of revitalization of the existing 7 SHPP plants, through reconstruction and replacement of parts of mechanical and electrical equipment and auxiliary equipment would improve characteristics of SHPPs, which would result in increased installed capacity and therefore increased production of electricity.

The issue of property rights has been resolved and consequently the legal / formal requirements have been established for the start of long-planned revitalization of small hydropower plants Glava Zete and Slap Zete, with the establishment of a mixed company ZETA ENERGY in 2010.

After rehabilitation the installed capacity of SHPP Slap Zeta, will increase from current 1.2 MW to 3.2 MW, and the annual production from the current 3.5 GWh to 14.6 GWh. The capacity of SHPP Glava Zeta would remain equal to 5 MW, but the production will increase, because of reconstruction and replacement of electro mechanical equipment and auxiliary equipment, from the current 12 GWh to 15 GWh.

Also remaining 5 SHPP owned by EPCG will be gradually rehabilitated in the period until the end of 2018, so the installed capacity will increase from the current 2.5 MW to 3.2 MW and planned production from 5.5 GWh to 7, 8 GWh.



1. Preparation of project documentation and tender for the following works: geological, geodetic and hydrological studies, studies of the environmental impact, preliminary design, publish tender for contractors. (Preparation of project documentation and tender)

ZETA Energy

2. Preparation of project documentation and tender for the following works: geological, geodetic and hydrological studies, studies of the environmental impact, preliminary design, publish tender for contractors. (Preparation of project documentation and tender)

EPCG

3. Reconstruction and replacement of mechanical, electrical equipment and auxiliary equipment

ZETA Energy


EPCG


2016 2017 2018 2019 2020


1. Preparation of project documentation and tender

ZETA Energy 1. 1. 2016 31.12.2016


EPCG 1. 1. 2016 31.12.2016


ZETA Energy 1. 4. 2017 31. 12. 2018


EPCG 1. 4. 2017 31. 12. 2018


Page: 70



2020)


ZETA Energy 625.000 625.000


EPCG 625.000 625.000

3.

Reconstruction and replacement of mechanical, electrical equipment and auxiliary equipment

ZETA Energy 5.200.000 4.600.000 9.800.000

4.

Reconstruction and replacement of mechanical, electrical equipment and auxiliary equipment

EPCG 5.000.000 4.200.000 9.200.000

Total (1-4) 1.250.000 10.200.000 8.800.000 20.250.000


Within the preparation of project documentation study on impact of reconstruction of SHPPs on the environment will be made.

There is no special social impact from the reconstruction of small hydropower plants. New employment on account of that cannot be expected, except for during the construction.


Page: 71

10.1.5. Project of undersea cable for connection with Italy and with it related projects of construction of new substations and transmission lines


The construction of HVDC submarine cable with capacity of 1,000 MW between Italy and Montenegro is in progress and is planned to be completed by the end of 2017. This project is being implemented by the CGES and company Terna, the Italian transmission system operator. Total TERNA’s investment amounts to 1,100 million €, of which in Montenegro about 210 million €.

Full utilization of the cable (1,000 MW) is expected to be achieved after the necessary reinforcements, as internal connections in Montenegro, as well as connections from Montenegro to neighbouring systems (Bosnia and Herzegovina and / or Serbian). At the moment, on the northern part of Montenegro, towards Bosnia and Herzegovina and Serbia there is no 400 kV overhead line. Taking into account ambitious plans for the development of generation capacities in Bosnia and Herzegovina and Serbia, as well as Project of construction of undersea cable between Montenegro and Italy, 400 kV connection between the two systems with the system of Montenegro would be of great benefit in the case of exports from Bosnia and Herzegovina, Serbia, Bulgaria or Romania to Italy and would provide a safe and uninterrupted transit of electricity.

Primarily for the construction of interconnection (submarine cable of 400 kV DC, 1,000 MW) between Montenegro and Italy the construction of SS 400/110 kV, 2x300 MVA Lastva Grbaljska is envisaged, which will be connected by the principle of "input-output" to the existing 400 kV overhead line Trebinje - Podgorica 2, whereby it would be necessary to build an additional 2 × 35 km of 400 kV transmission line from SS Lastva to Čevo. The new SS 400/110 kV Lastva is expected to solve the problem of supply in the coastal part of Montenegrin EES with the major idea to unburden the existing 110 kV network which is supplying the seaside from north direction (from SS Podgorica 1 and SS Podgorica 2). Bearing in mind that the 220 and 400 kV transmission network of Montenegro is relatively lightly loaded and that power is mainly transmitted through 110 kV network, which on that occasion has a remarkable transmission significance, the construction of the aforementioned substation greatly helps in better utilization of the 400 kV network, and thus substantially reducing losses in the transmission network. In addition, as one of the main advantages of the construction of the SS 400/110 kV Lastva, is that it is part of a broader project of connecting sub-maritime DC cable to Italy.



1. Construction of SS 400/110 kV Lastva CGES

2. Construction of 400 kV overhead line Lastva – Pljevlja CGES

3. Introduce 400 kV overhead line Podgorica – Trebinje in SS Lastva by constructing 2× 400 kV overhead line Lastva – Čevo (Introduce 400 kV overhead line Podgorica – Trebinje)

CGES

4. Construction of submarine DC cable (Montenegro – Italy) TERNA


2016 2017 2018 2019 2020


1. Construction of SS 400/110 kV Lastva

CGES 1.1.2016 31.12.2017

2. Construction of 400 kV overhead line Lastva – Pljevlja

CGES 1.1.2016 31.12.2017

3. Introduce 400 kV overhead line Podgorica – Trebinje

CGES 1.1.2016 31.12.2017

4. Construction of submarine DC cable

TERNA 1.1.2016 31.12.2017


Page: 72

(Montenegro – Italy)



2020)

1. Construction of SS 400/110 kV Lastva

CGES 13.720.000 5.600.000 19.320.000

2. Construction of 400 kV overhead line Lastva – Pljevlja

CGES 16.400.000 11.000.000 27.400.000

3.

Introduce 400 kV overhead line Podgorica – Trebinje

CGES 11.840.000 3.900.000 15.740.000

4.

Construction of submarine DC cable (Montenegro – Italy)

TERNA 30.000.000 91.000.000 121.000.000

Total (1-4) 71.960.000 111.500.000 183.460.000


In accordance with the laws of Montenegro on environmental impact, part of the required studies on the environmental impact of individual Projects has been developed, and the rest will be done in accordance with the implementation timeline of the Project.

Projects do not have explicitly expressed social effect, but will result in enhanced security of electricity supply of consumers in Montenegro.


Page: 73

10.1.6. Projects of construction of new substations 110/x kV


Construction of SS 110/35 kV Kolašin (Drijenak)

Near Kolašin there are significant tourism facilities and according to the adopted urban plan significant consumption increase is expected in this area.

Construction of SS 110/10 kV Nikšić 2 (Kličevo)

In the winter peak load regimes in the distribution area of Nikšić there is not enough transformation reserve for supplying the inner city area. Also, the existing SS 110/35 kV Nikšić, as the oldest transformer station in Montenegro, requires reconstruction and therefore the construction of another power supply point of the town of Nikšić.

Construction of SS 110/35 kV Žabljak

Due to the dynamic development of the region as a winter tourist centre it is necessary to increase the transform capacity and provide a secure and more reliable supply of Žabljak with construction of SS 110/35 kV and its connection with SS Pljevlja.

Construction of SS 110 kV/x kV Zeta (Golubovci)

With the construction of SS Golubovci the reliability and security of supply will increase in the area of Zeta.

Construction of SS 110/x kV Highway 1

In the area of the loop construction of highway Bar – Boljare, investor predicted supply point Gornje Mrke (former proposed location was Smokovac).

Construction of SS 110/x kV Highway 2

In the area of Mataševo, highway investor predicted construction of SS 110/x kV Highway 2, as a second supply point for Smokovac – Mateševo section.

Construction of TS Brezna (I phase - transformation 110/35 kV)

TS Brezna is being built in order to connect WPP Krnovo and securing two sided supply of SS Žabljak.

Construction of SS 110/35 kV Radovići (Luštica)

For the connection of new consumers on the Luštica peninsula it is necessary to build a new SS 110/35 kV in Radovići (GIS equipment).



1. Construction of SS 110/35 kV Kolašin (Drijenak) CGES

2. Construction of SS 110/10 kV Nikšić 2 (Kličevo) CGES

3. Construction of SS 110/35 kV Žabljak CGES

4. Construction of SS 110 kV/x kV Zeta (Golubovci) CGES, EPCG

5. Construction of SS 110/x kV Highway 1 Government/highway investor

6. Construction of SS 110/x kV Highway 2 Government/highway investor

7. Construction of TS Brezna (I phase - transformation 110/35 kV) WPP Krnovo Investor

8. Construction of SS 110/35 kV Radovići (Luštica) CGES, EPCG


Page: 74


2016 2017 2018 2019 2020


1. Construction of SS 110/35 kV Kolašin (Drijenak)

CGES 1.10.2019 31.12.2020

2. Construction of SS 110/10 kV Nikšić 2 (Kličevo)

CGES 1.1.2016 31.12.2016

3. Construction of SS 110/35 kV Žabljak

CGES 1.10.2017 31.12.2020

4. Construction of SS 110 kV/x kV Zeta (Golubovci)

CGES, EPCG 1.10.2016 31.12.2019

5. Construction of SS 110/x kV Highway 1

Government/ highway investor

1.1.2017 31.12.2019



1.1.2017 31.12.2019

7.


WPP Krnovo Investor

1.1.2016 31.12.2016

8. Construction of SS 110/35 kV Radovići (Luštica)

CGES, EPCG 1.1.2016 31.12.2018



2020)

1.

Construction of SS 110/35 kV Kolašin (Drijenak)

CGES 50.000 1.450.000 1.500.000

2. Construction of SS 110/10 kV Nikšić 2 (Kličevo)

CGES 240.000 240.000

3. Construction of SS 110/35 kV Žabljak

CGES 50.000 200.000 400.000 1.900.000 2.550.000

4. Construction of SS 110 kV/x kV Zeta (Golubovci)

CGES, EPCG 10.000 120.000 900.000 970.000 2.000.000



2.000.000 1.000.000 1.000.000 4.000.000



1.750.000 1.000.000 750.000 3.500.000

7.


WPP Krnovo Investor 5.000 25.000 50.000 1.500.000 950.000 2.530.000

8.

Construction of SS 110/35 kV Radovići (Luštica)

CGES, EPCG 3.400.000 6.700.000 7.700.000 17.800.000

Total (1-8) 3.655.000 10.645.000 10.850.000 4.620.000 4.300.000 34.120.000


In accordance with the laws of Montenegro on environmental impact, all required studies on the environmental impact of individual Projects will be developed.



Page: 75

10.1.7. Projects of construction of new 110 kV transmission lines


Construction of 110 kV overhead line Tivat-Kotor

Construction of 110 kV overhead line Tivat-Kotor is the project of connecting one of the most important tourist centres of Montenegro to transmission network, which would significantly reduce the problem of power supply.

Construction of the 110 kV overhead line Virpazar- Ulcinj

The area of Ulcinj is supplied from SS 110/35 kV Ulcinj, via one 110 kV overhead line and one 35 kV overhead line from SS 110/35 kV Bar. Construction of 110 kV overhead line Virpazar - Ulcinj would allow two sided supply of SS Ulcinj, to ensure the (n-1) criteria for security of supply and thereby increase the level of consumption supply.

Construction of 110 kV overhead line Podgorica 5 - Zeta (Golubovci)

Podgorica 5 - Zeta (Golubovci) overhead line is used to connect the SS 110 kV/x kV Zeta (Golubovci).

Construction of 110 kV overhead line Vilusi - Herceg Novi

Bearing in mind that the construction of 110 kV overhead line SS Vilusi - SS Herceg Novi is envisaged, it is necessary to expand the existing transformer station SS Vilusi and provide its connection on the principle of input / output to the overhead line Nikšić - Bileća.

Construction of 110 kV overhead line Lastva - Kotor

In the phase of connecting 110 kV coast network with SS 400/110 Lastva Grbaljska, two sided supply of SS Kotor would be achieved with construction of double 110 kV overhead line. Double overhead line would go to the site prior to the airport and the first system would be connected to the SS Kotor while second system possibly in the next phase of development of 110 kV coast network to the SS Tivat.

Construction of 110 kV cable Kličevo - Nikšić

110 kV cable Kličevo – Nikšić is used to connect SS 110/10 kV Nikšić 2 (Kličevo).

Construction of 110 kV connection Podgorica 4 - Podgorica 1

110 kV connection Podgorica 4 - Podgorica 1 (a combination of cable and overhead line) is constructed because the construction of SS Podgorica 6 is shifted after 2020.

Construction of 110 kV overhead line Brezna - Žabljak

110 kV overhead line Brezna - Žabljak is used to connect TS Brezna (I phase - transformation 110/35 kV).

Construction of 2×110 kV cable Tivat - Radovići (Luštica)

2×110 kV cable Tivat - Radovići (Luštica) is used to connect SS 110/35 kV Radovići (Lustica).

Construction of 110 kV overhead line Podgorica 1 – Highway 1

110 kV overhead line Podgorica 1 - Highway 1 is used to connect SS 110/x kV Highway 1

Introduction of 110 kV overhead line Podgorica - Trebješica in SS Highway 2

With the introduction of the 110 kV overhead line Podgorica - Trebješica in SS Highway 2, SS Highway 2 will be connected to the transmission line on the principle "input-output".


Page: 76



1. Construction of 110 kV overhead line Tivat-Kotor CGES

2. Construction of the 110 kV overhead line Virpazar- Ulcinj CGES

3. Construction of 110 kV overhead line Podgorica 5 - Zeta (Golubovci) CGES

4. Construction of 110 kV overhead line Vilusi - Herceg Novi CGES

5. Construction of 110 kV overhead line Lastva - Kotor CGES

6. Construction of 110 kV cable Kličevo - Nikšić CGES

7. Construction of 110 kV connection Podgorica 4 - Podgorica 1 CGES

8. Construction of 110 kV overhead line Brezna - Žabljak CGES

9. Construction of 2×110 kV cable Tivat - Radovići (Luštica) CGES

10. Construction of 110 kV overhead line Podgorica 1 – Highway 1 Highway investor

11. Introduction of 110 kV overhead line Podgorica - Trebješica in SS Highway 2

Highway investor


2016 2017 2018 2019 2020


1. Construction of 110 kV overhead line Tivat-Kotor

CGES 1.1.2016 30.9.2016

2. Construction of the 110 kV overhead line Virpazar- Ulcinj

CGES 1.7.2016 31.12.2019

3. Construction of 110 kV overhead line Podgorica 5 - Zeta (Golubovci)

CGES 1.10.2016 31.12.2019

4. Construction of 110 kV overhead line Vilusi - Herceg Novi

CGES 1.10.2016 31.12.2020

5. Construction of 110 kV overhead line Lastva - Kotor

CGES 1.7.2016 31.12.2019

6. Construction of 110 kV cable Kličevo - Nikšić

CGES 1.1.2016 31.12.2016

7. Construction of 110 kV connection Podgorica 4 - Podgorica 1

CGES 1.1.2016 31.12.2018

8. Construction of 110 kV overhead line Brezna - Žabljak

CGES 1.1.2018 31.12.2018

9. Construction of 2×110 kV cable Tivat - Radovići (Luštica)

CGES 1.1.2016 31.12.2018

10. Construction of 110 kV overhead line Podgorica 1 – Highway 1

Highway investor 1.1.2017 31.12.2019


Highway investor 1.1.2017 31.12.2019


Page: 77



2020)

1. Construction of 110 kV overhead line Tivat-Kotor

CGES 354.000 345.000

2. Construction of the 110 kV overhead line Virpazar- Ulcinj

CGES 600.000 1.350.000 2.275.000 1.475.000 5.700.000

3.

Construction of 110 kV overhead line Podgorica 5 - Zeta (Golubovci)

CGES 10.000 160.000 980.000 2.005.000 3.155.000

4. Construction of 110 kV overhead line Vilusi - Herceg Novi

CGES 5.000 15.000 23.000 650.000 2.390.000 3.083.000

5. Construction of 110 kV overhead line Lastva - Kotor

CGES 5.000 136.000 642.000 987.000 1.770.000

6. Construction of 110 kV cable Kličevo - Nikšić

CGES 756.000 756.000

7. Construction of 110 kV connection Podgorica 4 - Podgorica 1

CGES 200.000 550.000 793.000 1.543.000

8. Construction of 110 kV overhead line Brezna - Žabljak

CGES 720.000 720.000

9. Construction of 2×110 kV cable Tivat - Radovići (Luštica)

CGES Funding for this project is provided within the budget for

construction of SS 110/35 kV Luštica

10. Construction of 110 kV overhead line Podgorica 1 – Highway 1

Highway investor

1.150.000 650.000 500.000 2.300.000


Highway investor

400.000 350.000 200.000 950.000

Total (1-11) 1.930.000 3.761.000 6.433.000 5.817.000 2.390.000 20.331.000


In accordance with the laws of Montenegro on environmental impact, all required studies on the environmental impact of individual Projects have already been developed.



Page: 78

10.1.8. Projects of new interconnections with neighbouring systems


On the northern part of Montenegro, towards Bosnia and Herzegovina and Serbia there is not even one 400 kV connection. Taking into account ambitious plans for the development of generation capacities in Bosnia and Herzegovina and Serbia, as well as Project of construction of undersea cable between Montenegro and Italy, 400 kV connection between the two systems with the system of Montenegro would be of great benefit in the case of exports from Bosnia and Herzegovina, Serbia, Bulgaria or Romania to Italy and would provide a safe and uninterrupted transit of electricity.

New interconnection between Montenegro, Bosnia and Herzegovina or Serbia is obligation under the Contract on coordination of the Project realization of HVDC undersea cable between Montenegro and Italy in order to provide secure placement of energy through submarine cable.

400 kV overhead line Pljevlja 2 – Bajina Bašta: Realization of the Project includes construction of a new 400 kV overhead line Pljevlja - Bajina Bašta, as well as the construction of a new 400 kV high-voltage field in the SS 400/220/110 kV Pljevlja 2.

400 kV overhead line Pljevlja 2 - Višegrad: Realization of the Project includes construction of a new 400 kV overhead line Pljevlja - Višegrad, as well as the construction of a new 400 kV high-voltage field in the SS 400/220/110 kV Pljevlja 2.



1. Construction of 400 kV overhead line Pljevlja 2 – Bajina Bašta

CGES, EMS

2. Construction of 400 kV overhead line Pljevlja 2 – Višegrad CGES, Elektroprijenos BiH


2016 2017 2018 2019 2020



CGES, EMS 1.7.2016 31.12.2019

2. Construction of 400 kV overhead line Pljevlja 2 – Višegrad

CGES, Elektroprijenos BiH

1.7.2017 31.12.2020



2020)


CGES, EMS 20.000 2.630.000 3.000.000 2.600.000 8.250.000

2. Construction of 400 kV overhead line Pljevlja 2 – Višegrad

CGES, Elektroprijenos BiH

300.000 1.200.000 1.800.000 1.500.000 4.800.000

Total (1-2) 20.000 2.930.000 4.200.000 4.400.000 1.500.000 13.050.000


In accordance with the laws of Montenegro on environmental impact, all required studies on the environmental impact of individual Projects have already been developed.


Page: 79


10.1.9. Projects of reconstruction of transmission facilities


In the framework of this Project/Programme following reconstructions are necessary:

Replacement of high-voltage equipment in substations

In order to fulfil the conditions for reliable and secure supply of electricity to customers, CGES carries out replacement of equipment in existing facilities - substations.

Reconstruction of 110 kV overhead line Lastva - Tivat - Phase II

Reconstruction of 110 kV overhead line Budva -Lastva-Tivat is needed in order to increase operational safety and transmission capacity of the overhead line.

Reconstruction of SS Podgorica 2

Substitution of 400/110 kV transformer of 300 MVA, with a new one.

Reconstruction of the 110 kV overhead line Budva - Lastva

Reconstruction of 110 kV Budva-Lastva-Tivat is needed in order to increase operational safety and transmission capacity of the overhead line.

Reconstruction and expansion of SS 110/35 kV Pljevlja 1

Reconstruction and expansion of SS Pljevlja 1 will cover the installation of 110 kV connection field and replacement of collecting portals.

Revitalization of 110 kV overhead lines

Revitalization of 110 kV overhead lines, with replacement of equipment and reconstruction, is needed due to reduced operational reliability and/or increased distribution consumption.

Revitalization of 110 kV overhead line Budva - Podgorica 2

110 kV overhead line Budva-Podgorica 2 is very important for the supply of coastal municipalities. In the summer months overhead line is loaded to the maximum so it is necessary to carry out it’s revitalization in the coming period.

Revitalization of SS 110/35 kV Nikšić

Complete replacement of AB portals with steel grid portals is envisaged.

Expansion of SS Mojkovac

There is only one 110/35 kV transformer in SS 220/110/35 kV Mojkovac. In order to achieve more secure power supply it is necessary to install second transformer 110/35 kV, 20 MVA.

Expansion of SS Tivat

Expansion of SS Tivat is needed in order to connect 2x110 kV cable Tivat - Radovići (Luštica).

Reconstruction of SS Vilusi

Reconstruction and expansion of the existing SS Vilusi provides its connection on the principle of input/output to 110 kV overhead line Nikšić - Bileća, as well as connection of new 110 kV overhead line Vilusi - Herceg Novi.

Expansion of SS Herceg Novi

Expansion of SS Herceg Novi with construction of a new 110 kV overhead line field is needed in order to connect new 110 kV overhead line Vilusi - Herceg Novi.


Page: 80

Expansion of SS Virpazar

Expansion of SS Virpazar is needed in order to connect 110 kV overhead line Virpazar - Ulcinj.

Expansion of SS Ulcinj

Expansion of SS Ulcinj is needed in order to connect 110 kV overhead line Virpazar - Ulcinj.

Expansion of SS Podgorica 1

Construction of the new overhead line field in SS Podgorica 1 is needed in order to connect 110 kV connection Podgorica 1 – Podgorica 4.



1. Replacement of high-voltage equipment in substations CGES

2. Reconstruction of 110 kV overhead line Lastva - Tivat - Phase II CGES

3. Reconstruction of SS Podgorica 2 CGES

4. Reconstruction of the 110 kV overhead line Budva - Lastva CGES

5. Reconstruction and expansion of SS 110/35 kV Pljevlja 1 CGES

6. Revitalization of 110 kV overhead lines CGES

7. Revitalization of 110 kV overhead line Budva - Podgorica 2 CGES

8. Revitalization of SS 110/35 kV Nikšić CGES

9. Expansion of SS Mojkovac CGES

10. Expansion of SS Tivat CGES

11. Reconstruction of SS Vilusi CGES

12. Expansion of SS Herceg Novi CGES

13. Expansion of SS Virpazar CGES

14. Expansion of SS Ulcinj CGES

15. Expansion of SS Podgorica 1 CGES


2016 2017 2018 2019 2020


1. Replacement of high-voltage equipment in substations

CGES 1.1.2016 31.12.2020

2.

Reconstruction of 110 kV overhead line Lastva - Tivat - Phase II

CGES 1.7.2016 31.12.2018

3. Reconstruction of SS Podgorica 2

CGES 1.10.2016 31.12.2018

4. Reconstruction of the 110 kV overhead line Budva - Lastva

CGES 1.7.2016 30.6.2019

5. Reconstruction and expansion of SS 110/35 kV Pljevlja 1

CGES 1.10.2018 30.6.2020

6. Revitalization of 110 kV overhead lines

CGES 1.7.2016 31.12.2019

7. Revitalization of 110 kV overhead line Budva - Podgorica 2

CGES 1.4.2016 30.6.2018

8. Revitalization of SS 110/35 kV Nikšić

CGES 1.4.2016 30.9.2017

9. Expansion of SS Mojkovac

CGES 1. 4. 2016 31. 12. 2016

10. Expansion of SS Tivat

CGES 1. 1. 2016 31. 12. 2018

11. Reconstruction of SS Vilusi

CGES 1. 10. 2016 31. 12. 2020

12. Expansion of SS Herceg Novi

CGES 1. 10. 2016 31. 12. 2020


Page: 81

13. Expansion of SS Virpazar

CGES 1. 7. 2016 31. 12. 2019

14. Expansion of SS Ulcinj

CGES 1. 7. 2016 31. 12. 2019

15. Expansion of SS Podgorica 1

CGES 1. 1. 2016 31. 12.2018


Activity Responsibility 2016 2017 2018 2019 2020

Total (2016-2020)

1. Replacement of high-voltage equipment in substations

CGES 536.000 970.000 1.016.000 1.798.000 200.000 4.520.000

2. Reconstruction of 110 kV overhead line Lastva - Tivat - Phase II

CGES 70.000 1.180.000 1.072.000 2.322.000

3. Reconstruction of SS Podgorica 2

CGES 400.000 300.000 1.300.000 2.000.000

4. Reconstruction of the 110 kV overhead line Budva - Lastva

CGES 70.000 545.000 870.000 1.485.000

5. Reconstruction and expansion of SS 110/35 kV Pljevlja 1

CGES 20.000 50.000 700.000 770.000

6. Revitalization of 110 kV overhead lines

CGES 256.000 180.000 100.000 536.000

7. Revitalization of 110 kV overhead line Budva - Podgorica 2

CGES 100.000 360.000 50.000 510.000

8. Revitalization of SS 110/35 kV Nikšić

CGES 100.000 100.000 200.000

9. Expansion of SS Mojkovac

CGES 100.000 100.000 200.000

10. Expansion of SS Tivat CGES

Funding for this project is provided within the budget for construction of SS 110/35 kV Luštica

11. Reconstruction of SS Vilusi

CGES Funding for this project is provided within the budget for construction of 110 kV overhead line Vilusi - Herceg Novi

12. Expansion of SS Herceg Novi

CGES Funding for this project is provided within the budget for construction of 110 kv overhead line Vilusi Herceg Novi

13. Expansion of SS Virpazar

CGES Funding for this project is provided within the budget for construction of 110 kV overhead line Virpazar - Ulcinj

14. Expansion of SS Ulcinj CGES

Funding for this project is provided within the budget for construction of 110 kV overhead line Virpazar – Ulcinj

15. Expansion of SS Podgorica 1

CGES Funding for this project is provided within the budget for construction of 110 kV connection Podgorica 1 - Podgorica 4

Total (1-15) 1.632.000 3.735.000 4.328.000 1.948.000 900.000 12.543.000


In accordance with the laws of Montenegro on environmental impact, all required studies on the environmental impact of individual Projects will be developed.



Page: 82

10.1.10. Projects of secondary systems (NDC, protection, management, communication)


The management system is an inherent part of the transmission system, which must be continuously developed and maintained in accordance with the requirements of the time. In this period realization of a series of projects related to the requirements or recommendations of ENTSO-E is planned, which relate to the procurement of both new hardware and software solutions in the field of information technology and telecommunications.

In order to follow the latest developments in the field of protection and management, it is planned to supply all CGES substations with microprocessor devices for protection and management.

New SCADA\EMS system will enable automatic management of generation - AGC (regulation of active power and frequency and monitoring of system reserves), voltage reactive regulation, implementation of security analysis in real time, necessary forecasting for the operation planning of the power system, management system for ancillary services, which will enable CGES to meet the requirements of modern management practices of power systems in accordance with ENTSO-E standards.

Integrated information system of the transmission system operator is a Project which should ultimately allow full coverage of all business processes with relevant software tools in order to increase the level of efficiency, improve planning quality, reporting and monitoring of the implementation of business activities. Implementation of the Project will create the necessary preconditions to increase efficiency, business transparency will be further enhanced and will enable the appropriate user interface for all interested relevant entities (such as ERA).



1. Reconstruction of protection system across the network CGES

2. SCADA for dispatching centre with EMS system (including the estimate of the N-1 safety factor in the power system in real time) (SCADA for dispatching centre with EMS system)

CGES

3. Integrated information system of TSO CGES

4. Development, reconstruction, metering and protection in SS CGES

5. Hardware and software for re-implementation of the Financial Management Information System (FMIS) – Data Code (Hardware and Software for FMIS)

CGES

6. Expanding SCADA system with module for external system observability (Expanding SCADA system)

CGES

7. Module for data submission to the Transparency platform r2 (Module for Transparency platform r2)

CGES


2016 2017 2018 2019 2020


1. Reconstruction of protection system across the network

CGES 1.7.2016 31.12.2018

2. SCADA for dispatching centre with EMS system

CGES 1.1.2016 30.6.2018

3. Integrated information system of TSO

CGES 1.10.2016 30.6.2019

4.

Development, reconstruction, metering and protection in SS

CGES 1.4.2016 31.3.2019


Page: 83

5. Hardware and Software for FMIS

CGES 1.7.2016 30.6.2017

6. Expanding SCADA system

CGES 1.4.2016 31.12.2016

7. Module for Transparency platform r2

CGES 1.7.2016 30.6.2019


Activity Responsibility 2016 2017 2018 2019 2020 Total

(2016-2020)

1. Reconstruction of protection system across the network

CGES 820.000 2.270.000 1.010.000 4.100.000

2. SCADA for dispatching centre with EMS system

CGES 1.085.000 2.015.000 600.000 3.700.000

3. Integrated information system of TSO

CGES 100.000 200.000 200.000 160.000 660.000

4.

Development, reconstruction, metering and protection in SS

CGES 220.000 237.000 24.000 28.000 509.000

5. Hardware and Software for FMIS

CGES 60.000 60.000 120.000

6. Expanding SCADA system

CGES 50.000 50.000

7. Module for Transparency platform r2

CGES 4.000 7.000 7.000 4.000 22.000

Total (1-7) 2.339.000 4.789.000 1.841.000 192.000 9.161.000


These Projects do not have an impact on the environment and special studies in this regard (SEA or EIA) are not needed.

There is no recognizable social impact of these Projects, except the enhanced security of electricity supply of consumers in Montenegro.


Page: 84

10.1.11. Develop documentation for route selection for the construction of new transmission lines


Before starting the construction of a new transmission line it is necessary to develop (get) a number of documents in order to make route selection first and then get building permission.

This is regulated by larger number of laws and the most important are the Energy Law, Environmental Law, Law on Spatial Planning and Construction, the Law on the Protection of Cultural Property. In line with this and other laws it is necessary to develop documentation in order to make route selection for the transmission line and acquire the necessary conditions for the possibility of the construction of transmission lines.

For route selection of new transmission lines, it is necessary to develop technical documentation (concept design).



1. Develop documentation for route selection of new transmission lines



2016 2017 2018 2019 2020


1. Develop documentation for route selection of new transmission lines


1.1.2016 31.12.2020


Particular funding for these activities is not planned. They are included in the cost estimates of each transmission line in particular.


Documentation development for route selection of transmission lines does not have an impact on the environment.

There is no recognizable social impact of these Projects.


Page: 85

10.1.12. Project of estimation of the capacity of the power system for connection of RES (hosting capacity) and analysis of the possibility of connection of small HPP, WPP and PV power plants in the power system in terms when they will be built


Renewable energy sources (in this context large HPP are not considered), in addition to positive effects, have some negative effects in the power system. Because of its unpredictability and rapid variability in the generation, which is mostly related to wind power plants, but partly to photovoltaic power plants and small hydro power plants, in the power system, these sources cause technical problems with financial consequences. Technical problems are primarily related to the frequency maintenance, respectively regulation of active power in the system, where a need for greater power reserve in the system appears. Increased power reserve causes higher costs in the system.

Since these types of power plants have the advantage of dispatch, they could impact the decreased level of generation, and partly the reduction in revenues of other plants. In addition, the price of energy from these renewable sources, especially from photovoltaic power plants, is higher than from conventional sources. The funds for the subsidized price will be ensured from certain fees for renewable sources paid by all electricity consumers.

Notwithstanding the increased costs in the power system, the positive effects of the construction of renewable energy sources and the fulfilment of obligations towards the EU are what motivate national policies to stimulate them. They should have a reasonable level so the share of renewable sources would be appropriate to the size of the system, the economic situation in the country and the level of technological development of the country. In order to determine a reasonable level it is necessary to develop special study analyses of the power system.

Taking into account the connecting dynamics of wind farms, as well as other power plants in the period up to 2030, particularly recognizing the possibilities of hydropower plants to be built in this period, it can be concluded that the technical side of the problem caused by the wind farms, SHPPs and PV power plant is solvable.

Out of these three types of renewable energy sources, certainly the wind farms can cause the biggest problems in the network. There are two reasons for this. First, their generation is the most variable and least predictable. And secondly, by installed capacity it will be the largest concentration of the connected power.

Thus, it is possible to ensure stable operation of the power system and a sufficient level of power reserve in the system. This was shown in some studies that have been developed lately. However, it will be necessary to monitor the situation and do regular analysis of the stability of the power system and the available power reserves in order to have time to spot potential problems.



1. Drafting the terms of reference (TOR) CGES, ERA, ME

2. Tendering and selection of contractor CGES, ME

3. Preparation of a study on the estimation of the capacity of the power system for connection of RES and operating analysis of the power system in terms when WPP, small HPP and PV power plants will be built (Preparation of a study on the estimation of the capacity of the power system for connection of RES)

ERA, ME


Page: 86


2016 2017 2018 2019 2020


1. Drafting the terms of reference (TOR)

CGES, ERA, ME 1.10.2016 31.12.2016

2. Tendering and selection of contractor

CGES, ME 1.1.2017 31.3.2017

3.

Preparation of a study on the estimation of the capacity of the power system for connection of RES

ERA, ME 1.4.2017 31.12.2017


Activity Responsibility 2016 2017 2018 2019 2020 Total (2016-2020)


CGES, ERA, ME 5.000 5.000


CGES, ME 1.000 1.000

3.

Preparation of a study on the estimation of the capacity of the power system for connection of RES

ERA, ME 100.000 100.000

Total (1-3) 6.000 100.000 106.000


The Project has no environmental impact.

The Project has no social impact.


Page: 87

10.1.13. Projects of construction and reconstruction of the primary distribution network


The Strategy assumes and builds upon the goals of development of the distribution system that were already defined in previous Strategy (SRE-2007), primarily in the adequate expansion of the network in order to support the increase in consumption, increase system efficiency and reduce losses (both technical and commercial) and improving the quality of supply (reduction of supply interruptions). These are the basic functions of distribution and therefore the most critical both for the operation of the system and for the national economy.

At the distribution level, the main problems are the further expansion of the network to meet increasing consumption and reduce electricity losses. Distribution losses are still above acceptable international standards.

There are problems in ensuring standard conditions for the realization of investment Projects: incomplete project documentation, lack of building permits or their delay, incomplete financial resources. Many problems are related to property rights, what has a negative impact on the Projects of reconstruction, development and construction of the distribution system.

The structure and characteristics of distribution network objects indicate that the historical development of the network is based mainly on two transformation levels of 35/10 kV and 10/0.4 kV. In certain areas mainly sparsely populated, even 35/0.4 kV transformation exists, as well as a smaller part of the transformation of 35/6 kV for the needs of the industry (water plants and mines).

It should be noted that the development of the distribution network in recent years has not sufficiently been harmonized with the spatial planning documents, causing the distribution system not to be able to adequately respond to the growing demands of consumption, or very intensive construction, especially in Podgorica and the coastal region of Montenegro, which often frustrates the investors.

Development of distribution network should lead to increased security of supply (provision of double sided supply, especially in the most important points of the distribution network) and to reduce losses (technical and commercial) of electricity to a level below 10%, as well as creating opportunities to connect new users. The construction of new power lines and renovation of existing ones is envisaged, followed by the construction of new substations, reconstruction and expansion of the existing substation and reconstruction directed to increase the capacity of existing substations.

With the increase of electricity consumption, such a concept of distribution network has become inadequate, particularly in urban areas with higher load density. Conducted analysis and international experience showed the need for introduction of direct 110/10 kV transformation. In Montenegro, this began in the 80s of last century, with construction of SS 110/10 kV Podgorica 3 and SS 110/10 kV Podgorica 4, and construction of SS 110/10 kV Podgorica 5 is completed.



1. Construction of new SS EPCG FU Distribution

2. Reconstruction of SS EPCG FU Distribution

3. Construction of new overhead lines EPCG FU Distribution

4. Reconstruction of overhead lines EPCG FU Distribution

5. Install equipment in SS EPCG FU Distribution

6. Projecting and revision EPCG FU Distribution


Page: 88


2016 2017 2018 2019 2020


1. Construction of new SS EPCG FU Distribution

1.4.2016 31.12.2020


1.1.2016 30.6.2020

3. Construction of new overhead lines


1.4.2016 30.9.2020

4. Reconstruction of overhead lines


1.7.2016 30.6.2020

5. Install equipment in SS EPCG FU Distribution

1.10.2016 31.3.2020

6. Projecting and revision EPCG FU Distribution

1.1.2017 31.12.2020



2020)

1. Construction of new SS


1.302.500 1.283.190 750.000 2.550.000 1.900.000 7.785.690


1.128.300 50.000 50.000 50.000 50.000 1.328.300

3. Construction of new overhead lines


913.530 1.745.830 1.700.000 480.000 3.179.350 8.018.710

4. Reconstruction of overhead lines


155.460 150.000 150.000 750.000 1.650.000 2.855.460

5. Install equipment in SS


177.060 50.000 978.390 1.190.890 387.730 2.784.070

6. Projecting and revision


100.000 100.000 100.000 100.000 400.000

Total (1-6) 3.676.850 3.379.020 3.728.390 5.120.890 7.267.080 23.172.230


Certain facilities of distribution network have an impact on the environment (at least changing the landscape). In accordance with the laws of Montenegro and all the requirements laid down for environmental protection all the necessary studies of environmental impact will be prepared.

These projects do not have a special social impact.


Page: 89

10.1.14. Projects of the secondary distribution network


As is the case of the primary network, secondary distribution network is also in such a condition that it requires numerous interventions in order to ensure a secure supply of consumers.

Secondary distribution network Projects are related to the renovation of existing and construction of new substations, construction of new overhead lines and the reconstruction (reconstruction of existing), replacement and installation of new equipment parts.

Necessary interventions and investments are needed in all parts of the distribution network, in terms of territorial distribution.



1. Reconstruction of existing 10/0.4 kV substation, construction of new 10/0.4 kV substations, construction of new 10 kV and 0.4 kV overhead and underground lines, reconstruction of existing 10 kV and 0.4 kV overhead and underground lines, preparation of project documentation (Upgrading and reconstruction of secondary distribution network)



2016 2017 2018 2019 2020


1.

Upgrading and reconstruction of secondary distribution network

EPCG FU Distribution 1.1.2016 31.12.2020



1. Upgrading and reconstruction of secondary distribution network


2.111.205 4.706.404 2.092.500 2.092.500 8.470.000 19.472.609

Total 2.111.205 4.706.404 2.092.500 2.092.500 8.470.000 19.472.609


There is no significant effect on the environment, apart the changes in landscape. In any case, all laws and procedures will be respected.

New employments through this Programme are not expected so there is no significant social impact.


Page: 90

10.1.15. Projects of managing and automation of the distribution network


Building a modern management distribution centre is planned by 2016. The most of the SS and network on 35 kV and 10kV would be involved in the management centre by 2020. In the first phase the centre will have the functionality of SCADA, which will be supplemented with a set of distribution management functions in the final stages Distribution Management System, Geographic Information System, with functions for resource management (Asset Management) and set of functions for Work Permits/Instructions and Crew Management. Of course it is necessary to build supporting communication systems as well.

Modern standards of electricity supply quality require lower number and shorter supply interruption, which require works on the distribution network in terms of introducing new solutions such as the network automation, isolated or semi-isolated guides and similar. The installation of new guide on problematic sections of power line greatly reduces the number of failures (up to 80%) and distribution automation with remote controlled disconnectors allows quick network reconfiguration, fault isolation and supply of the healthy part.

In the next 5 years, Distribution will work on the concept of automation of the distribution network, to improve customer supply in the rural area in the most rational way, with relatively small investments.

In addition to the automation of network, quality parameters will be improved through compensation of reactive power, which affects the voltage conditions as well as losses.



1. Introduce SCADA system EPCG FU Distribution

2. Project of radio line digitalization EPCG FU Distribution

3. Software applications EPCG FU Distribution


2016 2017 2018 2019 2020


1. Introduce SCADA system


1.1.2017 30.9.2018

2. Project of radio line digitalization


1.1.2018 31.12.2018


1.4.2016 31.12.2016



2020)

1. Introduce SCADA system

EPCG FU Distribution 1.000.000 600.000 1.600.000

2. Project of radio line digitalization


500.000 500.000


25.210 25.210

Total (1-3) 25.210 1.000.000 1.100.000 2.125.210


No impact on the environment. Improve the quality of services, primarily to customers who provide vital public services and vulnerable customers, due to the possibility of identifying and reacting.


Page: 91

10.1.16. Development Programme of concept of the distribution network and the introduction of modern ICT, measurement systems and smart grid solutions


Modernization of SS, creates the condition for further operating rationalization of distribution networks, which is based on the remote control of SS and network. In last years all the reconstructions and construction of new facilities are being done in a way that the facilities are ready for remote control, so the Distribution will build management centre in the next 5 years.

Investments in new measuring points with the smart meters have already been proved to be economically viable investments in previous Pilot project. Smart meters and relocation of metering points solve the problems of commercial losses to a large extent. This makes investments in metering infrastructure quickly profitable investments.

Also, data from smart meters are considered as very valuable inputs for better network planning. Since the loss reduction is a top priority of distribution development, it is of strategic importance to intensively invest in the measurement infrastructure, both in meters and in metering points.

Together with investments in the primary and secondary network, it is the largest investment. All the consumers would switch to smart meters, which would provide the basis for further development of distribution and its services for consumers.

This Programme can be realized through the following:

Smart meters with a system of remote communication with the measurement centre are essential for the introduction of new innovative products on the electricity market.

Additional functions and services for consumers. In fact, the information system that is the core of the 'smart grid' offers additional possibilities for new functions, such as, remote object monitoring, technical security for the objects and alarms, automation of house/apartment (Home Automation), measurement and accounting for other infrastructure (water, gas, district heating), micro-production management for consumer (Prosumer-Producer Consumer) in terms of system services and similar.

The entire technical and economic assessments is needed on the state level which provides the analysis of overall costs and benefits caused by the introduction of 'smart grids' under different scenarios, different dynamics and ways of building the system.



1. New meters – measurement and distribution Project EPCG FU Distribution

2. Meters for new consumers and SS 35/10kV and SS 10/04kV EPCG FU Distribution

3. Meters for new consumers and reconstruction of metering points EPCG FU Distribution

4. Meter relocation (at no cost to the meter) - selective EPCG FU Distribution


Page: 92


2016 2017 2018 2019 2020


1. New meters – measurement and distribution Project

EPCG FU Distribution 1.1.2016 31.12.2018

2.

Meters for new consumers and SS 35/10kV and SS 10/04kV


1.1.2017 31.12.2020

3.

Meters for new consumers and reconstruction of metering points


1.1.2016 31.12.2016

4. Meter relocation (at no cost to the meter) - selective


1.1.2016 31.12.2016



2020)

1. New meters – measurement and distribution Project

EPCG FU Distribution 15.873.684 16.000.000 16.000.000 47.873.684

2. Meters for new consumers and SS 35/10kV and SS 10/04kV


200.000 200.000 200.000 200.000 800.000

3. Meters for new consumers and reconstruction of metering points


252.100 252.100

4. Meter relocation (at no cost to the meter) - selective


84.034 84.034

Total (1-4) 16.209.818 16.200.000 16.200.000 200.000 200.000 49.009.818


Project has no impact on the environment. Improve the quality of services, primarily to customers who provide vital public services and vulnerable customers, due to the possibility of identifying and reacting.


Page: 93

10.1.17. Project of distribution system capacity estimations for connection of RES (hosting capacity)


Over the past 60 years modern power systems have been developed according to the concept in which large electric generators inject electrical power (energy) through transformers in the high voltage transmission network. That transmission network was used for transmission of power to lower voltage levels, and through a series of distribution transformers and distribution networks to the consumers. The transfer of power (energy) is often taking place at a very long distance. With the development of new technologies (mainly for the production of electricity from renewable sources), which began with a very small capacities, and today these capacities are significantly greater, a new process was introduced. Generators are being connected in a large scale to the distribution network, and it is now called distributed generation of electricity.

Before the appearance of large scale construction of distributed sources, distribution networks were planned for one direction energy flow from the higher to lower voltage levels. However, the emergence of a large number of smaller sources changed the concept of distribution networks planning in this regard. About this problem, there are a lot of conflicting views. Does it bring more problems or benefits? However as they are renewable sources, they reduce the negative impact of power plants on the environment (reducing greenhouse gas emissions). It is also opportunity for smaller investors to emerge the business of electricity production.

There is a problem at the level of the power system and it is the frequency maintenance, and there are also problems at the local level, such as voltage control in some parts of the power system within acceptable limits.



1. Drafting the terms of reference (TOR) EPCG FU Distribution, CGES, ERA, ME

2. Tendering and selection of contractor EPCG FU Distribution, ME

3.

Preparation of a study that will give answers on a number of issues of which the most important is: how many and in what parts of the distribution system can renewable energy sources be connected, without endangering the stability of the system, what should be done in the distribution network, and how many investments in distribution network are needed, if the construction of renewable energy sources took place in accordance with the Strategy? (Preparation of study on distribution system capacity estimations for connection of RES)



2016 2017 2018 2019 2020

Activity Responsibility Start End 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1. Drafting the terms of

reference (TOR) EPCG FU Distribution, CGES, ERA, ME

1.10.2016 31.12.2016


EPCG FU Distribution, ME

1.1.2017 31.3.2017

3. Preparation of study on distribution system capacity estimations for connection of RES


1.4.2017 31.12.2017


Page: 94



2020)



5.000 5.000


EPCG FU Distribution, ME

1.000 1.000

3. Preparation of study on distribution system capacity estimations for connection of RES


120.000 120.000

Total (1-3) 5.000 121.000 126.000


Preparation of the study has no impact on the environment. This impact should be taken into account in the preparation and construction of the Projects.

There is no social impact.


Page: 95

10.2. KS 2: Renewable energy sources

10.2.1. Programme of the evaluation and competitiveness of certain renewable energy sources as well as recommendations for the introduction based on the natural capacities and economic assessment


The production of electricity from renewable energy sources has many positive effects for Montenegro. First of all, there is a reduction of deficit in the electricity system, the reduction of greenhouse gas emissions (if renewable energy generation replaces generation from coal), adoption and introduction of new technologies, and to some degree to increase employment.

This Project/Programme should process wind farms, photovoltaic plants, small hydro power plants, energy use of biomass and energy use of municipal waste.

Notwithstanding the increased costs in the power system, the positive effects of the construction of renewable energy sources and the fulfilment of obligations towards the EU is what motivate national policies to stimulate them. They should have a reasonable level so the share of renewable sources would be appropriate to the size of the system, the economic situation in the country and the level of technological development of the country.

Renewable energy sources (in this context HPP, biomass and municipal waste are not considered), in addition to positive effects, have some negative effects in the power system. Because of its unpredictability and rapid variability in the generation, which is mostly related to wind power plants, but partly to photovoltaic power plants, in the power system, these sources cause technical problems with financial consequences. Technical problems are primarily related to the frequency maintenance, respectively regulation of active power in the system, where a need for greater power reserve in the system appears. Increased power reserve causes higher costs in the system.

Since these types of power plants have the advantage of dispatch, they could impact the decreased level of generation, and partly the reduction in revenues of other plants. In addition, the price of energy from these renewable sources is higher than from conventional sources. The funds for the subsidized price will be ensured from certain fees for renewable sources paid by all electricity consumers.



1. Drafting the terms of reference (TOR) MSDT, ME, FA

2. Tendering and selection of contractor MSDT, ME, FA

3. Develop a comprehensive study of evaluation of the possibilities and integration economy of RES in the energy sector of Montenegro



2016 2017 2018 2019 2020



MSDT, ME, FA 1.4.2016 30.9.2016


MSDT, ME, FA 1.10.2016 31.12.2016

3. Develop a comprehensive study of evaluation of the possibilities and integration economy of RES in the energy sector


1.1.2017 31.12.2017


Page: 96

of Montenegro



2020)


MSDT, ME, FA 50.000 50.000


MSDT, ME, FA 10.000 10.000

3. Develop a comprehensive study of evaluation of the possibilities and integration economy of RES in the energy sector of Montenegro


250.000 250.000

Total (1-3) 60.000 250.000 310.000


Renewables are, in terms of environmental impact, undoubtedly the most desirable. Some of the Projects that will be candidates for the construction will require EIA.

Study itself does not have a direct social impact. However, depending on its results, and in particular its implementation the possibility of new employment appears.


Page: 97

10.2.2. Programme of the research and study for the possible realization of offshore wind farms, photovoltaic power plants and biomass projects (for electricity and/or heat generation) and accelerated dynamics of onshore wind farms


The Energy Strategy by 2030 does not explicitly envisage the construction of offshore wind farms but neither excludes them. Thus, there is space, at least for further research for possibility of constructing such plants. This Project/Programme should take into account the results of the IPA Power Project, which analysed the possibility of constructing offshore wind farms along the Adriatic coast. The Project was completed on 30.11.2015 and the experimental data will be collected until 2019 when the map of wind potentials will be published on the basis of the measured wind speed from anemometers placed on both sides of the Adriatic Sea. As for onshore wind farms, Strategy, and NREAP also, defined as a possibility but as a goal as well, the construction of about 150 MW of wind power plants by 2020. For additional construction, the size of the power system should be taken into account, the structure of other sources and economic situation, because on the incentives model.

The same applies to photovoltaic power plants, as well as biomass power plants, even if biomass power plants are not a problem for the power system technically speaking.

Offshore wind farms had a very dynamic expansion in the northern EU countries in the last decade. Through years of experience the technology of constructing the turbines was developing, where the capacity of the individual turbines reached up to 6 MW. On the other hand, the construction of offshore wind farms in deeper water and farther from the coast is possible. The average depth of the sea where offshore wind farms are built in these EU countries is between 22 and 25 m, and the average distance from the coast is about 29 km. This immediately implies a rather complex and expensive power transmission, first to the coast and then to consumers.

Photovoltaic power plants, as well as biomass and onshore power plants are already very mature technologies. Issues that should be processed by these studies and answers are: how realistic and technically - economically feasible is to build these power plants in Montenegro, the dynamics and the financing model in order to achieve the goals.



1. Drafting the terms of reference (TOR) ME, CGES, ERA

2. Tender announcement for individual studies and research programs ME, CGES, ERA

3. Selection of contractors for individual studies and research programs ME, CGES, ERA

4. Study on the possibility of realization of offshore wind farms and wind condition measurement

Contractor

5. Study on the possibility of realization of photovoltaic power plants Contractor

6. Study on the possibility of realization of biomass Projects (for electricity and/or heat generation)

Contractor

7. Study on the possibility of accelerated construction of an onshore wind farm Contractor


Page: 98


2016 2017 2018 2019 2020



ME, CGES, ERA 1.4.2016 31.3.2017

2. Tender announcement for individual studies and research programs

ME, CGES, ERA 1.7.2016 30.6.2017

3. Selection of contractors for individual studies and research programs

ME, CGES, ERA 1.10.2016 30.9.2017

4.

Study on the possibility of realization of offshore wind farms and wind condition measurement

Contractor 1.1.2018 30.9.2019

5. Study on the possibility of realization of photovoltaic power plants

Contractor 1.4.2017 30.9.2017

6.

Study on the possibility of realization of biomass Projects (for electricity and/or heat generation)

Contractor 1.1.2017 31.12.2017

7. Study on the possibility of accelerated construction of an onshore wind farm

Contractor 1.7.2017 31.3.2018



2020)


ME, CGES, ERA

75.000 25.000 100.000

2. Tender announcement for individual studies and research programs

ME, CGES, ERA

4.000 4.000 8.000

3. Selection of contractors for individual studies and research programs

ME, CGES, ERA

2.000 2.000 4.000

4.

Study on the possibility of realization of offshore wind farms and wind condition measurement

Contractor 60.000 100.000 160.000

5. Study on the possibility of realization of photovoltaic power plants

Contractor 70.000 70.000

6.

Study on the possibility of realization of biomass Projects (for electricity and/or heat generation)

Contractor 150.000 150.000

7. Study on the possibility of accelerated construction of an onshore wind farm

Contractor 60.000 20.000 80.000

Total (1-7) 81.000 311.000 80.000 100.000 572.000


Preparation of studies does not impact the environment, only the Programme of wind potential measurement (offshore) must satisfy the procedures envisaged by the laws.

There is no social impact.


Page: 99

10.2.3. Programme of construction of small hydropower plants / additional research of hydro potential


Gross hydro-energy potential of small water streams is estimated at the amount of 800 to 1,000 GWh / year, and it is estimated that the exploitable potential for construction of SHPP is about 400 GWh/year. It is sufficient potential for serious consideration.

The estimated potential for SHHP is based on rather stable ecological and specific limitations which exist on a number of small water streams in Montenegro. Additional research is necessary in order to fully evaluate the potential of SHHP which are realistic to be built. The effects of construction and exploitation of SHHP are still not sufficiently considered, but with the construction of SHPP, improving of the micro-climate, avoidance or mitigation of natural disasters can be achieved.

Due to the inability of exact presentation of numerous small hydro power plant Projects in Montenegro, and taking into account the Concessions that have already been issued for the construction of small hydropower plants, the assumption is that by 2020 the average annual generation from small hydropower plants would reach level of 422 GWh (with around 133 MW of installed capacity) what means that all technical potential for small hydro power plants from Water Master Plan of Montenegro (400 GWh) would be used, but which is considered underestimated on the basis of new measurements.

For the purpose of valorisation of available hydro potential, the Government of Montenegro has previously concluded 21 Concession Contracts for the construction of SHHP, in accordance with the Law on Concessions. Out of these, 14 Contracts have been concluded on the basis of four conducted tenders, and 7 Contracts for construction of SHPP of installed capacity up to 1 MW were concluded on the basis of Energy Permit issued by the Ministry of Economy, in accordance with the Energy Law. Contracts envisage the construction of 41 SHPP, with total installed capacity of about 72 MW and planned annual generation of about 244 GWh. Estimated value of investments for all planned SHPP is 109 million €. The first SHPP was put into operation in March 2013, while in 2014 construction of 6 SHPP was completed, out of which 5 SHPP received Operation Permits in April 2015, while one SHPP is still in test mode.



1. Gathering data and additional studies of potential locations for SHPP (Preparation of new Projects)

ME, WA, IHMS, EPA, local government, EPCG FU Distribution

2. Determining hydrological, technical and environmental conditions for construction of SHPP on potential locations (Determining construction conditions)

MSDT, WA

3. Flow measurement on potential locations of SHPP in order to create technical conditions for construction and optimal use of water streams (Flow measurement)

IHMS, contractors which have received Permits from ME

4. Creating conditions for construction, tendering procedure for concession rights and concession issuing to investors (Tender and concessions)

ME, MSDT, WA

5. Preparation of project documentation, obtaining permits and construction (Design and construction)

Contractor


Page: 100


2016 2017 2018 2019 2020


1. Preparation of new Projects


1.1.2016 31.12.2020

2. Determining construction conditions

MSDT, WA 1.1.2016 31.12.2016

3. Flow measurement


1.10.2016 1.10.2017

4. Tender and concessions

ME, MSDT, WA 1.1.2017 31.12.2018

5. Design and construction Contractor 1.1.2016 31.12.2020



2020)

1. Preparation of new Projects


70.000 50.000 40.000 40.000 30.000 230.000

2. Determining construction conditions

MSDT, WA 50.000 50.000

3. Flow measurement


20.000 50.000 20.000 90.000

4. Tender and concessions

ME, MSDT, WA

25.000 25.000 50.000

5. Design and construction

Contractor 18.000.000 23.000.000 25.000.000 20.000.000 15.000.000 101.000.000

Total (1-5) 18.165.000 23.125.000 25.060.000 20.040.000 15.030.000 101.420.000


Small hydro power plants can have a positive effect on other areas of water management, when power plants are appropriately planned and constructed. During the preparation of project documentation for individual Projects, the investor must perform EIA procedure.

Since the SHPP technology is relatively simple, domestic companies can be included, what implies creating jobs for local people.


Page: 101

10.2.4. Project of hydropower plants on the Morača river


The last tender for a system of hydro power plants on Morača River has not been successful (September 2011).

The tender was based on two main solutions related to HPP Andrijevo elevation (285 m and 250 m above sea level), but the bidders were also allowed to propose an alternative technical solution, provided that there is minimal generation of 600 GWh. There was no offer for any basic solution, nor a proposal for an alternative solution.

Last technical studies that were made in the period from 2009 to 2010, confirmed that the total installed capacity of the basic solution 1 is 238 MW with an expected generation of 721 GWh. According to this solution, construction of four HPP was planned: HPP Andrijevo, HPP Raslovići, HPP Milunovići and HPP Zlatica.

According to the solution 2 for the HPP Morača, backwater elevation of Andrijevo reservoir is lower (250 m above sea level instead of 285 meters above sea level), useful reservoir is smaller (100 million m3 instead of 250 million m3), generation is lower (616 GWh instead of 721 GWh) and the costs are lower (493.71 million € instead of 543 million €).

Solution 1 is more favourable than solution 2 from the technical and economical point of view, but is less favourable in terms of environmental protection, because solution 2 has no effect on the plateau of the Morača monastery, nor the landslide Đuđevina (which is on the opposite side of the monastery). Also, in this solution there is less road relocation, and the costs of land expropriation are lower. Therefore implementation of solution 2 is more probable. In both variants, the locations of all four dams are the same.

Since all the research works and preliminary design (building permit can be issued on its basis) are completed, their construction can start immediately after the adoption of appropriate offer. If the Montenegrin Government wants to renew the tender procedure, the tender documentation has been prepared and the procedure can start immediately. Of course, if adopted offer that has different technical solution compared to the solution 1 or 2 is approved, proper research works must be carried out and preliminary design has to be prepared. Both solutions are processed in draft DSP. It is envisaged that, when the Government adopts an offer for the HPP Morača, the contractor has to prepare DSP proposal with data from the adopted technical solutions and submit it to the Government for adoption.

The Ministry responsible for spatial planning has prepared at the same time the draft DSP and Strategic environmental assessment (SEA) for this Project.

Bearing in mind that the project HPP Morača is by far the most studied and documented Project, the Strategy envisages that the system of hydro power plants on river Morača is candidate that can emerge power system before other candidates of large HPP, but it might not be achieved before 2019. Now it is already 2022 as the earliest possible year of construction. The Strategy takes into account solution 2 (616 GWh/year and 238 MW).

Connection on the transmission network, depending on the results of study on the connection of HPP Morača, could be realized by connecting HPP Andrijevo on the 220kV overhead line Podgorica 1 - Pljevlja 2, while HPP Raslovići, HPP Milunovići and HPP Zlatica with 110kV overhead lines on section SS Kolašin - HPP Raslovići - HPP Milunovići - HPP Zlatica - SS Smokovac - SS Podgorica 1.


Page: 102



1. Preparation of Project on network connection (Preparatory phase) ME, CGES

2. The Government should decide on the implementation model, tender or direct concessions award (Implementation model)

ME, Government

3. Tender preparation and publishing or direct concession award (Tender or direct concession award)

ME, MSDT, WA

4. Obtaining a building permit, preparation of Environmental Impact Assessment (Building permit)

Concessionaire

5. Preparation of project documentation, construction of power plants and transmission lines (Building)

Concessionaire


2016 2017 2018 2019 2020


1. Preparatory phase ME, CGES 1.4.2016 30.9.2016

2. Implementation model ME, Government 1.4.2016 30.6.2016

3. Tender or direct concession award

ME, MSDT, WA 1.4.2016 31.12.2016

4. Building permit Concessionaire 1.1.2016 31.12.2017

5. Building Concessionaire 1.4.2017 31.12.2020



2020)

1. Preparatory phase ME, CGES 500.000 500.000

2. Implementation model

ME, Government

300.000 300.000

3. Tender or direct concession award

ME, MSDT, WA 1.600.000 1.600.000


5. Building Concessionaire 45.000.000 90.000.000 120.000.000 110.000.000 365.000.000

Total (1-5) 4.400.000 45.000.000 90.000.000 120.000.000 110.000.000 369.400.000

Results of cost – benefit analyses: NPV = –111.3 million €, IRR = 5.6 % and investment return rate 15 years.

-600,000

-400,000

-200,000

0

200,000

400,000

600,000

800,000

1,000,000

1,200,000

1,400,000

00

0 E

UR

Godina

Ekonomski tok


Page: 103


SEA has already been prepared and will be corrected in the case of adoption of a technical solution that is different from the solutions 1 or 2, and during the preparation of the necessary documentation, the concessionaire should prepare EIA.

The Project includes the construction of new infrastructure in local-regional community and hiring of new labour. Tourism development around the reservoir will be possible, as well as fishing, sailing and supply of drinking water, activation of in-house business and improving of ecological situation downstream of Podgorica at periods of low water and during the discharge of waste water, as well as flood reduction during high water.


Page: 104

10.2.5. Project of hydropower plants on the Komarnica river


Komarnica river as a tributary of the Piva river, has a large hydro potential, which should be optimally utilized by constructing a dam in Lonci, at 45 km upstream from HPP Piva. The dam solution Study has been prepared for selected location as well as project documentation for research work, with reports of already performed activities. Additional research work is required in order to collect the basis for the Preliminary Design and Feasibility Study.

The construction of HPP Komarnica is included in spatial and water management plans of Montenegro, so there are no obstacles for its realization. Project covers only uninhabited and infertile areas, does not endanger industrial capacities, roads, fields and households, and the reservoir would flood the inaccessible Komarnica canyon. It is necessary to build a complete infrastructure (roads, water supply, connection to network) on site.

Montenegro has developed a technical solution for the use of hydro potential of the Komarnica river, which envisages the construction of large hydropower plant with total installed capacity of 168 MW and expected annual production of 232 GWh. The estimated total construction costs amount to approximately € 183 million (option 1).

There is also the option 2 for HPP Komarnica. It is different from option 1 because of lower backwater elevation of reservoir (810 m above sea level instead of 816 meters above sea level), smaller useful reservoir (130 million m3 instead of 160 million m3), capacity of 172 MW, generation of 227 GWh and construction costs of 178 million €. Option 1 is more favorable than option 2 from technical and economical point of view, but is less favourable in terms of environmental protection, because option 2 has no influence on Nevidio canyon (which would be flooded in option 1), nor on the Šavnik (which would be threatened in the case of high water in option 1).

Therefore option 2 is more probable for implementation. In both options the dam location is the same.

This can significantly slow down the activities on HPP Komarnica, because after the successful completion of the research work, the Preliminary Design and tender documentation (therefore the Strategy favours the construction of HPP Morača) should be prepared. Both options are processed as draft form in the DSP, and then the processor has prepared a working version of the proposal of DSP which analyses only option 2.

Adoption of the DSP proposal is not envisaged at the moment, but when the Government adopts an offer for the HPP Komarnica, the processor has to prepare a new proposal of DSP with data from the adopted technical solution and submit it to the Government for adoption.

At the moment, Strategy takes into account solution 2 (227 GWh/year and 172 MW). According to the Strategy, HPP Komarnica was supposed to be completed by 2022, now 2026 is the earliest possible year of construction.

Connection to the transmission network, depending on the results of study on the connection of HPP Komarnica, could be done with two 110 kV overhead lines at SS 400/110 kV Brezna.


Page: 105

-200,000

-100,000

0

100,000

200,000

300,000

400,000

500,000

600,000

00

0 E

UR

Godina

Ekonomski tok



1. Additional research work and Preliminary Design (Preparation phase)

ME, EPCG, Elektroprivreda Srbije

2. The Government should decide on the implementation model, tender or direct concessions award (Implementation model)

ME, Government

3. Tender preparation and publishing or direct concession award (Tender or concession)

ME, MSDT, WA

4. Obtaining a building permit, preparation of Environmental Impact Assessment (Building permit)

Concessionaire

5. Preparation of project documentation, construction of power plants and transmission lines (Construction)

Concessionaire


2016 2017 2018 2019 2020


1. Preparation phase ME, EPCG, Elektroprivreda Srbije

1.4.2016 31.12.2017

2. Implementation model ME, Government 1.4.2018 30.6.2018

3. Tender or concession ME, MSDT, WA 1.7.2018 31.3.2019


5. Construction Concessionaire 1.4.2020 31.12.2020



2020)

1. Preparation phase

ME, EPCG, Elektroprivreda Srbije

1.000.000 1.200.000 300.000 2.500.000

2. Implementation model

ME, Government Funding is provided within the budget for Preparation phase

3. Tender or concession

ME, MSDT, WA 1.300.000 800.000 2.100.000

4. Building permit Concessionaire 1.500.000 500.000 2.000.000

5. Construction Concessionaire 35.000.000 35.000.000

Total (1-5) 1.000.000 1.200.000 1.600.000 2.300.000 35.500.000 41.600.000

Results of cost – benefit analyses: NPV = – 5,6 million €, IRR = 6,7 % and investment return rate 15 years.


Page: 106


SEA has already been prepared and will be corrected in the case of adoption of a technical solution that is different from the solutions 1 or 2, and during the preparation of the necessary documentation, the concessionaire should prepare EIA.

The Project includes the construction of new infrastructure in local-regional community and hiring of new labour. Tourism development around the reservoir will be possible, as well as fishing, sailing and supply of drinking water, activation of in-house business and improving of ecological situation at periods of low water.


Page: 107

10.2.6. Projects for construction of wind farms


Based on the results of CETMA study, Montenegro has issued four permits to measure wind potential without exclusive rights to the site during the period 2008 - 2009, for specific geographical areas in Montenegro. Two companies which received licenses, submitted their measurements, analysis and potential technical solutions that are based on the permits to the competent Ministry for energy in 2009. Based on the measurement results, the relevant opinion of Ministry of Spatial Planning and Environment and the transmission system operator, in December 2009 public tender for two specific locations was announced.

Two locations for wind power plants, for which the Contracts for lease of land and construction were signed, are wind farm Možura, with envisaged installed capacity of 46 MW and annual production of 105.8 GWh and wind farm Krnovo which would have two phases of construction. The first construction phase with installed capacity of 50 MW and annual generation of 115 GWh and the second phase of an additional 22 MW and 50.6 GWh. In addition to these locations, by 2020 and later on, few more WPP were added, without determining locations precisely, so that the annual generation from WPP by 2020 reaches the amount of 348 GWh (151 MW). Licenses to measure the wind have already been issued for four companies (Naturwind Ltd, Ulcinj; Vjetroelektrana Budva Ltd; Wind Europe - MNE Ltd; Tivat and the Technical University of the Marche, Ancona, Italy).



1. Construction of WPP Krnovo Investor

2. Construction of WPP Možura Investor

3.

Wind measurements at selected locations. After measuring, necessary documentation should be prepared and all approvals and permits obtained. (Measurements and documentation preparation for the remaining WPP)


4. Construction of additional 33 MW for which the location has not been defined yet (Construction of additional 33 MW)

Investor


2016 2017 2018 2019 2020


1. Construction of WPP Krnovo

Investor 1.1.2016 31.12.2016

2. Construction of WPP Možura

Investor 1.1.2016 31.12.2017

3.

Measurements and documentation preparation for the remaining WPP


1.7.2016 30.6.2018

4. Construction of additional 33 MW

Investor 1.10.2018 30.6.2020


Page: 108



2020)

1. Construction of WPP Krnovo

Investor 80.000.000 80.000.000

2. Construction of WPP Možura

Investor 30.000.000 30.000.000 60.000.000

3.

Measurements and documentation preparation for the remaining WPP


500.000 1.000.000 800.000 2.300.000

4. Construction of additional 33 MW

Investor 10.000.000 25.000.000 15.000.000 50.000.000

Total (1-4) 110.500.000 31.000.000 10.800.000 25.000.000 15.000.000 192.300.000


Wind farms have a certain impact on the environment, and all investors have to prepare EIA.

During the construction of wind farms, employment opportunities for a number of people can be created and activation of some domestic industry. But it's only temporary, until the completion of construction.


Page: 109

10.3. CC3: The cleaner and more efficient energy production from fossil fuels

10.3.1. Project of rehabilitation and expansion of the coal mine in Pljevlja for the needs of the existing TPP Pljevlja I and the new TPP Pljevlja II


Along with the plan of constructing a new power unit of TPP Pljevlja II, RUP has to develop and implement coal production expansion plans for regular supply of both units of TPP Pljevlja, with the appropriate schedule and timing of deposits exploitation in the Pljevlja basin, cost optimization and achieving the economically viable coal prices.



1. Preparatory phase of the DTE system resettlement to internal dump (Preparatory phase)

RUP

2. Reconstruction and start of operation of DTE system (Reconstruction of DTE) RUP

3. Kutlovača internal dump elevation RUP

4. Relocation of crushing facility to a new location RUP

5. Protective measures for OP Potrlica from surface and ground water (Protection of OP Potrlica)

RUP

6. Supply and replacement of equipment (Equipment replacement) RUP

7. Plan implementation for overburden and coal excavation (Overburden and coal excavation)

RUP

8. Environment protection with the measures envisaged by law and other regulations and measures envisaged by Environmental protection program for RUP (Environmental protection)

RUP, EPA, IA


2016 2017 2018 2019 2020


1. Preparatory phase RUP 1.1.2016 30.9.2016

2. Reconstruction of DTE RUP 1.1.2016 30.9.2016

3. Kutlovača internal dump elevation

RUP 1.4.2016 30.9.2017

4. Relocation of crushing facility to a new location

RUP 1.9.2018 31.12.2018

5. Protection of OP Potrlica RUP 1.1.2016 31.12.2020

6. Equipment replacement RUP 1.1.2016 31.12.2020

7. Overburden and coal excavation

RUP 1.1.2016 31.12.2020

8. Environmental protection RUP, EPA, IA 1.1.2016 31.12.2020



(2016-2020)

1. Preparatory phase RUP

16.218.000

14.135.000

3.930.000

2.780.000

2.900.000

39.963.000

2. Reconstruction of DTE RUP

3. Kutlovača internal dump elevation

RUP

4. Relocation of crushing facility to a new location

RUP

5. Protection of OP Potrlica RUP

6. Equipment replacement RUP

7. Overburden and coal excavation

RUP 150.000 2.850.000 11.660.000 3.050.000

17.710.000

8. Environmental protection RUP, EPA, IA 494.500 463.900 397.400 413.000 367.910 2.136.710

Total (1-8) 16.862.500 17.448.900 15.987.400 6.243.000 3.267.910 59.809.710


Page: 110


Environment analysis of the impact of coal mining in the OP Potrlica shows that specific impact on the environment will happen in that area.

The impacts of surface mining on the environment are diverse and require the following considerations:

hydro geological

Integral spatial including: area re-cultivation solving and evict population landscape values dust and gas emission noise emission micro-climate impact.

The impacts are of varying intensity and the local character. The domain of impact is constantly changing during the excavation of overburden and coal, so protective measures should be taken in order to reduce negative consequences for the environment and human health, to acceptable levels.

Mining Activities, generally, have both negative and positive social impacts.

The most significant negative social impacts are associated with the eviction of population from the zone of mining operations.

Positive impacts will result with the creation of new jobs in the local area, and on a broader level, as a result of the economic gain from the increased electricity generation in Montenegro.

Landscape impact associated with the proposed mining activities and the re-cultivation project which is defined in RUP, will be relatively significant, taking into account the topographic changes, that will directly affect the appearance of the area and the beauty of the landscape.


Page: 111

10.3.2. Project of association of business entities of Coal mine Pljevlja and TPP Pljevlja (and later Pljevlja II) into a single legal entity


The aim of the association/integration of business entities of Coal mine Pljevlja (RUP) and TPP Pljevlja (TPP) into a single business system is to improve the overall efficiency and cost optimization of the complex, thus increasing competitiveness in the electricity market and mitigating business risks.

RUP and TPP integration will provide funds for the exploitation of new areas that are property of RUP and for the construction of TPP Pljevlja II. It is expected that the associated/integrated entity will have a stronger financial stability, which could support the future growth and development of this activity.



1. Analysis of the legal framework and regulations RUP, EPCG

2. Preparation of Programme task for RUP-TPP (EPCG) association (Association Programme task)

RUP, EPCG

3. Preparation of the Study on RUP-TPP integration and optimal model proposal (Study on RUP-TPP integration)

RUP, EPCG

4. Drafting the association Contract and its assessment (Draft contract) RUP, EPCG

5. Submitting the draft Contract to the Central Registry of the Commercial Court (CRPS) and publication of the association in the media (Submitting the draft Contract to CRPS)

RUP, EPCG

6. Association Contract confirmation by the Assembly of Shareholders of RUP and EPCG (Association Contract confirmation)

RUP, EPCG

7. Association Contract signing (Contract signing) RUP, EPCG

8. Procedures and activities in accordance with the law (Further procedure) New entity


2016 2017 2018 2019 2020


1. Analysis of the legal framework and regulations

RUP, EPCG 1.7.2016 30.9.2016

2. Association Programme task

RUP, EPCG 1.10.2016 31.12.2016

3. Study on RUP-TPP integration

RUP, EPCG 1.1.2017 30.6.2017

4. Draft contract RUP, EPCG 1.7.2017 30.9.2017

5. Submitting the draft Contract to CRPS

RUP, EPCG 1.10.2017 31.12.2017

6. Association Contract confirmation

RUP, EPCG 1.1.2018 30.9.2018

7. Contract signing RUP, EPCG 1.10.2018 31.12.2018

8. Further procedure RUP, EPCG 1.1.2019 31.10.2019

Proposed activity schedule is approximate and depends on the decision of management or owners of both companies. In the case of Special Purpose Vehicle (SPV) creation for the implementation of TPP Pljevlja II Project, the integration process of RUP and SPV could happen after the construction of TPP Pljevlja II.


Page: 112



2020)

1. Analysis of the legal framework and regulations

RUP, EPCG Included in ordinary activities of RUP and EPCG

2. Association Programme task RUP, EPCG 10.000 10.000

3. Study on RUP-TPP integration

RUP, EPCG 200.000 200.000 400.000

4. Draft contract RUP, EPCG 30.000 30.000

5. Submitting the draft Contract to CRPS


6. Association Contract confirmation


7. Contract signing RUP, EPCG Included in ordinary activities of RUP and EPCG

8. Further procedure RUP, EPCG Included in ordinary activities of RUP and EPCG

Total (1-8) 240.000 200.000 440.000

Association of business entities of RUP and TPP (EPCG) will result in the optimization of human resources and operating cost reduction.

Restructuring costs include severance costs, advisor fees, and also other expenditures will occur.

Estimating the value of association synergy depends on the existing business plans and value estimation of RUP and EPCG and total lifetime of the new entity. Estimated values are:

NPV of future cash flows (100 % synergy) is 46,3 million €

NPV of future cash flows (50 % synergy) is 23,2 million €


An important area in which the new entity will have to pay attention is to protect the environment, because coal is often seen as a "dirty" fuel. The new entity will have to take into account public opinion and to improve the public informing through transparent activities on the environment.

During the association of RUP and TPP (EPCG) and the optimization and integration of human resources in the new entity, there is a risk that some may have to leave the company or to move, because some of the positions in EPCG and RUP can be doubled or surplus, which would increase unemployment rate in Pljevlja and other relevant locations in Montenegro. All this may negatively affect the business environment of the new entity. An important role of this process has the employee union which should have good communication and timely share information on plans for the association.


Page: 113

10.3.3. Project of the ash and slag landfill for the purposes of the block I and II of TPP Pljevlja


Process of electricity generation in the thermal power plant, is followed by production of by-products of combustion (for now-ash and slag, and after the start of TPP Pljevlja II gypsum as well), about 450.000 t/year (in dry conditions), which is equivalent to about 550.000 m3 in wet conditions (due to the current mode of transport and disposal by water), which is disposed in the landfill. Solving this problem is in a direct function of continuation of the electricity generation from coal in TPP Pljevlja, and therefore the continued operation of the Coal mine.

At the current situation, when the existing landfill at the location Maljevac is close to full occupancy of the space available for storage of by-products, following options are possible:

1. Expansion of the current landfill Maljevac (with necessity of buying/expropriating of additional land, and relocation of the part of the existing high-voltage transmission line Pljevlja - Piva from the disposal zone).

2. Use of the open pit Potrlica site near pits, but with transport operational problems, as well as authorization problems, since it was not envisaged by Urban spatial Plan of Pljevlja.

3. If the Activity 1 will not be approved, activation of the site on the exploited open pit Šumani, for which the project documentation has been prepared.

Selecting the best option (based on the techno-economic, environmental and other parameters) depends on the decision of the future operation of the existing unit of TPP Pljevlja and the construction project of a new unit TPP Pljevlja II.

Option 1 is almost forced, due to the delays in strategic decision-making on this issue, the only questionable is period of use: up to 2021 or up to maximum possibilities. The current choice is to use location Maljevac by 2021, and to prepare location at the OP Potrlica by then, within the internal Coal mine tailing, which would be a permanent solution for the storage of by-products from the combustion of TPP Pljevlja.

For location Maljevac, stability aspects of earthen dam and landfill as a whole should be evaluated. Derived sterilizing ballast on the downstream slope and right side of earthen dam is calculated for the amount of landfill to the elevation of 813 meters above sea level. The preliminary plan is that the landfill is completed at a height of 832 meters above sea level. Another significant problem is the stability factor of earthen dam in seismic conditions and occurrence probability of liquefaction of disposed and water saturated ash.

For landfill site in the inner dump OP Potrlica it is necessary to estimate the following:

Micro location of the by-products combustion landfill (TPP dump) and disposal technology,

Ash and slag landfill impact of on the mining-geological, mining-technical and technical-economic conditions of the open pit,

Harmonization of the dynamics of the ash and slag landfill construction with the pace of progress of works at the overburden landfill (RUP landfill),

Impact of the TPP landfill construction on the technology of the internal RUP landfill construction,

Impact of the TPP landfill construction on the environment and definition of measures aimed at eliminating the negative effects,

Impact of the TPP landfill creation on geo-mechanical, hydro-geological and other parameters that influence the determination of the geometry of the landfill and the regime of surface and ground water,

Necessity of permit regulation as well as state and local urban technical requirements for landfill construction.


Page: 114



1. Activities for the continuation of ash and slag disposal at the location Maljevac by 2020 consisting of the following activities: preparation of Preliminary Design and EIA, address to the competent ministry for a permit and the urban-technical requirements, decision on EIA, project approval, obtaining building permit, relocation of 220 kV overhead line Pljevlja - Piva, works and exploitation continuation of landfill (Activities for the continuation of ash and slag disposal at the location Maljevac)

EPCG, CGES

2. Preparation of OP Potrlica site for permanent disposal of by-products from the TPP Pljevlja, which consist of the following activities: request to modify the municipal/state Spatial Urban Plans (SUP) regarding the location, change Pljevlja SUP, development and approval of project documentation, works (landfill arrangement in internal dump OP Potrlica), works (external transport from TPP to the landfill site), final works and systems test (Preparation of OP Potrlica site for permanent disposal of by-products from the TPP Pljevlja)

EPCG, RUP


2016 2017 2018 2019 2020


1. Activities for the continuation of ash and slag disposal at the location Maljevac

EPCG, CGES 1.1.2016 30.9.2020

2. Preparation of OP Potrlica site for permanent disposal of by-products from the TPP Pljevlja

EPCG, RUP 1.1.2016 31.10.2019



2020)

1.

Activities for the continuation of ash and slag disposal at the location Maljevac

EPCG, CGES 1.750.000 3.500.000 1.700.000 700.000 700.000 8.350.000

2.

Preparation of OP Potrlica site for permanent disposal of by-products from the TPP Pljevlja

EPCG, RUP 500.000 4.500.000 15.000.000 4.000.000 24.000.000

Total (1-2) 1.750.000 4.000.000 6.200.000 15.700.000 4.700.000 32.350.000


Using of Maljevac location in the next 5 years does not degrade further agricultural land, nor block mineral wealth. The impact of the landfill on the quality of the soil in the vicinity of the landfill may be indirect, as a result of air pollution and water pollution. This landfill has closed recirculation water system, but pollutes ground water and Paleski stream. After completion of the disposal of ash and slag, re-cultivation of area where ash and slag were deposited, will be carried out. Re-cultivation of the surface will be carried out successively by cassettes, and by filling in. The problem of pollution of Paleski stream will be solved. Permanent landfill on location OP Potrlica, together with internal Coal Mine tailings, will partially settle the weight deficit and will have a positive effect on the landscape characteristics of the site. Other aspects of the environmental impact should be processed in more detail in project documentation, given the proximity of the Ćehotina river and town. Alternative location OP Šumani, if not used as a landfill, should also be re-cultivated. Generally speaking, combustion by-products landfills from thermal power plants have primarily negative and partly positive social impacts. The most significant negative impacts are related to the contamination of the living space and worse quality of life of the population in the area of the landfill. Positive impacts will result from the creation of new jobs in the local area, and on a broader level, as a result of the economic benefits resulting from the continuation of electricity generation in Montenegro.


Page: 115

10.3.4. Programme of district heating/cooling by locations - biomass, gas, heat

pumps, municipal waste, high efficient cogeneration plants


Montenegro should make a comprehensive assessment of the potential for the application of high efficiency cogeneration and efficient district heating and cooling, in accordance with Directive 2012/27/EU. Analyse the possibility of using high efficient cogeneration and/or efficient district heating/cooling whose benefits exceed the costs and take measures to implement these Projects at the local and regional level.

Development of these Projects/Programmes can significantly contribute to achieving the defined objectives concerning share of RES in final energy consumption, and also in improving the environment condition.

The simultaneous generation of electricity and heat (CHP) is the most effective way of generating heat and electricity from any fuel.

It is necessary to optimize the structure and size of such a production mode of thermal energy, so users can get low cost, competitive to any other type of heating.



1. Comprehensive assessment of the national potentials for heating and cooling in accordance with Directive 2012/27/EU

ME

2. Develop Feasibility studies for sustainable Projects Local community

3. Implementation of Projects Local community

4. Reducing barriers for rapid development of production and modern biomass market (pellets, briquettes, etc.) in Montenegro

ME

5. Organization of promotional events in local communities by showing the use of modern technologies

Local community


2016 2017 2018 2019 2020


1.

Comprehensive assessment of the national potentials for heating and cooling in accordance with Directive 2012/27/EU

ME 1.1.2016 30.9.2017

2. Develop Feasibility studies for sustainable Projects

Local community 1.10.2017 30.9.2019

3. Implementation of Projects

Local community 1.10.2019 31.12.2020

4.

Reducing barriers for rapid development of production and modern biomass market (pellets, briquettes, etc.) in Montenegro

ME 1.1.2016 31.12.2020

5.

Organization of promotional events in local communities by showing the use of modern technologies

Local community 1.1.2016 31.12.2018


Page: 116



2020)

1. Comprehensive assessment of the national potentials for heating and cooling in accordance with Directive 2012/27/EU

ME 150.000 100.000 250.000

2. Develop Feasibility studies for sustainable Projects

Local community 70.000 140.000 210.000

3. Implementation of Projects Local community Included in ordinary activities of local community

4. Reducing barriers for rapid development of production and modern biomass market (pellets, briquettes, etc.) in Montenegro

ME Included in ordinary activities of ME

5. Organization of promotional events in local communities by showing the use of modern technologies

Local community Included in ordinary activities of local community

Total (1-5) 150.000 100.000 70.000 140.000 460.000


The main impacts on the environment are extremely positive:

efficient use of fuel energy,

lowering the cost of electricity and heat generation,,

reduction of CO2 emissions per unit of energy generated,

electricity generation at the point of consumption and avoiding losses in transmission and distribution,

greater security and flexibility of supply.

Development of Projects in this area will stimulate economic growth, education and the creation of quality jobs in areas related to energy efficiency.

Public opinion influence regarding the success of RES projects should be noted. The experience of others shows that renewable energy sources are mostly implemented in countries where the widest public support is obtained, which should be considered during the implementation of these Projects.

During the realization of Projects, problem of access to private land (the passage of the pipeline through the property, etc.) may occur, which should be solved during project preparation (purchase, expropriation, restitution and others).


Page: 117

10.3.5. Programme for developing Study of introducing district heating system in local communities in the municipalities in the north part of Montenegro (Kolašin, Berane, Žabljak and Plužine) as well as in other cities of Montenegro (Nikšić, Bijelo Polje, Cetinje, Podgorica) for the use of biomass or waste heat from industrial processes and implement Projects if studies show their justification


The aim of Projects/Programmes is the development of biomass district heating in the municipalities in two phases:

consideration of biomass district heating potential in all cities,

prepare Feasibility Studies for the most sustainable projects.

In October 2014, in cooperation with the EBRD, preparation of Biomass Project Identification Study Montenegro has started and the estimation of realization possibilities of district heating for the following 10 municipalities in northern Montenegro was done: Andrijevica, Berane, Bijelo Polje, Mojkovac, Nikšić, Plav, Plužine , Rožaje, Šavnik, Žabljak.

Feasibility Study for the district heating system in Kolašin was prepared based on biomass (WBIF, March 2014), but because of administrative problems in the municipality of Kolašin project implementation is delayed.

Proposed solutions for biomass district heating include:

energy fuels with biomass-fired boiler that use wood chips and cover the base load,

auxiliary boiler with fuel oil that covers the peak load and boilers standby regime,

district heating network. The network provides thermal energy for space heating but not for domestic hot water.

Heat loads are: Kolašin 10 MWth, Žabljak 4,3 MWth and Berane 15 MWth.



1. Prepare the Study on Project identification related to biomass ME

2. Prepare Feasibility Studies for sustainable Projects ME, local community

3. Implementation of sustainable Projects (Žabljak) ME, local community

4. Implementation of the biomass based district heating Project in Kolašin

Local community

5. Implementation of the interest-free loans program for the installation of biomass heating systems in Montenegro - ENERGY WOOD (Interest-free loans program)

ME

6. Reducing barriers for rapid development of production and modern biomass market (pellets, briquettes, etc.) in Montenegro (Reducing barriers for rapid development)

ME, local community


2016 2017 2018 2019 2020


1. Prepare the Study on Project identification related to biomass

ME 1.1.2016 30.9.2016

2. Prepare Feasibility Studies for sustainable Projects

ME, local community

1.10.2016 30.9.2017

3. Implementation of sustainable Projects (Žabljak)

ME, local community

1.1.2018 31.12.2020


Local community

1.4.2016 31.12.2018

5. Interest-free loans program ME 1.1.2016 30.9.2017

6. Reducing barriers for rapid development

ME, local community

1.1.2016 31.12.2020


Page: 118



2020)

1. Prepare the Study on Project identification related to biomass

ME Funds are not envisaged any more.

2. Prepare Feasibility Studies for sustainable Projects

ME, local community

70.000 140.000

210.000

3. Implementation of sustainable Projects (Žabljak)

ME, local community

1.350.000 1.800.000 1.350.000 4.500.000


Local community

3.500.000 4.500.000 2.000.000 10.000.000

5. Interest-free loans program ME Included in ordinary activities of ME.

6. Reducing barriers for rapid development

ME, local community

Included in ordinary activities of ME and local community.

Total (1-6) 3.570.000 4.640.000 3.350.000 1.800.000 1.350.000 14.710.000

Analysis of cost savings per unit of product (saved € per generated MWh) shows that compared to the situation without the Project:

Andrijevica, Bijelo Polje, Mojkovac, Plužine and Šavnik cannot achieve the savings,

savings in Berane, Nikšić, Plav and Rožaje are not significant,

in Žabljak there are significant savings.


Environmental impacts related to the collection and transport of wood for the preparation of wood chips or pellets are:

impact on the quality of water and water basins,

impact on bio diversity,

noise/air pollutants and emissions of greenhouse gases,

landscape changes and erosion,

production of waste and waste water.

Other impacts of Projects on the environment are result of the combustion of wood chips (or wood pellets) in installations with heating boilers (CHP), what creates emissions of pollutants (including dust) on the site. It is therefore important to increase the efficiency of the equipment used for collection, processing and transport and to use high-efficiency boilers and equipment to the installation site.

The positive impact on the environment compared to fossil fuels is lower amount of greenhouse gases and lower emissions of pollutants at the site. Compared to fossil fuels, with biomass combustion there is no SO2 emission and NOx emissions will be lower.

The main social impacts are related to new employments and positive impact on the regional economy.

Investments in these Projects will increase the efficiency and reliability of the heating system and thus improve the quality of life and living standard of the population living in households connected to the system.


Page: 119

10.3.6. Project of heating system for town Pljevlja


The problem of air pollution and other environmental segments in Pljevlja is present for a longer period.

Proposed measures to improve the situation contain an emergency, medium and long term measures.

Medium-term measures include the construction of a new biomass heating plant with coal inceneration, and long-term measure, as permanent and the only rational, reasonable and possible to solve the problem is the heating system in Pljevlja, from TPP II.

Heat supply from TPP Pljevlja II is not treated for now in the Energy Development Strategy, but the basic source is envisaged as biomass boiler or coal and biomass co-incineration (current plans of the local community)

The main objective of this Project is to suppy the town of Pljevlja via district heating pipes, through modern centralized system for thermal energy supply, through the central energy source (new plant), enabling the combined production of heat and electricity with all economic, energy and environmental benefits.

The main components of thir Project are:

ecological, it is the improvement of air quality in the town and negative impact reduction on human health, especially the younger population

economic, stemming both from improving the energy efficiency of TPP Pljevlja as a base heat source, and from the primary energy savings for town heating.

Heating system of town of Pljevlja would consist of the following basic parts:

1. Basic source: New town heating plant by 2020, and after that the TPP Pljevlja II, with a heat source of 74,5 MWth. Plant would have the function of peak/backup boiler,

2. Peak-backup source: auxiliary boiler in TPP Pljevlja, the town heating plant, Vektra-Jakić boiler,

3. Main pipeline (supply and return) to the town. 4. Water distribution from the main pipe to heat substations in heated areas 5. Heat substations, 6. The secondary network–piping for hot water distribution from the substations to the

end users.

The number of heating days amount in cross-section 219 days/year, or as many days in the heating period with average daily temperature below +12 ° C.



1. Actualization of the Main Design and Feasibility Study of heating system of the town and EIA (Actualization of the Main Design)

Pljevlja Municipality

2. Coordination of technical solutions for heat source (new plant) (Coordination of technical solutions)

Pljevlja Municipality, EPCG

3. EIA evaluation and Project approval (EIA evaluation) EPA

4. Provide funding Government, Pljevlja Municipality, EPCG, RUP, Vektra-Jakić

5. Building permit Pljevlja Municipality

6. Selection of contractors Pljevlja Municipality

7. Construction and commissioning Contractor

8. Temporary reception Pljevlja Municipality, contractor


Page: 120


2016 2017 2018 2019 2020


1. Actualization of the Main Design

Pljevlja Municipality

1.1.2016 30.9.2016

2. Coordination of technical solutions


1.4.2016 30.9.2016

3. EIA evaluation EPA 1.10.2016 31.12.2016

4. Provide funding

Government, Pljevlja Municipality, EPCG, RUP, Vektra-Jakić

1.1.2016 31.3.2017

5. Building permit Pljevlja Municipality

1.10.2016 31.12.2016

6. Selection of contractors Pljevlja Municipality

1.4.2016 31.12.2016

7. Construction and commissioning

Contractor 1.1.2017 30.9.2020


1.10.2020 31.12.2020



2020)

1. Actualization of the Main Design

Pljevlja Municipality 200.000

200.000

2. Coordination of technical solutions


Included in ordinary activities of Pljevlja Municipality and EPCG

3. EIA evaluation EPA Included in ordinary activities of EPA

4. Provide funding Government, Pljevlja Municipality, EPCG, RUP, Vektra-Jakić

Included in ordinary activities of Pljevlja Municipality, EPCG, RUP and Vektre-Jakić

5. Building permit Pljevlja Municipality Included in ordinary activities of Pljevlja Municipality

6. Selection of contractors Pljevlja Municipality Included in ordinary activities of Pljevlja Municipality


Contractor 1.000.000 1.500.000 1.500.000 700.000 300.000 5.000.000


Included in ordinary activities of Pljevlja Municipality and contractor

Total (1-8) 1.200.000 1.500.000 1.500.000 700.000 300.000 5.200.000


The positive effects expected after heating system implementation are as follows:

Reduce concentration of smoke and soot in the town as a result of termination of the boilers, fireboxes with poor combustion and individual fireboxes. Reduce the amount of combusted coal in the fireboxes with a low level of utilization and without devices for the environment protection from pollution. Thus it will reduce the local soiling of the town as a result of the transport of coal from boiler and individual consumers in the town. The operation of modern installations and district heating system has positive effects on social welfare.

Project of the heating system in town Pljevlja will lead to economic development and growth of the municipality and region, with an increase in the employment rate.

All residents of the town are interested for the Project, thus confirming its social justification.

Through new employments during the implementation of the Project, in TPP Pljevlja and within the utility company for heating, social welfare for a part of the population of the local community will be provided.

The investment will increase the efficiency and reliability of the heating system and thus it will improve the comfort of living and the living standard of people living in houses connected to the system.


Page: 121

10.3.7. Project for construction of the new TPP Pljevlja II

The electricity demand in the long term, Montenegro plans to, among the others, resolve with further utilization of the thermal power complex in Pljevlja through the construction of a new unit TPP Pljevlja II, using the existing resources of coal in Pljevlja basin, the benefits of the existing location and the chances provided by the electricity market in the region.

The main objectives of the investment are to:

continue with electricity generation from thermal power complex Pljevlja,

ensure energy independence of the country,

ensure security of supply of electricity to customers,

obtain better production structure of EPCG, and therefore more competitive participation of EPCG in the electricity market,

increase the profitability of thermal power complex in Pljevlja,

optimal and efficient valorization of coal reserves in Pljevlja basin,

solve the fundamental problem of the environment of the Pljevlja valley in the heating season (Project of heating system of town from TPP as a basic heat source),

direct and indirect effects on the economy of the region, individual and social standard.

In the period 2013-2015, the Ministry of Economy and EPCG carried out the negotiation procedure with several companies interested in the Project, including negotiations on the possible participation of stakeholders in the Project. At the end of this procedure the best offer has been chosen, and after the consultation of the main shareholders in EPCG, negotiations with the chosen company will be resumed.

Main technical parameters of the new unit are following:

Based on reserves and coal quality, envisaged operation of the existing unit of TPP Pljevlja I, as well as the possible efficiency of major equipment, Preliminary Design envisages the condensing unit of TPP Pljevlja II with capacity of 250 MW, with a possible heat subtraction for town heating.

The unit of this strength in practice can achieve following steam parameters: 165-190 bar, 565/565 °C which enable the net efficiency rate at the level of about 39%.

Ecological indicators in accordance with IED DIRECTIVE 2010/75/EU.

Heat station is envisaged (maximum power of 75 MW th) for the provision of thermal energy for district heating of town.



1. Decision on the Project and the method of its financing (Decision on the Project)

EPCG, Government

2. Provide funding EPCG, Government

3. Establishment of the project company for implementation of the Project TPP-II (SPV) (Establishment of the project company)

EPCG, Government

4. Arranging the implementation of the Project (EPC contract) EPCG, Government

5. Completion of the Preliminary/Base and development of the Main/Detailed Design (Project Design preparation)

EPCG, EPC contractor

6. EIA preparation and evaluation EPCG/SPV, EPA

7. Building permit EPCG/SPV, MSDT

8. Preparatory works on the site EPC contractor

9. Construction and commissioning EPC contractor

10. Temporary reception EPC contractor, EPCG/SPV


Page: 122


2016 2017 2018 2019 2020


1. Decision on the Project EPCG, Government

1.1.2016 31.3.2016

2. Establishment of the project company

EPCG, Government

1.1.2016 30.6.2016

3. EPC contract EPCG, Government

1.1.2016 30.6.2016

4. Project Design preparation

EPCG, Government

1.1.2016 31.3.2016

5. Provide funding EPCG, EPC contractor

1.1.2016 30.6.2017

6. EIA preparation and evaluation

EPCG/SPV, EPA 1.1.2016 30.6.2016

7. Building permit EPCG/SPV, MSDT 1.4.2016 30.6.2016

8. Preparatory works on the site

EPC contractor 1.1.2016 30.6.2016


EPC contractor 30.6.2016 30.9.2019


1.10.2019 31.12.2019



2020)

1. Decision on the Project

EPCG, Government

Included in ordinary activities of EPCG and Government

2. Establishment of the project company

EPCG, Government


3. EPC contract EPCG, Government


4. Project Design preparation

EPCG, Government


5. Provide funding EPCG, EPC contractor

5.500.000

3.300.000

8.800.000

6. EIA preparation and evaluation

EPCG/SPV, EPA

Included in ordinary activities of EPCG/SPV i EPA

7. Building permit EPCG/SPV, MSDT

Included in ordinary activities of EPCG/SPV i EPA

8. Preparatory works on the site

EPC contractor

700.000

700.000


EPC contractor 35.000.000 77.000.000 110.000.000 75.000.000 32.000.000 329.000.000


Included in ordinary activities of EPCG/SPV i EPC contractor

Total (1-10) 41.200.000 80.300.000 110.000.000 75.000.000 32.000.000 338.500.000

The necessary investments in the TPP II are estimated at 338.5 million €, or 1.3 million €/MW.

Financing of the Project will be carried out with own funds in the amount of 15% and the credit in the amount of 85% of the total funds required. The proposed structure and dynamics of financing sources will be subject to negotiations with the bidder and can be updated.

The main economic parameters of the Project are:

Project NPV estimation is given for the following conditions:

Economic lifetime of the Project is 40 years,

The electricity prices on the market and CO2 compensations have been taken based on POYRY Study.

The results show that the net present value of the Project (NPV)> 55 million € and internal rate of return (IRR) is 9,84%.


Page: 123

The conclusion is that the Project is economically acceptable. Period of return of investments is shorter than the lifetime of the Project, net present value (NPV) is positive, the internal rate of return (IRR) is greater than the average cost of funding.


Technology of powdered coal in flight combustion is envisaged for the TPP Pljevlja II, which includes all of the waste gas cleaning measures in accordance with the IED Directive 2010/75 EC, respectively, and will meet the emission limit values:

SO2: do 150mg/nm3

NOx: do 200 mg/nm3

dust: 10 mg/nm3

Net efficiency of the block will be about 39%, and CO2 emissions will be reduced.

Construction of thermal station is envisaged (with nominal capacity of 75 MWth) to ensure thermal energy for district heating, which will significantly reduce air pollution from individual fireboxes.

During the construction phase the quality of the environment will be temporarily disrupted due to the increase of: noise, traffic intensity and transport of various materials, dust concentration.

In the phase of use/utilization of the facility, impacts will be positive because of the preserving or increasing the number of jobs, as well as the use of modern technologies, reduction of pollution and noise.

At the stage of utilization or operation of the Project, there will be no significant changes in the number, age and qualification structure of local people.

Due to the use of modern technologies, pollutant emissions will be reduced, so significant air quality improving is expected, especially in terms of SO2 and dust particles, which will have positive consequences in terms of the health of local population.

Regarding the impact on the population health, the problem of air pollution due to the use of coal in individual households and municipal boiler rooms should be noted. It will get better because of the construction of thermal station for district heating of the town of Pljevlja with its surrounding.


Page: 124

10.3.8. Programme of gasification of the country


Gas consumption in Montenegro is currently limited to the use of gas tanks. Montenegro does not have its own production of natural gas nor is connected to any transport gas pipeline which would supply natural gas from import.

In the past, there were several scenarios of natural gas delivery in Montenegro. At the moment, the most likely connection is to the Ion-Adriatic Pipeline (IAP). The pipeline would come through Albania to Montenegro and connect to the gas pipeline that would come to the Croatian south.

IAP Feasibility Study analysed possible routes of the future gas pipeline. Routes were analysed from the aspects of economic feasibility, the optimum diameter of the pipeline, the possibility of gas consumption and consisted of alternative solutions for the entire route from Fier to Split. For the purposes of the Study preparation, Montenegro accepted IAP route option that should be between Anomalsko polje (Ulcinj), Bar, from there by underwater section to Luštica, then across Luštica undersea to Croatia.

The European Union has launched a new Project to start the process of natural gas supply in Montenegro. This is the beginning of a long-term process that will contribute to a cleaner environment and improving the quality of energy supply in Montenegro.

The Study title is the Master plan for the development of gas and portfolio for the identification of priority investment Projects in Montenegro. The study was commissioned by the European Investment Bank (EIB) under the Western Balkans Investment Framework (WBIF) and the implementation by COWI-IPF Consortium is ongoing.

The study which is almost finished consists of developing a comprehensive medium-term Master plan for the gasification of Montenegro, which will examine all aspects (technical, legal and regulatory, economic, market, social etc.) related to the introduction of gas in several regions of Montenegro. This is in line with the Energy Strategy and Action Plans of Montenegro. After development and the establishment of a Master plan for gas, it will develop and establish a portfolio of priority investment gas Projects, so the Government of Montenegro would be able to attract investments and implement gas Projects.

Forecast of future gas consumption takes into consideration all sectors, households, services and industry, and includes the effects of initiative to move from electricity to gas, which could determine the price of gas. Optimization of the direction and arrangement of the gas pipeline and distribution system will be technically implemented with minimum cost and will be available on geographic information system and will be directed towards large consumption centres and neighbouring countries in the most economical manner and with minimal environmental impact.

That implies the necessary changes to the legal and regulatory environment in relation to gas, the steps needed to accelerate the process of introducing gas as a clean energy source, investment incentives for independent companies to engage in the development of gas infrastructure and political decisions that will confirm that certain parts of Montenegro demand gas to an extent that justifies the connection to the gas transmission system from a technical and economic perspective.



1. The completion of gasification Study of Montenegro, which should define the scope of the development of transport and distribution gas network (Completion of gasification Study)

ME, ERA

2. Adoption of the Energy Law and preparation of the Law on cross-border electricity and natural gas exchange (Adoption and preparation of the Laws)

ME, ERA, Parliament, Government


Page: 125

3. Preparation of bylaws for the gas market and define licensing model for TSO and DSO (Preparation of bylaws)

ME, ERA

4. Gas network designing based on the results of the Study (Gas network designing)

Contractor


2016 2017 2018 2019 2020


1. Completion of gasification Study

ME, ERA 1.1.2016 30.6.2016

2. Adoption and preparation of the Laws


1.1.2016 31.12.2016

3. Preparation of bylaws ME, ERA 1.4.2016 31.12.2016

4. Gas network designing Contractor 1.1.2017 31.12.2017



(2016-202)

1. Completion of gasification Study

ME, ERA 200.000 200.000

2. Adoption and preparation of the Laws


200.000 200.000

3. Preparation of bylaws ME, ERA 120.000 120.000

4. Gas network designing Contractor 2.000.000 2.000.000

Total (1-4) 520.000 2.000.000 2.520.000


SEA is done. The construction of the pipeline requires the development of a study of the environmental impact (EIA).

During the construction, economic activity will be increased. New employment and increased production in some segments of the industry will appear.


Page: 126

10.3.9. Project for introduction of LPG as a replacement for petroleum products and coal and electricity in services (tourism) and in households in areas which will not be covered by gasification


Liquefied petroleum gas (LPG), in ecological and economic terms, is highly desirable replacement for the use of fossil fuels (oil, coal) as well as electricity in the service sector and households. The benefits of introducing LPG are particularly important in the areas of Montenegro, which will not be covered by the gasification Programme, or in areas where natural gas will not be available.

For the use of liquefied petroleum gas, tanks are needed, and they do not have to be bought - authorized distributors of LPG offer tank renting, with relatively small and acceptable monthly fee, especially for larger residential buildings where many users share the costs.

The selection and placement of the tanks is part of a Project that needs to be strictly regulated. Minimum conditions for small tank placement should be prescribed, so the minimum tank distance from all household openings, public road, the boundary of neighbouring land, storage of flammable materials is prescribed.

Authorized distributors of LPG should also offer small tanks. It is common to rent a gas tank, although there is an option of buying. Renting is more economical because it includes regular inspection and maintenance of the tank.

In addition to drafting and adopting Regulation on the LPG facility construction and storage and pouring operations of LPG, preparation of Feasibility Study of replacement potentials of petroleum products, coal and electricity in services and households with LPG is needed. Attention should be paid to promoting the use of LPG as a clean and economical energy source.



1. Preparation of the Regulation on the LPG facility construction and storage and pouring operations of LPG

ME

2. Preparation of the Study of replacement potentials of petroleum products, coal and electricity in services and households with LPG

ME

3. Promoting the use of LPG ME, distributors

4. Construction of necessary infrastructure for the possibility of LPG using Distributors


2016 2017 2018 2019 2020



ME 1.1.2017 30.6.2017


ME 1.7.2016 31.3.2017


1.1.2017 31.12.2020

4. Construction of necessary infrastructure for the possibility of LPG using

Distributors 1.1.2018 31.12.2020


Page: 127



(2016-202)


ME 60.000 60.000


ME 80.000 40.000 120.000


15.000 15.000 15.000 15.000 60.000

4. Construction of necessary infrastructure for the possibility of LPG using

Distributors 1.000.000 1.000.000 1.000.000 3.000.000

Total (1-4) 80.000 115.000 1.015.000 1.015.000 1.015.000 3.240.000


For the infrastructure needed for LPG using, Study of the environmental impact is required.

New jobs and employment possibilities will appear.


Page: 128

10.4. CC 4: Increase of the energy efficiency (demand side)

10.4.1. Programme of measures by sector (households, public sector, commercial services/industry, transport)


Energy efficiency is one of the priorities of the new Energy Policy (EP-2011) in Montenegro and wider, in the region of Southeast Europe and the EU. EE continues to gain in importance in an environment that is characterized by i) the high import dependence ii) high cost of energy, and iii) an evident concern about the security of energy supply and climate change.

According to the LEE, EE policy and activities for improving EE are defined by the EE Strategy, whose implementation is carried out based on a two-year EE Action Plans (EEAP). In accordance with the LEE, Montenegro has adopted the indicative target for energy savings in the amount of 9% of final energy consumption, which should be achieved by the end of 2018 (increase savings in average 1% per annum).

Gradual introduction of EU Directives into legislation in the EE area and adopting good work practices, adapting to local conditions is logical process of EE implementation in the country. EEAP includes the design and implementation of Projects, including the activation of support from IFI and set up of coordination body (ME representatives and interested donors) in order to increase awareness regarding the importance and effects of the implementation of energy efficiency measures. The key directions of action are:

Legislation domain:

completion and harmonization of EE legislation,

implementation of legislation in the field of EE,

establishment of EE central information system,

establishment of EE information systems of the state and local administration.

Household sector:

awareness campaigns on the EE in households,

state subsidies for the purchase of more efficient household appliances.

Public sector:

reconstruction of 1% of administrative buildings (as of January 2018),

measures for the promotion of EE in public procurement,

energy audits and project documentation preparation,

tendering process for contractors for the rehabilitation/reconstruction of buildings,

works on renovation/reconstruction of buildings,

supervision of works,

assessment of implemented measures effects.

Industry sector:

promotion and EE/RES use of specific technologies.

Transport sector:

awareness campaigns on the EE in transport,

prescribe criteria for EE in transport infrastructure,

driver training, training for efficient maintenance of vehicles.


Page: 129


Main necessary activities to achieve the objective by sector are following:


1. Improvement of the legal framework in the field of EE in line with EU requirements and creation of conditions for better implementation (Improvement of the legal framework in the field of EE)

ME

2. Establishment of EE central information system, statistics improvement in field of EE (Establishment of EE central information system)

ME

3. Improving energy management system in the subjects recognized by Law (government bodies, local government units, large consumers (Improving energy management system)

ME, public administration bodies, local government, large consumers

4. Prepare and prescribe criteria for EE in transport infrastructure ME, MTMA

5. Develop and implement Projects to improve energy efficiency in public buildings (Develop and implement Projects to improve EE)

ME, entities in charge of public buildings, contractor

6.

Establishment of mechanisms to support the implementation of EE measures and greater use of RES in sector of commercial services/industry (Establishment of mechanisms to support the implementation of measures in the sector of commercial services)

ME

7. Promotion of EE/RES specific technologies Contractor

8. Establishment of mechanisms to support the implementation of EE measures and greater use of RES in household sector (Establishment of mechanisms to support the implementation of measures in the household sector)

ME

9. State subsidies for the purchase of more efficient household appliances ME


2016 2017 2018 2019 2020

Activity Responsibilit

y Start End 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4

1. Improvement of the legal framework in the field of EE

ME 1.1.2016 30.9.2017

2. Establishment of EE central information system

ME 1.1.2016 31.12.2017

3. Improving energy management system

ME, public administration bodies, local government, large consumers

1.1.2016 31.12.2017

4. Prepare and prescribe criteria for EE in transport infrastructure

ME, MTMA 1.1.2016 31. 12. 2020

5. Develop and implement Projects to improve EE


1.1.2016 31. 12. 2020

6. Establishment of mechanisms to support the implementation of measures in the sector of commercial services

ME 1.1.2016 31. 12. 2020

7. Promotion of EE/RES specific technologies

Contractor 1.7.2016 31. 12. 2020

8.

Establishment of mechanisms to support the implementation of measures in the household sector

ME 1.4.2016 31. 12. 2020

9.

State subsidies for the purchase of more efficient household appliances

ME 1.10.2016 31. 12. 2020


Page: 130



202)

1. Improvement of the legal framework in the field of EE

ME 1.100.000 1.000.000 1.000.000 1.000.000 1.000.000 5.100.000

2. Establishment of EE central information system

ME 400.000 100.000 500.000

3.

Improving energy management system

ME public administration bodies, local government, large consumers

1.000.000 2.000.000 3.000.000

4. Prepare and prescribe criteria for EE in transport infrastructure

ME, MTMA 300.000 50.000 50.000 50.000 50.000 500.000

5. Develop and implement Projects to improve EE


1.800.000 7.460.000 12.070.000 14.220.000 17.620.000 53.170.000

6. Establishment of mechanisms to support the implementation of measures in the sector of commercial services

ME 200.000 100.000 50.000 50.000 50.000 450.000

7. Promotion of EE/RES specific technologies

Contractor 150.000 150.000 150.000 150.000 150.000 750.000

8.

Establishment of mechanisms to support the implementation of measures in the household sector

ME 500.000 900.000 1.100.000 1.100.000 1.100.000 4.700.000

9.

State subsidies for the purchase of more efficient household appliances

ME 100.000 250.000 250.000 250.000 250.000 1.100.000

Total (1-9) 5.550.000 12.010.000 14.670.000 16.820.000 20.220.000 69.270.000


Programme itself has no direct impact on the environment, but its long-term effects will be positive for the environment.

New jobs and thus employment positions will appear.


Page: 131

10.4.2. Programme of the investment Projects of EE in public lighting, water supply systems and waste water treatment and other utility services


Public lighting is a segment of electricity consumption, where with the replacement of existing bulbs with bulbs of new technologies significant savings in relative terms can be achieved. In the countries that launched the Project of reconstruction of public lighting system several years ago, one of the most widely used is the ESCO model.

The same ESCO model or model of public-private partnership can be achieved in the area of water supply, waste water treatment and other utility services.

In Montenegro, there is potential for the development of public-private partnership (PPP) in the energy sector through the ESCO model. This is one of the segments whose development can improve the achievement of the indicative target related to energy efficiency. For significant development of public-private partnerships through the ESCO model it is necessary to create the legal conditions which so far have been inadequate.

Regional or local Government that cares about public lighting, the water supply, waste water treatment or other utilities can itself enter into investment Projects that improve energy efficiency in these sectors. However, according to the budget of these entities, it can hardly be expected from them to have the funds available to do so.

The most important laws which regulate public-private partnership in the energy sector are the Law on Efficient Use of Energy, Law on Concessions and the Law on Private Sector Participation of Public Services Execution. To complete the legal environment it is necessary to adopt the Law on Public-Private Partnerships, and its adoption is planned for 2016.

Public lighting is an important part of total lighting. Past experience shows that the period of return of investment when replacing old lighting with new technologies is 3-5 years.

Water supply systems also consume a lot of electricity and the consumption level is similar to the level of the overall lighting. So it is somewhere around 4% of total electricity consumption.

In the waste water treatment there is also extensive use of electricity, and for other utilities, such as waste management, energy is consumed in the form of petroleum products.



1. Establishing a legislative and institutional framework for the implementation of ESCO Projects (Establishing a legislative and institutional framework)

ME, Government, Parliament

2.

Analysis of existing situation (baseline) in the sectors of public lighting, water supply, wastewater treatment and municipal waste management:

Develop energy consumption balance and associated energy costs

analyse models of management and maintenance of public lighting systems and water supply systems, which are applied

(Analysis of existing situation)

Local government

3.

Perform energy audits:

determine the stages of the process and the energy consumption by stages

identify the most critical phases (for example the water supply, it is usually the pump that can be inefficient because of age or mode)

(Perform energy audits)

Local government


Page: 132

4.

Prepare Feasibility Studies or investments profitability estimation:

prepare the required investment assessment to increase the efficiency and calculate the payback period

examine the operation of equipment and propose improvements in the operation

apply the available software packages that are used in the world for this purpose

(Prepare Feasibility studies)

Local government

5. Project implementation using different financing models (Project Implementation)

PPP or ESCO companies, local government

6.

Follow-up results:

Follow up savings in certain segments of the energy consumption and take the necessary measures so the savings will be in line with set objectives

(Follow-up results)

ME, local government


2016 2017 2018 2019 2020


1. Establishing a legislative and institutional framework


1.1.2016 31.12.2016

2. Analysis of existing situation

Local government

1.1.2017 31.12.2018

3. Perform energy audits Local government

1.4.2017 1.4.2019

4. Prepare Feasibility studies

Local government

1.7.2017 1.7.2019

5. Project Implementation PPP or ESCO companies, local government

1.7.2016 31.12.2020

6. Follow-up results ME, local government

1.1.2017 31.12.2020



202)

1. Establishing a legislative and institutional framework


150.000 150.000

2. Analysis of existing situation Local government 300.000 300.000 600.000

3. Perform energy audits Local government 400.000 400.000 150.000 950.000

4. Prepare Feasibility studies Local government 400.000 400.000 300.000 1.100.000

5. Project Implementation PPP or ESCO companies, local government

500.000 800.000 900.000 750.000 600.000 3.550.000

6. Follow-up results ME, local government

20.000 20.000 20.000 20.000 80.000

Total (1-6) 1.750.000 1.920.000 1.370.000 770.000 620.000 6.430.000


There is no direct impact on the environment. However, each activity or measure that leads to a reduction in energy consumption has an impact on the environment. Reducing energy consumption, the negative effects of the energy sector on the environment will reduce.

A number of smaller companies will be formed, independently or in collaboration with someone from abroad. Thus new businesses and employments will appear. Also certain knowledge and technologies will be achieved.


Page: 133

10.4.3. Programme of informing, education and training


Informing and education of people in terms of efficient use of energy play a key role in achieving the objectives of improving energy efficiency and reducing energy consumption. Some of these activities may have relatively rapid effects, and some have long-term effects. Since the early days of pre-school, children should start to learn about some of the basic concepts of energy efficiency and renewable energy. As children grow up and enter in the more complex system of education, learning about the efficient use of energy and renewable energy sources must become more and more complex. In secondary schools and colleges the educational program should include courses in the framework of which students will gain the necessary knowledge on energy efficiency and renewable energy sources. Thus, education activities are long-term activities and if implemented systematically, they can provide very good results, but in long term.

Informing activities are occasional, of short duration, which can give specific results on more efficient use of energy in a relatively short period of time. These activities can be conducted in various ways, through the media (radio, television, press - various promotional materials, internet portals, posters) or through various forms of workshops.

Education is a more complex form of activity, largely institutionalized, which may take place in the form of shorter or longer courses, which end with examinations and obtaining certain licenses, certificates or diplomas. Particularly important areas of education are: energy audits, energy certification of buildings, energy management.



1. Continuing promotion of energy efficiency measures (Continuous promotion)

ME, MED, MS, UCG, NGO

2. Performing presentations which focus on a specific segment of the energy consumption (Performing presentations)

ME, MED

3. Introduction of energy efficiency in the education system from the beginning of the learning process through high school to university (Introduction of EE programs in the educational system)

ME, MED, MS

4. Promotion of certification of the energy performance of buildings and energy efficiency of products that affect energy consumption (Promotion of certification of energy performance of buildings)

ME, MSDT

5. Education and professional examination for authorized persons to carry out energy audits (Education and professional examination for authorized persons)

ME, MSDT

6. Introduction of EE measures to the employees in state administration and local government (Introduction of EE measures to the employees)


7. Highlighting energy efficiency labels of products (appliances) and certificates of buildings on the designated place by law (Highlighting EE labels of products)

ME, MSDT, contractor

8 Driver training, training for efficient maintenance of vehicles (Driver training)

ME, MED


Page: 134


2016 2017 2018 2019 2020


1. Continuous promotion


1.1.2016 31.12.2020

2. Performing presentations

ME, MED 1.1.2016 31.12.2020

3. Introduction of EE programs in the educational system

ME, MED, MS 1.10.2018 31.12.2020

4. Promotion of certification of energy performance of buildings

ME, MSDT 1.1.2016 31.12.2020

5. Education and professional examination for authorized persons

ME, MSDT 1.1.2016 31.12.2020

6. Introduction of EE measures to the employees


1.1.2016 31.12.2020

7. Highlighting EE labels of products


1.1.2016 31.12.2020

8. Driver training ME, MED 1.7.2016 31.12.2020



202)

1. Continuous promotion


30.000 30.000 30.000 30.000 30.000 150.000

2. Performing presentations ME, MED 20.000 20.000 20.000 20.000 20.000 100.000

3. Introduction of EE programs in the educational system

ME, MED, MS 200.000 500.000 500.000 1.200.000

4. Promotion of certification of energy performance of buildings

ME, MSDT 20.000 20.000 20.000 20.000 20.000 100.000

5. Education and professional examination for authorized persons

ME, MSDT 50.000 50.000 50.000 50.000 50.000 250.000

6. Introduction of EE measures to the employees


40.000 40.000 40.000 40.000 40.000 200.000

7. Highlighting EE labels of products


10.000 10.000 10.000 10.000 10.000 50.000

8. Driver training ME, MED 150.000 150.000 150.000 150.000 150.000 750.000

Total (1-8) 320.000 320.000 520.000 820.000 820.000 2.800.000


All these activities will, in the long term, have a positive impact on the environment since it will lead to reduction in energy consumption for the same production of goods or services. This then has a positive impact on the environment.

New jobs will appear (for the energy certifiers, new profile of professionals in the education process).


Page: 135

10.5. CC5: Development of the energy market

10.5.1. Programme of development of the market in accordance with EU regulations, good practice and specificities of Montenegro, harmonization with the third package (also in the field of gas)


The electricity market

Since 1 January 2015, the electricity market is open for all final customers, including households. Montenegro has 4 customers at 110 kV level, 25 customers at 35 kV level, 528 customers at 10 kV and 387.500 customers at 0.4 kV level. In Montenegro, there are two participants in the electricity market in the category of electricity suppliers and 33 participants in the market in the trader category. From this we can conclude that sufficient competitiveness in the retail electricity market is not established.

Electricity Market Operator

By the existing Law on Energy, activity of organizing and managing the electricity market is performed by Electricity Market Operator, which is categorized as a new energy entity established by the Government of Montenegro and is 100% state owned. The Government of Montenegro on 16 December 2010 adopted the Decision on the Establishment of Ltd. Montenegrin Electricity Market Operator with the short name COTEE.

Electricity Transmission System Operator

Transmission System Operator was constituted in March 2009 by unbundling from EPCG as an independent energy entity called Montenegrin Electricity Transmission System. Certification of the Transmission System Operator, which is envisaged in the proposal of the new Law, will confirm the fulfilment of the conditions for the unbundling and independence, as well as the conditions of financial, material, technical and personnel equipment and capability, as well as other conditions prescribed by the Law. Since the OPS certification is process that includes regulatory institutions of EU member states, as well as the Energy Community, the date of completion of this process is uncertain. Realistically, however, it is expected that the certification process is complete by July 2017.

Electricity Distribution System Operator

The process of legal unbundling of the Electricity Distribution System Operator from the vertically integrated entity (EPCG) is ongoing. Functional unbundling has been completed. The completion of this process can be expected in the first quarter of 2016.

Development of the gas market New draft Law on Energy identifies four energy entities in the gas field, as follows: Gas Transmission System Operator, Gas Distribution System Operator, Gas Storage System Operator and LNG Facility Operator, and in particular the fifth energy entity in the field of gas, Combined Gas System Operator in the case if that energy entity carries out all four activities. The Government of Montenegro adopted the Decision on determining the Gas Transmission System Operator, which role is entrusted to the company Montenegro Bonus Cetinje. Draft new Energy Law stipulates that the Gas Transmission System Operator is also the Gas Market Operator. Montenegro still does not have developed market for LNG and is not connected to any of the international gas pipeline. The only aspect of the gas market in Montenegro is wholesale, retail (supply) and storage of LPG. In this context, the market of Montenegro consists of 15 licensed companies engaged in LPG wholesale, 2 licensed companies engaged in LPG wholesale and supply to final customers, 24 licensed companies engaged in supplying end customers with LPG and 13 licensed companies engaged in LPG storage.


Page: 136

One of the prospective options for bringing gas and gasification of Montenegro is connection to the Adriatic-Ionian gas pipeline. The most optimistic estimates do not predict the Project completion before 2020.



1. New market rules must be harmonized with the new Law on Energy and will include rules for the organization and functioning of the organized day-ahead and within the daily electricity market (Preparation of new Market Rules)

COTEE, ERA

2. Preparation of rules for the operation of the balancing market COTEE, ERA

3.

In line with the planned development of the electricity market and depending on the pace of process development, the market operator will have to prepare other acts (rules, act from the category of auxiliary regulations, contract forms, etc.). (Preparation of other acts and rule books)

COTEE

4.

The proposal of the new Law provides that the market operator shall prepare and submit to the Energy Regulatory Agency on approval formulary contracts (unified contract form) to be concluded in the electricity market (Preparing formulary contracts)

COTEE, ERA

5. In case that during the period covered by the Action Plan there is a change of the European legislation, harmonization of laws and by-laws with it will be necessary (European legislation follow-up)

COTEE, ERA

6. Analysis of the electricity market functioning in Montenegro COTEE, ERA


2016 2017 2018 2019 2020


1. Preparation of new Market Rules

COTEE, ERA 1.1.2016 30.7.2016

2. Preparation of rules for the operation of the balancing market

COTEE, ERA 1.6.2016 31.12.2016

3. Preparation of other acts and rule books

COTEE 1.1.2016 31.12.2016

4. Preparing formulary contracts

COTEE, ERA 1.1.2016 31.12.2016

5. European legislation follow-up

COTEE, ERA 1.1.2016 31.12.2020

6. Analysis of the electricity market functioning in Montenegro

COTEE, ERA 1.1.2016 31.12.2020



(2016-202)

1. Preparation of new Market Rules COTEE, ERA 20.000 20.000

2. Preparation of rules for the operation of the balancing market

COTEE, ERA 40.000 40.000

3. Preparation of other acts and rule books COTEE 20.000 20.000

4. Preparing formulary contracts COTEE, ERA 40.000 40.000

5. European legislation follow-up COTEE, ERA Included in ordinary activities of COTEE and ERA

6. Analysis of the electricity market functioning in Montenegro

COTEE, ERA Included in ordinary activities of COTEE and ERA

Total (1-6) 120.000 120.000


No impact on the environment. Project / Programme completion will not provide creation of any new job.


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10.5.2. Project of development and implementation of information technology and measurement infrastructure as technological support to the functioning of the electricity market and its subsequent inclusion in the regional processes


Activity performing of organization and management, as well as the development of the electricity market, cannot be successfully carried out without a very complex IT infrastructure (software and hardware).

At this point COTEE has a specific hardware infrastructure and software that can meet the requirements of certain business segments for the achieved level of market development. COTEE also has a static Web site through which interested parties are informed of all aspects of its operations and its activities that may be publicly available.

The planned development of the electricity market in Montenegro, which includes the establishment of an organized day-ahead and within the daily electricity market, on which the Energy Community insists ("Road Map" - "Soft measures" that provides intensive dynamics is prepared) cannot be successfully implemented without buying adequate IT infrastructure. The planned development of the COTEE information system, which would enable the successful functioning and fulfilment of the imposed Law and License obligations at least for the period covered by the Action Plan, is contained in COTEE document Blue Print Report of the Information System. The issue of the use of information technology (IT) in the operation of COTEE is essentially axiomatic and refers to two groups of requirements:

requirements arising from the nature of the activities that are done that way,

technical requirements of infrastructure and data protection that are the subject of the energy market.

IT Application requirements for COTEE are following:

business requirements arising from law and bylaw legislation, standards, technical and technological needs for the development of IT infrastructure,

requirements arising from the need of servicing the operation of the existing electricity market,

requirements arising from the need of servicing the operation of the future electricity market,

requirements of phase development of the electricity market, which include IT flexibility when it comes to its new functions and features,

requirements for using the services of e-business, easy and intuitive access to IT functions from the locations within COTEE and external locations (location of market participants and other users of the system),

requirements for a smooth transition or change in the mode of the electricity market operation,

requirements for system users necessary informing in those elements that are defined by the relevant legislation,

requirement for the purpose of monitoring the further development of electricity market (automation of trade, the flow of information between energy entities and market participants in all combinations and directions and general business in the energy sector, etc.),

requirements for integration needs of the power sector in Montenegro into regional/European integration,

requirements for the need of a high-quality project documentation which would have all the necessary qualifications to organize the tender, obtain a loan or be the subject of donor programs.

COTEE has a need for upgrading the existing software within the technical potential, as well as for purchase of new software with the corresponding hardware infrastructure.


Page: 138



1. Preparation of project documentation for the upgrade of the existing software (in phases) and purchase/procurement of new software (Documentation to upgrade the existing software)

COTEE

2. The module for reception and recording of bilateral sales contracts between market participants; Module for risk management and transaction monitoring module of registered participants in the electricity market (supplier - end customer relationship) (Upgrade of the existing software)

COTEE

3. Purchase of software to support the establishment and functioning of the day-ahead market, within daily market and the balancing energy market, in accordance with the selected model based on the recommendations of the ERA (Purchase of new software)

COTEE

4. Creating a dynamic Web site/Web portal (Activities on the implementation of IT COTEE for the period covered by the Action Plan)

COTEE


2016 2017 2018 2019 2020

Activity Responsibilit

y Start End 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4

1. Documentation to upgrade the existing software

COTEE 1.1.2016 31.12.2017

2. Upgrade of the existing software

COTEE 1.1.2016 30.7.2017

3. Purchase of new software COTEE 1.1.2016 31.12.2017

4. Activities on the implementation of IT COTEE for the period covered by the Action Plan

COTEE 1.6.2016 30.6.2018



(2016-202)

1. Documentation to upgrade the existing software

COTEE 250.000 250.000 500.000

2. Upgrade of the existing software COTEE 400.000 400.000

3. Purchase of new software COTEE 400.000 500.000 900.000

4. Activities on the implementation of IT COTEE for the period covered by the Action Plan

COTEE 100.000 100.000 200.000

Total (1-4 ) 250.000 1.150.000 600.000 2.000.000


No impact on the environment. Project / Programme completion will not provide creation of any new job. Professional staff within the COTEE will be able to perform the tasks envisaged by the Project/Programme after its completion.


Page: 139

10.5.3. Project of competition increasing in the market of petroleum products


Petroleum products in Montenegro are fully imported. There is positive perspective for the local oil fields which’s research capacity and sustainability is in preparation.

Petroleum sector in Montenegro is regulated by the following laws and bylaws:

Energy Law

Law on Air Protection

The Law on General Product Safety

Inspection Law

Decree on the method of maximum retail prices of petroleum products

Decree on limit values of pollutants in liquid fuels of petroleum origin

Rule book on the quality and quality control of liquid fuels of petroleum origin

Based on the number of licenses issued for activities in the field of petroleum products and taking into account the principle of competitiveness, which implies a sufficient number of companies engaged in the same activity, the need to provide the same working conditions and creating a product surplus that would ultimately provide a competitive price of petroleum products, either would be necessary for the market of petroleum products in Montenegro to appear at least one, and preferably more competitive companies. Although the ERA awarded 26 licenses for wholesale trade in petroleum products, it cannot be concluded that there is substantial competition in the wholesale market because of the main position of only one company - Jugopetrol Kotor.

Considering the size of the Montenegrin market of petroleum products and the number of licensed entities that are engaged in activities related to petroleum products, it can be concluded that there is a certain degree of competition in the retail market (supplies to final customers) of petroleum products, which is not the case with the wholesale market.

The objective of the Project/Programme is a proposal of measures for establishing a satisfactory level of competitiveness in the market of petroleum products in Montenegro. The objective of the Project/Programme is also to perform permanent control of product quality and level of services provided by licensed companies engaged in activities related to trade of petroleum products.

As all mentioned above must comply with the legislation, Project/Programme will treat obligations of Montenegro concerning the obligation to maintain minimum stocks of crude oil and/or petroleum products because this obligation is directly reflected on the state of the market of petroleum products. On one hand the fulfilment of the obligation to maintain minimum stocks of petroleum products will cause the increased security of supply to final customers in case of emergencies and disruptions on the market, at least for a period of 90 days, while on the other hand it will cause a rise of retail price of petroleum products due to the cost of maintenance of minimum stocks.

The storage capacity of the oil sector of Montenegro is 192.593 m3.

Storage facilities consist of several small reservoirs and medium size reservoirs which are mainly located in Bar, Lipci and Bijelo Polje.


Page: 140



1. Completion of the legislation in this field with mandatory compliance with European legislation

ME, MF, ERA, Parliament

2. Creating a favourable business environment, the simplification of company registration procedures and licensing (Favourable business environment)


3. To envisage the construction of medium and large storage capacities in Spatial - Planning documents (Provision of storage capacity)

ME, ERA, municipalities

4. Deregulation of petroleum products retail prices ME, MF, ERA, Government, Parliament

5. Establish clear and unified methodology for collecting and systematizing data on petroleum products trade and import

ME, ERA


2016 2017 2018 2019 2020




1.1.2016 31.12.2016

2. Favourable business environment


1.1.2016 31.12.2020

3. Provision of storage capacity

ME, ERA, municipalities

1.1.2016 31.12.2017

4. Deregulation of petroleum products retail prices


1.6.2016 30.6.2017


ME, ERA 1.1.2016 31.12.2016



(2016-202)



40.000 40.000

2. Favourable business environment ME, MF, ERA, Government, Parliament

Included in ordinary activities of MF, ME, ERA, Government and Parliament

3. Provision of storage capacity ME, ERA, municipalities

40.000 20.000 60.000

4. Deregulation of petroleum products retail prices


20.000 20.000


ME, ERA 40.000 40.000

Total (1-5) 140.000 20.000 160.000


During the preparation of spatial planning documentation (construction of storage facilities, construction of new gas stations, etc.) it is necessary to prepare the Strategic Environmental Assessment, and during the preparation of project documentation, the investor has to prepare the Environmental Impact Assessment.

During the preparation and implementation of the Project the conditions to create new jobs will appear which will positively affect the social position of a number of citizens in Montenegro.


Page: 141

10.5.4. Monitoring Programme of introduction and operation of non-discriminatory energy market (electricity, gas)


Market opening and introduction of competition in the electricity sector has led to a change in the way of sector operation as a whole, the market operator is formed, electricity trading began, as well as market supply, in particular for large consumers.

Unbundling of activities which include network services, transmission and distribution, is one of the preconditions for establishing the market and competition in the energy sector.

Supply on the electricity market

In accordance with the Energy Law, from 1 January 2015, tariff electricity customers became eligible customers, which formally meant that retail electricity market in Montenegro is completely opened.

Because of the lack of competition in the supply, the Law provides that even after 1 January 2016, the supply of these customers should continue in the same manner, i.e. by the supplier that was supplying them until the entry into force of the Law, as long as these customers do not change supplier.

Draft Law on Energy precisely defines the conditions of supply of these customers, i.e. the duration and cost, before finding their supplier. In accordance with these provisions, the ERA will do whatever it takes, pursuant to its authorizations and possibilities, to create the conditions that customers fully understand their rights and opportunities and in the new circumstances, better use benefits that will be available.

Regarding the price changes in the interim period after 1 January 2017 until the end of 2019, the supplier may change the prices for small customers which do not belong to the category of household in accordance with market price changes within the limitations prescribed by Law.

ERA will also have a control function in following cases:

If a supplier which has a dominant position in the market, in terms of disturbances in the electricity market, has intention to change the price of electricity for customers outside the limits or to make change at different rates for different categories of customers, he is obliged to prepare the estimation of income changes from each category of customers and submit it to the ERA for approval.

If the dominant supplier makes a profit at a rate higher than the average rate of return that is shown in the transmission and distribution operator balances during the period until the emergence of a liquid market, ERA will instruct the supplier to determine the price for the customers for which the profit will be achieved at most at the average rate of return for regulated activities in the next year.

The existence of a liquid market, the existence of a dominant position and the elements of abuse of dominant position, as a basis for ERA action, is determined by the competent Competition Commission at the request of the ERA.

The law envisages the existence of a last resort supplier and vulnerable customer supplier which will supply households and small customers which choose that way of supply, in the case of losing their supplier without their fault.

In this way, conditions for the continuous supply of all customers in Montenegro are created.

General and specific parameters are as follows:

Create conditions for the emergence of new suppliers as the basic precondition for liquid electricity markets reviving.


Page: 142

Ensure that the electricity Distribution System Operator is legally unbundled from the vertically integrated undertaking - EPCG and functionally independent.

Development of the consumption pattern for all consumer groups for which power is not measured in order to be able to offer it to the new suppliers who will appear on the market.

Establish a system for collecting and recording data for minimum supply quality and the provision of network services.

Approval of the market rules and the balancing market rules.



1. DSO unbundling ME, ERA

2. Approval of the market rules ERA

3. Establish system for supply quality DSO, suppliers

4. Monitoring ERA


2016 2017 2018 2019 2020


1. DSO unbundling ME, ERA 1.1.2016 31.3.2016

2. Approval of the market rules

ERA 1.1.2016 30.6.2016

3. Establish system for supply quality

DSO, suppliers 1.1.2016 31.12.2016

4. Monitoring ERA 1.6.2016 31.12.2020



1. DSO unbundling ME, ERA 5.000 5.000

2. Approval of the market rules ERA Included in ordinary activities of ERA

3. Establish system for supply quality DSO, suppliers 20.000 20.000

4. Monitoring ERA Included in ordinary activities of ERA

Total (1-4) 25.000 25.000


No impact on the environment.

The social impact will be better customer protection and compliance with the EU legislation.


Page: 143

10.6. CC6: Environmental protection and climate changes

10.6.1. Programme of monitoring of the fulfilment of international obligations regarding climate change


Montenegro has established a number of institutions that are responsible for the activities in the area of climate change. Ministry of Sustainable Development and Tourism (MSDT), the Directorate for climate change within the same Ministry, has core competencies in the area of the policy and relevant regulations for climate change.

National GHG emission inventory is prepared and maintained by the Environmental Protection Agency (EPA), which also has executive competences to implement the legislation in the area of climate change. EPA is responsible for implementation of activities for protection of the Ozone Layer and regulations for F-gases.

Policy in the field of climate change, including measures to mitigate and adapt, is firmly associated among the sectors with the activities of the entire state administration. The integration of climate policy in the relevant sectoral policies will be developed. This requires a system functioning of policy harmonization at the national level. The integration of climate policy into all relevant sectoral policies is a major precondition for its implementation and the achievement of goals.

The key document the National Strategy for Climate Change by 2030, which is adopted in September 2015, defines climate policy, establishes the guidelines and a roadmap towards climate-resilient, low-carbon society. The initial assessment of the policy compatibility and strategies relevant to climate change compatibility with EU requirements in this field indicates that the local strategic and legal framework deal with climate change issues to some extent. In order to harmonize the national with the EU climate policies and regulations, part of the EU climate legislation has already been transposed into national legislation.

The key legal instruments of the EU that need to be implemented in Montenegro, or have already been implemented, are as follows:

1. Decree on the mechanism for monitoring and reporting (MMR)

2. Legislation on the EU emissions trading scheme (ETS)

3. Legislation on the EU emissions trading scheme for aviation activities

4. The decision on the effort division

5. Decrees on Substances that deplete the Ozone Layer and certain fluorinated gases

6. Directive on fuel quality

7. Directive on the vehicle labelling in terms of CO2 emissions

8. Carbon capture and storage of (CCS)



1. Submission of the first supplementary report on climate change to the UNFCCC Secretariat

MSDT

2. Preparation of the third national report on climate change and second supplementary report on climate change

MSDT

3. Implementation of EU regulations in the field of climate change MSDT, ME


Page: 144


2016 2017 2018 2019 2020



MSDT 1.1.2016 1.4.2016


MSDT 1.4.2016 31.12.2018

3. Implementation of EU regulations in the field of climate change

MSDT, ME 1.1.2016 31.12.2020



2020)


MSDT 100.000 100.000


MSDT 284.000 284.000 284.000 852.000

3. Implementation of EU regulations in the field of climate change

MSDT, ME 470.000 185.000 205.000 205.000 685.000 1.750.000

Total (1-3) 854.000 469.000 489.000 205.000 685.000 2.702.000



No social impact.


Page: 145

10.6.2. Programme for coal consumption reduction


In Montenegro, there are two separate geographical areas in which coal is mined: Pljevlja area and Berane area. Currently, coal is only mined from several pits in the Pljevlja basin. One of the basins around Pljevlja is practically exhausted. The plan is to start production from Berane basin in the next few years, as well as the opening of new mines in the area of Pljevlja, after 2020.

According to calculations performed for the EDS by 2030, coal balance is given for the period between 2015 and 2020, which shows an increase of coal consumption for electricity generation and simultaneously reduction of coal consumption in the industry, households and others. The sharp rise of coal consumption in the energy transformation sector is determined by the construction of a new TPP Pljevlja 2. Coal is not envisaged for the new boilers, or for district heating cogeneration (except in Pljevlja), so the coal consumption in final consumption further reduces, and in 2020 becomes negligible.

The future operation of the existing TPP block is conditioned by a decision of the Ministerial Council of the Energy Community D/2013/05/MG-EnG on the implementation of Directive 2001/80/EC of the European Parliament and of the Council of 23 October 2001 on the limitation of emissions of certain pollutants into the air from large combustion plants, with which the operation of this plant is limited to 20,000 hours in the period 2018-2023. Power plant operator has already suggested the option of closing down this block, after this period and for the preparation of a technical document for intended national contribution to the global reduction of greenhouse gas emissions has given the expected work plan for the period after 2015.

Coal consumption in the period between 2016 and 2020, has a declining trend, at least until the end of 2019. This trend will be particularly pronounced in 2017, when the total coal consumption will be reduced to a minor consumption in the industry, households and others. This consumption also has a declining trend, due to the gradual introduction of cogeneration plants for the production of hot water and steam in the manufacturing industry, as well as biomass district heating systems in several municipalities in the north and central part of the country, which will reduce or completely eliminate industrial and individual coal fireboxes. The exception is 2020, when the consumption of coal in the energy transformation sector will be significantly increased due to parallel operation of both units of the power plant.



1. Continue subsidizing the use of environmentally friendly fuels


2. Raising public awareness about the positive effects of the transition to district heating



2016 2017 2018 2019 2020




1.1.2016 31.12.2020

2. Raising public awareness about the positive effects of the transition to district heating


1.1.2016 31.12.2020


Page: 146



2020)



120.000 120.000 120.000 120.000 120.000 600.000

2.

Raising public awareness about the positive effects of the transition to district heating


25.000 25.000 25.000 25.000 25.000 125.000

Total (1-2) 145.000 145.000 145.000 145.000 145.000 725.000


The environmental impact is positive in terms of improving air quality. Specific evaluation concerning the care for the environment is not prepared as the whole Programme is related to the improvement of the environment, except in the case of biomass district heating, which requires Environmental Impact Assessment, as it can have negative effects on air quality due to emissions of carcinogens PAH associated with the burning of biomass, if a system for waste gases purification is not provided.

There will be job creation through the strengthening of administrative capacities and human resources in public services and the regulatory agency.


Page: 147

10.7. CC7: Long-term energy development of Montenegro

10.7.1. Programme of Study development for hydro potential use and river basin management for all rivers in Montenegro (in the main stream and the tributaries) and preparation of the feasibility studies for selected objects


The current Strategy has considered only those hydroelectric facilities that already have prepared project documentation at an acceptable level. Although in Montenegro there is a large untapped hydro potential, the necessary research works and studies have not been done, and it cannot be objectively evaluated.

The Programme implementation will enable the electricity generation with a corresponding deficit reduction in the power systems of the countries which belong to the basins of the following rivers: Drina, Piva, Tara, Ćehotina, Lim, Ibar and Morača, increasing security of supply, increasing the stability of the power systems by putting hydro power plants in operation, energy improvement opportunities of downstream power plants on Drina, Piva, Ćehotina, Lim and Ibar, water management and improvement of water regime in the basins of Sava, Drina, Piva, Tara, Ćehotina, Lim, Ibar, Morava, Morača and Skadar Lake (an increase of low waters and mitigate floods by reducing large waters), favourable ecological conditions, valorisation of tourism potential, etc.

It is necessary to update the data in documents of countries which belong to the Drina River basin and in the Water Master Plan of Montenegro, and prepare the documentation for the use of hydro potential and water management of following rivers: Drina, Piva, Tara, Ćehotina, Lim, Ibar and Morača. Water management plan should ensure the improvement of water regimes of Drina, Piva, Tara, Ćehotina, Lim, Ibar, Morača and Skadar Lake (mitigate floods by high waters, increase of low waters, water supply, etc.) by providing favourable ecological conditions, but it must be prepared in close cooperation with the energy sector, which wants to valorise the hydro potential with construction of hydro power plants, as well as in accordance with the water Framework Directive.

The documentation should include all necessary elements in order to achieve States agreement with respect to the optimum utilization of the joint hydro potential and joint water management

It is necessary to immediately intensify study working on developing new Projects that with time could become candidates for future updates of the Strategy. The first step should be the development of Study on the exploitation of hydropower potential of all rivers, in the main stream and in the tributaries. Specifically, in the area of new hydro power plants, Montenegro does not have clearly identified new facilities after 2022, except of those that are already in the Strategy. For the identified HPP Boka, HPP Kruševo, HPP on Ćehotina and HPP on Lim there is no documentation developed at satisfactory level.

Updating the data in documents that already exist should start without delay and begin the development of new planning and design documents. That would be the basis for drafting documents for the use of hydro potential and water management of all rivers on which there are possibilities for the energy use of their potential.



1. Preparatory phase

WA, MSDT, ME, relevant Ministries of neighbouring countries

2. Spatial plan and SEA MSDT, relevant Ministries of neighbouring countries

3. Research works, studies and designs

MSDT, MARD, ME, WA, relevant Ministries of neighbouring countries


Page: 148


2016 2017 2018 2019 2020


1. Preparatory phase WA, MSDT, ME, relevant Ministries of neighbouring countries

1.1.2016 31.12.2017.

2. Spatial plan and SEA

MSDT, relevant Ministries of neighbouring countries

1.1.2017 31.12.2017



1.1.2016 31.12.2020



2020)

1. Preparatory phase

WA, MSDT, ME, relevant Ministries of neighbouring countries

2.000.000 2.000.000 4.000.000

2. Spatial plan and SEA

MSDT, relevant Ministries of neighbouring countries

1.000.000 1.000.000



1.000.000 2.000.000 2.000.000 2.000.000 2.000.000 9.000.000

Total (1-3) 3.000.000 5.000.000 2.000.000 2.000.000 2.000.000 14.000.000


During the preparation of spatial planning documents SEA is required, and during the preparation of project documentation with the possible realization (construction) of the individual Project, the investor has to prepare the Environmental Impact Assessment.

The Project has no direct social impact, but it certainly has an indirect, where also during the research of individual sites, various NGOs get included and different opinions appear in the society about the (un)justified Projects.


Page: 149

10.7.2. Programme of agreement with neighbouring countries on the optimal use of mutual hydro potential and water management


When talking about significant water resources in Montenegro, it should be noted that the water coming from the territories of upstream countries amount only 5%, whereas the water of Montenegro amount 95% of total water outflow, which is unique in comparison with other countries in the SEE region, and represents a significant comparative advantage of Montenegro. It should be emphasized that the water regimes are very unequable, among the toughest in Europe, taking into account unequable aspects over the time. The use of available water resources (hydro potential, human consumption, agriculture, tourism, etc.), with floods and uncontrolled damages prevention, mitigation of climate change, etc. is a key development issue in Montenegro. The development of the full potential in the scenario of sustainable development requires agreements with the neighbouring countries of Albania, Bosnia and Herzegovina and Serbia on the use of water rights. Agreement on mutual relations in the field of water management has already been concluded with Croatia. Activities on harmonization and signing of the Agreement on water management relations between Montenegro and Albania are ongoing.

Programme has several components and targets, such as:

complete the harmonization of national legislation with international agreements and the EU Water Framework Directive,

promoting sustainable water management,

mitigate the effects of global climate change,

preventing or limiting the negative effects of floods and droughts, act in the case of dangerous occurrences and incidents involving substances hazardous to water,

ensuring the monitoring and control of implementation of agreements, laws, regulations and standards.



1.

Initiative for the agreement with Serbia and signing of the agreement with Bosnia and Herzegovina (Initiative for the agreement)

ME, WA, MARD, relevant Ministries of neighbouring countries

2. Preparation of basic documents for agreement on water rights, optimal utilization of mutual hydro potential and water management with time frames, preparing of expert analyses, studies and data, engage consultants (Preparation of basic documentation)


3.

Negotiations to achieve the agreement

Government of Montenegro and Governments of neighbouring countries


2016 2017 2018 2019 2020


1.

Initiative for the agreement


1.7.2016 31.12.2016

2. Preparation of basic ME, WA, MARD, 1.7.2017 31.12.2017


Page: 150

documentation relevant Ministries of neighbouring countries

3.



1.4.2017 30.6.2018



2020)

1.

Initiative for the agreement


30.000 30.000

2.

Preparation of basic documentation


40.000 360.000 400.000

3.



120.000 40.000 160.000

Total (1-3) 70.000 480.000 40.000 590.000


Having in mind activities planned within the Programme, which are primarily related to preparation of memorandums, documentation, negotiations and international cooperation, we believe that the SEA is not needed.

The Programme does not have significant social impact.


Page: 151

10.7.3. Project of analysis, research work and feasibility study to ensure sufficient quality basic data for making investment decisions for the eventual construction of HPP Boka and / or HPP Kruševo after year 2030


Based on preliminary research and so far activities, identified large HPP for the possible construction are following: HPP Morača, HPP on Tara (Buk Bijela, Koštanica, Ljutica), HPP Komarnica, HPP on Ćehotina, HPP on Lim, HPP Kruševo (Piva) and HPP Boka (Trebišnjica). Some of these options have been removed from the final scenario in the Strategy, due to the present Declaration on the Protection of the Tara River (2004) or due to incomplete available project documentation for the other mentioned plants.

For eventual implementation of Projects HPP Kruševo and HPP Boka, interstate agreement on the use of hydro potential must be previously achieved.



1. Interstate agreement on the use of hydro potential Government of Montenegro, Government of BiH

2. Research works ME, EPCG, relevant Ministry in BiH, Elektroprivreda Republike Srpske

3. Preparation of power plants Conceptual Design and Feasibility Study

ME, EPCG, relevant Ministry in BiH, Elektroprivreda Republike Srpske

4. DSP and SEA preparation MSDT, relevant Ministry in BiH


2016 2017 2018 2019 2020


1. Interstate agreement on the use of hydro potential

Government of Montenegro, Government of BiH

1.7.2016 30.6.2018

2. Research works


1.7.2018 31.12.2019

3.

Preparation of power plants Conceptual Design and Feasibility Study


1.1.2020 30.6.2020

4. DSP and SEA preparation

MSDT, relevant Ministry in BiH

1.7.2020 31.12.2020


Page: 152



2020)

1. Interstate agreement on the use of hydro potential

Government of Montenegro, Government of BiH

Funding is envisaged within the budget for 10.7.2.

2. Research works


500.000 1.500.000 2.000.000

3. Preparation of power plants Conceptual Design and Feasibility Study


1.000.000 1.000.000

4. DSP and SEA preparation MSDT, relevant Ministry in BiH

1.000.000 1.000.000

Total (1-4) 500.000 1.500.000 2.000.000 4.000.000


During the preparation of spatial planning documents SEA is required, whereas during the project documentation preparation, the investor has to prepare the Environmental Impact Assessment.

The Programme does not have significant social impact.


Page: 153

10.7.4. Project of coal exploration in area of Pljevalja and Berane


Montenegro has two registered types of coal: lignite in the broader Pljevlja region and brown coal in Berane municipality. Lignite is exploited by the surface mining in the region of Pljevlja.

Pljevlja area includes three basins: the Pljevlja basin with deposits: Potrlica with cement plant, Kalušići, Grevo, Komini and Rabitlje, with gravitating small basins, deposits: Otilovići Glisnica and Mataruge. The second basin is Ljuće-Šumanski, deposits: Šumani 1 and Ljuće 2 (mainly used) and the third basin Maoče.

Reserves in basins Glisnica and Mataruge are estimated with a considerable degree of reliability. Basin Glisnica is in phase of final testing and defining the sites. The amount of coal in the basin Mataruge is not questionable, but it is necessary to conduct a detailed geological exploration to define the quantity and quality of coal. Basin Maoče is explored and it has 109.9 million tons of estimated balance reserves of coal.

Berane area basins: Polica, Petnjik and Zagorje, insufficiently explored. Geological reserves of brown coal amount to about 158 million tons, but the mineable reserves estimated in 2008 amount to a maximum of 17.8 million tons (IMC study, 2008). One part of the Berane basin is already under contract - Petnjik pit, and the concessionaire is DOO Rudnici mrkog uglja Podgorica.

Coal quality and reserves of Berane basin have not been properly documented. Although research activities during and after the exploitation were performed in different time periods and in significant quantities, they have not been performed in economical way. A significant part of the research activities has not been included in elaborate or verified by the competent government authority. Structural boreholes were not followed-up according to the rules, with analyses of coal quality and the required hydro-geological, technical-geological and other elaborates and studies.

In the analysis of the available documentation, treatment of the Berane region from the aspect of coal classification, reserves and coal quality, significant discrepancies are noticed. Data are prepared by different authors and in different periods.



1. Award of concessions for development and exploitation of deposits Maoče, Mataruge and Otilovići, as well as Berane deposits (Award of concessions)

ME

2. Geological reserve explorations, review of documentation, analysis in the Berane area (Police and Zagorje) and in the deposit Mataruge, Rabitlje, Grevo, Komini and Radosavac and research program for small deposits (Geological works)

Concessionaire

3. Main Designs of coal exploitation in deposits Maoče, Otilovići, Mataruge and Berane (Mining techno-economic activities)

Concessionaire


2016 2017 2018 2019 2020


1. Award of concessions ME 1.1.2016 31.12.2016 2. Geological works Concessionaire 1.1.2017 31.12.2018

3. Mining techno-economic activities

Concessionaire 1.7.2018 31.12.2019


Page: 154



2020)

1. Award of concessions ME 30.000 30.000

2. Geological works Concessionaire 25.000 2.500.000 2.500.000 5.025.000

3. Mining techno-economic activities

Concessionaire 350.000 3.850.000 12.660.000 4.050.000 20.910.000

Total (1-3) 405.000 6.350.000 15.160.000 4.050.000 25.965.000


Planned activities refer to explorations for which EIA procedure is not required. EIA procedure is mandatory for exploitation projects.

The project does not have significant social impact.


Page: 155

10.7.5. Project of hydrocarbon exploration in Montenegro offshore


Previous hydrocarbon explorations in the Montenegro offshore indicate the perspective in terms of commercial hydrocarbon reserves discovery. The existence of basic preconditions for the production of hydrocarbons in the South Adriatic geological basin has been proven, and direct confirmation of this fact is the production in the Albanian, Italian and Croatian part of the basin. On Public Invitation for submission of bids for award of the Hydrocarbons Production Concession Contract in Montenegro offshore, which was published by the Ministry of Economy on 7 August 2013, and concluded in 2014, 6 bidders applied. The first tender was open for 13 blocks in the Montenegro with a total area 3.100 km2. The Concessionaire has not been selected yet. According to the LEPH the Concession Contract for the production of hydrocarbons is divided into the hydrocarbon exploration phase, which includes the phase of verification of reserves; development phase and phase of hydrocarbons production. The exploration phase with the phase of reserves verification may last up to seven years for a block in the offshore, from the date of signing the Concession Contract for production, with the possibility of extension for a period of two years in accordance with the LEPH. The content of the exploration program, i.e. the mandatory work program which is obligatory for the Concessionaire will be defined by the individual Concession Contracts. Bearing in mind that the Action Plan is adopted for the period of 5 years, and that the first Concession Contracts shall be concluded at the beginning of 2016, it cannot be expected to reach the stage of development and production of hydrocarbons in Montenegro offshore in due time, but will start the activity of hydrocarbon exploration. However, during the period of Action Plan implementation, publishing of second Public Invitation for submission of bids for award of the Hydrocarbons Production Concession Contract in Montenegro offshore is expected. LEPH also envisages the possibility of concluding the Concession Contracts for hydrocarbon exploration, which gives the right to seismic companies to carry out offshore explorations in Montenegro, without drilling exploratory wells, in order to collect and marketing (sell) data on the perspective of Montenegrin offshore in terms of finding commercial hydrocarbon reserves. The Public Invitation for the award of this Concession Contract will be announced after the conclusion of the first Concession Contracts for hydrocarbon production, or prior to the announcement of second Public Invitation for submission of bids for award of the Hydrocarbons Production Concession Contract in Montenegro offshore. B. Necessary activities to achieve the objective


1. Conclusion of the Hydrocarbons Production Concession Contract (Concession Contract)

ME

2. Exploration in line with concluded Hydrocarbons Production Concession Contract (Exploration in line with Concession Contract) Concessionaire

3. Preparation of the Public Invitation and conclusion of Hydrocarbon Exploration Concession Contract (Preparation of the Public Invitation)

ME

4. Seismic hydrocarbon exploration in line with Hydrocarbon Exploration Concession Contract (Seismic hydrocarbon exploration)

Concessionaire

5. Preparation of the second Public Invitation and conclusion of Hydrocarbon Production Concession Contract (Preparation of the second Public Invitation)

ME

6. Hydrocarbon exploration in line with the Concession Contracts for production concluded on the second tender (Exploration by the second tender)

Concessionaire


Page: 156


2016 2017 2018 2019 2020


1. Concession Contract ME 1.1.2016 31.3.2016

2. Exploration in line with Concession Contract


3. Preparation of the Public Invitation

ME 1.1.2016 30.6.2016

4. Seismic hydrocarbon exploration


5. Preparation of the second Public Invitation

ME 1.1.2017 31.12.2018

6. Exploration by the second tender




2020)

1. Concession Contract ME Included in ordinary activities of ME

2. Exploration in line with Concession Contract

Concessionaire 10.000.000 10.000.000 10.000.000 70.000.000 10.000.000 110.000.000

3. Preparation of the Public Invitation

ME 50.000 50.000

4. Seismic hydrocarbon exploration

Concessionaire 100.000 5.000.000. 5.000.000 5.100.000

5. Preparation of the second Public Invitation

ME 20.000 20.000 40.000

6. Exploration by the second tender

Concessionaire 10.000.000 10.000.000 20.000.000

Total (1-6) 10.150.000 10.020.000 15.020.000 80.000.000 20.000.000 135.190.000


The works will be carried out in accordance with international and Montenegrin regulations related to environmental protection:

International Convention on measures against sea pollution from the hydrocarbons, London, 1954/62; Convention on the High Seas intervention in case of pollution by hydrocarbons, Brussels, 1969,

Convention on the High Seas, Geneva, 1958,

Law for the Prevention of Sea Pollution from Ships (official gazette CG, 20/11),

Law on Environmental Impact Assessment (official gazette of RC, 80/05 and CG40/10, 73/10, 40/11 and 27/13).

By the end of the first quarter of 2016 Strategic Environmental Assessment will be adopted for the Programme of Hydrocarbon Production and Exploration in the offshore of Montenegro. The concessionaires are obliged to carry out special EIA for each activity.

Results of hydrocarbon exploration in the offshore of Montenegro will certainly have an impact on the economy of Montenegro, and they will imply social impact as well. What will be the economic and social impact is a subject of much broader and more comprehensive economic and environmental analysis that must be prepared. First of all the economic and social impact will depend on several factors, among which the first refers to what will then be the hydrocarbon market.


Page: 157

10.7.6. Project of Ionian-Adriatic pipeline


With the Project of construction of the Ionian-Adriatic Pipeline (IAP), connection of Fier (Albania) with Split (Croatia) by gas pipeline is planned, thereby passing through the territory of Montenegro. The projected capacity of the pipeline is 5 bcm/year, with the total length of 511 km. Construction of the pipeline will enable the gasification of Albania, Montenegro and southern Croatia, and will provide diversified and reliable supply of natural gas. IAP is planned as a bidirectional pipeline, so the supply line can be north-south, from the LNG terminal in Croatia, or from some other sources. IAP is intended to be a continuation of the Trans-Adriatic Pipeline Project (TAP), a gas pipeline that via Greece, Albania, Adriatic Sea, and the Italian region Puglia enables the transport of gas from the Caspian region to Western Europe. IAP Feasibility Study analysed possible routes of the future gas pipeline. Routes were analysed from the aspects of economic feasibility, the optimum pipeline diameter, gas consumption possibility and it included alternative solutions for the entire route from Fier to Split. For the purposes of the Study, Montenegro adopted a solution of the IAP route that should be on relation from Anomalsko polje (Ulcinj) to Bar, from there by underwater section to Luštica, then across Luštica again underwater to Croatia.

Possible models of IAP construction that are taken into consideration are as follows:

1. IAP – as a unique Project that would form SPV (Special Purpose Vehicle), at the beginning consisted from the participating countries as shareholders, afterwards the SPV would provide the financial structure for the Project implementation by attracting sponsors/investors.

2. Special separate IAP section Projects, through which each section would be considered as a special Project (eg. section through Montenegro), and where the funding would be based on each section individually.



1. Preparatory activities and preparation of the Main Design with EIA ME, Montenegrobonus

2. Tender process ME

3. Construction Contractor


2016 2017 2018 2019 2020


1. Preparatory activities and preparation of the Main Design with EIA

ME, Montenegrobonus

1.1.2016 30.6.2018

2. Tender process ME 1.1.2019 30.9.2019

3. Construction Contractor 1.1.2020 31.12.2020



2020)

1. Preparatory activities and preparation of the Main Design with EIA

ME, Montenegrobonus

600.000 1.750.000 2.350.000

2. Tender process ME 420.000 420.000

3. Construction Contractor 20.000.000 40.000.000 60.000.000

Total (1-3) 600.000 1.750.000 420.000 20.000.000 40.000.000 62.770.000


Page: 158


The final, detailed construction plan will depend on a variety of technical and contractual items and will take into account the socio-economic and environmental factors associated with the sensitive issues of construction. During the preparation of spatial planning documents, SEA is required, and during the preparation of the Main Design it is necessary prepare the Environmental Impact Assessment. The Project can strengthen the position of Montenegro in the energy sector of the region, thus support intensive overall economic development. In addition, there is a possibility of higher demand for gas for heating purposes, and new jobs during construction and afterwards.


Page: 159

10.7.7. Project to establish the CSE and 90-day reserves of petroleum products


Council Directive 2009/119/EC of 14 September 2009 imposed an obligation on Member States to maintain stocks of crude oil and/or oil products.

Mandatory stocks of oil and oil products are stocks which are used for security of oil and oil products supply in the event of threat to energy security of the country because of extraordinary circumstances.

According to provisions of Directive, member states need to have oil stocks that correspond to 90 days of average daily net import or 61 days of average daily inland consumption, whichever of the two quantities is greater.

Total storage capacity that could be used for the needs of strategic stocks and which the Montenegrin oil sector has at its disposal is around 205,000 m3. Out of the total capacity, 129,000 m3 belongs to Jugopetrol. The storage capacities of around 55,000 m3 (54,000 m3 for oil products and 1,000 m3 for LPG), previously owned by the former Federal Directorate for Commodity Reserves, which were given to Montenegro Bonus for use have not been used for several years because of a dispute with Jugopetrol over ownership. The remaining part of storage capacities of around 21,000 m3 is located at other gas stations.

The storage capacities comprise several smaller tanks and medium-sized tanks that are mostly located in Bar, Lipci and Bijelo Polje. The tanks that are in use are currently used solely for commercial purposes by the companies (operating stocks); therefore only a small part of the existing capacities is operational and most of the unused capacities need for significant investment and maintenance.

According to the current estimate of the quantity of strategic oil stocks, it is believed that a bigger part of stocks can be stored in domestic storage facilities, with certain investments needed for their restoration and adaptation. The rest can be stored in storage facilities outside Montenegro. It is necessary to draft a detailed study on the status of storage capacities and the investments needed to keep stocks in them.



1. Adoption of the Law on Strategic Oil Stocks ME

2. Establishment of the Central Stockholding Entity ME

3. Adopt methodology for collection and systematization of data related to trade in oil products (Methodology for collection and systematization of data)

ME, MF, AH, ERA, Monstat

4. Prepare detailed study on the status of storage capacities and the investments needed to keep stocks in them (Prepare detailed study on storage capacities)

ME

5.

Amendments to the Decree on the Maximum Retail Price of Oil Products, so that this compensation could be included in the price of oil products on the market (Amendments to the Decree on the Maximum Retail Price)

ME, MF

6. Prepare the bylaws and methodologies required for transparent and clear work on development of stocks (Prepare the bylaws and methodologies)

ME, CSE

7. Renewal and adaptation of existing local stocks CSE

8. Signing the contract with owners/contractors for providing corresponding amounts of reserves (Signing the contract with owners/contractors)

ME, CSE


Page: 160


2016 2017 2018 2019 2020


1. Adoption of the Law on Strategic Oil Stocks

ME 1.1.2016 31.12.2016

2. Establishment of the Central Stockholding Entity

ME 1.1.2016 31.12.2016

3. Methodology for collection and systematization of data


1.1.2016 31.12.2016

4. Prepare detailed study on storage capacities

ME 1.1.2016 31.12.2016

5. Amendments to the Decree on the Maximum Retail Price

ME, MF 1.1.2016 31.12.2016

6. Prepare the bylaws and methodologies

ME, CSE 1.1.2016 31.12.2016

7. Renewal and adaptation of existing local stocks

CSE 1.1.2016 31.12.2017

8. Signing the contract with owners/contractors

ME, CSE 1.1.2016 31.12.2016



2020)

1. Adoption of the Law on Strategic Oil Stocks ME 25.000 25.000

2. Establishment of the Central Stockholding Entity ME 50.000 50.000

3. Methodology for collection and systematization of data


40.000 40.000

4. Prepare detailed study on storage capacities ME 80.000 80.000

5. Amendments to the Decree on the Maximum Retail Price

ME, MF 25.000 25.000

6. Prepare the bylaws and methodologies ME, CSE 25.000 25.000

7. Renewal and adaptation of existing local stocks CSE 100.000 200.000 300.000

8. Signing the contract with owners/contractors ME, CSE Included in ordinary activities of ME and CSE

Total (1-8) 345.000 200.000 545.000


Creation of oil and petroleum products mandatory reserves has no additional impact on the environment.

No recognizable social impact other than opening several positions in the Central Stockholding Entity.


Page: 161

10.7.8. Programme of analyses and studies for preparation of municipal solid waste incineration Project in Montenegro (waste potential, the plat location etc.)


Incineration of municipal waste, in addition to getting heat and electricity, is often used technology for waste management in Europe. The aim of incineration is to reduce the amount of waste and use energy from the process. Some of the documents that deal with this issue in Montenegro envisage the burning of solid fuels from the combustible fractions of mixed municipal waste after 2020 in a plant for electricity and heat production. Energy Development Strategy supports this commitment, but with the addressed problems in the future.

For most cities in Montenegro, decentralized plants for energy generation from waste (incineration) are not recommended, because investment costs for these small plants are too high. There are suggestions that these technologies are cost-effective only at the level of the collected waste from over 150,000 tons/year, which could be applicable only for Podgorica, as an integral solution of the problem at the national level.

The aim of this Programme is development of relevant study on the level of state, regions, local communities about the possibility of municipal solid waste incineration, on the basis of which decisions can be made for the future.

Sustainable waste management implies consideration of all options of waste treatment. There are several methods available for the use of waste for energy generation: incineration (controlled combustion process), pyrolysis, gasification, plasma process.

Comparison of processing technologies and utilization of municipal solid waste should be carried out on the basis of best available technologies (BAT).



1. Preparation of documentation basis ME

2. Preparation of Preliminary Feasibility Study ME, PUC

3. Preparation of documentation for obtaining urban-technical conditions PUC

4. Preparation of Detailed Spatial Plan for the waste thermal treatment with the Environmental Impact Assessment (Preparation of Detailed Spatial Plan)

MSDT

5. Preparation of documentation for building permit PUC

6. Preparation of Preliminary Design and EIA PUC

7. Preparation of documentation for applying for funds and/or credit PUC


2016 2017 2018 2019 2020


1. Preparation of documentation basis

ME 1.4.2016 31.12.2016

2. Preparation of Preliminary Feasibility Study

ME, PUC 1.4.2016 31.12.2016

3. Preparation of documentation for obtaining urban-technical conditions

PUC 1.1.2017 31.12.2017

4. Preparation of Detailed Spatial Plan

MSDT 1.1.2017 31.12.2017

5. Preparation of documentation for building permit

PUC 1.1.2018 31.3.2018

6. Preparation of Preliminary Design and EIA

PUC 1.4.2018 30.6.2019

7. Preparation of documentation for applying for funds and/or credit

PUC 1.7.2019 31.12.2020


Page: 162



202)

1. Preparation of documentation basis ME Included in ordinary activities of ME

2. Preparation of Preliminary Feasibility Study

ME, PUC Included in ordinary activities of ME and PUC

3. Preparation of documentation for obtaining urban-technical conditions

PUC 50.000 50.000

4. Preparation of Detailed Spatial Plan MSDT 80.000 80.000

5. Preparation of documentation for building permit

PUC Included in ordinary activities of PUC

6. Preparation of Preliminary Design and EIA

PUC 150.000 150.000 300.000

7. Preparation of documentation for applying for funds and/or credit

PUC Included in ordinary activities of PUC

Total (1-7) 50.000 80.000 150.000 150.000 430.000


Today there is no ideal solution that would enable economically effective and to a maximum extent utilization of solid waste without producing of by-products, pollutant emission into the atmosphere and production of waste water.

This technique is often rejected because of public protest against its negative elements in the domain of health and environmental protection. It is believed that the ash and smoke emitted by incinerators are the largest sources of dioxin and other dangerous substances that are carcinogenic. Dioxins cause various health problems, including cancer, damage to the immune system, the problem of the development and reproduction. In addition to dioxins, incinerators emit lead, heavy metals, cadmium, arsenic, chromium and others. A particular problem is the ash that remains after incineration and it is cancerous, and therefore incinerator accommodation should be avoided in the area of food production, as through air and water they can pollute the environment and the food chain.

Positive aspects, of course, are reducing the amount of waste and energy utilization, which can be considered as safeguarding of non-renewable sources.

The realization of the Project requires the activity connection of collection, preparation, transportation of waste to incineration plants and waste incineration process itself, which creates space for new jobs.

Location for the waste incineration plants will require some space, its expropriation or sale, possible resident eviction, which may be subject to agreement of the owner with a Public Utility Company.


Page: 163

10.8. CC8: Regulatory framework

10.8.1. Programme of prompt monitoring of current EU legislation and harmonization of the regulatory framework of Montenegro


Montenegro, as a member of the Energy Community and a candidate for membership in the European Union is required to implement EU regulations (acquis communautaire) in the energy sector.

Ministerial Council of the Energy Community in October 2011 made decision which obliges member states to implement the Third Energy Package of the EU, which consists of Directive on electricity and natural gas market (2009/72/EC and 2009/73/EC) and regulations on conditions for access to the network for cross-border exchanges in electricity and conditions for access to the natural gas transmission network (714/2009 and 715/2009).

Also, in October 2012 the Council made decision which obliges member states to implement the Directive on the obligation to maintain minimum stocks of crude oil and/or petroleum products and the use of energy from renewable sources (2009/119/EC and 2009/28/EC).

Implementation of directives related to energy efficiency is mandatory. These directives have mostly been transposed into the Law on Efficient Use of Energy, while the part that is related to energy efficiency of energy generation, transmission and distribution will be implemented by adopting the new Energy Law.

Regulation (EC) No 714/2009, No 715/2009 and Regulation (EU) No 994/2010 on security of gas supply will be implemented through a special law.

Directive 2009/119/EC on the obligation to maintain minimum stocks of crude oil and/or petroleum products will be implemented by a special law, while the Energy Law transposes only the basic requirement of the obligation to secure oil and/or petroleum products reserves.

At the time of drafting this plan, the proposal of the new Law is in the parliamentary procedure, after which it will be adopted.

The adoption of this Law will lead to further harmonization of Montenegrin legislation with EU regulations in the energy field, so the obligation of full harmonization of regulations in the energy field with the Third Package will be accomplished.



1. Continuous monitoring of European regulations ME, ERA

2. Adoption of the new Energy Law ME, Parliament

3. Update, or adopt new bylaws ME, ERA and energy entities

4. Improve professional capacities of public services and regulator

ME, ERA and energy entities

5. Finalize the institutionalization of the electricity market (Unbundle Distribution System Operator)

ERA and energy entities

6. Certification of Transmission System Operator ERA and CGES


Page: 164


2016 2017 2018 2019 2020


1. Continuous monitoring of European regulations

ME, ERA 1.1.2016 31.12.2020

2. Adoption of the new Energy Law

ME, Parliament 1.1.2016 1.6.2016

3. Update, or adopt new bylaws


1.1.2016 31.12.2016



1.1.2016 31.12.2018

5. Unbundle Distribution System Operator


1.1.2016 31.12.2016

6. Certification of Transmission System Operator

ERA and CGES 1.1.2016 31.12.2016



202)

1. Continuous monitoring of European regulations

ME, ERA Included in ordinary activities of ME and ERA


ME, Parliament Included in ordinary activities of ME and ERA

3. Update, or adopt new bylaws


50.000 50.000



20.000 20.000 10.000 50.000

5. Unbundle Distribution System Operator


100.000 100.000 100.000 50.000 50.000 400.000

6. Certification of Transmission System Operator

ERA and CGES Included in ordinary activities ERA and CGES

Total (1-5) 170.000 120.000 110.000 50.000 50.000 500.000



Job creation through strengthening of administrative capacities and human resources in

public services and the regulator.


Page: 165

10.8.2. Programme to create a regulatory conditions for public private partnership


In the framework of EE policy development and implementation of existing and potentially amended LEE, it is necessary to take into account the mitigation of barriers and the promotion of alternative financing mechanisms (energy performance contract, funding from third parties, etc.), Public Private Partnership in field of EE, enterprise development for provision of energy services (ESCO), ensure the performance of energy audits, consulting services for EE and like.

Montenegrin economy to a large extent bases the economic growth on the inflow of foreign investments so the PPP is appropriate model to attract investors, who are more likely to decide to invest if the partner is local company or country.

The interest for the PPP comes from the benefits that the public sector can have from the expertise of private sector in order to increase efficiency, and partly because of the limited budget, so in the current economic crisis, this model is the most efficient.

The partnership will be implemented in areas where the state is recognized as a service carrier, and identifies the sectors and Projects where the private sector can provide services and invest more efficiently. During the establishment of this relationship it is of vital importance to recognize credible investors who can implement the planned Projects.

Depending on the education degree of stakeholders and political will, PPP can be one of the key models in future investment Projects that would help Montenegro to get out from the crisis and encourage economic growth.

The partnership between the public and private sector in Montenegro is desirable, however, a key element for the promotion and development of this still insufficiently present institute in Montenegro, requires the creation and improvement of incentive regulatory framework.

In Montenegro, the greatest potential for cooperation between the public and private sector when it comes to specific Projects has the construction of new power capacities. One of the positive preconditions is that the European Investment Bank, the European Bank for Reconstruction and Development and the World Bank have expressed their readiness to support PPP Projects.

Prior to the start of new Projects, Law on Public Private Partnership should be adopted, which should precisely define: a way to assess the compliance of potential Projects with national and sectoral strategic objectives, identification of prior conditions that are necessary for Project realization (Feasibility Analysis), the need for assessment of financial risk and the impact on the budget, personal, professional, technical and financial conditions to be met by bidders, the criteria for selecting the best bidder, the Project approval process, the method of monitoring the status and dynamics of Project implementation, the control procedure of the private partner and fulfilment of the contract obligations, database drafting and management for investments and investment agreements.



1. Continuous establishment of communication and cooperation with all interested investors (Cooperation with interested investors)

MF, ME

2. Adoption of the Law on Public-Private Partnership MF, Parliament

3. Drafting bylaws MF, ME

4. Identification of potential Projects and Project register creation MF, ME

5. Establishment of the Investment Agency ME, Government


Page: 166


2016 2017 2018 2019 2020


1. Cooperation with interested investors

MF, ME 1.1.2016 31.12.2020

2. Adoption of the Law on Public-Private Partnership

MF, Parliament 1.1.2016 31.12.2016

3. Drafting bylaws MF, ME 1.1.2016 31.12.2016

4. Identification of potential Projects and Project register creation

MF, ME 1.1.2016 31.12.2016

5. Establishment of the Investment Agency

ME, Government

1.1.2016 31.12.2016



202)

1. Cooperation with interested investors MF, ME Included in ordinary activities of MF and ME

2. Adoption of the Law on Public-Private Partnership

MF, Parliament 25.000 25.000

3. Drafting bylaws MF, ME 25.000 25.000

4. Identification of potential Projects and Project register creation

MF, ME 25.000 25.000

5. Establishment of the Investment Agency ME, Government

150.000 150.000

Total (1-5) 225.000 225.000



Job creation through attracting foreign investors and start of new investment Projects is possible.


Page: 167

10.8.3. Programme to support the investments in RES with sustainable financial criteria


In Montenegro there is a hydro potential of small water streams of about 1 TWh per year of which technically usable around 0.4 TWh/year, which is used for the construction of small hydro power plants in the last few years.

The limiting factor for the utilization of water resources is partial coverage of the river Tara by Durmitor National Park, which is on the list of World Natural Heritage sites UNESCO, while the Tara river basin is included in the biosphere reserves of UNESCO program.

A significant part of hydropower potential is formed in the catchment areas of Montenegro, while a part of the water streams and reservoir is formed at border areas with neighbouring countries. For the utilization of these resources and the construction of facilities on water streams, it is necessary to achieve an agreement on their utilization on international level.

In accordance with the Law and the Strategy, the Government of Montenegro on 11 December 2014 adopted the National Action Plan for the use of energy from renewable sources by 2020. The national target for Montenegro is determined in accordance with the decisions taken at the 10th meeting of the Ministerial Council of the Energy Community, which stipulates that share of renewable energy in the total energy consumption in Montenegro reaches the level of 33%.

As a supporting program for electricity produced from renewable energy sources, Montenegro has chosen a system of guaranteed electricity purchase from privileged producers with incentive prices. In addition to the guaranteed price, privileged producers have priority in total electricity delivery in the transmission or distribution system, and are exempt from paying system balancing service.

In the coming period application for obtaining the status of privileged producers of electricity from the wind (wind farms in Krnovo and Možura) is expected, as well as for solar electricity (this Project is still in the preparatory phase).

Energy Law provides attractive position for investors because of better conditions for the construction of energy facilities through defining the rights to acquire the temporary status of a privileged producer of electricity from renewable sources and a clearer procedure definition for the purchase of newly constructed power transmission and distribution facilities by the system operator.

The Law defines the obligation of the final electricity customer to pay a fee for electricity generation incentives from renewable sources and high efficiency cogeneration as an addition to the price of electricity, as well as the obligation of supplier to express the fee separately on the invoice for consumed electricity that is delivered to the final customer. For these reasons it is necessary to reconsider the placed model after the start of the application, in relation to the impact on prices of final customers.


Page: 168



1. Continuous monitoring of European regulations in this area ME

2. Preparation of appropriate bylaws in this area after the adoption of new Energy Law (Preparation of new bylaws)

ME

3.

Review the existing incentive model from the point of price impact to final customers, then align guaranteed incentive prices and other conditions, propose amendments of existing or the adoption of new regulations (Amendment of existing or adoption of new regulations)

ME

4.

Continuous promotion of investments in renewable energy sources without guaranteed incentive prices, if there are interested investors, and if this is possible in the power system (Promoting investments in RES)

ME


2016 2017 2018 2019 2020


1. Continuous monitoring of European regulations in this area

ME 1.1.2016 31.12.2020

2. Preparation of new bylaws ME 1.1.2016 31.12.2016

3. Amendment of existing or adoption of new regulations

ME 1.1.2016 30.06.2017

4. Promoting investments in RES

ME 1.1.2016 31.12.2020



(2016-202)

1. Continuous monitoring of European regulations in this area

ME Included in ordinary activities of ME

2. Preparation of new bylaws ME 25.000 25.000

3. Amendment of existing or adoption of new regulations

ME 25.000 25.000 50.000

4. Promoting investments in RES ME Included in ordinary activities of ME

Total (1-4) 50.000 25.000 75.000


The construction of HPP has a positive impact on increased use of renewable energy sources and contributes to the reduction of environmental pollution.

The construction of HPP has a positive impact on the economy development, because domestic companies can significantly participate in the construction, whereas the reservoirs give possibilities for new economic activities.


Page: 169

10.8.4. Programme for development of Regulatory Energy Agency


In Montenegro, the regulatory function is performed by the Energy Regulatory Agency (ERA) in a manner similar to EU regulators, in accordance with the Energy Community Treaty and the EU directives.

In accordance with the Energy Law, the ERA was established as an autonomous, functionally independent and non-profit organization, which has public entrusted authorizations and is a legal entity with rights, obligations and responsibilities defined by the Law and the Statute of the ERA.

After the adoption of new Energy Law, ERA will work on the adoption or amendment of a large number of acts for which is authorized. Also, energy entities will have obligations in terms of determining the rules and methodologies related to the system functioning or entity activities, with necessary ERA approval for the application of these acts.

In the field of prices and tariffs ERA has an obligation to determine the methodologies for: determining the regulatory allowed revenue for network activities, market operator, auxiliary services and balancing, as well as the methodology on determining prices for the supplier of last resort and vulnerable customers. ERA will pay special attention to intensive investment in the transmission system in order to avoid negative effects on the tariffs for electricity transmission and in this relation will use the opportunities provided by the future Law on cross-

border electricity and natural gas exchange in part of the revenues that are achieved by allocation of available cross-border transmission capacities of the Transmission System Operator.

In accordance with the new Law, ERA will have increased workload related to measures to reduce electricity losses in transmission and distribution networks based on studies prepared by competent professional institutions. ERA will increasingly monitor the implementation of the investment plans of the system operators, as a key factor for the stability of the system and price optimization for service provision. Proposal of the Law stipulates that the development of transmission and distribution systems are based on the ten-year development plans which are updated on an annual (TSO) and five-year basis (DSO). New obligations related to the certification of Transmission System Operator for electricity or gas or combined gas operators are identified, as well as determining the status of closed electricity distribution system and determining the closed electricity distribution system operator, for geographically limited economies, commercial systems or systems of joint services.

The increased scope of authorizations and duties brings the need for human resources and institutional strengthening, broader professional training of employees, while continuing ongoing participation and cooperation with institutions at national and international level. The Third Package requires sufficient human and financial resources so the regulator could perform extended tasks and activities according to the new legislation. For these reasons it is necessary to approve the increase of material resources and provide additional employment gradually over the next two to three years intensively and then evaluate for later period.

As the most significant innovation, the establishment of professional service for the gas should be envisaged and the hiring of new employees to monitor and regulate these areas. The main task will be to create a legislative basis for regulation starting, after that the implementation of adopted acts and supervision of energy entities operation in this field would follow.

It is important to point out that the European Commission in its comments on the Second Draft of Negotiation Position of Montenegro for the Intergovernmental Conference on Accession of Montenegro to the European Union for Chapter 15 - Energy, as the most


Page: 170

significant remark was pointed out that the regulator did not envisage an increase in the number of staff in order to meet new responsibilities from the Third Package. Also, in the Implementation report of the Energy Community for Montenegro for the previous year, lacks were identified in the system of supervision regulation of ERA operation and priority changes of the current state of affairs with the aim of ensuring the necessary institutional and financial independence of regulator.



1. Improve the professional capacities of regulator, especially for the gas sector


2. Due to the increased scope of authorizations and duties, additional financial resources should be envisaged


3. Provide financial and institutional independence required by the Third Package



2016 2017 2018 2019 2020




1.1.2016 31.12.2018



1.1.2016 31.12.2016



1.1.2016 31.12.2016



202)



25.000 25.000 25.000 75.000



25.000 25.000 25.000 75.000



Included in ordinary activities of Government, Parliament and ERA

Total (1-3) 50.000 50.000 50.000 150.000



Through the realization of anticipated activities additional employment will be possible.


Page: 171

10.8.5. Programme of monitoring of fulfilling the international obligations in relation to the organization of the Energy Sector


By Treaty establishing the Energy Community, Montenegro is committed to participate in the creation of a stable and unique market that will ensure a reliable supply of electricity and gas and attract new investments in the energy sector, while taking into account energy efficiency and use of renewable energy sources. Start of achieving these objectives is to ensure the implementation of the EU acquis - Directives and Regulations for the areas of: electricity and gas supply, energy efficiency, renewable energy sources, competition, environment protection, oil and statistics.

Even if harmonization with the requirements of the Energy Community is ongoing, it is necessary to make additional efforts to implement the obligations which’s deadlines have passed long time ago. One of these tasks in the energy sector of Montenegro that has to be implemented as soon as possible is unbundling of the Distribution System Operator and its training (professional, technical and normative) to perform tasks related to the electricity market.

Also, one of the main challenges will be to create conditions for market opening and preparation of secondary legislation that will allow a change of suppliers and ensure that eligible customers can effectively exercise their rights.

Realization of the Projects for gas introduction in Montenegro is under the Energy Community attention and the opinion is that an adequate legal framework is established to allow the construction of infrastructure and the institutional capacity building of regulators and transmission system operators of gas is necessary in order to achieve full readiness to begin the operation of this field of energy. A grant of € 550,000 for Montenegro was approved for the study "Gasification Master Plan of Montenegro - The priority project portfolio in Montenegro" within tenth invitation of Western Balkans Investment Framework. This plan will closely analyse the needs of Montenegro for gas consumption and the development mode of gas network infrastructure, as well as institutional measures to be undertaken. Drafting the Gasification Master Plan began in November 2014.

European Commission adopted Montenegrin Progress Report for 2015 in November 2015 and identified that the Law on Energy has not been adopted yet but all the preparations for the harmonization of domestic legislation with the Third Energy Package have been made. As soon as possible Energy Law adoption is recommended what would imply harmonization with the Third Energy Package, and thus its implementation.

In accordance with the proposal of the new Energy Law, ERA is obliged to inform the competent authority of the Energy Community on the appointment of the Transmission System Operator and the certification decision with accompanying documentation on which the decision making was based.



1. Adoption of the new Energy Law ME and Parliament

2. Adoption of secondary legislation following the entry into force of the new Energy Law


3. Unbundling of Distribution System Operator ME, ERA and EPCG

4. Provide conditions for the start of certification process of Transmission System Operator

ME, ERA and CGES

5. Continuously implement activities in order to achieve the national target for energy consumption from renewable sources by 2020


6. Preparation of Study " Gasification Master Plan of Montenegro – The priority project portfolio in Montenegro"



Page: 172


2016 2017 2018 2019 2020



ME and Parliament

1.1.2016 30.06.2016



1.1.2016 31.12.2016

3. Unbundling of Distribution System Operator

ME, ERA and EPCG

1.1.2016 31.12.2016


ME, ERA and CGES

1.1.2016 31.12.2016

5. Continuously implement activities in order to achieve the national target for energy consumption from renewable sources by 2020


1.1.2016 31.12.2020

6. Preparation of Study "Gasification Master Plan of Montenegro – The priority project portfolio in Montenegro"


1.1.2016 31.12.2016



202)

1. Adoption of the new Energy Law ME and Parliament Included in ordinary activities of ME and

Parliament



50.000 50.000

3. Unbundling of Distribution System Operator

ME, ERA and EPCG Included in ordinary activities of ME, ERA and

EPCG


ME, ERA and CGES Included in ordinary activities of ME, ERA and

CGES

5.

Continuously implement activities in order to achieve the national target for energy consumption from renewable sources by 2020


Included in ordinary activities of ME, ERA and energy entities

6.

Preparation of Study "Gasification Master Plan of Montenegro – The priority project portfolio in Montenegro"


Included in ordinary activities of ME, ERA and energy entities

Total (1-6) 50.000 50.000



Better consumer protection and harmonization with the EU acquis.


Page: 173

10.9. CC9: Monitoring and follow-up of the AP implementation

10.9.1. Programme of monitoring and follow-up of the AP implementation


Description of monitoring and follow-up of the AP implementation, as well as its update, is presented in Chapter 9.



1. Staffing and Training of DIAP ME

2. Monitoring and reporting ME, later DIAP

3. Follow-up ME, later DIAP

4. AP updating ME, later DIAP


2016 2017 2018 2019 2020


1. Staffing and training of DIAP

ME 1.1.2016 30.6.2016

2. Monitoring and reporting ME, later DIAP 1.4.2016 31.12.2020

3. Follow-up ME, later DIAP 1.4.2016 31.12.2020

4. AP updating ME, later DIAP 1.1.2017 31.12.2020



202)

1. Staffing and training of DIAP ME 50.000 50.000

2. Monitoring and reporting ME, later DIAP 50.000 50.000 50.000 50.000 50.000 250.000

3. Follow-up ME, later DIAP 50.000 50.000 50.000 50.000 50.000 250.000

4. AP updating ME, later DIAP 50.000 50.000 150.000 150.000 50.000 450.000

Total (1-4) 200.000 150.000 250.000 250.000 150.000 1.000.000


The Programme has no direct impact on the environment.

The Programme has no direct social impact apart of ME staffing for DIAP.


Page: 174

ANNEX – Detailed timeline

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