Can Italy’s MACSE Market Solve the Renewable Intermittency Challenge?

Why MACSE could address intermittency

To evaluate whether MACSE can solve renewable intermittency, it is necessary to examine its structural advantages.

1. It incentivizes storage where the grid needs it most.
   Auction volumes and geographic allocation are aligned with network constraints and renewable growth forecasts. This ensures storage is built in locations that maximize system value.
2. It creates bankable business models.
   Stable annual premiums reduce financing risk, lowering the cost of capital and accelerating project deployment timelines.
3. It strengthens system reliability.
   Contracted storage must be available for dispatch services, enabling fast response to frequency deviations, demand spikes or generation drops.
4. It reduces curtailment.
   By absorbing surplus production, storage minimizes renewable energy waste and increases effective utilization of clean generation assets.

Taken together, these factors show that MACSE is not just a subsidy scheme. It is market architecture designed for high-renewable grids.

Why investors are paying attention

The strong participation in the first auction suggests that Italy is quickly becoming one of Europe’s most attractive markets for grid-scale storage.

From a financial perspective, MACSE offers a rare combination:

• Long-term revenue certainty
• Competitive allocation ensuring cost discipline
• Access to multiple value streams including capacity payments and market participation

Such conditions are uncommon internationally. Many jurisdictions rely on grants or temporary incentives, whereas MACSE embeds storage directly into the electricity market structure.

For institutional investors and infrastructure funds, this signals a mature policy environment, a key prerequisite for large-scale capital deployment.

A Blueprint for Future Electricity Markets?

MACSE reflects a broader structural transition in electricity markets.

As renewable penetration rises:

• Flexibility becomes infrastructure
• Storage becomes a regulated system asset
• Deterministic control becomes revenue protection
• Market design becomes as critical as technology

Italy’s framework demonstrates that intermittency is manageable when flexibility is procured, financed and executed as an integrated system function.

Other European markets facing similar renewable growth trajectories are likely to observe this closely.

The Structural Limits of MACSE

MACSE is the right instrument, but it operates within boundaries that prevent it from fully resolving the intermittency challenge on its own. Four structural limitations define where the mechanism falls short.

First, the capacity gap remains structural. Italy has approximately 1 GW of grid-scale BESS in operation as of early 2025 – according to publicly available sector data – against the PNIEC target of 11 GW of new utility-scale BESS by 2030, representing the centralised storage component of a broader 22.5 GW total storage scenario that also includes pumped hydro and distributed residential systems. 

Terna’s operational planning framework is structured around 71 GWh of centralised storage capacity, approved by the European Commission in December 2023 as a state aid scheme worth approximately €17.7 billion, which will be procured progressively through successive MACSE auction rounds. 

The first auction delivered roughly 1.5 GW of new contracted capacity with a 2028 delivery date. Even if all projects currently under construction and in permitting proceed without delay, total installed utility-scale BESS would remain well short of the 11 GW target. 

Annual auction rounds will need to deliver 2-3 GW of new capacity consistently across the remainder of the decade, a pace that requires coordinated progress across permitting processes, grid integration and EPC capacity: a shared challenge for the entire energy sector ecosystem.

Second, MACSE cannot compensate for delays in the underlying renewable build-out. The mechanism is designed to manage intermittency from generation assets that exist. If the solar and wind pipeline falls behind, as some sector analyses suggest is possible relative to Italy’s 2030 NECP targets, the storage build-out and generation build-out risk becoming misaligned. 

Deploying storage well ahead of generation creates stranded asset exposure for investors; conversely, an accelerated renewable build without adequate storage in place increases the system balancing burden. Keeping the two trajectories in step is therefore a shared priority for all parties in the energy transition. 

This coordination challenge is critical: the sequencing of permitting, financing, and grid connection timelines determines whether storage and renewable assets enter operation in a mutually reinforcing manner. Regulatory predictability reduces this mismatch risk but cannot eliminate execution friction inherent in complex infrastructure build-outs.

Third, geographic scope and market structure require active management to sustain system resilience.

The first MACSE auction (delivery year 2028) procured capacity in the Central-South, South & Calabria, Sicily and Sardinia areas, reflecting Terna’s zonal needs assessment for that delivery horizon. 

This geographic allocation is deliberate by design: long-term contracted support is directed to the zones where renewable growth, transmission constraints and system adequacy requirements create the greatest value for new storage capacity. Northern Italy, with its different generation and grid profile, is served through the Capacity Market, which provides a structurally distinct revenue model with shorter contract tenors, broader technology eligibility and exposure to market-based pricing.

At the level of market structure, the first auction’s results reflect the profile of a mechanism in its opening phase, with participation concentrated among operators who had reached the necessary permitting and financial readiness thresholds. 

As the development pipeline matures and successive auctions accumulate track record, the breadth and diversity of participating operators is expected to grow, reinforcing both competitive discipline and system resilience across the full MACSE programme.

Fourth, battery storage alone cannot resolve all dimensions of intermittency. MACSE is designed primarily for lithium-ion BESS with discharge durations of two to eight hours, optimised for intraday balancing and ancillary services. It does not address seasonal storage needs, the multi-week mismatches between renewable generation and demand that characterise winter periods, nor does it operate as a standalone solution for structural transmission congestion between Italy’s resource-rich south and its demand-intensive north. 

In this respect, MACSE is most effective as one pillar of an integrated system strategy: Terna’s approximately €23 billion multi-year grid development and modernisation programme, which includes transmission reinforcement, interconnections and digitalisation initiatives, provides the complementary transmission backbone that enables contracted storage capacity to deliver its full system value. The two are designed to work in concert and Italy’s approach of advancing both in parallel reflects this systemic logic.

In addition, long-term availability obligations must account for battery degradation curves over the 15-year contract horizon. While contractual frameworks typically define minimum availability thresholds, actual usable capacity may decline over time depending on cycling intensity, temperature exposure and operational strategy. 

Aligning technical degradation profiles with contracted capacity commitments will therefore be a key bankability consideration for both operators and lenders.

Storage Alternatives in Northern Italy

The absence of MACSE eligibility in the north does not leave the region without flexibility options. Northern Italy benefits from a set of structural and market-based alternatives that, taken together, address intermittency through different mechanisms.

Pumped hydro storage (PHES) represents the north’s most significant existing flexibility asset. Italy’s Alpine and pre-Alpine basins host the majority of the country’s installed PHES capacity, which provides multi-hour dispatch capability, seasonal storage characteristics and fast frequency response.

For northern operators, the upcoming PHES phase opens a long-term contracted revenue path that is structurally analogous to what BESS developers access through the current battery-only rounds, with the additional advantage that pumped hydro assets are well represented in the Alpine and pre-Alpine basins of the north.

The Capacity Market is the primary contracted mechanism available to northern BESS developers. It is technology-agnostic, open to both existing and new assets and allocates capacity across multi-year delivery periods. While it does not provide the duration certainty of a 15-year MACSE tolling agreement, it offers access to Italy’s strong northern price spreads and the ability to stack revenues from intraday trading, ancillary services and balancing markets. 

The TIDE reform, effective January 1, 2025, introduced 15-minute granularity for imbalance settlement and intraday auctions as part of the broader redesign of Italy’s electricity market framework. The increased temporal resolution can enhance trading optionality for BESS assets by amplifying intraday price dynamics and enabling more precise market positioning. 

However, the revenue impact remains structurally differentiated across bidding zones: southern and island regions -characterized by higher solar penetration, sharper intraday price swings and transmission constraints- tend to exhibit deeper intraday spreads than the northern zone, where hydro generation and cross-border interconnections generally mitigate volatility. 

In parallel, the results of the first MACSE auction suggest that longer-duration systems (typically 6-8 hours) were competitively positioned under the prevailing market and remuneration structure, whereas the standalone merchant case for short-duration assets remains sensitive to capex levels and to the availability of complementary contracted revenue streams.

Demand response and aggregation are increasingly viable in northern Italy’s industrial base. ARERA has opened balancing and ancillary service markets to demand-side aggregators, enabling large industrial consumers to offer flexibility as a grid service. In a region with high industrial electricity consumption and growing data centre load, demand response provides a distributed flexibility resource that complements physical storage without requiring additional generation assets or grid connections.

Cross-border interconnection gives northern Italy access to European balancing capacity that is not available to the more isolated southern zones. Strong transmission links with France, Switzerland and Austria allow the northern bidding zone to import and export flexibility across borders, effectively leveraging the broader European generation mix -including French nuclear and Swiss hydro- as a buffer against domestic intermittency. Italy’s integration into European balancing platforms reinforces this structural advantage.

Terna participates in MARI platform, which provides cross-border balancing for manual Frequency Restoration Reserves (mFRR). Terna accessed, moreover, the PICASSO platform (aFRR – automatic Frequency Restoration Reserves) in July 2023 and subsequently suspended operations in March 2024 following anomalous imbalance price events in the northern bidding zone (Terna remains a member of the project and the platform is technically ready for renewed participation once the identified issues are resolved). 

As Terna’s integration into European balancing platforms stabilises, northern storage and demand response operators will gain expanded access to transnational ancillary service markets, deepening the revenue stack available outside the MACSE framework.

Can It Truly Solve Intermittency?

Strictly speaking, remuneration mechanisms alone do not solve intermittency.
Performance under real grid conditions does.

MACSE imposes operational obligations. Contracted assets must guarantee availability, participate in dispatching services and always comply with grid-code requirements. This shifts the focus from installed megawatt-hours to execution reliability.

The following example illustrates how execution-layer digital infrastructure supports capacity-based mechanisms in practice.

In hybrid and storage-intensive environments, we have seen how deterministic plant-level control becomes decisive. At the CrossWind Baseload Power Hub offshore project in the Netherlands, our Power Plant Controller acts as the deterministic real-time execution layer at the Point of Interconnection, coordinating wind generation, battery storage, floating PV and hydrogen systems within a unified architecture.

The objective is not simply energy maximization. It is grid control. Active and reactive power control, ramp-rate management, frequency response and predictable export behaviour ensure that a complex hybrid system presents itself to the grid as a single, controllable asset.

At supervisory level, our APM platform Energy Studio Pro® provides continuous monitoring, historical traceability and performance validation across multi-technology portfolios, supporting availability commitments and structured reporting requirements. In capacity-driven environments such as MACSE, execution reliability must not only be delivered – it must be measurable and auditable over time.

This distinction is fundamental. In capacity-driven markets, infrastructure value is measured not only in capacity awarded, but in compliance delivered.

This creates a shared technical challenge at two distinct levels of the MACSE ecosystem. Storage operators must demonstrate – on a continuous basis- that their assets meet the availability, dispatch and grid-code obligations set out in their 15-year tolling contracts. Terna, as the contracting authority and system operator, must verify and monitor that performance across an expanding portfolio of contracted assets operating in geographically dispersed and technically heterogeneous configurations. Both requirements converge on the same operational imperative: structured, verifiable data flows between the asset and the grid.

BaxEnergy’s technology portfolio is designed to operate precisely at this interface. At the asset level, the Power Plant Controller provides the deterministic real-time execution layer that translates TSO dispatch instructions into coordinated action across multi-technology storage configurations ensuring that a contracted BESS asset responds within the time windows and tolerance bands required by Terna’s technical rules.

At the supervisory level, Energy Studio Pro® delivers the continuous performance monitoring, historical data traceability and structured reporting that allow operators to substantiate their availability obligations and give Terna the evidential basis for contract compliance verification. 

The Smart Data Logger provides the underlying acquisition layer that ensures measurement integrity across OT protocols and physical boundaries, a prerequisite for any data that will be used in regulatory or contractual contexts.

The relevance of this architecture extends beyond individual asset performance. As the number of MACSE-contracted systems grows across successive auction rounds, Terna will manage an increasingly complex portfolio of obligations with varying technical profiles, dispatch windows and degradation curves. 

The capacity to aggregate, normalise and interpret performance data across that portfolio in a format consistent with the reporting requirements of the Decreto MACSE and ARERA’s deliberations, will become a systemic condition for the mechanism to function as intended. In this sense, the software and control infrastructure that supports MACSE is not ancillary to the energy transition: it is part of the execution layer on which the credibility of Italy’s storage policy ultimately rests.

While different technology providers may offer alternative execution-layer architectures, the systemic requirement remains constant: deterministic control and auditable performance data are foundational to capacity-based market credibility.

Conclusions

Can Italy’s MACSE market solve renewable intermittency? It cannot eliminate variability. But it can institutionalize flexibility.

By transforming storage into contracted, performance-bound infrastructure, MACSE reduces systemic risk, improves investment clarity and strengthens grid resilience. The next chapter will depend on disciplined execution and the ability of storage assets to deliver measurable, compliant performance over time.

For boards, investors and system operators, the message is clear: the energy transition is no longer about adding megawatts. It is about structuring flexibility as core infrastructure and ensuring it performs under stress.