MACSE auction: A game changer for Italy’s energy storage sector

With the first auctions for procuring new storage capacity in Italy expected in the second quarter of 2025, Aurora Energy Research has analyzed the internal rate of return for projects supported by the Energy Storage Capacity Procurement Mechanism (MACSE) and found that in certain cases expected returns exceed 9%, providing a high level of revenue security. However, as Aurora’s Maddalena Cerreto tells ESS News, there are also zones where the expected profitability of merchant investments outcomes the MACSE ones.
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2025 is set to see a rapid growth in investment in the Italian energy storage sector, led by battery energy storage systems (BESS), with the implementation of MACSE. The eagerly anticipated procurement exercise will offer a stable, predictable premium over 15 years, making it particulary attractive for risk-averse investors.

According Aurora Energy Research, the internal rate of return (IRR) analysis underscores the financial sustainability of projects supported by MACSE. For example, projects in Southern Italy and Sardinia could achieve IRRs exceeding 9% even with minimal exposure to energy market volatility, as MACSE provides a high level of revenue security.

“An eight-hour battery in South zone with a MACSE contract, starting its operation in 2028 and oversizing by 18%, achieves IRR higher than a merchant case up to 1 percentage point, in case the MACSE awarded price covers only the investment costs and 6% cost of capital,” Maddalena Cerreto, research senior associate at Aurora Energy Research, tells ESS News.

There are stark differences in energy storage requirements across Italy and MACSE procurement targets will adapt to these zonal needs. Most of the new utility-scale storage capacity catalyzed by MACSE will be needed in Southern Italy and the islands, with 16.8 GWh in the South, 13.6 GWh in Sicily, and 10.4 GWh in Sardinia.

Therefore, the level of IRR will depend on the asset’s location as well as technical configuration. “There are other zones where the expected profitability of merchant investments outcomes the MACSE ones, thanks to the higher revenues resulting from the trading in the energy markets,” Cerreto says.

Moreover, fierce competition expected in the MACSE procurement may result in low prices, affecting the expected IRR levels. “Since the auction is pay-as-bid: the oversizing strategy and how it is reflected in the bid can play an important role,” Cerreto says.

Since asset owners will need to manage carefully the availability and maintenance requirements outlined in MACSE regulations, Aurora’s report estimates that projects would need to be oversized by 18% to safely meet MACSE availability requirements throughout their lifetime.

An alternative approach to oversizing, according to Cerreto, is pursuing a merchant tranche strategy. An asset can participate in the MACSE with only a certain percentage of its capacity and increase it over time. This would make it possible to gain merchant upside for the remainder capacity not assigned to MACSE. “Moreover, this strategy would allow to submit a lower auction bid and be more competitive,” Cerreto says.

The IRR calculated by Aurora excludes merchant revenues during the first 15 years of contract since wholesale market revenues are not stackable due to MACSE regulation. Meanwhile, the revenues from the transmission system operator’s ancillary and balancing markets are capped at 20%. This means that the successful bidders will be swapping the remaining portion of those merchant margins and all day-ahead and intraday revenues for the fixed price with Terna under the MACSE contract.

The mechanism, offering 15-year contracts on up to 100% of asset capacity, aims to support the installation of energy storage necessary to achieve the country’s renewable energy target of 131 GW by 2030. Namely, according to the updated scenario developed by gas company Scam and power grid operator Terna, Italy will need 72 GWh of storage capacity by 2030 to meet the EU’s “Fit for 55” package goals. Around 50 GWh of this capacity will be allocated to new utility-scale systems supported by MACSE to complement the growing penetration of renewables.

According to Aurora analysis, the difference between the daily maximum and minimum electricity prices is expected to rise by approximately EUR 10/MWh in the five-year period from 2030 to 2035, thereby enhancing arbitrage opportunities.

“While the penetration of renewable energy sources can ensure good investment returns depending on the geographical location and technical specifications of the asset, MACSE contracts provide protection against various risk scenarios, ensuring highly bankable projects. However, the competitive dynamics of the auction could impact expected profitability, making it crucial for developers to analyze the optimal investment strategy. Diversifying the portfolio by combining different business strategies and market zones represents a sound compromise between investment risk and return,” Cerreto says.


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  • Marija has years of experience in a news agency environment and writing for print and online publications. She took over as the editor of pv magazine Australia in 2018 and helped establish its online presence over a two-year period.

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