Italy’s 2028 Capacity Market auction: Northern zones rewarded in shift for developers, notes Aurora

Italy’s upcoming 2028 Capacity Market auction is set to introduce structural shifts that will impact energy storage deployment, according to recent analysis by Aurora Energy Research.

The primary adjustment involves a new geographic focus designed to steer energy storage capacity to areas where the grid requires the most support, notably rewarding projects in Italy’s northern zones. Historically, capacity market mechanisms have often treated different regions with a broad brush.

However, the 2028 framework will adjust the capacity rating coefficients for battery storage based directly on their specific location, marking a major departure from previous iterations and a deliberate step toward geographical optimization.

This localized approach, decided on August 6th in a decree by the Ministry of the Environment and Energy Security (MASE), means developers must now re-evaluate project pipelines and expected returns across the country.

“The most relevant change introduced by the Capacity Market 2028 is the geographic differentiation, for the first time, of battery rating coefficients, with the aim of providing more locational development signals,” said Maddalena Cerreto of Aurora Energy Research.

Within the analysis, Aurora provides an example of a dramatic drop in remuneration in certain locations, while also showing that northern areas seem to be rewarded.

“For a 4-hour battery in Sicily and Sardinia, the coefficient has gone from 67% in the previous auction to 31%. This latter value is also much lower than the 51% proposed in the consultation phase. Consequently, the final values ​​imply a battery remuneration 50% lower than in the previous auction for a 4-hour battery in Sicily and Sardinia, two of the regions most affected by renewable overgeneration in Italy and where BESS development is needed.”

According to Aurora, from the regulator’s perspective, this choice is consistent with the fact that southern regions and Sicily and Sardinia already have a dedicated instrument for storage development via MACSE, while the Capacity Market focuses on system adequacy in areas where the risk of shortages is greatest and where there are fewer alternatives for remunerating new technologies, such as in Northern Italy.

According to the consulting and intelligence firm, the picture is now more complex for developers.

“For BESS plants located in the South and the Islands, opportunities outside of the MACSE currently appear more limited. Not only are the new rating coefficients significantly lower than those of previous auctions, but with the newly published data, it seems more likely that the 2028 auction will be the first to experience a true market split between geographic areas. Regions like Sicily could indeed post significantly lower prices than the North. The next auction will therefore represent a particularly important test to understand how the market will interpret the new balance between the Capacity Market and the MACSE and what the future geography of battery investments in Italy will be,” concluded Cerreto.

From pv magazine Italy.