​Italy’s capacity market has increasingly settled into a steady, reliability-focused role. Most awards now come from existing assets renewing their one-year commitments, with smaller amounts of new-build capacity clearing.

MACSE now provides a route for major new-build investment, leaving the Capacity Market to focus on smaller, targeted additions.

Within that smaller slice of new capacity, the technology mix has shifted dramatically: BESS has gone from 0% to 95% of new build across the six auctions held so far.

If you need a refresher on how it works, including bids, de-rating and price formation, read our Italian Capacity Market Explainer.

Why the Capacity Market requires less new build

The Capacity Market was designed both to encourage new investment when the adequacy margin (the buffer of capacity above peak demand) is tight, and to secure existing firm capacity when reliability is already met.

In recent years, its role has shifted more heavily toward the latter.

Margins tightened sharply in 2022, falling briefly to zero in the tightest hours, driven by a severe hydro drought and gas-system stress which reduced thermal headroom.

Margins have since recovered as conditions have normalised and contracted capacity has come online.

With margins secured, the system requires less additional generating capacity. In the Capacity Market, procured volumes remain above the 42 GW average, but they consist overwhelmingly of existing plants renewing one-year commitments.

For the same reasons, prices for new capacity have converged towards those for existing assets. This reflects the fact that extra capacity is less valuable when the system isn’t under stress.

While margins stay stable and MACSE covers major new investments, the Capacity Market now plays a steadier role: maintaining reliability rather than driving significant additions of new capacity.

Battery storage has become the marginal technology

While new-build volumes have fallen, BESS now makes up almost all of the new capacity that does clear, rising from 0% to 95% over just a few auctions.