Italy’s new MACSE mechanism introduces long-term capacity contracts for battery storage - the first scheme of its kind in Europe. Across three auction rounds, MACSE aims to support up to 50 GWh of storage capacity.
The first auction round is scheduled for the 30ᵗʰ September 2025 and will:
- Procure up to 10 GWh of new storage capacity.
- Award 15-year fixed revenues, plus a 20% share of ancillary services market revenues.
- Target Southern Italy, Sardinia and Sicily, where renewable penetration is highest and interconnection is weakest.
Supporting Italy’s ambitious renewables plans
Italy’s Energy and Climate Plan, targets 108 GW of wind and solar capacity by 2030 - more than double today’s fleet.
Delivering this target requires a parallel expansion of system flexibility. Without it, growing renewable penetration risks price cannibalisation, network congestion, and under-generation during periods of low output.
MACSE provides that framework. By guaranteeing long-term fixed returns, it de-risks storage investment and delivers the flexibility needed to integrate Italy’s renewable build-out.
Auction design: balancing cost control and competition
The MACSE auction is structured to procure storage capacity in a cost-reflective yet competitive way. Each project can submit one bid per asset, quoted as a premium in EUR/MWh/year.
Two core rules define how capacity is awarded:
- Premium cap: bids are limited to a maximum of 37,000 EUR/MWh/year, derived from modelled storage costs plus a regulated return.
- Procurement volume: the final volume awarded is the lower of two values: the procurement target set by the system operator, or 80% of the total qualified capacity.
This approach guarantees that some qualified projects remain out of contract, even when supply is tight, maintaining competitive pressure.
Performance adjustment: how MACSE bids are made comparable
Beyond caps and volumes, MACSE applies performance coefficients to ensure bids are evaluated fairly across asset characteristics.
Bids are standardised against a 4-hour asset with 85% round-trip efficiency (RTE). Assets with longer duration or lower RTE are multiplied by higher coefficients, which raise their effective bid price and reduces their chance of selection.
These adjustments shift bids in the merit order: lower coefficients mean bids are treated as cheaper while higher coefficients mean bids are treated as more expensive.
To see this in practice, consider two batteries with the same bid but different technical profiles:
| Characteristic | Battery A | Battery B |
|---|---|---|
| Bid Premium | 30 EUR/MWh/year | 30 EUR/MWh/year |
| RTE | 85% → coefficient: 1.000 | 80% → coefficient: 1.030 |
| Charge Duration | 4h → coefficient: 1.000 | 6h → coefficient: 1.016 |
| Discharge Duration | 4h → coefficient: 1.000 | 6h → coefficient: 1.016 |
| Combined Coefficient | 1.000 | 1.063 |
| Adjusted Bid | 30 EUR/MWh/year | 31.9 EUR/MWh/year |
Winners are paid as bid with the coefficients only affecting the ranking of offers, not the level of support received.
Strategic takeaway: success will hinge on weighing capex, fixed-revenue stability, merchant upside, and performance profile when setting bid levels.
Flexibility where it’s needed most
The first MACSE round directs all procurement to Southern Italy, Sardinia, and Sicily - regions with the highest renewable shares and weakest interconnection.
This ensures capacity is built where it relieves the greatest system stress and supports continued renewable build-out.
To reinforce this, minimum quotas apply in Sardinia and Sicily; if eligible projects exist, they must be contracted ahead of other regions, even if bids elsewhere are lower.
MACSE fixes revenues while adding performance risks
Winners of the auction take on both stable revenues and obligations. The revenue structure de-risks cash flows by providing predictable income, while obligations introduce additional risks to manage.
Revenues
- Winners receive long-term fixed payments that underpin project bankability.
- Projects also retain 20% of ancillary service revenues, creating an incentive for efficient operation.
Obligations
- Projects are subject to a 1% annual degradation requirement and must meet availability expectations.
- Uneconomic bids in the ancillary services market are penalised, keeping batteries engaged in real-time balancing.
Participants may also choose to contract only part of a battery’s capacity. This oversizing strategy both de-risks compliance, by providing headroom against obligations, and creates additional upside through merchant revenues.
Where participants strike the balance between fixed-revenue stability and merchant upside will shape both project economics and market outcomes.
