BESS industry gears up for Italy market kick-off with first MACSE auction – but is 2030 target overly ambitious?

CIP and GCSS, a joint venture between developers Ikigai Capital and Agnoli Giuggioli, recently partnered to deploy 14 projects totalling 2.3GW of battery energy storage system (BESS) capacity, the first of which are expected to reach ready-to-build (RTB) this year.

Castiglioni is also co-founder of Ikigai, one of the early movers in the UK market.

Bigger developments in Italy

In general terms, developing BESS in Italy requires the same approach as in GB, Castiglioni said. You need to think about technology and monetisation strategy much earlier on than in solar, for example.

However, there are some differences. Typically developers will buy the land rather than enter a long-term lease, for example. The process of grid application is also different. Grid connection times are shorter, which may relate to the more significant upfront financial commitments that are required.

“To connect you have to pay a deposit. That doesn’t necessarily happen in the UK, which is why you have ghost projects,” he said. “For big projects, the amount really adds up.”

Castiglioni also pointed to the role of a new auction for energy storage called MACSE: Meccanismo di Approvvigionamento di Capacità di Stoccaggio Elettrico.

“The market in Italy has also started right away with large projects. Here, 50MW is a relatively small one. Duration is also much higher because of MACSE in the South and the capacity market (CM) in the North. We’re seeing 6-hour or even 8-hour projects.”

Something that has changed recently is that projects below 200MW in size will now go to local regions for approval, and anything above it goes to the Ministry of Environment and Energy Security (MASE).

“This has created a bit of discomfort among operators because some regions don’t necessarily know how to carry out a planning process for BESS,” Castiglioni explained.

“They know PV but not necessarily BESS. So there may well be delays as a consequence of this rule change. Sicily for example is very familiar with the process, as approval has always been done there, but others like Sardinia or Puglia less so. They didn’t have the responsibility until the end of last year. Fortunately all our pipeline is with MASE or already submitted.”

First MACSE auction ‘smaller than expected’, CM will be important

MACSE has been the biggest talking point in Italian storage. It is a relatively original scheme, whereby operators sell their flexible capacity into a centralised platform run by Terna, which makes that capacity available to renewables operators.

Its 15-year contract is expected to help make projects in Italy very bankable. “We know of at least four or five banks that are ready to fund projects,” Castiglioni said.

“The first auction will be at the end of September. You’ll need to have your project consented by July to participate.”

Transmission system operator (TSO) Terna came out with a 10GWh procurement target in the south for the first auction, which he said is less than the market was expecting. The TSO said this is because it doesn’t expect many projects to have moved through the planning process by that point, so it’s trying to keep the auction competitive, Castiglioni added, with a 15% discount applied to the demand they believe is actually necessary.

“I think their approach is that they want to learn from other experiences. And that’s why they’ve refined the structure of the market in Italy the way they did it. There will be another MACSE auction next year too and each year and in the meantime there is the CM,” he said.

He also pointed out that the amount of CM contracts going to BESS has been steadily increasing too, with the recent auction for 2027 delivery year handing out nearly 600MW of contracts to BESS.

Castiglioni: “You can clearly see the trend of new capacity being awarded. Obviously there are declining prices as expected in any CM as you add capacity, but there is definitely a focus on more flexibility and the participation of BESS. Gas will continue to be important, as will demand response, but the direction of travel is clear.”

More conservative, but ‘still enormous’ 2030 target

Terna has, by its own admission, gone for a more conservative energy storage deployment target for 2030, revising its previous 71GWh target to around 50GWh to help integrate its solar and wind pipeline.

“But that is still an enormous requirement in five years and I’m struggling to see how we as an industry will be able to meet it,” Castiglioni said.

“You’ll have to deal with planning, construction and procurement. Procurement is going to be a bottleneck. Not just of batteries but transformers too. And will we have enough EPC contractors to install all of these gigawatts?”

“I think the developers and investors with experience in other markets will benefit from it because they are ahead on the learning curve. They already know how to set up an efficient procurement strategy, how to build a bankable projects, how to design projects.”

CIP, which will be the long-term owner of the 14 projects, is highly active in the BESS market globally and typically only invests in the much larger scale of project. It is investing in projects in the UK, US, Chile and Australia. Executives from the firm discussed three equally-sized projects totalling 1.5GW/3GWh projects in Scotland in a recent interview (Premium access).

The only company that is already building a substantial pipeline of BESS in Italy is utility and power generator Enel, with a 1.6GW pipeline that won most BESS contracts awarded in the 2022 CM for 2024 delivery. It sold a 49% stake in that portfolio to investor Sosteneo. Enel hasn’t provided an update this year, but some (or potentially all) of that portfolio should be operational.