Overview of revenue streams available to battery storage in the Italian market
Available Markets
This page describes the revenue streams included in the current Italy Dispatch Model release. It is a description of model scope, not of the Italian market as a whole.
The model covers three energy markets and two balancing services. The energy markets are the day-ahead market, the second intraday auction and continuous intraday trading. The balancing services are the balancing market (MB) and activated aFRR energy, both procured by Terna, the Italian transmission system operator.
Italy also operates MSD ex-ante, a capacity market, the MACSE storage capacity mechanism, two further intraday auctions and, since June 2026, a competitive frequency containment reserve (FCR) auction. These markets exist but are not modelled in this release. The reasoning for each is set out under “Markets not modelled in this release” on this page.
Energy Markets
| Market | Granularity | Description |
|---|---|---|
| Day-ahead (MGP) | 15-minute | Main wholesale market, cleared the day before delivery, with a separate price for each bidding zone |
| Intraday auction (MI-A2) | 15-minute | Second of three intraday auctions, closing at 22:00 on the day before delivery |
| Continuous intraday (MI-XBID) | 15-minute | Continuous trading, coupled with other European markets, until shortly before delivery |
Balancing Services
| Service | Direction | Payment | Description |
|---|---|---|---|
| Balancing market (MB) | Upward and downward | Pay-as-bid | Manual balancing instructions from Terna in real time |
| aFRR energy | Upward and downward | Pay-as-cleared | Energy delivered when the battery follows Terna’s automatic frequency restoration signal |
GME (Gestore dei Mercati Energetici) runs the energy markets. MGP stands for Mercato del Giorno Prima, MI-A for the intraday auctions and MI-XBID for continuous intraday trading. MB stands for Mercato di Bilanciamento, and aFRR for automatic Frequency Restoration Reserve.
Day-ahead Market (MGP)
The Italian day-ahead market is the main wholesale market:
- Zonal pricing: each of Italy’s seven bidding zones clears at its own price
- 15-minute granularity: since 1 October 2025, in line with the European day-ahead market
- Pay-as-cleared: accepted bids receive the zonal clearing price
The Italian model trades one intraday auction and continuous intraday
GME runs three intraday auctions and a continuous intraday market. The Italy Dispatch Model trades the second auction, MI-A2, which closes at 22:00 on the day before delivery. It uses continuous intraday trading to rebalance the battery around balancing activations, rather than as a standalone arbitrage market.
Italian balancing revenue comes from MB and aFRR energy
Terna activates batteries in real time through the balancing market (MB) and automatic frequency restoration reserve (aFRR):
- Upward activation: the battery discharges and is paid for the energy
- Downward activation: the battery charges and pays for the energy
- Energy only: the model values activated energy, with no payment for holding capacity available
How much a battery is activated is set by an activation cap for each zone. The caps are measured on the activations of Italian batteries, and they fall as the battery fleet grows. The Italian Dispatch Model page describes both.
MACSE Storage Capacity Mechanism
MACSE (Meccanismo di Approvvigionamento di Capacità di Stoccaggio Elettrico) is Terna’s mechanism for procuring new grid-scale storage in Italy:
- 15-year contracts: awarded by auction, with a fixed annual payment set by each winning bid
- 20% of ancillary revenue: contracted projects keep 20% of the ancillary services revenue their capacity earns
- Southern focus: the first auction, on 30 September 2025, procured storage only in Southern Italy, Sicily and Sardinia
MACSE enters the forecast only through balancing competition, described on the Italian Dispatch Model page.
Markets not modelled in this release
The following revenue streams exist in the Italian market but are not included in the current model.
- MSD ex-ante: Terna’s scheduling stage, run ahead of real time. Its volumes fell from 24.5 TWh in 2020 to 1.5 TWh in 2025, and batteries supplied less than 0.1% of its accepted energy in the first half of 2026. It is not included in the forecast.
- Capacity market: Terna runs a capacity market, and batteries can hold capacity contracts in it. It is excluded because contracted revenue is asset-specific: it depends on the auction and delivery year in which the contract was won, and on de-rating factors that can change between auctions.
- MACSE contract payments: MACSE contracts pay a fixed premium set by each project’s winning bid. The payment is asset-specific rather than a market price, so it is excluded.
- Frequency containment reserve (FCR): Terna began procuring FCR capacity through a competitive auction in June 2026, in a pilot phase alongside the existing mandatory provision. It is excluded because the auction is new, with limited volumes and only a few months of price history.
- First and third intraday auctions: GME runs three intraday auctions. The model trades the second auction only.
Related Pages
- Dispatch Model – How the model optimises across these revenue streams
- Capacity Expansion Model – Projected buildout across Europe