Italy offers to increase capacity market payouts from 2025

Italy's power and gas regulator Arera has raised maximum payments in capacity auctions for 2025 through 2027 to Eur81,000/MW for new capacity, it said March 28.

Previous auctions for 2022, 2023 and 2024 offered maximum payments of Eur70,000/MW for new capacity and Eur33,000/MW for existing capacity, payable over a 15-year period. The capacity can be traded on a secondary market, with monthly delivery.

Under the new proposals for 2025, 2026 and 2027, payments for existing capacity would increase to Eur39,000/MW, Arera said. The prices are based on a series of benchmarks and standard operating rates for an open cycle gas turbine unit.

The latest secondary auction saw 687 MW of April 2024 capacity traded at level of Eur32,317/MW, grid operator Terna reported March 27.

In the 2024 market, 41.5 GW of capacity was awarded, including 1.1 GW of battery capacity. Enel was the largest taker with 12.9 GW.

Market impacts such as the 2020 COVID-19 pandemic and the gas price spike of 2022 have led to a delay in the terms for the 2025 market.

Italian power demand is expected to increase going forward, Terna estimates, driven by the increased electrification of energy demand, such as electric vehicles, heat pumps and electrolyzers.

Together with rising conventional demand, this could mean an increase from 317 TWh in 2022 to 343 TWh in 2028 and 378 TWh in 2033.

Peak load is seen at 64 GW in 2028 and 67 GW in 2033, compared to a maximum 61 GW in summer 2015.

This could leave a shortfall of 10 GW between thermal capacity and demand peak in 2028, taking into account expected thermal closures and new capacity from the capacity market schemes, rising to a shortfall of 14 GW in 2033.

In the first two capacity market sales, Italy awarded 40.9 GW in 2022 and 43.4 GW in 2023.

The consultation phase for the 2025-27 markets runs until April 26, Arera noted.