An unlikely leader emerges in Europe's race to install grid-scale battery storage

Italy is pulling into a lead when it comes to deploying battery energy storage system (BESS) technologies for the European renewable energy buildout and looks set to consolidate this position at the end of next month with the conclusion of a first allocation round under a new incentive programme.

The initiative, known by its acronym of MACSE, aims to keep Italy's energy storage capacity in step with its buildout of renewables capacity — mainly solar and onshore wind so far — with a new regulatory framework designed to support the addition of 50GWh of BESS capacity by 2030.

National electricity transmission system operator Terna has said it wants to see a total 57GWh of BESS capacity in place by then.

The MACSE programme looks set for a flying start, with 10GWh of peak discharge capacity lined up for allocation in the first auction next month, and international interest is running high, according to Matteo Coriglioni, Italian lead with Aurora Energy Research, an advisory firm.

“We see Italy as the European country with the largest battery build-out between now and 2030,” he commented.

Even before the MACSE effect takes hold, Italy has seen a strong increase in authorisations of battery storage projects, especially in recent months.

“Italy already has about 2.4GW (in battery storage capacity) coming online by the end of 2025, and MACSE is entirely additional to this,” Coriglioni noted.

The new framework — which is also available to other energy storage systems such as pumped hydro — offers long-term security and stability, providing BESS owners with fixed capacity-based and inflation-adjusted monthly payments over 15 years.

Energy arbitrage – charging batteries from the grid when electricity is cheap and discharging when prices are high — is a key earner for BESS assets, but Italy's scheme reserves energy trading for third parties.

Assets can contract only part of their capacity under MACSE, with the rest trading on the markets, increasing or decreasing merchant exposure.

“The essence of this scheme is the separation between the investment decision and the trading decisions,” said Coriglioni.

“Essentially you incentivise the construction of these assets by providing a fixed contract. But the benefits of using this capacity are not in the hands of the people that have built the plant – they are auctioned off to third parties who can then use this capacity for their trading."

The scheme appears to be viewed positively by investors and an Aurora study of 28 European markets published earlier this year showed Italy emerging at the top of the firm's European Battery Markets Attractiveness Report, ahead of the UK and Germany.

Tackling grid bottlenecks provides part of the rationale for Italy, as elsewhere, but there is also a strong emphasis on opening up ancillary markets and giving BESS a prime role in grid balancing system.

By addressing the kind of load fluctuations that are frequently associated with renewable energy sources, the MACSE programme is intended to underpin a massive growth in renewables over the next decade.

Italian Prime Minister Giorgia Meloni is keen on reviving the nuclear energy industy in industry and wants the nation to become a gas hub for Europe, but her energy policy includes a targeted 70% share for renewables in electricity generation by 2030, with an installed capacity target of 131GW for clean energy. The MACSE programme is intended to support such ambitions.

"This large pool of storage capacity will be used to shift solar-generated electricity between day and night hours," said Coriglioni. "It is an essential step in order to integrate smoothly a pool of renewable assets that will grow and grow."

Italy’s incentives for BESS have drawn international attention, especially after the April blackouts that hit Spain and Portugal highlighted the dangers of allowing the buildout of renewables to outpace the provision of adequate grid-balancing mechanisms or interconnectors.

“I think there is a lot of interest in the way Italy has designed a support mechanism that looks like it will be effective in getting a lot of storage capacity online in a relatively short period of time," Coriglioni said.

"The scheme supports construction of these assets through highly guaranteed fixed revenues, and this allows the assets to be much more capital intensive than a battery would want to be if it needs to rely on energy trading."

The lengthening duration of Italian BESS coverage provides further evidence that the Italian model is working, not least because assets are not so reliant on energy trading to become bankable investments.

"Initially we were seeing one hour batteries in markets like the UK, then it became two hour batteries, and so on. But in Italy it started out with four hours, and many backers are trying to build even longer batteries, looking at six or eight hours batteries," Coriglioni said.

Italian renewables

As part of its wider plans to expand renewable energy production, Italy is currently holding a major auction for onshore wind and solar energy under its FER X programme, for which final bids are due on 12 September.

The precursor FER1 auctions that ran between 2019 and 2024 awarded 20-year Contracts for Difference to a total 5.5GW of utility-scale solar PV and onshore wind, but FER X is expected to deliver much more than this.

After this process is concluded, the Italian government is expected to provide more clarity on the incentives and policy framework for the FER II scheme for offshore wind.

The country has several big floating wind projects in the pipeline, with at least two fully permitted, but some developers have grown frustrated at the pace of the FER II process.

Europe's battery chase

Aurora's top-ranking for Italy was largely driven by its 50GWh battery peak discharge target under MACSE and the opening of its ancillary markets to BESS.

Italy's ranking was based more on the opportunity it presented for developers to back greenfield projects, while the UK was seen as attractive for more advanced projects.

In capacity terms, Aurora estimated that Europe’s grid-scale BESS will rise from 10.3GW, as of October 2024, to 55GW by 2030 and 126GW by 2050.

The UK's installed capacity of 4.3GW is expected to more than double to 10.6GW, with attractive revenue streams reinforcing the position of an established battery industry.

According to Aurora associate director Eva Zimmerman, Italy offers better opportunities for BESS developers looking for greenfield projects than the UK, where a "full" pipeline pulls investments toward more advanced projects.

Germany's third placed rating was also more forward-looking, with "strong market outlook and ambitious renewable energy targets".