The capacity market is the mechanism by which Terna procures capacity through long-term contracts awarded by competitive auctions. Its purpose is to guarantee the adequacy of the electricity system, i.e. the availability of enough power to cover demand on a stable basis. For a business it is not a market to take part in every day but a cost: the premiums paid to auction winners are recovered from energy withdrawals.
How it works
The auctions are open to the owners of production units, both programmable and non-programmable; consumption units and foreign resources are also admitted, with specific obligations and rights. For the capacity selected, the operator has the obligation to offer it on the energy and services markets, the right to receive a fixed annual premium from Terna and the obligation to return to Terna the difference, when positive, between the price formed on those markets and a strike price defined by the regulator ARERA. New capacity can obtain fifteen-year contracts; the premium for existing capacity is granted for one year.
The mechanism is provided for by Legislative Decree 379/2003, follows the criteria set by ARERA with Resolution ARG/elt 98/11 and rules proposed by Terna and approved by the Ministry. The first auctions were held in 2019 for delivery years 2022 and 2023. The European Commission assessed it as compatible State aid, authorising its implementation until 31 December 2028.
Results of the most recent auctions
| Delivery year | Auction date | Existing capacity | New capacity | Auction cost |
|---|---|---|---|---|
| 2025 | 25-26 July 2024 | 37,581 MW at 45,000 €/MW/year | 174 MW at 67,500 €/MW/year | €1,723.6 million |
| 2026 | 18 December 2024 | 38,265 MW at 46,000 €/MW/year | 140 MW at 56,160 €/MW/year | €1,816.1 million |
| 2027 | 26-27 February 2025 | 38,047 MW at 47,000 €/MW/year | 594 MW at 47,000 €/MW/year | €1,847.3 million |
The cost of each auction is added to that of the new capacity already awarded in previous years: 572 million euros according to the report on the auction for 2027, in which storage accounts for about 95% of new capacity.
For 2028 the Ministry approved the rules with Decree no. 259 of 6 August 2026, asking Terna to consider holding the auction after the storage auction (MACSE) scheduled for 24 November 2026. As of 10 October 2026 Terna has not published results for that delivery year.
Capacity, energy, services: three different remunerations
| Mechanism | What it pays for | How it pays |
|---|---|---|
| Capacity market | The availability of power | Fixed annual premium in €/MW |
| Day-Ahead Market | The energy sold | Zonal marginal price in €/MWh |
| MSD | Balancing and redispatching services | Offered price |
How the cost falls on end customers
ARERA defines a net cost: the premiums paid by Terna, minus the amounts Terna recovers, starting with the variable fees returned by the awardees. The cost is covered by a fee applied to the withdrawal dispatching users, i.e. the operators that buy energy for end customers. 70% of the expected cost is charged to the energy withdrawn in the system's peak hours, which Terna identifies and publishes by 15 December of the previous year; the rest is spread over the other hours, with a value updated every quarter. The 70% share is also set for delivery years 2026, 2027 and 2028.
For a business: what to look at
- In the contract. Check whether the capacity fee is pass-through, with the two values for peak and off-peak hours, or included in the price; and on which measurements consumption is attributed to peak hours (hourly meter curve or conventional profile).
- In the invoice. It is a cost separate from the dispatching fee, even when the supplier shows them in the same section. With a pass-through formula, the values charged can be compared with those published by Terna.
- The decisions it affects. The peak-hour calendar is known in December: that is the time to assess how much consumption falls in those hours and whether the production process allows part of it to be shifted. In the budget the item should be reviewed every year, within the procurement and risk management strategy.
- Typical mistakes. Thinking that the cost disappears by changing supplier, when only the way it is shown changes; comparing an "all-inclusive" offer with a pass-through one without bringing them to the same basis; ignoring the peak-hour calendar.
To understand how the capacity fee is treated in your supplies, with an IPGS ENERGY consultant: Request a discussion.
Sources
- Terna — Mercato della capacità (accessed 10 October 2026)
- Terna — Rendiconto degli esiti, asta madre 2025 (accessed 10 October 2026)
- Terna — Rendiconto degli esiti, asta madre 2026 (accessed 10 October 2026)
- Terna — Rendiconto degli esiti, asta madre 2027 (accessed 10 October 2026)
- Terna — News per gli operatori (accessed 10 October 2026)
- MASE — Decreto del Ministro n. 259 del 6 agosto 2026, disciplina per l'asta con consegna 2028 (accessed 10 October 2026)
- ARERA — Deliberazione ARG/elt 98/11, criteri e condizioni del mercato della capacità (accessed 10 October 2026)
- ARERA — Relazione 274/2026/I, relazione annuale ad ACER e alla Commissione europea (accessed 10 October 2026)
- GME — Mercato a pronti (MPE) (accessed 10 October 2026)
Informational content by IPGS ENERGY. Information is reviewed as of the stated update date and does not replace a contractual, tax or regulatory assessment specific to an individual business.
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