Capacity market: Terna sets 21 December as the date for the 2028 auction. Here’s how it works and who can take part

The next capacity market auction for 2028 – the mechanism managed by Terna that ensures the adequacy of the electricity system – will take place on 21 December. The date was announced by the company led by Pasqualino Monti following the publication by the Ministry of the Environment and Energy Security of the decree approving the technical operating provisions (DTF2) for the procedure. The decree amends the capacity market regulations, incorporating the proposal submitted by Terna and already approved by ARERA via Resolution 370, published in recent days. Applications to participate in the auction may be submitted until 3 November.

But what is the capacity market? It is a mechanism through which Terna acquires capacity via long-term supply contracts awarded through competitive auctions. Operators owning generation units (both dispatchable and non-dispatchable) may participate in the auctions organised by Terna. These operators, in return for the capacity selected as a result of the auction, are obliged to offer that capacity on the energy and services markets; they are entitled to receive a fixed annual premium from Terna; and they are also obliged to repay Terna any positive difference between the price of electricity realised on the energy and services markets and an operating price defined by the sectoral authority chaired by Nicola Dell’Acqua. Demand-response units and foreign resources may also participate in the auctions, subject to specific obligations and rights.

The most recent auction, for the 2027 delivery year, was held in February 2025, and a total of approximately 43 GW was allocated. To date, Terna has conducted six auctions through which – in addition to preventing the decommissioning of existing capacity still required to ensure system adequacy – it has enabled the purchase of approximately 9 gigawatts (GW) of new capacity available on a probabilistic basis, allowing the closure of the most polluting and least efficient plants, whilst renewing part of the generation fleet with more efficient plants offering better dynamic performance.

In view of the increase in authorised storage capacity, the derating factors (the coefficients calculated by Terna to determine what proportion of a plant’s nominal power can be considered effectively ‘available’ during peak load hours) have been increased. Compared with the 2027 auction, in addition to the derating factors for batteries, those relating to photovoltaic capacity have also been increased, whilst the derating factors for wind and run-of-river hydro capacity have remained unchanged.