The MACSE discipline

This Alert outlines the main provisions of the MACSE regulations.

 

WHAT ARE THE REGULATORY REFERENCES OF THE MACSE?

On October 22, 2024, Terna S.p.A. (Terna) published regulations on the new Mechanism for the Provisioning of Electric Storage Capacity (MACSE), approved by the Ministry of Environment and Energy Security with Ministerial Decree No. 346 of October 10, 2024 (the MACSE Discipline).

This Discipline contains the rules for operating the MACSE adopted pursuant to Article 18 (Development of storage capacity) of Legislative Decree No. 210 of November 8, 2021, and in accordance with the criteria defined by the Energy Networks and Environment Authority in ARERA Resolution No. 247/2023/R/EEL of June 6, 2023 on "Criteria and conditions for the operation of the system for the forward supply of electric storage capacity, pursuant to Article 18 of Legislative Decree No. 210 of November 8, 2021.”

The framework and the documents attached to it form an integral and substantial part of it. They contain the rules for operating the MACSE and, in particular, participation in the MACSE competitive procedures, admission requirements, preparatory activities, operation of auctions, regulation of contracts, and pre-auction and post-auction guarantees.

 

WHAT ARE THE GOALS OF THE MACSE?

Storage facilities will play a key role in the operation of the electricity system in the future. There will be an increasing diffusion of renewable energy sources, allowing facilities to be fully exploited and contribute to providing dispatching services useful to ensure the security and adequacy of the system.

Legislative Decree 210/21 introduced a new mechanism for the supply of electricity storage capacity (MACSE) developed with the aim of integrating renewables with an efficient level of “overgeneration” (ie at times when electricity production exceeds demand) from planned grid developments. This mechanism will enable the system to acquire new storage capacity through long-term procurement contracts awarded through competitive auctions organized by Terna, in which operators owning new storage systems can participate.

Those selected as a result of the auction have:

• the obligation to build the system;
• the obligation to make the storage capacity available to third-party market operators, for its use in the energy market, through a platform managed by the GME;
• the obligation to offer the capacity on the MDS;
• the right to receive a fixed annual premium from Terna.

 

WHO CAN PARTICIPATE IN THE MACSE AND WITH WHICH SDS?

The MACSE Framework requires the fulfillment of subjective and objective requirements.

Regarding the subjective requirements, entities that meet the following requirements may be eligible for MACSE:

• are not in default of obligations to Terna;
• are not in a position of control and/or connection pursuant to art. 259 of the Italian Civil Code, or are not subject to the same control pursuant to art. 2497 of the Italian Civil Code, or do not have one or more directors in common with companies in default of payment obligations to Terna;
• are not in a state of judicial liquidation or compulsory liquidation or composition with creditors, or are not undergoing proceedings for access to one of these procedures;
• there are not, with reference to the persons referred to in Article 85 of Legislative Decree 159/2011, causes of disqualification, suspension or prohibition provided for in Article 67 of Legislative Decree 159/2011;
• have not been suspended from the MACSE pursuant to Article 9 of the MACSE Regulations.

A person who intends to be admitted to the MACSE has to submit a request for admission certifying the possession of these subjective requirements, made in accordance with the outline in Annex 1 of the MACSE Discipline. The application for admission must be received by Terna at least 120 days before the execution date of the first auction in which the applicant intends to participate.

Regarding the objective requirements, the following are eligible.

New SdSs (SdSs) belonging to one of the Reference Technologies identified by the version of the Study in force at the time of the conduct of the bidding process if:

• the participant holds the construction and operating permits and, where, required by the regulations in force, the concessions for the use of water related to the construction and operation of the pumping plant (among the relevant permits, operating permits for environmental purposes are expressly excluded);
• the SdS falls, alternatively, into one of the following cases:
  • the storage system doesn't share the network infrastructure for connection and doesn't have a functional relationship with another generation and/or consumption group;
  • the storage system shares network infrastructure for connection with another generation and/or consumption facility but doesn't have a functional relationship with that group;
  • the storage system has a functional relationship with another generation group, but that generation group uses the same primary energy source for electricity generation;
  • the SdS hasn't been the subject of post-auction nomination under the Capacity Market Rules, or has been the subject of post-auction nomination under the Capacity Market Rules and has subsequently been the subject of contractual termination for failure to obtain the licenses for construction and operation of the facilities;
  • the SdS wasn't contracted within the ultra-sapid reserve pilot project, or was contracted and subsequently subject to contractual termination before the commencement of reserve service;
  • the participant waives any further incentive, with respect only to the contracted portion, if any, of the storage system;
  • the start of work is after the day of execution of the auction.

New SdS not belonging to any of the reference technologies identified by the study in effect at the time of the conduct of the bidding process. However, according to Article 16.7 of the MACSE Framework, the quantity allocated to such SdS can't exceed 10% of the national quota.

SdS in reconversion for the reference technology under the conditions indicated in Art. 6.3. of the MACSE Framework if:

• the participant holds the concessions for the use of water related to the construction and operation of the pumping plant and the permits required by current regulations for the Conversion operation;
• the SdS falls, alternatively, into one of the following cases:
  • the SdS doesn't share the network infrastructure for connection and doesn't have a functional relationship with another generation and/or consumption group; or
  • the SdS shares network infrastructure for connection with another generation and/or consumption group, but does not have a functional relationship with that group (eg common control or regulation system); or
  • the SdS has a functional relationship with another generation group, but that generation group uses the same primary energy source for power generation;
  • the existing hydropower facility to be converted to SdS is already qualified for bidding on the Day-Ahead Market (PGM), in accordance with the Network Code;
  • the existing hydropower plant to be converted to SdS isn't subject to decommissioning measures approved by the competent authorities;
  • the existing hydroelectric facility to be converted to SdS hasn't been qualified to the Capacity Market in relation to any of the years included in the MACSE Delivery Period;
  • the Participant renounces any further incentives, with respect only to the contracted portion, if any, of the SdS;
  • the Commencement of Work is subsequent to the day of execution of the auction.

 

WHAT ARE THE PREPARATORY STEPS AND REQUIREMENTS TO PARTICIPATE IN THE COMPETITIVE BIDDING PROCESS?

The activities required by the MACSE framework are:

 

 

WHEN DOES THE AVAILABILITY OBLIGATION FROM QUALIFIED SDS HAVE TO BE FULFILLED?

The Delivery Period is defined in the Technical Report (which Terna has not yet published).

The Delivery Period always starts from January 1 and covers only the contracted SdS.

 

HOW AND WHEN DOES THE AUCTION TAKE PLACE?

Since Terna has not yet published Needs Document and Technical Report, the 180 days for the first auction have not yet started to run. Consequently, it's possible to assume that the first auction will be held no earlier than July 2025. Terna publishes on its website the National Quota and, for each area, the minimum and maximum quota following which it sets the day on which bids can be submitted.

For each auction, the demand care is inelastic and corresponds to the National Quota.

According to Article 14 of the MACSE Regulations, a participant can submit, for each qualified SdS, only one bid:

• the capacity offered must not exceed the qualified capacity of the same;
• the premium (an amount expressed in a whole number of EUR/MWh-years). The adjusted premium (iethe product between the premium and the coefficients referred to in Articles 15.2 and 15.5 of the MACSE Discipline) must not exceed the reserve premium related to the auction in which the bid is submitted.

For each auction, Terna will select bids in a manner that maximizes the net value of transactions on the entire system, such that the total capacity selected in a given area is greater than or equal to the minimum quota or less than or equal to the maximum quota and the total capacity selected on a national basis is less than or equal to the national quota.

At the end of each auction, Terna notifies each participant through the MACSE portal of the capacity selected, the maximum capacity selected, and the value of the award in relation to each storage system offered.

 

WHAT ARE THE AWARD CRITERIA?

For each auction, Terna selects bids in a way that maximizes the net value of transactions on the entire system, such that:

• the overall capacity selected in a given area is greater than or equal to the minimum quota and less than or equal to the maximum quota;
• the total capacity selected on a national basis is less than or equal to the national quota.

Where there are one or more areas where the total capacity offered in each such area is less than the respective minimum quota, the total capacity selected on a national basis shall be no more than the difference between:

• the national quota;
• the sum of the differences between the minimum quota and the overall capacity offered in the area, for all areas where the capacity offered is less than the minimum quota.

The award criterion is based on an algorithm that, for quota compliance purposes, takes into account:

• the value of the adjusted premium (ie the product between the premiums and the coefficients referred to in Articles 15.2 and 15.5 of the MACSE Framework);
• the capacity offered;
• the geographical area in relation to which Terna defines the minimum and maximum requirements and, for each auction, the minimum and maximum quota;
• the national and local quotas defined for each area;
• the type of technology admitted to the auction.

 

WHAT COMMUNICATIONS ARE MADE BY TERNA ON THE OUTCOME OF THE AUCTION?

At the end of each auction, Terna communicates, through the MACSE Portal, for each SdS offered, the capacity selected, the maximum power selected, the minimum power selected, and the value of the Award.

Within seven days, Terna makes all the data available on its website. The data includes:

• the allottee;
• the area;
• the technology;
• the selected capacity;
• the maximum selected power;
• the minimum selected power; and, for each area,
• the marginal premium and the weighted average of the premiums.

 

WHAT GUARANTEES MUST THE GRANTEE PROVIDE?

For each contract and within 15 days of the communication of the auction results, the assignee must set up one or more post-auction guarantees of a total amount equal to the sum of the products between:

• the committed capacity of each contracted storage system, expressed in MWh;
• the reserve premium;
• the number of years, rounded down, of the planning period of the reference technology with the shortest planning period among those admitted to the competitive bidding process;
• a percentage equal to 15%.

Post-tender guarantees must be in the form of either a non-interest-bearing security deposit or a first-demand bank guarantee drafted in accordance with the outline in Annex 6 of the MACSE Discipline, issued by banking institutions registered pursuant to Article 13 of Legislative Decree 385/1993. Specifically, post-auction guarantees in the form of a bank surety must have a duration of at least until May 31 of the year following the last year belonging to the delivery period and, in any case, until the full settlement of the economic items arising from the standard contract and related implementing agreements.

Post auction guarantees are returned, upon request of the assignee, following the complete settlement of the economic items arising from the standard contract and its implementing agreements.

Terna will release the post-auction guarantees if the assignee fails to fulfill the payment obligations arising from the contract or the implementing agreements. In such a case, if the assignee doesn't make up the required amount within 10 days, Terna applies what is provided in the standard contract.

For each standardcontract and within 15 days of the communication of the auction results, the assignee has to pay Terna a contribution to the guarantee fund, in the form of an interest-bearing security deposit, equal to the sum of the products of:

• the committed capacity of each contracted storage system, expressed in MWh;
• the reserve premium;
• a percentage equal to 15%.

This subsidy is returned by Terna, at the request of the assignee, following the complete settlement of the economic items arising from the standard contract and its implementing agreements.

 

WHAT FULFILLMENTS ARE REQUIRED POST-AUCTION?

Within two working days from the communication of the auction outcomes, the assignee sends Terna the declarations for the purpose of anti-mafia verifications according to the template in Annex 3 of the MACSE Discipline.

Within 15 days of the communication of the auction outcomes, the assignee has to:

• send to Terna, in accordance with the template in Annex 4 of the MACSE Discipline, the standardcontract for procurement of electric storage capacity related to the reference technology of the selected SdS;
• submit to Terna the implementation agreement of the contract referred to in the previous point;
• submit the post-auction guarantee (see Section II.2.3) by providing the relevant documentation;
• pay the guarantee contribution.

The assignee will forfeit the assignment if they fail to submit one or more of these documents.

 

WHAT CONTRACTUAL COMMITMENTS DOES THE ALLOTTEE MAKE?

The assignee, in addition to committing to maintain the requirements of the MACSE Discipline throughout the term of the contract, is also subject to the following obligations:

• implementation obligation (ie obligation to implement and enable to the Market for Dispatch Service each contracted SdS) within the delivery period (see above);
• availability obligation (ie obligation to make available, for the entire delivery period, the committed capacity, maximum committed power, and minimum committed power of each contracted SdS, guaranteeing a charge-discharge efficiency at least equal to that declared during qualification);
• repayment obligation (ie obligation to repay the upward variable charge and the downward variable charge for each unit of time to which the bid on the Market for Dispatch Service relates).

The assignee, for each month of the delivery period:

• is entitled to receive the fixed consideration determined pursuant to Article 24 of the MACSE Discipline;
• has to return to Terna the variable consideration determined pursuant to Article 25 of the MACSE Discipline;
• has to return to Terna, if positive, the contribution margin in accordance with the terms and conditions set forth in Article 26 of the MACSE Discipline.

 

UNDER WHAT CIRCUMSTANCES CAN TERNA TERMINATE THE CONTRACT WITH THE ASSIGNEE?

Terna, pursuant to Article 1456 of the Civil Code, may exercise its right to terminate the standard contract or implementing agreements, subject to the right to compensation for damages, upon simple declaration in any of the following cases:

• if, following the signing of the contract, the original or supervening deficiency of the requirements set forth in Article 3.2 of the MACSE Discipline is established;
• if it's found that the statements and/or documentation provided by the grantee in connection with participation in the MACSE are not true;
• if the post-auction guarantee (see Section II.5.2) be declared null and void, be cancelled, be terminated or be ineffective or, in any case, be invalid and not be reconstituted in the manner provided for in the MACSE Discipline;
• the contribution to the guarantee fund (see paragraph II.5.3) has not been validly established, is ineffective or invalid and is not reconstituted in the manner set forth in the MACSE Discipline.

In addition, Terna can exercise its right to terminate the standard contract, subject to a notice to comply, in the event of the assignee's non-performance or non-compliance with the obligations and conditions set forth in the MACSE Discipline, the contract or the implementing agreements.

 

IS THE ASSIGNEE'S WITHDRAWAL ALLOWED?

The assignee, during the planning period and in any case by the date on which the fulfillment of the implementation obligation occurs, can exercise the right of withdrawal upon the occurrence of the conditions set forth in Article 22 of the MACSE Discipline.

The withdrawal is exercised by the assignee in relation to the committed capacity of a contracted SdS, or part of it, and must be expressed in whole MWh values.

The exercise of the right of withdrawal entails the payment of an amount in favor of Terna equal to the product of:

• the committed capacity for which the assignee exercises the right of withdrawal;
• one-twelfth of the reserve premium of the auction open to the reference technology with the shortest planning period among those admitted to the competitive procedure in which the SdS was contracted;
• the lesser of: (i) the greater of 12 and the number of months, rounded up, that elapse between the date of Terna's receipt of the notice regarding the exercise of withdrawal and the date of the conduct of the auction in which the SdS was contracted; and (ii) 12 and the number of years, rounded down, of the planning period of the reference technology with the shortest planning period among those admitted to the competitive procedure in which the SdS was contracted.

During the delivery period, the grantee cannot withdraw from the contract.

 

WHAT ARE TIME-SHIFTING CONTRACTS?

Pursuant to Article 11 of ARERA Resolution No. 247/2023/R/EEL of June 6, 2023, Terna defines one or more categories of time-shifting contracts differentiated according to:

• of the associated performance and localization. These performances and localizations are identified by Terna in consistency with the quantities, types and location of electricity storage resources procured through the MACSE;
• the validity period, corresponding to the time horizon within which they can be exercised.

Terna, in implementing Article 11 of ARERA Resolution No. 247/2023/R/EEL, identified the procedures for defining time-shifting contracts to make available to operators entitled to operate on the GME platform the capacity contracted for each SdS as a result of the MACSE auctions, the maximum and minimum power contracted as a result of the MACSE auctions.

According to Annex 7 of the MACSE Regulations, time shiftingcontracts are distinguished on the basis of:

• market area;
• reference technology;
• validity period;
• duration in charge and discharge;
• charge-discharge performance;
• initial state of charge;
• charge-restoration period.

The GME organizes a centralized platform for the negotiation, through competitive auctions, of the different categories of standard time-shifting contracts referred to in Article 11, paragraph 11.1

The time-shiftingcontracts are allocated on a centralized platform organized by the GME. They're organized in accordance with the procedures defined in the GME Regulations referred to in Article 13.2 of Annex A of ARERA Resolution No. 247/2023/R/EEL, for trading, through competitive auctions, the categories of time-shiftingcontracts and give the operators entitled to operate on the GME platform who are assigned the right to offer in the energy markets and to register bilaterally on the energy accounts platform through commercial storage units.

For each reference technology, time-shifting contracts can be multi-year (not exceeding ten years), annual, monthly, weekly and daily.

Terna, ten days before negotiating each time-shiftingcontract on the GME platform, calculates for each reference technology and for each market zone the total capacity of load-unload yield.

For each validity period, Terna defines the capacity to be allocated through the GME platform, based on the defined total capacity and scheduled maintenance of each storage system.

As a result of the negotiations that have taken place on the energy market, the GME communicates to Terna the cumulative intermediate schedules and the cumulative final schedules of the commercial storage units. For each timing unit to which the offer on the Dispatch Services Market refers, Terna defines the cumulative intermediate and final schedules of the SdSs for which the availability obligation referred to in paragraph II.5.2 has been fulfilled.

If as a result of the energy markets, the operators qualified to operate on the platform have not complied with the limits of cumulative energy in withdrawal and/or input, the dispatching user is obliged to pay Terna (if positive) or receive from Terna (if negative) the consideration referred to in Article 12.3 of Resolution No. 247/2023/R/EEL.

 

IN WHAT CASES IS THE PRE-BID GUARANTEE RETURNED?

The pre-auction guarantee will be returned by Terna (i) to each assignee participant, within 15 days from when Terna sends to the same the countersigned copy of the contract and/or of the implementation agreement, and (ii) to each non-assignee participant, within 15 days from the communication of the results of the auction, if its bid is not awarded.

 

IN WHAT CASES IS THE PRE-AUCTION GUARANTEE ENFORCED?

The pre-auction guarantee will be enforced by Terna if:

• the awarded participant fails to fulfill its obligations under Articles 18.1, 18.2, 18.4 and 18.5 of the MACSE Discipline ie fails to deliver the documentation for the anti-mafia verifications, fails to enter into the contract and/or the implementing agreement and/or fails to deliver the post auction guarantee; and
• as a result of verifications carried out in accordance with Article 8 of the MACSE Discipline before the stipulation of the contract and/or the implementing agreement, it turns out that the statements made and/or the documentation provided are not true.

 

WHAT POWERS DOES TERNA HAVE IN CASE OF IRREGULARITIES?

Terna verifies the regularity and completeness of the data and documentation provided.

If the data and/or documentation are irregular or incomplete, Terna notifies the participant of the steps necessary to regularize or supplement the data and/or documentation, as well as the deadline within which to do so. In case of failure to regularize or supplement the data and/or documentation provided within the specified deadline, Terna excludes the SdS from the auction, providing adequate reasons.

Pursuant to Art. 8 of the MACSE Regulations, Terna reserves the right to verify at any time, including through inspections, the statements made and the documentation provided by the subject in connection with participation in the MACSE. If, as a result of the verifications, including anti-mafia verifications, the declarations and/or documentation prove to be untrue, Terna excludes the subject from the competitive bidding process and/or orders the forfeiture of the subject from any rights acquired in relation to the SdS to which the untrue information refers. In this case, the subject isn't entitled to compensation for any expenses incurred and is obliged to return to Terna any amount received for the period during which the same benefited without being entitled to it.

In addition, without prejudice to the provisions of the contract, Terna can suspend a participant from the MACSE for a serious violation of the MACSE Discipline, providing adequate justification. The assessment regarding seriousness will take into account the extent of the violation and the consequences resulting from it. Suspension from the MACSE means that the participant cannot participate in the competitive procedures that take place during the period of suspension. Terna will lift the suspension if the prerequisites for the suspension cease to exist.