Electricity market in Italy: renewables, and CER yes, but it's not enough.

The electricity market in Italy must be increasingly renewable, participatory, and flexible. It must therefore increasingly be characterized by the contribution of renewable sources , the development of energy communities , and flexibility. Where are we today on these three fronts? The Electricity Market Report 2025, by Energy & Strategy – Politecnico di Milano, offers a clear vision of the situation and the objectives. The reality is that, considering current data, despite the progress made in recent years, we are behind the established targets.

Let's start with the contribution of renewable sources, a crucial element of the Italian electricity market. In 2024, they contributed 130 TWh of national electricity production, or 49%. Currently, renewables account for approximately 56% of the country's installed electricity generation capacity.

Photovoltaic is the dominant energy source: of the approximately 80 GW total, it already contributes half (40 GW). Hydroelectricity comes in second with 22 GW. The positions reverse when considering production: hydroelectricity is the leading RES in terms of volumes produced, with 54 TWh, equal to 42% of total renewable energy production. Photovoltaic comes in second, with production of 36 TWh.

In any case, the result in terms of production from renewable sources "is a growing trend: we have gone from providing a 35% contribution in 2015, to reaching 49% of total national electricity production and the first six months of this year report a figure of 50%", explained Vittorio Chiesa , director of E&S, highlighting the data on RES plants in Italy which, in the first half of 2025, exceeds two million, a number more than tripled compared to ten years ago.

But there's a downside. How are we doing compared to the target set by the PNIEC, i.e. the 2030 objective, which calls for an estimated contribution of 228 TWh from renewable sources? We're almost a hundred TWh short, considering the 2024 data. To reach the goal, an increase of approximately 75% is needed compared to the 130 TWh produced in 2024. The National Integrated Energy and Climate Plan also indicates the expected contributions from individual renewable sources to reach the goal.

"Investments are essentially concentrated in photovoltaic and wind power, which are expected to add 62 and 43 TWh, respectively, between 2024 and 2030." Geothermal, bioenergy, and hydroelectricity are expected to remain largely stable or decline compared to targets.

To have a sustainable electricity market , we need to grow renewable energy sources, but also we need to free ourselves from fossil fuels. So far, however, they remain dominant, especially gas. "Analysis of the Day-Ahead Market (MGP) results has highlighted that, despite the growth of renewable energy, the market remains largely influenced by gas-fired thermoelectric generation , which continues to be the technology that most often determines prices," the report states. This trend is evident, for example, in the increase in the PUN recorded during the 2022 gas crisis and the increased volatility during different hours of the day. "In this context, the change in theMarket Time Unit (MTU)—from 1 hour to 15 minutes, which came into effect on October 1, 2025—represents a further step towards a market more capable of integrating renewable sources."

Energy communities are an element being considered in the Italian electricity market because they could significantly contribute to the development of renewable sources. The Report maps 876 distributed self-consumption configurations, based on data from the GSE's list of active configurations as of May 31, 2025. Considering that there were 46 in 2024, this represents a 19-fold increase in just one year. Furthermore, almost half of the 2024 total was located in Lombardy and Piedmont. Today, they are a nationwide phenomenon.

The analysis highlights that these are currently small entities, considering the total power involved, which is 85 MW.

"While there has been some excitement in terms of numbers, these solutions are currently accompanied by limited power and investment," Chiesa emphasized.

Considering the expected development scenario for 2028, these CACERs could range from a conservative 0.5 GW to an ambitious 2.7 GW. Even considering the latter, "it is still significantly lower than the one reported in the documents, which set the target of 5 GW for additional power that can be generated through self-consumption configurations."

Another defining element of the present and future of the Italian electricity market is flexibility . The concept of electrical flexibility "refers to an electricity system's ability to effectively and efficiently manage variability in electricity production and demand," the report notes. Specifically, flexibility at the transmission grid scale is called global.

To assess the ability of distributed resources to provide ancillary services and contribute to global flexibility, the UVAM pilot project , short for Mixed Virtual Enabled Units, was approved in 2017. It involved a cluster of sites capable of modulating their own electricity production and consumption through an aggregator, representing a virtual generation and consumption plant. The pilot lasted from 2019 to 2024. Starting this year, with the entry into force of the Transitional TIDE , the UVAM project merged with the UVA pilot project (Enabled Virtual Units). The latter will continue for the entire duration of the Transitional TIDE and will not conclude before February 2026.

The UVAM project was born with the goal of making the energy market more flexible and involving more private individuals with energy generation and storage facilities in dispatching services. What did it achieve during its lifespan? Given that it was an experimental project, the report nevertheless highlights a rather limited role. Furthermore, participation has decreased over time.

While the provision of global flexibility by distributed resources does not appear to be able to make a significant contribution to the electricity system, as the E&S analysis highlights, local flexibility must also be considered. This term refers to the ability of distribution system operators (DSOs) to manage variability in electricity production and consumption at the distribution network level.

For 2025, the pilot projects active in Italy are the same as those already highlighted in the 2024 edition of the Report: Romeflex, EDGE, and MiNDFlex. Given that the local flexibility pilots aim to enable the provision of ancillary services by distributed resources present in the testing area, including generation units, consumption units, and storage systems, an analysis of the evolution of the three from 2024 to 2025 shows that overall participation has increased and their growth potential is significant, although work will be needed to remove obstacles that could hinder their development.

Another significant factor in the electricity market, in Italy and beyond, is the development of storage systems. It's worth returning to the production data for renewable sources: although photovoltaic has a higher installed capacity than hydroelectric, its annual production is lower due to fewer hours of actual operation. This reflects the different generation profiles of the technologies: photovoltaic and wind are intermittent sources, dependent on the availability of their "raw materials," namely, sun and wind.

It is therefore essential to rely on storage systems that can guarantee the storage of excess production and its use when and where it is most needed. This is a key element in supporting increased energy production from renewable sources, as well as energy efficiency and security, notes the European Commission .

At the end of 2024, over 700,000 electrochemical storage systems were installed in Italy, up over 200,000 from the end of 2023, for a total capacity of approximately 13 GWh (+85%): "this growth was strongly influenced by the Superbonus, which primarily favored the installation of distributed systems." Last year, another factor became evident: there was an acceleration in the installation of centralized storage systems. While until 2023, distributed electrochemical energy storage systems dominated, last year the situation changed.

Centralized systems accounted for approximately one-third of total capacity, with a 6.8-fold increase year-over-year (2023 vs. 2024). Distributed systems, for their part, increased by 39%. The positive results from the first MACSE auction suggest further growth in installed capacity. However, we are still far from our targets. As the report highlighted, looking at the 2030 targets envisioned by the Terna-Snam scenario, we are talking about 58 GWh, of which 53 GWh is centralized.

Closing this gap would require a very ambitious growth rate of 56% for the centralized segment until 2030 and 8% for the distributed segment.