Negative electricity prices were recorded in several Italian market zones for the first time on Oct. 14, as low demand coincided with solar generation. Valerio Covicchio, country manager at Whes, told pv magazine Italia that the next 7 GW of solar capacity will have a greater impact on price spreads than the previous 7 GW. Spreads reached €300 ($336.30)/MWh in October, with zero-price periods likely to return in spring 2027 and early battery energy storage system (BESS) installations set to deliver substantial returns.
What happened on Oct. 14, when zonal electricity prices turned negative in Italy for the first time in the history of the day-ahead market?
On Oct. 14, a situation occurred that had never happened before and was historic in terms of its implications. At 1 p.m. (CEST), the Sicily, Calabria and South market zones cleared at -€0.01/MWh. The same price was recorded at 2 p.m. and 3 p.m. It was the first time that an Italian market zone had recorded a negative price.
A little background may help explain the event. Every 15 minutes, offers from electricity producers on Italy’s main electricity market, the day-ahead market (MGP), are ordered from the cheapest to the most expensive. Buyers’ bids – submitted by traders, utilities and other market participants on their behalf – are ordered from the highest to the lowest.
The market would operate as a single zone if connections between electricity zones had unlimited transfer capacity. In practice, transmission lines have finite capacity, so the country’s seven market zones can record different prices.
There are therefore two possible situations.
First, if there is no congestion and transmission capacity is not saturated, all seven zonal prices are equal to one another and to the PUN (Prezzo Unico Nazionale) Index GME, Italy’s national reference price index for the day-ahead market and a benchmark for many industrial electricity supplies.
Second, if the grid becomes congested and transmission capacity is saturated, different prices can emerge across the seven zones.
On Oct. 14, Sicily (SICI), Calabria (CAL) and South (SUD) behaved as a single market, with no internal congestion. The Central South (CSUD) zone cleared at €46.87/MWh, while North (NORD) and Central North (CNORD) cleared at €194.98/MWh.
In effect, Italy was divided into three price areas. The northern area, where electricity demand was high, recorded prices almost €200/MWh higher than the negative-price zones. Market settlement mechanisms meant that buyers ultimately paid a weighted average of these values, or €138.19/MWh.
Against this background, how could prices turn negative? There is nothing unusual about negative-price offers themselves. They have existed in Europe and Italy for a long time. What had not happened in Italy was for electricity demand to fall sufficiently low for those offers to set the clearing price where supply and demand intersect.
Plants that submit negative-price offers prefer to pay to continue generating rather than shut down. As solar generation increases and demand falls, these plants may offer increasingly negative prices, up to the point where stopping production becomes more economical than paying to generate.
Across Europe, hours with negative prices – both zonal prices and prices for indices equivalent to the PUN Index GME – occur hundreds of times a year. Italy remains an anomaly in the European context, demonstrating relatively weak interconnection.
How many hours has Italy’s average day-ahead electricity price been zero so far in 2026?
The PUN Index GME, which can be estimated as a volume-weighted average of zonal prices, reached zero for 14 hours in 2026 out of approximately 6,900 hours analyzed from Jan. 1 to Oct. 16. Ten of those hours occurred during the May 1–3 weekend, three on May 24 and one on July 5. In 2025, there were 10 such hours, all in May.
The numbers remain small, but are increasing.
For investors and electricity consumers, however, the more important indicator is not the headline-grabbing zero price, but the average electricity price during peak solar generation hours, from 1 p.m. to 3 p.m., compared with evening prices from 5 p.m. to 9 p.m. The market is moving toward two distinct price levels.
When could the PUN Index reach zero again in Italy?
As solar capacity increases, the probability rises that supply and demand will intersect at increasingly low prices, potentially reaching zero or, as demonstrated on Oct. 14, turning negative. The next zero-price periods are expected in spring.
October saw spreads reach €300/MWh. Why are you still running business plans based on 2025 spreads of €100/MWh, and when might that assumption change?
Beyond the historic – and currently exceptional – event, assessments of investments in flexibility technologies such as BESS need to be based on a much longer data history than a single day.
A solar generator in southern Italy could have stored electricity between 1 p.m. and 3 p.m. and sold it in the evening, capturing a spread of €300/MWh. But when assessing the average daily value a BESS can capture over a year, the figure would be closer to €100/MWh.
This parameter is continually updated in our models and adjusted gradually.
What do you expect over the next six to 12 months?
The shape of the supply curves suggests that zero and negative prices will not emerge in a linear progression, but more like a step change. Nature does not jump, but the day-ahead market can.
Italy’s installed solar capacity increased from 41.1 GW in September 2025 to 48.3 GW in September 2026. More than 7 GW is significant, but it is nothing compared with the effect the next 7 GW connected to the grid will have on price spreads, precisely because of this nonlinear dynamic.
Energy-intensive companies, among others, are responding by installing storage to manage rather than simply endure electricity price volatility. However, day-ahead market arbitrage is only the last of the revenue streams available to BESS. Discussions with companies often begin with price spreads, but investors come to recognize that the value lies also, and above all, elsewhere, such as in self-consumption and flexibility services.
What factors could cause Italian price spreads to increase or decrease?
The main drivers are straightforward. Spreads increase when solar generation rises, electricity demand falls and fossil fuel prices – particularly gas – remain high. They decrease when the opposite occurs.
Large-scale battery deployment could also reduce spreads, but current installation trends point to a much smaller increase in instantaneous storage power than the expected growth in solar capacity.
The most important mechanism for BESS in Italy is currently the Macse storage procurement scheme, which has a planned allocation of 26 GWh. Assuming batteries with four- to six-hour durations, this equates to approximately 4.3–6.5 GW of effective shifting capacity. The first 10 GWh is expected to enter operation no earlier than 2028, with the remaining 16 GWh scheduled for 2029.
In other words, Italy installed more peak solar capacity over the past 12 months than the storage power expected to be available under the scheme by 2029.
Renewable energy auctions (FER), together with other national and European mechanisms, will, I estimate, bring at least 10 GW of additional capacity onto the grid by 2028. Before BESS deployment can narrow the price spreads, the first BESS installations will have generated substantial returns.
It is also often overlooked that BESS can itself replace gas-fired generation during evening hours, effectively setting the level the price spreads reach. This is a dynamic already familiar in markets with more extensive battery deployment.
From pv magazine Italia
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