How the Italian power market works: MGP, MI, balancing and PCE after TIDE

The Italian power market is the set of markets in which generators, wholesalers and retailers buy and sell electricity wholesale: forward, day-ahead, during the delivery day and, for balancing, in real time. GME runs the power exchange and the bilateral contracts platform, Terna runs the grid and balancing, and ARERA writes the rules.

Who the players are

• GME, the Italian energy markets operator. It organises the Electricity Market: the spot market, with the Day-Ahead Market (MGP) and the Intraday Market (MI), the forward market and the forward energy accounts platform (PCE) for bilateral contracts.
• Terna. The national transmission system operator: it keeps injections and withdrawals in balance at every moment and procures the resources it needs on the balancing and redispatching market.
• ARERA. The regulator defines the dispatching rules, now collected in the Integrated Text on Electricity Dispatching (TIDE).
• Market operators. Generators, wholesalers, traders and retailers take part in the markets directly or through an operator. Whoever is in charge of generation or consumption units is accountable for schedules and imbalances: under TIDE this is the role of the BRP, the balance responsible party.

The Day-Ahead Market (MGP)

The MGP is an auction that closes the day before delivery. Sellers submit offers with a quantity and a minimum price, buyers submit bids with a quantity and a maximum price; the algorithm ranks them in merit order, takes the transmission limits between zones into account and sets, for each period, the accepted quantities and the clearing price. The Italian MGP is coupled with the other European day-ahead markets.

The country is divided into market zones, and each zone can have a different price when the grid between zones is congested. Since 1 January 2025 purchase bids are also settled at zonal prices, and GME publishes the PUN Index GME: the average of zonal prices weighted by the quantities purchased, which has replaced the PUN as the reference price. Since 1 October 2025 the MGP has worked in 15-minute periods, and every day has 96 periods instead of 24.

The Intraday Market (MI) and XBID

After the MGP, forecasts change: the weather shifts renewable output, consumption deviates from estimates, a plant trips. The MI is where positions are adjusted. It works in two complementary ways: the MI-A auctions, coordinated with the European intraday auctions, and MI-XBID continuous trading, where orders are matched as soon as they find a counterparty, including operators in other countries, until shortly before delivery.

Under TIDE the MI auctions work in 15-minute periods, and XBID trades quarter-hourly products alongside hourly ones. For anyone who has to keep forecasts, position and bids aligned, the number of decisions to take every day has grown accordingly.

Balancing and imbalances

The schedules coming out of MGP and MI are commitments: what has been sold must be produced, what has been bought must be consumed. Reality, however, never matches the schedule exactly. Terna corrects the differences on the balancing and redispatching market (MBR), which under TIDE has replaced the Dispatching Services Market (MSD): it selects the offers of qualified resources to relieve congestion, maintain reserves and balance the system in real time.

The difference between each operator's schedule and its metered energy is the imbalance, which is settled financially. Under TIDE the imbalance settlement period is also 15 minutes. This is why forecast quality has a direct impact on the accounts: every badly forecast MWh becomes an imbalance cost.

Forward market and bilateral contracts on the PCE

Much of the energy does not go through the day-ahead auction but is contracted in advance, to hedge against price volatility. The instruments are exchange-traded forward products, GME's physical-delivery forward market and, above all, bilateral contracts between operators.

Bilateral contracts concluded off-exchange are registered on the PCE, GME's forward energy accounts platform, as commercial transactions in the operators' energy accounts; they generate the schedules that enter the MGP. For an energy company, then, registered deals, energy accounts, bids and schedules must all tell the same story.

An operator's typical day

Put in sequence, the markets make up a cycle that repeats every day:

• Forecast. Forecasts of plant output and customer withdrawals, at 15-minute granularity.
• Position. Comparison between what is forecast and what is already covered by forward and bilateral contracts.
• Transactions and bids. Registration of commercial transactions on the PCE and bids on the MGP to close the residual position.
• Adjustments. Corrections on the MI and XBID when forecasts or plant availability change.
• Metering and settlement. Comparison between schedules and metered data, imbalance costs, financial settlement and analysis of results.

If these steps live in separate tools, the 15-minute market multiplies manual work and the risk of error. If they share the same data, every forecast update reaches the bids without being copied by hand.

The other markets: capacity and services

Alongside the energy markets there are markets that reward something else. The capacity market, run by Terna with auctions held well ahead of the delivery period, pays for available capacity in exchange for the commitment to offer it on the markets; we covered it in our article on the Capacity Market. For the details of the reform, read our article on TIDE and quarter-hourly dispatching.

How MAS does it: ERGO Suite

ERGO Suite, the MAS platform for power trading, covers the operator's day from start to finish. Forecasts come from FAST, for withdrawals based on SII metering data, from SOLIS UPNR, for the output of generation units, and from THOR, for the schedules of third-party producers.

ERGObid, the TIDE-compliant bidding software, manages deals, energy accounts and commercial transactions on the PCE and sends bids on MGP, MI and XBID via IPEX, with a 15-minute market time unit and quantities in MW to one decimal place. ERGO Portfolio, the suite's ETRM, brings together portfolio position, value and risk; for hydropower producers, IDRO Optimizer calculates the entry price from which bids are built and CAMPO manages capacity market obligations.

For an overview of trading systems, also read the guide what is an ETRM. To see ERGO on your own portfolio, request a demo.