Key Takeaways
- Nepra has approved amendments to the electricity wheeling auction process, making battery energy storage systems (BESS) mandatory for solar and wind projects.
- The first auction quantum has been increased from 200 MW to 400 MW.
- The 10 percent BESS requirement is seen as a temporary measure, with ISMO to assess its impact before proposing any changes.
National Electric Power Regulatory Authority (Nepra) has approved amendments to the electricity wheeling auction process, making battery energy storage systems (BESS) mandatory for solar and wind projects. The changes are aimed at improving the reliability and efficiency of renewable energy projects in Pakistan.
Under the approved amendment, solar and/or wind projects will only be eligible to participate in the auction if the firm capacity of their co-located BESS is at least 10 percent of the firm capacity of the associated renewable generation facility. This requirement is designed to mitigate curtailment risks and improve equity returns for project developers.
The first wheeling auction quantum has been increased from 200 MW to 400 MW, with Nepra's approval of the Ministry of Energy (Power Division). ISMO estimates that the 10 percent BESS requirement would represent around 40 MW of BESS firm capacity and approximately 160 MWh of storage energy capacity for the 400 MW auction.
According to ISMO’s simulations, the mandatory BESS requirement could reduce system-level renewable energy curtailment by around 0.3 percentage points for wind and 1.1 percentage points for solar. However, its impact on marginal electricity prices is expected to be negligible.
Nepra noted that the stronger quantified benefit of BESS emerged at the project level, where storage improves equity returns and helps mitigate curtailment risks. ISMO’s modelling showed that the addition of 10 percent BESS increased the equity internal rate of return (IRR) for both solar and wind projects supplying B-3 and B-4 consumers.
Despite broader stakeholder support during consultation for a 20 percent requirement, Nepra approved the 10 percent threshold for the first auction. The regulator justified this decision by stating that a higher mandatory threshold could increase upfront costs and implementation risks, potentially discouraging participation, particularly by smaller participants.
Nepra directed ISMO to publish its supporting financial model before issuing the first request for proposals (RFP). ISMO has been directed to assess market participation and competition, BESS capital and operating costs, technical performance, availability, utilisation, charging and discharging behaviour, and the contribution of storage to renewable energy integration before submitting a detailed proposal to the authority.
The regulator also rejected ISMO’s proposal to retain discretion to extend the proposal submission deadline, instead fixing the submission period for the first auction at two months from the publication of the RFP. This decision aims to ensure a timely and structured process for the auction.
On the auction timetable, Nepra has fixed the submission period for the first auction at two months from the publication of the RFP. This decision is expected to streamline the process and ensure a fair and transparent bidding environment.
