ISLAMABAD: The National Electric Power Regulatory Authority (Nepra) on Friday allowed the government to require mandatory Battery Energy Storage Systems (BESS) as part of an upcoming auction for 800 megawatts of renewable power capacity from wind and solar projects, aimed at helping stabilise an electricity supply facing serious duck curve challenges.

After a delay of more than 30 years, the government has announced the auction process for a notional 800MW of capacity as part of its efforts to gradually move towards a competitive energy market. It is currently engaging with the private sector to finalise the bidding schedule.

Facing serious duck curve challenges, the government had decided in July to make BESS mandatory for bidders as part of the upcoming auction.

The regulator approved the move through amendments to the “wheeling auction process”, allowing the Independent System Operator (Ismo) — a subsidiary of the power division — to formally issue a request for proposals for the first block of the 400MW auction within the current month.

Under the first of three key amendments to the previous wheeling auction process, prospective bidders would be required to commit to having BESS comprise at least 10 per cent of their proposed wind or solar capacity, the regulator stated.

“An auction participant that intends to participate in the auction by utilising solar and/or wind generation technologies shall only be eligible to participate in the auction if the firm capacity of its BESS located at the site of the generation facility is equivalent to at least 10pc of the firm capacity of its solar and/or wind generation facility,” it said.

For the first auction conducted by Ismo, participants are to submit their proposals within two months of the publication of the request for proposal (RFP).

“This period shall be fixed and non-extendable. For all subsequent auctions, auction participants shall submit their proposals within one month of the publication of the RFP,” Nepra said.

The rationale for this provision, apart from it being a standard feature of many procurement and auction frameworks, is to give Ismo flexibility during the implementation of the first auction, as a significant number of prospective participants may seek an extension of the submission deadline.

The amendments also provide for the constitution of a three-member grievance redressal committee, headed by the managing director of the Private Power and Infrastructure Board (PPIB) and comprising two independent directors of the Ismo board, to address complaints or grievances regarding the auction process.

Ismo’s extensive modelling of BESS and its financial implications also indicated that returns from installing BESS increased up to a certain capacity.

Based on feedback from participants, a minimum BESS capacity of 10pc has been finalised as a mandatory requirement. However, auction participants may install more than the minimum to further improve their financial viability, as the financial model showed higher returns with greater BESS capacity.

According to Ismo, international markets had adopted two approaches to integrating BESS into the grid. Countries with mature markets generally published all relevant information and allowed market players to make appropriate decisions, while developing countries adopted mandatory requirements for BESS integration. Developing markets such as India, the Philippines, China and the Dominican Republic have also implemented mandatory BESS requirements, it said.

Most prospective auction participants and other stakeholders, according to Ismo, acknowledged the importance of BESS in addressing grid flexibility and mitigating the challenge of the duck curve caused by renewable energy — for example, large numbers of solar consumers exiting the grid during the day and suddenly returning in the evening, creating a surge in demand.

Under the current mechanism, the auction committee is responsible for evaluating eligibility as well as addressing grievances over these evaluations. The private sector, however, called for an independent forum, separate from the auction committee, to address grievances relating to auctions, in order to eliminate an apparent conflict of interest and enhance the credibility and transparency of the process.