ISLAMABAD: The National Electric Power Regulatory Authority (Nepra) on Friday allowed the government to seek mandatory Battery Energy Storage System (BESS) as part of the upcoming auction of 800-megawatt power capacity induction from renewable sources wind and solar to help stabilise electricity supply facing serious duck curve challenges.
This was permitted through amendments to the Wheeling Auction Process (WAP), allowing the Independent System Operator (Ismo) a subsidiary of the Power Division to formally issue a request for proposals for the first 400MW block auction this month. The prospective bidder would commit to having BESS at least 10 per cent of its proposed wind or solar capacity.
The regulator allowed three major changes to the previous WAP. ‘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,’ Nepra said in its first key amendment.
For the first auction to be conducted by Ismo, participants shall submit their proposals within two months from the date of publication of the request for proposal (RFP). This period shall be fixed and nonextendable. For all subsequent auctions, participants shall submit their proposals within 1 month of the RFP’s publication date.
The rationale for this provision, apart from it being a standard feature in many procurement and auction frameworks, is to provide Ismo with the necessary 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, led by the managing director of the Private Power and Infrastructure Board (PPIB) and comprising two independent directors of the Ismo board of directors, to address any complaints or grievances regarding the auction process.
After more than a 30-year delay, the government has announced the auction process for a notional 800MW capacity to gradually move towards a competitive energy market and is currently engaging with the private sector to finalise the bidding schedule.
Ismo’s extensive modelling of the BESS and its financial implications also suggested very encouraging financial numbers, with returns showing an upward trend with the installation of BESS up to a certain percentage.
However, based on participant feedback, a minimum percentage (10pc) has been finalised as a mandatory requirement. Auction participants may install more BESS than this minimum requirement to further improve their financial viability, as the financial model showed higher returns for greater BESS capacity.
According to Ismo, international markets have adopted two approaches to integrating BESS into the grid. Countries with mature markets generally published all relevant information and let the market players make appropriate decisions, while developing countries followed this integration through mandatory requirements. Developing markets such as India, the Philippines, China and the Dominican Republic have implemented mandatory requirements for BESS.
According to Ismo, most prospective auction participants and other stakeholders acknowledged the importance of BESS in addressing grid flexibility and mitigating the duck curve challenge caused by renewable energy for example, solar consumers exiting the grid in large numbers during the daytime and returning suddenly to the grid in the evening, with surging demand.
Under the current mechanism, the auction committee is responsible for eligibility evaluations as well as the redressal of grievances regarding such evaluations. The private sector, however, called for an independent forum, separate from the auction committee, to redress grievances related to auctions, end apparent conflicts of interest, and enhance the credibility and transparency ofthe process.