The National Electric Power Regulatory Authority (NEPRA) just took a major step toward stabilizing Pakistan’s power grid. The regulator officially approved amendments to the electricity wheeling auction process. The Independent System and Market Operator of Pakistan (ISMO) initially proposed these changes. Consequently, NEPRA has now entirely mandated Battery Energy Storage Systems (BESS) for solar and wind projects participating in the very first auction.
Under the new rules, solar and wind facilities can only participate if they include a co-located BESS. Furthermore, the firm capacity of this battery system must equal at least 10% of the renewable generation facility’s firm capacity. Authorities will determine and verify this capacity using the Market Commercial Code and relevant operating procedures.
The 400 MW Target & Grid Impact
NEPRA also made a significant change to the auction size. With approval from the Ministry of Energy (Power Division), the regulator doubled the first wheeling auction quantum from 200 MW to 400 MW.
Therefore, for this 400 MW auction, ISMO expects the 10% mandate to generate about 40 MW of BESS firm capacity. It will also create roughly 160 MWh of storage energy capacity, depending on discharge duration requirements.
This storage requirement directly tackles system instability. According to ISMO simulations, the BESS mandate will reduce system-level renewable energy curtailment. Specifically, wind curtailment will drop by roughly 0.3 percentage points, while solar curtailment will decrease by 1.1 percentage points. Additionally, this move will not increase marginal electricity prices.
Why limit this to solar and wind? NEPRA clarified that these specific technologies create ramping challenges, curtailment issues, and the dreaded “duck curve.” BESS easily co-locates with renewable generation. Meanwhile, alternative options like pumped-hydro storage require specific geographic locations, and other storage technologies remain commercially unviable in Pakistan.
Financial Returns & the 10% BESS Threshold Set by NEPRA
During the public consultation phase, several stakeholders supported a much higher 20% storage requirement. Ten different groups, including FESCO, GEPCO, MEPCO, the Punjab Energy Department, and the Rawalpindi Chamber of Commerce and Industry, submitted comments.
However, NEPRA firmly capped the requirement at 10% for the first auction. NEPRA stated that a higher BESS threshold would increase upfront costs and implementation risks. Ultimately, a 20% requirement could scare away smaller participants.
At the project level, storage brings strong financial benefits. ISMO’s financial modeling shows that adding 10% BESS increases the equity internal rate of return (IRR) for solar and wind projects supplying B-3 and B-4 consumers. Storage successfully improves equity returns and mitigates curtailment risks.
Before issuing the first request for proposals (RFP), NEPRA has directed ISMO to publicly release its supporting financial model. Furthermore, NEPRA treats this 10% rule as an initial phase, not a permanent threshold. ISMO must closely analyze market participation, capital and operating costs, equipment performance, and utilization rates before proposing any future threshold increases.
Strict Deadlines & Grievance Rules
NEPRA established uncompromising timelines for the auction process. The regulator outright rejected ISMO’s request to retain the power to extend proposal submission deadlines. Instead, NEPRA fixed the submission window for the first auction at exactly two months from the RFP publication date. This period is strictly non-extendable. For all subsequent auctions, participants will get only one month to submit their proposals. Moreover, all submitted proposals will remain unopened until the exact deadline expires.
Finally, NEPRA approved the creation of a three-member Grievance Redressal Committee (GRC). The Managing Director of the Private Power & Infrastructure Board (PPIB) will chair this committee. Two independent directors from ISMO’s Board will fill the remaining seats. To prevent conflicts of interest, the PPIB representative on the Auction Committee cannot be the PPIB Managing Director. Furthermore, no GRC member can evaluate proposals or make Auction Committee decisions.
Auction participants will have just five business days to file grievances after ISMO publishes the provisional list of eligible participants. The GRC then has exactly four weeks to issue a binding, published decision. NEPRA has ordered ISMO to incorporate all these approved changes into the RFP and auction documents immediately.
