NEPRA okays amendments in electricity wheeling auction process

ISLAMABAD: The National Electric Power Regulatory Authority (NEPRA) has approved amendments to electricity wheeling auction process proposed by the Independent System and Market Operator of Pakistan (ISMO), making battery energy storage systems (BESS) mandatory for solar and wind projects participating in the first auction.
According to the determination, NEPRA has been apprised that the government has increased first auction quantum of 400 MW instead of 200 MW earlier proposed by it.
The determination says that the Authority has considered ISMO ‘ s original and revised proposals for amendment to the Auction Process, the comments and submissions of stakeholders and ISMO’s rejoinders thereto, the queries raised by the Authority and ISMO’s responses thereon, the Framework Guidelines, the approved Auction Process, the WAP Determination, and other relevant records and applicable documents in reaching its decision in the matter.
The proposed amendment makes the co-location of BESS a mandatory eligibility requirement for solar and for Wind generation facilities participating in the Auction, with BESS Firm Capacity of at least 10% of the Firm Capacity of the associated generation facility. For the first Auction quantum of 400 MW, ISMO estimates that the requirement would correspond to approximately 40 MW of BESS Firm Capacity and, subject to the applicable discharge-duration requirement, approximately 160 MWh of storage energy capacity. ISMO’s simulations indicate a modest system-level reduction in VRE curtailment, of approximately 0.3 percentage points for Wind and 1 .1 percentage points for Solar, with negligible impact on marginal prices, while reliability was not quantified. The stronger quantified benefit appears at the project level, where the inclusion of BESS improves modelled equity IRRs and mitigates curtailment risk. Accordingly, the Authority regards the proposed requirement a proportionate market-development and project-risk-management measure rather than a material system-level load-shifting effect.
The Authority considers the 10% threshold proportionate for the first Auction. ISMO’s modelling indicates that Solar and Wind projects remain financially viable and that a substantial part of the modelled economic benefit is captured at 10%, whereas a higher mandatory threshold would increase upfront cost and implementation risk and may discourage participation, including by smaller participants. ISMO has also explained its reasons for not adopting the 20% level that received broader consultation support. The Authority finds merit in this explanation and approves the 10% threshold at this stage. In the interest of transparency and informed participation, ISMO shall publish the supporting financial modelling on its website before issuance of the first RFP.
The Authority has considered stakeholder concerns regarding MW, MWh and BESS discharge duration. These concerns are adequately addressed through the applicable CCOP for Firm Capacity Certification, which accounts for inverter Capacity, Duration Factor and Availability Factor, as applicable. To remove ambiguity and avoid eligibility disputes, Clause 4.2(c) of the Auction Process shall expressly require the Firm Capacity of both the BESS and the associated Solar and for wind generation facility to be determined and verified in accordance with the MCC and the relevant CCOP.
The Authority considers limiting the mandatory BESS requirement to solar and wind justified by their contribution to the identified duck-curve, ramping and curtailment concerns. All technologies shall continue to compete solely on Bid Value. BESS is also suitable for the initial phase because it can be readily co-located, whereas pumped hydro is location-specific and other storage technologies are not presently commercially established in Pakistan at the required scale. International experience, including the approaches adopted in India and China, also supports treating mandatory co-location as a transitional measure rather than a permanent market design.
The Authority does not consider it appropriate, at this stage, to provide for an escalating BESS threshold in the absence of sufficient operational, technical and market experience. Preferential treatment of BESS-paired projects, standalone Front-of-the-Meter BESS, locational arrangements, DER aggregation and storage-service mechanisms may appropriately be considered in Phase 2, as these require wider market-document changes. This is also consistent with mature markets, where storage is increasingly integrated through market rules, capacity valuation and ancillary-service arrangements rather than mandatory co-location. Accordingly, the 10% BESS requirement shall apply as an initial phase requirement. ISMO shall comprehensively assess, inter alia, market participation and competition, BESS capital and operating costs, technical performance, availability, utilization, charging and discharge behaviour, contribution to renewable energy integration, as well as implementation issues and submit a detailed proposal to the Authority for consideration.
The Authority finds the proposed compliance framework adequate. The RFP shall require an undertaking to comply with the stipulated BESS requirement and provide for verification through Finn Capacity certification and confirmation of the required BESS installation. A breach shall result in encashment of the Performance Guarantee, while continued compliance after commercial operation remains governed by the Grid Code, Distribution Code and Market Commercial Code. The applicable CCOP already requires a co-located BESS to be charged from the associated generation facility, while the applicable provisions relating to ancillary services and their compensation apply to the generation facility as a whole. Accordingly, duplication of these requirements in the Auction Process is not considered necessary. However, ISMO shall ensure effective implementation, verification and enforcement of the approved BESS requirement.
ISMO has informed that Ministry of Energy (Power Division), vide letter dated July 10, 2026, has approved an increase in the quantum of the first Auction from 200 MW to 400 MW. The Authority takes note of the said approval and determines that Annex D shall be revised from 200 MW to 400 MW for the first Auction.
Amendment 2: The Authority has considered the original proposal for allowing extensions, the subsequently proposed staged mechanism, the stakeholders’ concerns regarding discretion and equal treatment, and the recommendation for providing a fixed submission period. A pre-determined and non-extendable submission period provides greater certainty, transparency, equal treatment and predictability to all prospective participants and avoids reliance on subjective or case-specific grounds for extending the deadline. Accordingly, for the first Auction, the proposal submission period shall be two (02) months from the date of publication of the RFP, while for subsequent Auctions the submission period shall be one (01) month, as specified in the RFP. The Authority considers a fixed and non-extendable period more appropriate for the first Auction, as it provides the full preparation period upfront while eliminating discretion over extensions.
In view of the approved fixed and non-extendable proposal submission periods, the Authority considers that a separate proviso providing for cascading adjustments to the Auction Calendar is no longer necessary. Annex C of the Auction Process shall accordingly be revised to reflect the approved fixed timelines. All proposals, whether submitted electronically or in hard copy, shall remain unopened until expiry of the prescribed proposal submission deadline to preserve the confidentiality and integrity of the procurement process and to ensure equal treatment and a level playing field for all participants by preventing any proposal from being accessed before the submission period has closed.
Amendment 3:- During the Auction Process proceedings, as highlighted at paragraph 3.15 of WAP Determination, ISMO opposed a separate grievance forum on the ground that the Auction Committee itself was an independent and neutral body capable of evaluating eligibility and deciding grievances, and that an additional layer could cause delay. The Authority accepted that position and considered conflict-of-interest declarations sufficient for grievance handling by the Auction Committee. The present proposal represents a change in that position, as ISMO now accepts the need for a forum separate from the Auction Committee. Since the existing period of five (05) business days for filing a grievance and the four weeks stipulated for its disposal remain unchanged, the earlier concern regarding additional delay does not arise to the same extent, and a separate forum avoids the Auction Committee reviewing its own eligibility decisions.
The Authority has considered the proposed composition of the GRC against its intended purpose of providing a review forum separate from the Auction Committee. ISMO itself has now sought establishment of a separate GRC despite its earlier recommendation that an additional grievance forum was unnecessary. Having advanced independence of review as the basis for this change, the composition of the GRC must reflect that objective in substance and not merely in form.
Nonetheless, the Authority does not consider ISMO’s proposed composition, with the CEO, ISMO chairing the GRC, consistent with the objective of an independent review. The Auction Committee is itself chaired by a C-Suite representative of ISMO with a casting vote, while ISMO administers the Auction Process. If the purpose of constituting a separate GRC is to provide independent review of the Auction Committee’s decisions, placing the CEO, ISMO as Chair of that forum would retain both the original decision making and its review within ISMO management. This would weaken the institutional separation sought through creation of the GRC. Accordingly, the GRC should be constituted in a manner that maintains an appropriate degree of institutional separation from the Auction Committee, avoids actual or perceived conflicts of interest, and provides reasonable assurance to participants that grievances, particularly those relating to eligibility or other decisions of the Auction Committee, will be considered by an impartial and independent forum.
The Authority, therefore, considers it appropriate that the GRC shall comprise the Managing Director, Private Power & Infrastructure Board (PPIB), as Chair, and two independent directors of ISMOs Board. The PPIB representative on the Auction Committee shall be a person other than the MD, PPIB. No GRC member shall participate in proposal evaluation or in decision-making by the Auction Committee.
ISMO shall publish the composition of the GRC on its website before the Auction. External or rotating provincial representation is not considered necessary, as it may impair uniform treatment and create conflicts where public entities themselves participate in the Auction.
In view of the foregoing, the Authority hereby approves the amendments to the Auction Process, with modifications, set out in Annexure-A to this Determination. Further, ISMO is hereby directed to comply with the directions of the Authority of this determination. ISMO shall make all consequential changes to the RFP and other Auction documents necessary to give effect to this Determination. Ends