The National Electric Power Regulatory Authority on Friday allowed the government to require mandatory Battery Energy Storage Systems as part of an upcoming auction for 800 megawatts of renewable power capacity from wind and solar projects, aimed at helping stabilize 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 toward a competitive energy market, and 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 participating in the upcoming auction. The regulator approved the move through amendments to the wheeling auction process, allowing the Independent System Operator, 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, according to the regulator. An auction participant intending to take part using solar or wind generation technologies would only be eligible to participate if the firm capacity of its battery storage system located at the generation site is equivalent to at least 10 per cent of the firm capacity of its solar or wind generation facility.
For the first auction conducted by the system operator, participants are required to submit their proposals within two months of the publication of the request for proposal, with this period fixed and non-extendable. For all subsequent auctions, participants will be required to submit proposals within one month of the request for proposal being published, a timeline the regulator said was designed to give the system operator flexibility during implementation of the first auction, since a significant number of prospective participants may otherwise 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 and comprising two independent directors of the system operator’s board, to address complaints or grievances regarding the auction process.
According to extensive modelling conducted by the system operator on battery storage and its financial implications, returns from installing BESS increased up to a certain capacity, and based on feedback from participants, a minimum BESS capacity of 10 per cent has been finalised as a mandatory requirement, though auction participants may install more than the minimum to further improve their financial viability given that the financial model showed higher returns with greater battery storage capacity. The system operator noted that international markets have adopted two broad approaches to integrating battery storage into the grid, with countries operating mature markets generally publishing all relevant information and allowing market players to make their own decisions, while developing countries have tended to adopt mandatory requirements for battery storage integration, citing markets such as India, the Philippines, China and the Dominican Republic as examples that have implemented similar mandatory BESS requirements. Most prospective auction participants and other stakeholders acknowledged the importance of battery storage in addressing grid flexibility and mitigating the duck curve challenge caused by renewable energy, such as large numbers of solar consumers exiting the grid during the day before suddenly returning in the evening and creating a surge in demand. While the current mechanism places responsibility for evaluating eligibility and addressing grievances with the auction committee itself, the private sector had called for an independent forum separate from the auction committee to handle grievances relating to the auction process, in order to remove any apparent conflict of interest and strengthen the credibility and transparency of the overall process.
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