Competition beckons for battery storage IPPs
14 January 2025
Commentary
Jennifer Aguinaldo
Energy & technology editor
Battery energy storage system (bess) projects in the GCC region have attracted international and local utility developers, investors, and engineering, procurement and construction (EPC) contractors specialising in thermal and renewable energy power plants.
In late December, principal buyer Saudi Power Procurement Company (SPPC) prequalified 33 companies that can bid as consortium lead, managing or technical members for contracts to develop Saudi Arabia’s first batch of bess projects. These projects will be procured using an independent power producer (IPP) model.
The kingdom’s first independent bess projects will comprise four schemes with a combined capacity of 2,000MW, equating to about four hours or 8,000 megawatt-hours (MWh) of storage.
In comparison, 29 companies prequalified for the first bess projects in Abu Dhabi, which will have a storage capacity of roughly 800MWWh.
Amid international developers’ dwindling appetite to bid for thermal power plants due to their carbon neutrality targets and concerns about low margins, particularly for solar photovoltaic (PV) power plants, bess projects appeal to developers on either side of the fence due to the scope for innovation in technologies and financing structures.
Bess facilities are designed to strengthen electricity grids’ flexibility by accommodating more intermittent renewable power. They complement open-cycle gas turbine plants designed to provide backup capacity.
Saudi Arabia has the upper hand, with The Red Sea Company delivering one of the world’s largest existing bess facilities, with a capacity of 1,300MWh, as part of its multi-utility IPP package. Construction works are under way for a 400MW bess facility to support the $8.4bn Neom green hydrogen project and a 700MWh facility catering to Amaala.
Saudi Electricity Company also awarded EPC contracts to build substantial energy storage capacity last year. Dubai and Oman plan to develop bess facilities over the coming years.
Beyond the GCC, Morocco has received bids for the contracts to develop its first set of solar plus bess contracts, departing from a previous strategy to procure hybrid solar PV and concentrated solar power (CSP) schemes.
It will be interesting to see which companies eventually submit proposals for Abu Dhabi and Riyadh’s first batch of bess IPPs, given that some qualified developers anticipate highly competitive bids due to the universal appeal of the projects.
A wait-and-see attitude could help avoid some of the risks endemic in a relatively new utility asset class, while early success will help position them in a niche market, acquiring experience to help them price future bids better.
Related read: Battery storage gains foothold
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