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The MENA Region – The Next Hot Market for Energy Storage?

The global market for stationary battery energy storage is set to experience tremendous growth by 2025 – about 30 times its current size. This is expected to come mainly from the “usual suspects” such as the USA, China, India and Western Europe. But what about other geographies that are not yet on the radar of the storage industry, but still have the potential to become substantial contributors to this future global growth?

We expect the MENA region will surely be one of those – let’s have a closer look to find out why.

 

The three prerequisites for energy storage market growth

When assessing the energy storage growth potential of a specific market, Apricum typically examines three key prerequisites:

  • Demand: First of all, there obviously needs to be a demand for services that energy storage – but also non-storage solutions – can principally serve. This can involve demand for increased power system flexibility, for power infrastructure expansions, for optimization of power sources or for an adequate quality of power supply.
  • Competitiveness: This demand could be addressed by non-storage solutions as well; therefore, energy storage needs to be competitive with alternatives. Next to ensuring that the technology actually works, the most competitive solution is typically the one that features the lowest costs over its lifetime.
  • Frameworks: Energy storage needs to be allowed to play to its competitive advantages. Hence, adequate frameworks need to be in place that provide unrestricted market access, avoid one-sided privileges such as subsidies, and allow for the overall bankability of energy storage deployments.

So how does the MENA region perform according to these three prerequisites?

 

Demand: Renewable energy integration will drive the need for energy storage

Demand for energy storage is reflected in specific use cases, i.e., how energy storage is used to generate value. To address these, the energy storage system can be located centrally (in front of the meter) or distributed (behind the meter) and adds value both on the supply and demand side of a power system as shown in Figure 1 below.

Demand for energy storage and related use cases depends on the individual challenges faced by a specific power system. Today energy storage installations in MENA are still low and serving a diffuse set of purposes. The dominating demand driver for storage in the region, however, is definitely the vast upcoming expansion of renewable energy in UAE, Saudi Arabia, Egypt, Morocco and other MENA countries, with cumulated installations expected to reach around 19 GW of PV and 7 GW of wind over the next four years.

Consequently, announced energy storage projects in MENA will predominantly address use cases dealing with the integration of renewable energy capacities. This can be achieved, for example, by limiting the up and down ramp rates of PV or offering “grid congestion relief” to avoid temporary bottlenecks, e.g., at substations next to multiple PV parks. In addition, long-duration energy storage could shift the majority of the power generated during the day forward – enabling a PV plant to deliver electricity during the night.

 

Competitiveness: Falling costs of both battery systems and renewables improve the case for storage

Energy storage costs have declined over the last few years and will continue to do so. According to Apricum’s estimates, Li-ion battery system prices will more than halve to approximately 200 USD/kWh between now and 2025, mainly driven by economies of scale and technological improvements.

While cost declines are rapidly increasing the competitiveness of energy storage around the world, the MENA region has a particular advantage: the already incredibly low costs of PV-based power production. With LCOE below 3 USD-cents per kWh already realized in Abu Dhabi and Dubai, a PV plant can add energy storage and still offer electricity at a competitive (combined) price in various cases. This is especially compelling when taking into account that more PV power can then be sold (e.g., by avoiding grid congestion) and at peak prices during the evening hours.

 

Frameworks: First positive examples emerging

Very recently, Jordan’s ministry of energy and mineral resources (MEMR) released a request for expression of interest (REOI) for a 30 MW/60 MWh stand-alone energy storage project, which is remunerated via a 15 year capacity lease agreement. Also in Jordan at about the same time, the Irbid District Electricity Company signed a PPA with Philadelphia Solar for a 4 MW / 12 MWh battery linked to the expansion of its existing solar park.

These are the first examples of how commercial, bankable frameworks for energy storage could look in the MENA region. If successfully executed, resulting low-cost PPAs are the best proof of concept, which can trigger similar frameworks also in neighboring countries – as was the case with PV a few years back. It should be noted, however, that the specific situation in Jordan with 97% of imported energy and a rather ailing grid infrastructure is of course a perfect hotbed for renewables plus storage solutions, which is not the case in all MENA countries to the same extent.

 

Summary: MENA is set for significant energy storage deployment

The key prerequisites for energy storage growth are increasingly materializing in the MENA region, which naturally vary from country to country. As demand is growing and competitiveness is improving, authorities and the private sector are increasingly acknowledging the benefits energy storage can add and offering frameworks for bankable and fair access to the energy market.

Overall, it’s not a question of “if”, but of “when” MENA will play a substantial role in the energy storage world.

 

Florian Mayr,
Partner,
Apricum – The Cleantech Advisory


The ees International Magazine is specialized on the future-oriented market of electrical energy storage systems, not only from a technological-, but also a financial and application-oriented point-of-view. In cooperation with ees Global, the ees International Magazine informs the energy industry about current progress and the latest market innovations.

Contact: Xenia Zoller - zoller(at)ees-magazine.com