Abu Dhabi's Emirates Water & Electricity Company (EWEC), the main procurer of water and electricity in the Emirate of Abu Dhabi, has recently issued a request for proposals (RFP) for its first battery energy storage system (BESS) project.
The project is for two 150MW BESS facilities, making them some of the largest facilities of their kind in the region. The BESS project is an important part of the UAE Energy Strategy 2050 and UAE Net-Zero by 2050 initiatives. The BESS project is being procured separately to EWEC's 1,500 MW photovoltaic (PV) Al-Ajban solar IPP (PV3) project, which currently under tender. Both projects show the UAE's continued commitment towards solar and renewable energies amid a rising global interest in BESS technology.
BESS facilities are designed to collect and store energy that is generated from the grid or a power plant and then discharge that energy into the grid or provide electricity at other times when needed. They are typically made of lithium-ion components (although sodium-based components have also been used, among other technologies). This has until recently been an impediment on the uptake of BESS projects given the relatively high price of lithium-ion components.
However, the decreasing prices of lithium-ion components in recent years; the increased bankability and competitiveness of solar energy projects; and a desire for offtakers to implement energy diversification policies has led to greater market attention on BESS systems.
Interest has increased given the steady pace of development of renewable energy projects in the MENA region. The UAE itself has prioritised becoming net-zero by 2050. The UAE is focusing on renewable energy production, for example in its solar PV IPPs, across the Emirates. BESS projects have the potential to tie neatly into solar energy projects. For example, BESS projects can help to conserve energy generated during the day which can be used during 'down periods' at night.
However, this technology is not without its challenges. One of the persistent problems with BESS as an energy storage solution has been the issue of energy leakage, which reduces end yield. This has reduced to widespread adoption of the BESS technology systems globally.
Positively, advances have been made in this regard. According to the Energy Storage Inspection 2022 report by the University of Applied Sciences, HTW Berlin, the number of storage systems that were efficiency class "A" had increased from two (2) in 2020 to six (6) in 2022. Whilst issues remain, particularly in scalability (the larger the facilities, the larger the loss), an increasing focus on improving efficiencies and an increasing commitment to large-scale projects may overcome remaining resistance in adopting BESS technology.
Lenders and other stakeholders will be watching developments in the BESS space very closely. It will be interesting to see the integration of BESS technology in limited recourse project finance structures across the region. Lenders are typically cautious around the introduction of new technologies in project financings. However, as more projects come to market and are successfully commissioned this will likely build a more solid track record, giving market participants greater confidence.
If you would like further information about BESS technology and its ongoing and growing impact on the energy sector, or need assistance with procurement, development, operation, and legislative changes in the energy sector across Abu Dhabi, the United Arab Emirates, and the wider region, please do not hesitate to contact Shaun Hardiman.
