Is MENA The Next Hot Market for Energy Storage? Florian Mayr, Partner September 27, 2017
Drastic market growth expected for energy storage – increasingly appreciated by the financing world. Global stationary battery energy storage installations [GWh] 50 45 Navigant “Energy storage: An underappreciated 40 disruptor” (Feb 8, 2017) 35 30 30-fold increase! Apricum 1 25 20 “Energy storage will grow exponentially” 15 (Feb 9, 2017) BNEF 10 5 0 “Significant growth expected in energy 2015 2017 2019 2021 2023 2025 storage deployments in emerging markets” (Jan 09, 2017) 1) In cooperation with Cairn ERA 2
Apricum – The Cleantech Advisory. Apricum at a glance Business Founded in 2008, over 200 successful transaction advisory and strategy consulting projects Industry focus Cleantech. Strong focus on solar, wind, water, energy storage and digital energy Team >40 cleantech experts with decades of industry experience Clients Companies, investors and public institutions Services Transaction advisory Strategy consulting Locations HQ in Berlin, Germany Branch offices: Abu Dhabi and Dubai Representative offices: Argentina, Brazil, Mexico, USA, UK, The Netherlands, Turkey, Saudi Arabia, India, China, Thailand, Indonesia, Philippines, South Korea, Japan 3
Apricum has been active in MENA for several years. Globally, increasing projects in the energy storage space. References from the MENA region (examples): References from other global players / energy storage companies: …and many more 4
In a given country, there are three principal drivers for future growth of the energy storage market. Drivers of energy storage market 3. Competitiveness on… 2 1. Demand for… 1 • …CAPEX a • increased flexibility in the • …lifetime costs power system • …"soft factors" • replacements/expansion b of grid and generation Market for infrastructure energy storage 2. Framework in place to… • optimization of 3 c (combined) sources of • …allow for bankable power supply energy storage projects • adequate quality and • …remove barriers for d reliability of power storage to participate in supply markets Source: Apricum analysis 5
Demand is addressed by specific energy storage use cases, applied across all parts of the power system. Structured overview energy storage use cases Supply Demand Demand Supply Supply shaving (Grid congestion Demand shifting (ToU optimi- Supply shifting (RE self relief) zation, demand response) consumption optimization) Demand shaving (demand Supply shaving (fossil gen. Demand shaving charge reduction, T&D deferral) firming) (T&D deferral) Quality/reliability – BTM Ancillary services (all) Quality/reliability (backup, UPS) (frequency/voltage control, - IFTM (microgrid Ancillary services – grid stability spinning res., black start) islanding) (frequency/voltage control) Diesel Ancillary services – genset grid stability (frequency/ voltage control) Fossil Renewable energy Self power plant (RE) park generation Ancillary services – generation integration (ramp control, RE smoothing, black start, spinning res.) Supply shifting (RE time shift, energy arbitrage) End customers (industry, commercial, Supply shaving (RE firming, fossil gen. firming) residential, public) Central Distributed 6
Demand drivers – and potential applications for storage – depend on the individual challenges in a specific region. Challenges in different global regions and resulting use cases (examples) • Examples of challenges: • Examples of challenges: • Examples of challenges: • Aging infrastructure • Decreasing FiT • Electrification of rural areas • Time-of-use pricing, • High penetration of • Insufficient infrastructure demand charges intermittent renewables • Expensive/inefficient diesel • Natural disasters • Loss of inertia based generation • Typical use cases for ES 1 : • Typical use cases for ES 1 : • Typical use cases for ES 1 : • Time-of-use optimization • RE self consumption opt. • T&D deferral/avoidance • Demand charge reduction • Frequency control • Grid congestion relief • Microgrid islanding • Backup/UPS Source: Apricum analysis; 1) Energy storage 7
What’s the situation for energy storage in MENA? 8
1 Demand In MENA, vast renewable energy expansion will be the key driver for energy storage… Key PV projects: MENA solar PV annual demand [GW] • UAE DEWA III (800 MW) Total (2018–2021) 6,4 • UAE ADWEA Sweihan (1.2 GW) = 18.6 GW 5,1 4,5 • Egypt Ben Ban FiT (~1.5 GW 1 ) 2,7 • KSA REPDO tenders (~2 GW) 0,9 0,9 • Jordan R2–3 and priv. projects (~1.3 GW) • Iran FiT (~1.5 GW) 2016 2017 2018 2019 2020 2021 • Algeria new solar tenders (1.35 GW) Key wind projects: MENA wind annual demand [GW] 2,7 • Egypt FiT & bilateral projects (~2 GW 1 ) Total (2018–2021) = 7.4 GW 2,0 • Morocco Sahara wind park & other bilateral projects (~2 GW) 1,4 1,2 • Iran FiT (~800 MW) 0,6 0,1 2016 2017 2018 2019 2020 2021 Source: Apricum PV and Wind market models Q3/2017; 1) Approximately ~1.5 GW have secured DFI financing to date 9
1 Demand …leading to storage use cases related to the integration of renewable energy, both on the supply and demand side. Overview of use cases that will become most relevant in the MENA region short term Short-term storage up Mid-term storage Long-term storage up to 1–2 hours up to 5–6 hours to a few minutes 06:00 10:00 14:00 18:00 06:00 10:00 14:00 18:00 06:00 10:00 14:00 18:00 22:00 Ancillary services – Supply shifting Supply shaving generation integration • RE time shift • RE firming • Ramp-control • Grid congestion relief • RE smoothing Supply shifting • RE self-consumption optimization Source: Apricum analysis 10
1 Demand Existing projects are situated both behind- and in front of the meter, although centralized applications will dominate. Examples for MENA energy storage installations and underlying use cases • ADWEA BESS, UAE • Rated power/status: 108 MW • Use case: Ramp-control, RE/fossil generation firming In front of the meter • Afourer Pumped Storage Scheme, Morocco • Rated power/status: 465 MW • Use case: RE time shift • Masdar rural electrification project, Morocco • Rated power/status: ~5 MW (17,610 batteries) • Use case: Renewables self consumption optimization Behind the meter • Dukhan Oil Field, Qatar • Rated power/status: 2 MW • Use case: RE smoothing, backup Source: Apricum analysis 11
1 Demand Next to integrating renewable energy, power quality and reliability can further drive energy storage demand. Examples of blackouts in the MENA region UAE Kuwait (Dubai) • Apr 2017: Cable failure at local substation • Feb 2015: Technical failure led to sudden during planned maintenance disconnection of 2 GW generation capacity • Dubai Mall, the world’s largest shopping • Large parts of Kuwait without power for center, without power for 90 min several hours • Shops and restaurants had to shut down and • Traffic jams due to traffic signal blackouts, no response included police and security lights in hospitals and at the airport, etc. personnel as well as a mobile hospital Black-outs are considered very embarrassing in the energy exporting countries of the MENA region, resulting in a strong interest for solutions increasing quality and reliability of power supply Source: Press research 12
1 Demand Increasing number of energy storage installations already in different stages of implementation. Energy storage installations announced, contracted or operational, as of September 2017 54 MW 815 MW 2.25 MW 161 MW 30 MW <1 MW 5 MW 250 MW 0.1 MW 108 MW Energy storage technologies Plus an undisclosed number of 1 MW Mechanical Thermal (Electro)-chemical storage pilots announced by DEWA, (Pumped hydro) 1 GW announced by 2030 Source: DoE, Apricum analysis 13
2 Competitiveness Increasing cost competitiveness of energy storage will further drive demand in the region. Forecast for lithium-ion battery system prices 1 for large-scale stationary storage applications [USD/kWh] • Significant energy storage cost -51% 368 decreases expected due to technological improvements 305 and economies of scale 263 • Renewable energy costs have 231 already reached levels as low 202 as 2.9 USD-cents per kWh • Energy storage will become an increasingly applied solution to boost penetration of renewable energy at prices still competitive to alternatives, e.g., fossil fuels or grid expansion 2017 2019 2021 2023 2025 Source: Apricum BESS cost model Q1/2017; 1) On DC level 14
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