The Gulf’s Energy Transition-2025 Review: Part. 1

The Sudden Rise of Battery Energy Storage Systems In the Gulf, a region long defined by oil prosperity, a quieter but no less consequential transformation is underway. Until recently, it was somewhat difficult to imagine a flourishing post-oil Gulf economy. Today, however, national strategies, significant infrastructure investments, and proactive policy frameworks are converging to support a decisive transformation in energy and industry.

Recent high-profile projects in green hydrogen, large-scale solar installations, and electric vehicles manufacturing have heightened the focus on energy storage and battery mineral supply chains. As part of its Vision 2030 strategy and commitment to net-zero emissions by 2060, Saudi Arabia set a target to generate 50% of its electricity capacity from renewable sources by 2030.

To achieve this goal and manage the expected surge in intermittent energy generation from solar and wind, the Kingdom has prioritized maintaining a stable and reliable power grid. This has catalysed a dramatic expansion of utility-scale battery energy storage systems (BESS). In early 2024, Saudi Arabia had virtually no operational large-scale BESS capacity. By June 2025, the country will have connected over 11.7 GWh of storage to the grid with a total of 25.5 GWh currently under contract. According to the Ministry of Energy, the Kingdom is targeting 48 GWh by 2030, ranking it third globally in announced energy storage capacity, behind only China and the United States.

Saudi Arabia's battery deployment is unmatched by any oil-dominated economy. This month, three new projects in Khamis, Najran, and Jizan added 7.8 GWh. For contrast, this resulted in surpassing the total storage capacity of countries like the UK. These projects build on earlier milestones, such as the 2.6 GWh Bisha system delivered by BYD and brought online in February 2025 after just 11 months of construction; it remains the world's largest single-phase grid-connected battery energy storage system.

Another 12.5 GWh in capacity is on the way from BYD with installations planned across five additional sites. Moreover, distributed sites near Makkah, Qassim, and Hail will support grid spinning reserves and peak shaving, addressing any critical buffers as solar and wind capacity grows.

Meanwhile, developments at NEOM and Red Sea Global are also integrating battery storage at scale. NEOM has allocated several BESS projects to support its planned 100% renewable grid, while Red Sea Global is installing a 1 GWh off-grid battery plant to power its resort complex.

Furthermore, in an attempt to reduce its upstream carbon intensity, Aramco announced last month that, in partnership with China's Rongke Power, the company commissioned a megawatt-scale Iron-Vanadium (Fe/V) flow battery in Wa'ad Al-Shamal to store solar energy and power remote gas operations. This represents the world's first use of an iron-vanadium flow battery in gas field operations.

The flow battery is engineered for long life, minimal degradation, and stable performance across Saudi Arabia’s extreme desert temperatures without the need for thermal regulation. Aramco states that the system is already supporting multiple gas wells and offers a flexible, scalable solution for industrial decarbonization. “This is just one example of how Aramco is deploying advanced technologies to reduce emissions across its operations,” said Ali Al-Meshari, SVP of Technology Oversight.

Central to this rapid rise in energy storage is the Kingdom's utilization of Independent Storage Provider (ISP) auctions, launched by the Saudi Power Procurement Company (SPPC), as well as parallel tenders through Saudi Electricity Company. In November 2024, SPPC invited BESS project market participation for an initial 8 GWh in capacity under build-own-operate contracts backed by 15-year service agreements.

SPPC aims to procure up to 10 GW of BESS by 2030, signalling a long-term, financially viable market. As in solar and wind procurement, the use of centralized auctions and long-term contracts enhances bankability while promoting cost competition.

Considering that the primary BESS suppliers have been Chinese companies BYD, Sungrow, and Huwaei, it’s worth mentioning a relevant shift currently happening in China. Until recently, hard mandates required energy storage to be included alongside every new renewable energy project. As of June 1, 2025, national policy no longer requires this co-location, with provinces allowed to determine their own implementation. This transition to more market-based grid connections elevates uncertainty for developers, making Saudi Arabia’s centrally coordinated, contract-backed approach increasingly appealing to suppliers and global investors.

On the other hand, Saudi neighbour, the UAE, is demonstrating similar ambitions. In January 2025, Abu Dhabi’s Masdar–EWEC partnership announced a monumental 19 GWh battery storage complex designed to deliver 5.2 GW DC solar power around the clock; it is expected to come online in 2027. Using CATL’s LFP systems, this project directly supports the UAE’s goal of 44% clean energy by 2050. Together, these investments fully indicate a regional strategic alignment between renewables and energy storage infrastructure.

Globally, BloombergNEF projects 94 GW / 247 GWh of new energy storage capacity in 2025, up 35% year-over-year, with a 15% annual growth rate expected through 2035.

Cost collapses are also driving Gulf adoption. Lithium-ion battery prices have dropped by approximately 90% since 2010. Installation costs of LFP systems currently stand at under $200/kWh in Saudi Arabia, which is significantly lower than those in the US and Europe, especially after accounting for elevated tariffs, resulting in 30%–70% premiums.

While lithium dominates global storage headlines, UK-based LiNa Energy is piloting an alternative: solid-state sodium–metal–chloride batteries. This week, the company shipped its first units to Saudi Arabia for pilot deployment, addressing the Kingdom's hot summer conditions, where conventional lithium-ion systems often struggle.

“Saudi Arabia is going to be an energy storage behemoth,” said CEO Will Tope, citing the country's immense solar potential and rising electricity demand, especially considering the anticipated wave of AI data centres. “It’s also really hot. And that's exactly the interest in high-temp sodium. And exactly why we’re here with our batteries.”

As energy storage scales, so does demand for critical materials, creating powerful incentives to secure and localise supply chains.

Part 2 of this series explores how the Gulf is investigating energy transition models that complement its geology and existing infrastructure. In particular, the extraction of lithium from oilfield brines and desalination waste streams.