Only the best for BESS

THE country’s first battery energy storage system (BESS) – which will allow for storage of renewable energy like solar – is about to kick off, and some big players are expected to be in the fray.

The bidding process is likely to attract interest largely from bigger energy-related companies, including foreign players.

A week ago, the Energy Transition and Water Transformation Ministry (Petra) launched the bidding process for the project, which will offer a total capacity of 400 megawatts (MW) and 1,600 megawatt-hours (MWh).

The project – broken into four separate projects with a capacity of 100MW/400MWh each – essentially entails the design, installation and operation of BESS at various sites in the peninsula.

Each project must achieve commercial operations by 2026, Petra said in a statement.

The bidding process will be conducted in two stages starting with a Request for Qualification (RFQ) where interested bidders may submit their qualifications to the Energy Commission (EC).

Qualified bidders will then be invited to submit their proposals for the BESS project via a Request for Proposal (RFP).

BESS is a system that uses batteries to store energy from renewable energy (RE) sources for later use, often to balance supply and demand on the grid or to provide backup power.

However, such a project requires substantial upfront investment and active management throughout its life span.

This may deter small players into the fray, says Nirinder Singh Johl, founder and chief executive officer of Malaysian energy trading platform Asia CarbonX Change.

“It’s a business mainly for players with deep pockets, and we may see locals partnering with China players, who are big in the game.”

Under the BESS bid, it is understood that a local company may submit not more than two RFQs –as a sole participant and a member of a consortium.

A foreign company, meanwhile, may only participate in one RFQ as a member of a consortium with a local company.

Where technicals go, bidders must demonstrate their qualifications and ability to meet technical, operational and regulatory requirements.

The bidders will have to show they have raised at least RM500mil in total financing (debt and equity) for one infrastructure project in the last five years.

Equity contribution members in a consortium are expected to be proportional to their proposed equity stake, sources say.

Globally, Nirinder says battery storage costs range between US$300 and US$400 per kilowatt-hour (kWh).

This should take the cost for each 100MW/400MWh system to about US$120mil to US$160mil.

One local benchmark is the recently-awarded 100MW/400MWh BESS project in Sabah – it was set at RM645mil.

The project was awarded to an associate of Seal Inc Bhd in September, which subsequently roped in China’s Sungrow Power Supply Co Ltd to supply the BESS technology.

The good news is that battery storage has been seeing a continued decline in prices.

In view of this, Solarvest Holdings Bhd Group CEO Davis Chong estimates the feasible topline pricing to be around RM600mil for similar projects.

“This range should provide the potential for a decent internal rate of return (IRR), depending on other factors like financing costs, project efficiency and revenue streams,” Chong tells StarBiz 7.

Besides the one in Sabah, Tenaga Nasional Bhd (TNB) is also undertaking a similar BESS project.

But both are likely to focus on immediate grid support and improving reliability in specific regions.

The Petra-initiated BESS programme, however, is the first public battery storage project in Malaysia.

With the high barrier of entry for BESS, the interest may not be as robust as that of the fifth cycle of the large-scale solar programme five (LSS5), which is expected to be announced by the government in the first quarter of 2025 (1Q25).

One challenge is picking the optimum site, which could entail land acquisition.

Another is the reliability of their solution – how the system charges and discharges from the grid.

The government has set an ambitious target to achieve 70% RE mix by 2050, which will necessitate a quadrupling in annual RE installation over the next two-and-a-half decades.Chong says that with solar energy grid contributions projected to approach 20%, grid stability is a concern.

The addition of 800MW from the Corporate Green Power Programme (CGPP) and at least two gigawatt (GW) from LSS5 will increase load variability on the grid.

Based on the last CGPP guidelines, analysts note that the EC strongly encourages solar plants to include a BESS that can support at least one hour of full export capacity.

“BESS will be a proactive step to enhance grid stability and support RE growth. We note that the 2025 budget does not include specific incentives or tax exemptions for BESS.”

Solarvest, one of the country’s largest solar engineering, procurement, construction and commissioning (EPCC) players and an RE provider, sees strong potential in BESS as part of its strategic five-year roadmap.

“We are actively exploring asset investment opportunities and EPCC roles in BESS projects.”

BESS could prove to be a boon if a power crunch arises from the data centre (DC) boom. UOBKH Research estimates that an additional 15GW of power supply (or half of the current capacity) is required beyond 2030 to cater for this.

There are a handful of listed players in the BESS space apart from Seal Inc and TNB, which also operates the national grid.

Genetec Technology Bhd is in a joint-venture with Citaglobal Bhd, which produces locally-assembled BESS equipment.

In 2023, it unveiled a working prototype of one MW capacity.

Citaglobal’s executive director of the energy division, Aimi Aizal Nasharuddin, says the BESS bidding scheme, while bearing similarities to the LSS programme, could introduce distinct revenue models in integrating BESS into the national grid.

“Unlike the single revenue stream in the LSS programme, energy storage offers multiple revenue opportunities, making it a far more dynamic and attractive proposition for the industry.

“The key challenge for the government lies in balancing this with the broader energy tariff structure to ensure that tariffs remain competitive and affordable.”

“If tariffs become less competitive, Malaysia could risk losing its edge in attracting investments such as DCs which often rely on low-cost and reliable energy,” Aimi adds.

On the company’s home-grown solution MYBESS, he says it is designed to reduce dependency on imported energy storage technology, which could be subjected to supply chain disruptions.

Elsewhere, QL Resources Bhd’s subsidiary BM Greentech Bhd recently acquired Plus Xnergy Holding Sdn Bhd and is in partnership with power producer Leader Energy Group Bhd to install a 1.45MWh capacity BESS in the latter’s large-scale solar farm in Bukit Selambau, Kedah.

Early last year, land-starved Singapore launched its 200MW/285MWh BESS on Jurong Island – currently South-East Asia’s largest and developed by Temasek-backed Sembcorp Industries Ltd.

Malaysia now stands to be also an early adopter of BESS in the Asean region.