Charging forward on energy storage

SABAH is making headlines with its ambitious plan to build South-East Asia’s largest battery energy storage system (BESS).

BESS utilises batteries to store energy generated from renewable sources like solar and wind, enabling later use to balance supply and demand on the grid or provide backup power.

Sabah, via Sabah Electricity Sdn Bhd (SESB), is set to develop the massive 100MW BESS project in the Lahad Datu district on the east coast.

The facility will be able to store 400MWh of energy, surpassing Singapore’s 285MWh giant container-like battery system, currently the largest in South-East Asia.

SESB is 80%-owned by Tenaga Nasional Bhd (TNB), with the Sabah state government holding the remaining 20%. Work on the project will begin this month and is slated to be completed by end-June 2025.

Despite the strong demand for the system, the cost is prohibitively expensive with installation averaging around US$270 per kW, according to BMI Research.

The engineering, procurement and construction segment of the Lahad Datu project alone is estimated to cost RM645mil. The final installed capacity will be 517MWh to meet the client's long-term needs.

This portion of the job was awarded to MSR Green Energy Sdn Bhd, an associate company of Seal Inc Bhd.

So, what are the financial returns to SESB and how is it going to fund this project?

Is it bankable?

Over in Peninsular Malaysia, TNB is set to spearhead another utility-scale battery storage project, which will also have an energy storage capacity of 400MWh.

According to news reports, the project was initially scheduled to begin work in the first quarter of 2024. It is expected to commence in the near future as part of TNB’s long-term plan to future-proof the power grid as the country transitions towards greener energy sources.

There is growing recognition of BESS as a critical component of modern energy infrastructure. For example, subsequent to launching its BESS project on Jurong Island, land-starved Singapore had gone on to pilot a floating energy storage facility.

But the typical energy storage systems are on land and Sabah has ample of that, which presents several advantages for its BESS project.

In the absence of the initiative, Sabah would have to continue depending on costly diesel-fuelled power generation, especially on the east coast side. Notably, diesel remains subsidised in Sabah and Sarawak, with the federal government shouldering the subsidy bill.

Furthermore, blackouts and power rationing are common in Sabah due to insufficient generation capacity and growing energy demand.

BESS presents a viable solution as highlighted, among other initiatives, in the Sabah Energy Roadmap and Master Plan 2040 (SE-RAMP 2040).

Presently, over 86% of Sabah’s generation relies on natural gas, which is highly concentrated on the west coast. With production of natural gas projected to decline in the long-term, the state needs to explore alternative energy sources.

The SE-RAMP 2040 noted the challenges of supplying gas to the east coast via pipelines due to the state’s mountainous terrain.

Meanwhile, Sabah’s energy reserve margin currently sits below 20%. For context, a reserve margin of 30% is considered “comfortable”.

Ironically, despite its vast renewable energy (RE) potential, Sabah has struggled to develop the sector due to pricing and complex infrastructural barriers.

Observers say this is because tariff rates are heavily subsidised, posing challenges in developing affordable generation sources which are crucial for establishing reasonable tariff.

In contrast, the rollout of BESS has achieved success in many countries like the United States, Japan, China and Australia, which leads the global market for BESS with 25 big battery projects connected to its grid.

One of the success stories Down Under is a project undertaken by Elon Musk’s Tesla Inc a few years ago.

The facility substantially reduced network costs in South Australia, with the savings being passed on to both businesses and households.

Asean has set ambitious targets of 23% RE in its total primary energy supply and 35% in its installed power capacity by 2025. This means massive energy storage is required to achieve the goals.

Malaysia needs to step up its efforts in developing energy storage solutions, as other Asean countries are also making BESS inroads, albeit at a slower pace.

Strengthening these initiatives is essential for enhancing energy security and supporting the transition to RE in the region.