Supercharging the new energy order [part 1]

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This year the world is abuzz with the word 'batteries', as Tesla releases its wall-mounted storage device for the home and the global race for the 'super battery' becomes ever more heated.

In MENA, the adoption of battery technology will bring about profound changes as petrostates become solar-nations and homeowners become their own energy suppliers.

This is the second of Wamda's three-part dive into the possibilties - and challenges - of the age of the battery. The first in this series is The future of energy, and click here for the second part of this article.

For decades the resource that swung the Middle East’s geopolitical pendulum was oil. But experts believe that within 10 years a new resource and an old technology will combine to overthrow that balance, and MENA’s startups have an opportunity to be at the forefront of that change.   

As yet however, only a handful of local entrepreneurs are beginning to realize how powerful a combination renewable energy and batteries might be.

The problem they must solve is that the vast majority of electricity generators in the region, from the biggest power stations to the farmer’s lonely generator on an isolated mountainside, rely largely on oil, gas or diesel. Solar and wind power tends to be expensive or not as useful during, say, night-time powercuts.

But lithium- or nickel-based batteries like those in mobile phones are much too expensive for the sizes required - larger batteries require much larger quantities of the pricey metals such as cobalt - and the standard lead-acid unit requires a lot of care and attention to coax between three and seven years of life from it (they "suck", according to US battery king Elon Musk). (Click here for your full Two Minute Guide to the Battery).

Your 2 Minute Guide to the Battery. (Image via Rachel Williamson)

This is where batteries come in: systems that can blend cutting-edge supercapacitors - microchips that can store energy for a few seconds and smooth out the tiny fluctuations in solar power by discharging a second of stored energy when needed - with batteries or fuel cells to regulate and store energy. It makes renewables worth the expense and allows fossil fuel generators deliver their loads more efficiently. Off-grid systems are one area where battery use in MENA is already rising.

Citigroup puts the market for the humble battery at $400 billion a year by 2030, worth more than today’s entire global pharmaceutical trade.  

Outside the Middle East, experts are watching the region’s state-sponsored swing towards renewable energy. The region’s major oil producers are among the world’s heaviest users - Saudi Arabia uses a quarter of all its oil production at home and that current behavior, according to a report by the think tank Chatham House, will make it a net oil importer by 2038. If they act on their rhetoric to install large-scale solar power, it’ll not only free those states from increasingly urgent fossil fuel dependencies, but that locally-used crude will again be destined solely for global markets.

It’s that dynamic which is leading those experts to speculate about how the introduction of cheap batteries could cement the old oil order: by making renewables more useable at home, the Middle East’s petrostates can use the excess to entrench their position as the world’s chief oil suppliers.

Steve LeVine. (Image via Steve LeVine)

Only last week Oman, an oil exporter, announced it would build the region’s largest solar power plant, specifically to take natural gas out of the domestic market and use it for enhanced oil recovery

“In the next five years there’s going to be… (a) visible change in Saudi Arabia specifically,” says Steve LeVine who is the author of The Powerhouse. “The countries in the world that include Saudi Arabia… that are the biggest burners of oil to create electricity, have incredible upside installing this much more efficient solar, in conjunction with energy storage.”

Entrepreneurs could be the early adopters

But that scenario is, as LeVine says, at least five years away if those states act on their ambitious plans. 

More immediate, is the potential for small-scale solutions to start changing the way citizens of MENA go about their daily lives, and it’s entrepreneurs who could - some say should - be leading that evolution.

Ahmed Huzayyin, founder of non-profit Cleantech Arabia, believes it’s startups that will introduce small-scale battery technology to the region. He says there’s a “big market gap” in MENA for people who can adapt systems designed for European or American markets to the region’s needs.  

Cleantech Arabia founder Ahmed Huzayyin.
(Image via Rise Up Summit)
 

“The applications for energy storage on that level (of small-scale, personal battery units)... is most beneficial in electrical vehicles or portable electronics or off-grid systems. So this is definitely not a government-based project. It should be brought up by local innovation,” he said.

“Because these systems need to be tuned and designed for certain applications, it’s not one size fits all - the battery and the supercapacitor are highly dependent on the (electricity) load - and wherever you have this need for fine-tuning, startups can compete because small companies can set solutions.”

LeVine expects individual entrepreneurs could be the likely candidates to bring batteries into MENA homes, for the same reason. He says once batteries become normal in homes, generators, with their ongoing fuel needs and maintenance costs, are likely to become obsolete.

“If a person in your neighbourhood installs a lithium-ion battery… then your neighbour will see that you’ve installed it, and then your other neighbour and pretty soon, very quickly, this will take off like wildfire,” he told Wamda.

This is because batteries can store energy during periods of the day when electricity is cheaper to use – or on at all – for use later, spreading demand for electricity more evenly over a day rather than everyone hitting the grid at 6pm. Hook it up to a solar panel and suddenly a house has two potential sources of energy, one of which is effectively free and both of which can be stored to use later.

 A backup renewable energy power system for the home. (Image via WholeSaleSolar)

Realism vs optimism

However, Logan Goldie Scott, head of Bloomberg New Energy Finance's energy storage analysis team, cautions against unbridled optimism over both the use and development of battery technology in the region.

He told Wamda he didn't expect to batteries to be particularly disruptive over the next five years in MENA, and although energy storage is playing an increasing role in off-grid systems, "the opportunity at the residential level seems very limited".

"Retail electricity prices are incredibly low, thus removing the need for rooftop PV and storage," he said. And, "if a market does emerge for energy storage, I imagine the technology will be imported rather than developed within the MENA region. None of the leading energy storage suppliers at the moment, nor the emerging technology companies, are based in the MENA region."

Globally, the real revolution in solar energy does indeed lie in rooftop panels and, crucially, the availability of residential energy storage, according to Seb Henbest in Bloomberg New Energy Finance's recently released New Energy Outlook 2015.

"(Globally) small-scale rooftop installations will reach socket parity in all major economies and provide a cheap substitute for diesel generation for those living outside the existing grid network in developing countries. By 2040, just under 13 percent of global generating capacity will be small-scale PV."

In the Middle East and Africa, “Despite the prevalence of subsidized retail power tariffs, as much as 40 percent of the new solar could be small-scale systems, used for example to build mini-grids to electrify communities sited away from the main grid," he said.

MENA entrepreneurs are already jumping into small-scale solar (as you can see with KarmSolarSolar PiezoClean and the deluge of startups in Egypt), so the time could be ripe for canny businessmen to develop a market and step into the energy storage breach.

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