At $73/kWh, Saudi Arabia's Battery Storage Bids Reset Expectations

Saudi Electricity Company (SEC) has secured two massive battery energy storage systems totaling 4.9 GWh at a cost of just USD 73-75 per kilowatt-hour (kWh) installed, marking a potential turning point for energy storage economics outside China. Energy storage costs have been on the sort of slide that even solar did not experience in its steep drop by over 90% from 2010 to 2020. Battery costs have dropped over 50% in just the past 12 months , with even steeper falls in China, the dominant BESS supplier.  

The Saudi contracts, awarded to Chinese manufacturer HiTHIUM and Saudi EPC contractor Alfanar Projects, comprise two 500MW/4-hour systems located in Tabuk and Hail provinces in northern Saudi Arabia. 

Each project features 2.45 GWh of installed capacity, incorporating a 5-year degradation overbuild to maintain 4-hour duration throughout the system's operational life.

The energy storage projects have a total capacity of 4.9 GWh across two sites, located in Tabuk and Hail. The contract values for equipment supply are approximately USD 179 million for the Tabuk site and USD 183 million for the Hail site. 

Additionally, the engineering, procurement, and construction (EPC) costs are estimated at USD 116 million and USD 118 million respectively for these locations. 

The projects utilize advanced technology by HiTHIUM, specifically their 1175Ah large-format lithium iron phosphate (LFP) cells, housed within 6.25 MWh Desert Eagle containerized battery energy storage systems designed for extreme environments. These systems are engineered for high durability and stability, particularly suited for harsh climate conditions. Commissioning of both projects is expected to be completed by 2026.

Why is it Significant?

The new prices make it possible to target the increasing challenges being faced by solar developers. Supply during non-solar hours, and perhaps more importanly, avoiding curtailment or negative prices during solar hours. From Australia to Rajasthan to the US and Europe, curtailment of renewable energy, especially wind and solar is assuming worrying proportions.

A faster build out of energy storage capabilities will go a long way in capping this practice as well as building more resilient and greener grids. Keep in mind that the other big challenge, transmission and grid capacity, is also impacted positively by the use of energy storage. At these costs seen in Saudi Arabia, solar, or solar and wind plus storage is no longer a competitor to other options like thermal or gas. It is by any stretch a lower cost option, with or without subsidies.  

However, notable regional disparities still exist. In China, the average price stands at USD 101/kWh, with some systems achieving prices as low as USD 65/kWh for four-hour duration storage. In contrast, the United States has an average price of USD 236/kWh, while Europe faces even higher battery storage cost at around USD 275 per kWh. 

The Saudi battery energy storage projects, priced between USD 73/kWh and USD 75/kWh, closely approach the lower costs seen in China. This suggests that advancements in manufacturing technology and increasing economies of scale are beginning to diminish the traditional regional cost differences in energy storage systems.

Chinese manufacturers are also, in their own way sending a message to potential competitors in other regions on the benchmarks they will need to match, to compete effectively outside their own (protected) markets. 

A Drop Long In Coming

The pricing breakthrough occurs amid a global battery cost decline driven by manufacturing overcapacity and falling material costs. Battery pack prices dropped 20 percent in 2024 to USD 115/kWh, the largest annual reduction since 2017. This trend is accelerating energy storage adoption, with 69 GW of battery capacity installed globally in 2024, nearly doubling the previous year's total.

Strategic Context

The projects advance Saudi Arabia's Vision 2030 goals, supporting the kingdom's target of generating 50 percent of electricity from renewable sources by 2030. The systems will provide essential grid services including load shifting, frequency regulation, voltage support, and black-start capabilities.

This deployment follows Saudi Arabia's broader energy storage procurement program, which includes 12.5 GWh of contracts awarded to BYD and 7.8GWh to Sungrow, positioning the kingdom as a major global battery storage market.

The combination of record-low pricing and advanced technology deployment signals that the energy storage industry may be entering a new phase where geography no longer determines competitiveness, potentially accelerating the global transition to renewable energy systems.