Battery storage is becoming critical to the Middle East’s energy transition, thus bridging the gap between abundant but intermittent solar and wind generation and sharply rising demand, according to a report by S&P Global Ratings.

In its latest report, titled “GCC Energy Transition: Utility-Scale Batteries Are The Next Big Move”, the top ratings agency said said the GCC countries are hosting some of the world’s largest battery tenders, with Saudi Arabia and the UAE spearheading giga-scale deployments. The kingdom is targeting 48 gigawatt hours of capacity by 2030. 

Saudi Arabia is executing projects rapidly, having commissioned or contracted several in the past year alone. At the same time, the UAE is advancing one of the world’s largest solar-plus-storage projects, it stated. 

The unprecedented scale and speed of these projects underscore how the GCC region has shifted from pilot schemes to large-scale deployment in just a few years, it added.

S&P Global Ratings credit analyst Sofia Bensaid pointed out that the GCC had become one of the most dynamic battery storage markets globally.

"Declining battery costs and a strong policy push are strengthening the investment case for utility-scale battery storage in the region," she stated.

Bensaid said battery storage projects in the GCC were typically financed through nonrecourse project finance structures, mirroring the region’s approach to utility-scale infrastructure. 

Under this model, lenders rely primarily on the project’s own cash flows and assets for repayment, rather than on the financial strength of the project sponsors.

The robustness of these cash flows is underpinned by the region’s established single-buyer framework, where state-backed entities act as long-term offtakers under availability-based contracts. 

These arrangements provide predictable, contracted revenues that form the backbone of the project’s financial model and help mitigate exposure to merchant or volume risk, said the statement.

"We expect project finance to remain the dominant funding model for battery storage projects in the GCC region," remarked Bensaid. 

"The credit quality of these projects hinges on remuneration schemes that secure stable cash flows and investors' growing confidence in the technology," he added.-TradeArabia News Service