Market drivers for distributed energy in the Gulf Cooperation Council

A new report released by research company Frost & Sullivan reveals factors driving the distributed energy market in the Gulf Council Cooperation.

The Distributed Energy Rejuvenating the Power Sector in the GCC through Innovation and Efficiency, 2021 report states that the market will record a double-digit growth at a compound annual growth of 25.4% between 2020 and 2021 with revenue increasing from $480 million to $602 million. This growth is anticipated within the Gulf Council Cooperation, the intergovernmental political and economic union of Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, and the United Arab Emirates.

Neeraj Sanjay Mense, Energy & Environment Industry Analyst at Frost & Sullivan, said: “As utility-scale and distributed renewable resources become a crucial aspect of the region’s decarbonization mandates, utilities will invest in grid modernisation solutions, digital platforms, software solutions, and systems associated with asset performance, modeling, and predictive analysis.

“Additionally, distributed solar PV will drive the market for distributed energy resources (DERs) as an increasingly wider customer base is expected to adopt rooftop solutions, buoyed by the regulatory mechanisms supporting such installations.”

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Factors including the continued decline in technology costs and resource availability are expected to encourage market growth. At the same time, an increase in the adoption of the prosumer business model will drive the region’s distributed energy market. Customers are expected to increasingly self-generate electricity through distributed renewable sources and sell excess electricity back to the grid.

Mense added, “Business models have evolved, and customers would prefer operation and output-based operating expenses (OPEX) contracts that include maintenance, performance guarantees, and availability, especially across residential, commercial, and industrial consumers. Further, behind-the-meter energy storage is set to become a game-changer for DERs in the region as it enhances the value proposition of the DERs and enables revenue stacking.”

In the energy generation segment, the market will be driven by the recovery in the diesel gensets market along with strong growth in rooftop solar PV and hybrid power systems, according to the report. The UAE and Saudi Arabia will lead the market for distributed energy, with Oman set to emerge as the fastest-growing market in the region.

The rise in prosumerism will present tremendous growth opportunities to all stakeholders, which include:

  • OEMs, System Integrators, and Service Providers: Project developers and installers should move up the value chain to offer complex energy solutions, such as solar storage or microgrid solutions based on DER aggregation, load management optimisation, digital services, and aftermarket services. This will translate into diversification of revenue streams.
  • Consumer to Prosumer: System integrators should leverage the end-user need for energy security, diversification, and cost optimization to provide packaged solar and battery storage solutions. Commercial & Industrial (C&I) companies should focus on hybrid systems with battery storage to improve system reliability and ensure optimal consumption of available renewable resources.
  • Market Entry into DER: Utilities should actively pursue DER and storage, sharing their costs with customers, so they can deploy assets that help manage peak demand and provide an additional revenue stream. They should also adopt new business models and forge new partnerships to diversify service offerings in an evolving electricity landscape.
  • Expanding Solution Offerings: Energy service companies (ESCOs) should focus on raising customer awareness about the types of contracts available for DER projects and acquiring distributed generation (DG) solutions either independently or through partnerships with installers.
  • Mergers & Acquisitions: OEMs should tap into this opportunity of technological evolution and acquire companies or make partnerships to release new products to meet the evolving needs.

The report is available for download.