Since last week, sunlight power release and Saudi Arabia ALGIHAZ “7.8GWh! The world's largest energy storage project signed” news screen the entire new energy industry.
In addition to the debut of high-performance electric core supporting the Sunny Power PowerTitan2.0 energy storage system, is considered an indirect entry into Saudi Arabia in the new aviation, July 16 the same day, there are Envision Energy, JinkoSolar, TCL Central, Hainan Mining and many other new energy companies released news to enter Saudi Arabia.
Looking back, in June this year, Sineng Electric successfully supplied 1.016 GW of high-efficiency centralized inverter boost integrated machines to the AlKahfah solar power station project in Saudi Arabia. In May, Linyang Energy signed a supply contract for smart meters with Saudi ECC, with a total contract value of 210 million yuan. It is evident that under the strong push of Saudi Arabia's "Vision 2030," venturing into Saudi Arabia has become a crucial step for Chinese new energy companies to escape domestic competition and secure a promising future.
PV Giants' Pivot to the Middle East Out of Necessity
For photovoltaic giants, shifting production capacity to the Middle East is an act of necessity. On June 7, 2024, the US International Trade Commission passed preliminary rulings on the anti-dumping and countervailing duty investigations of photovoltaic products from Cambodia, Malaysia, Thailand, and Vietnam. This signifies the end of the duty-free policy for some photovoltaic products imported from these four Southeast Asian countries, which began in June 2022, as of June 6 this year. Subsequently, Chinese photovoltaic manufacturers exporting to the US from Southeast Asia will face tariffs.
For Chinese photovoltaic companies, these four Southeast Asian countries have always been important bases for exporting products to the US. After intensive changes in related trade policies in the first half of this year, many leading photovoltaic manufacturers with factories in Southeast Asia reported shutdowns. With the increasing possibility of Trump, who represents the interests of fossil energy companies, returning to the White House, the expectation of increased tariffs on Chinese new energy companies in the US market is also rising. Seeking larger and safer markets outside the US has become urgent for Chinese new energy companies heavily reliant on US market profits.
In this context, shifting production capacity from Southeast Asia to other regions has become an inevitable choice for Chinese photovoltaic companies. At this time, strategic cooperation between China and Middle Eastern countries is becoming increasingly close, especially with Saudi Arabia and the UAE, which are vigorously developing renewable energy. Under the framework of the "Belt and Road" initiative, cooperation in infrastructure construction and energy fields is deepening. Friendly policies combined with market potential provide Chinese new energy companies with opportunities to transfer production capacity and reshape their overseas industrial chains.
Yazeed Al-Humied, Vice President of Saudi Arabia's Public Investment Fund and Head of Investments in the Middle East and North Africa, stated that the new agreements (referring to the cooperation agreements signed with JinkoSolar, Envision Energy, and TCL Zhonghuan on July 16) are part of the Public Investment Fund's efforts to localize advanced technology in the renewable energy field and fulfill the commitment to increase the share of local supply chains. According to the National Renewable Energy Program of the Saudi Ministry of Energy, 75% of the components in Saudi renewable energy projects will be locally produced by 2030.
Meeting Long-term Development Needs is Key to Rooting in the Middle Eastern Market
Compared to photovoltaic companies being forced to pivot to the Middle East, Chinese lithium battery and energy storage companies are more composed.
In the first half of 2024, nearly 30 lithium battery companies shipped about 110 GWh of energy storage products, a year-on-year increase of 20%. In terms of battery orders, North American integrator Powin became the strongest buyer, reaching battery procurement agreements of 15 GWh, 12 GWh, and 5 GWh with EVE Energy, REPT, and Kester Energy respectively, mainly involving large 300 Ah+ energy storage cells. In terms of system orders, Sungrow, BYD, Canadian Solar, Envision Energy, and Kolt Electronics secured large overseas orders of 1,870 MWh, 1,100 MWh, 705 MWh, 624 MWh, and 480 MWh respectively.
From a regional perspective, the export share increased significantly, from about 40% for the whole of 2023 to 48% in the first half of this year. Nearly half of the batteries were exported overseas, with the US being the largest export destination. Grid-side energy storage in the US grew rapidly, and large-scale energy storage shipments in the European market surpassed residential storage, becoming the main force. The demand for renewable electricity storage is expected to grow rapidly.
Industry insiders believe that starting from 2026, the US will impose a 25% retaliatory tariff on Chinese-made energy storage batteries. This will have some impact on the low-cost advantage of Chinese energy storage batteries but is not a decisive factor. "Currently, the price of Chinese energy storage systems is about $120 per kWh, with a maximum of $125. Even with a 25% increase, it will be around $150 per kWh. However, the cost of American energy storage companies is as high as $300 per kWh, twice the difference. But if Trump is elected president and is determined to support American domestic companies, a 25% tariff alone won't stop Chinese energy storage companies. More restrictive measures are expected, making 2026 a critical year. It will become very difficult for Chinese energy storage companies to export to Europe and the US."
Therefore, this year, Chinese lithium battery companies are investing abroad, mainly in Europe and Southeast Asia, while also seeking opportunities in the Middle Eastern market. However, investment risks in the Middle East should not be ignored. Industry experts point out that the Middle East is very different from Europe, the US, Japan, Korea, and Southeast Asia. Standards are high, profits are thin, and while rules appear to align with international norms, many "jungle rules" are hidden.
First, Saudi Arabia provides development opportunities more from the perspective of national strategic transformation. It aims to introduce advanced technology, improve the industrial chain, and upgrade production capacity to drive the development of local supporting industries and provide quality employment opportunities. Saudi Arabia will be more willing to cooperate on matters benefiting long-term development. Therefore, to find development opportunities in Saudi Arabia, one needs to think from the local people's perspective and meet their demands.
It is worth noting that in recent years, Saudi capital has started to bypass intermediaries and directly seek business opportunities and quality enterprises and assets with real money. For example, setting up offices in China is an important step for them.
Saudi capital no longer invests through third-party funds but establishes offices in China to directly find investment target companies, aiming to better serve Saudi national strategies. They focus more on whether the invested companies can help Saudi industries. For Chinese energy storage companies, correctly understanding their needs is a prerequisite for close cooperation with Saudi Arabia and other Middle Eastern countries.
In addition, Saudi Arabia has a "Saudization" requirement for foreign companies, which mandates hiring a certain percentage of Saudis. This system was introduced by the Saudi Ministry of Labor to address the large-scale recruitment of foreign workers (especially Indians) by foreign companies and the high unemployment rate in Saudi Arabia.
Therefore, in the process of exploring the Middle Eastern market, Chinese energy storage companies need to consider local regulations and environmental assessment risks, the support capacity of raw materials and supply chains, trade barriers, local investment environment and incentives, local talent support capacity, geopolitical and logistical risks, product after-sales service, and maintenance. The support capacity of overseas supply chains and the cultivation capacity of new energy talent are weaker than domestically, which is a crucial point for domestic companies going global.
Source：，ESCN，abridged