[Column] BESS is not a "battery sales business" but a "designing the value of electricity" – Next point from Southeast Asia

✅ Roughly speaking

• 🔋 BESS (Battery Energy Storage System, Battery Storage System) is not just an installation or technology, but is considered a "business design" theme that includes system operations, electricity markets, PPAs, aggregation, finance, guarantees, and even recycling.
• ⚡ Demand for electricity is surging in Southeast Asia, and the IEA has concluded that flexibility resources, including transmission and distribution networks and battery storage, are essential to expanding renewable energy ( IEA "Southeast Asia Energy Outlook 2026" ).
• 💰 However, BESS is not a "profitable" facility. If we don't design which systems, who takes which risks, and which revenues are accumulated, we don't think we can see business viability.
• 🌏 It would be a mistake to lump them all together as the "ASEAN market." The electricity system and the stage of renewable energy implementation vary greatly from country to country, and Malaysia has begun to launch a public call for applications for BESS for the grid, "MyBeST" ( Suruhanjaya Tenaga (Malaysian Energy Commission) ).
• 🤝 We believe that opportunities for Japanese companies can extend beyond the sale of batteries and PCS to peripheral practices in EPC, O&M, control, finance, contract design, safety standards, recycling and aggregation.

Introduction

This time, we will explain BESS (Battery Energy Storage System, battery storage system) in Southeast Asia from the perspective of designing institutional, contract, and revenue models, rather than simply discussing market size.

The Southeast Asian renewable energy market has often been talked about in terms of solar, wind, PPA (Power Purchase Agreement), electricity liberalization, grid connection, and green electricity certificates.
BESS is a theme that connects all of that to the side.
While it is an electrical storage facility, in practice it can also be considered a regulating device for integrating renewable energy sources into the power system, and a device for reorganizing the roles of power generators, demanders, transmission and distribution operators, retailers, aggregators, financial institutions, manufacturers, and O&M operators.

What I consider most important about this topic is not the market size itself.
Rather, BESS is not a "technology theory" but a "design theory of institutional, contract, and revenue models."
This paper will organize the BESS in Southeast Asia from this perspective, focusing on the differences between countries, especially Malaysia, and on the administrative divisions of contract and financial practices.

Why BESS is important in Southeast Asia

First, let's review the assumptions for the entire region.

The IEA positions Southeast Asia as a major driver of global energy demand growth.
The 2026 Southeast Asia Energy Outlook states that Southeast Asia accounts for 9% of the world's population and 4% of GDP, while under current policy it will account for approximately 20% of the increase in global energy demand by 2035 ( IEA "Southeast Asia Energy Outlook 2026" Executive summary ).
The report explains that electricity demand is growing at about twice the rate of total energy, and that in the next decade alone, electricity demand will increase at a rate equivalent to Japan's current total electricity generation ( The report ).

At the same time, Southeast Asia also faces a structural weakness: its dependence on fossil fuel imports.
The IEA estimates that without structural changes, regional fuel imports could rise significantly from over US$80 billion in 2024 to around US$245 billion in 2035 ( The report ).
From this perspective, it is likely that expectations for energy reuse, such as solar and wind power, that can be developed domestically are rising.

However, solar and wind power are variable renewable energy sources, known as VRE (Variable Renewable Energy). Power generation varies depending on the weather and time of day.
As the volume of data deployed increases, problems arise in system operation, supply and demand adjustment, electricity pricing, PPA, output control, reserve capacity, and the design of ancillary services.
The IEA's "Integrating Solar and Wind in Southeast Asia" also notes that while Southeast Asia has great solar and wind potential, increasing adoption will create technical and regulatory challenges ( IEA "Integrating Solar and Wind in Southeast Asia" ).

This is where BESS comes in.
BESS absorbs excess re-energy and discharges it during the required time, adjusting the supply and demand balance.
It can be used for frequency control, short-term grid stabilization, and backup during power outages, and if placed on the demand side, it can also be related to peak cuts and improving self-consumption rates.
The ASEAN Centre for Energy's 8th ASEAN Energy Outlook also states that energy storage technologies, including BESS, will play a key role in supporting grid stabilization and the ASEAN Power Grid as ASEAN's power sector transitions to renewable energy, focusing on solar and wind power ( ASEAN Centre for Energy "8th ASEAN Energy Outlook" ).
In other words, BESS is becoming a prerequisite infrastructure for truly increasing renewable energy, rather than a supplementary facility that we consider after increasing renewable energy.

BESS is not a story about "putting down batteries" but about "moving the value of electricity."

It seems that understanding BESS requires a change in mindset first.

BESS is an electrical storage facility, but as a business, it's not just electrical storage.
It can also be said that it moves time value, coordination power, stable supply value, and backup value.
For example, if sunlight generates a large amount of electricity, charging it during the day when electricity prices are low, and discharging it in the evening when prices are high due to peak demand, you can monetize the price difference between different time periods.
When system operators need regulating power to maintain frequency or adjust supply and demand, they monetize response capacity, not power consumption itself, as a resource capable of responding quickly.
When placed in a consumer's factory or data center, the value lies in providing backup during power outages, suppressing peak demand, improving self-consumption rates, and optimizing electricity rates.

Thus, BESS's revenue is not a single entity.
A variety of sources are possible, including charging and discharging using price differences, ancillary services and supply and demand adjustment, capacity value and grid stabilization value, avoidance of output control, peak cuts on the demand side, backup in case of power outages, improvement of the supply quality of renewable PPA, diesel replacement on remote islands and mini-grids, and deferral of grid reinforcement.

The problem is that you can't monetize all of these at the same time.
In some countries, the ancillary services market is well-developed, while in others, the electricity market is vertically integrated, making it difficult for BESS to participate in the market alone.
When incorporating electricity into a renewable energy PPA, the contract must define environmental value, simultaneous and equal supply, supply guarantee, and the handling of electricity via batteries. Therefore, BESS's business will not be determined solely by battery prices, but only by looking at the system, market, contracts, electricity rates, grid connections, finance and guarantees combined.

Even if costs fall, business risks do not automatically disappear

The reason BESS is attracting attention is the decline in battery costs.
According to the IEA's Batteries and Secure Energy Transitions, battery storage in the power sector will be the fastest-growing commercialized energy technology in 2023, adding 42 GW of battery storage capacity worldwide.
Lithium-ion battery prices are also said to have fallen from US$1,400 per kWh in 2010 to less than US$140 per kWh in 2023 ( IEA "Batteries and Secure Energy Transitions" Executive summary ).

However, lower costs do not mean the elimination of business risks.
BESS has a large initial investment, reduced capacity and output due to battery degradation, revenue is dependent on market prices and systems, warranty conditions are prone to complexity, there are issues with fire, safety and insurance, the conditions for system connection vary from country to country, it is difficult to explain the revenue model to financial institutions, and removal after use There are risks such as remaining responsibility for recycling and disposal.

The IEA also points out that for batteries to play the necessary role, policy and regulatory frameworks must ensure that they are properly market-participating and rewarded for the services they provide to the power system ( The report ).
Even if battery prices fall, they cannot be monetized without a system, and even if there is a market, operators will incur unexpected losses if they misshare the risks in their contracts. Therefore, BESS believes that it should not be "we put in because it's cheaper," but rather "we should work backwards from which value we recover under which scheme and contract."

Not lumped together with "ASEAN market" – Country-specific preparation phase

When considering Southeast Asia BESS, the most dangerous thing is to lump it all together with the "ASEAN market."
Electricity systems, stages of economic development, renewable energy adoption, grid strength, the role of state-owned power companies, foreign investment regulations, PPA practices, island status, and industrial structures vary greatly from country to country.

The IEA's VRE Integrated Report organizes the need for different measures depending on each country's readiness and classifies Brunei, Cambodia, Laos and Myanmar as early stages, Indonesia, Malaysia, Thailand and Vietnam as intermediate stages, and the Philippines and Singapore as high readiness stages ( IEA "Integrating Solar and Wind in Southeast Asia" ).
This classification is also useful for viewing BESS. In early-stage countries, the context of mini-grids, island power supplies, and diesel alternatives is strong, while in intermediate-stage countries, the focus is on grid congestion, power control, and procurement and pricing systems. In highly preparatory countries, the integration of advanced grid operations such as market operations and grid forming is likely to become a point of contention.

Below, we will summarize the perspectives of the major countries, focusing on Malaysia, the country where this article is published.
Furthermore, because national systems change rapidly, it is necessary to individually review the latest electricity laws, procurement systems, grid connection regulations, PPA systems, and electricity tariff systems for actual cases.

Malaysia

Malaysia is a market where renewable energy procurement, green electricity for businesses, grid constraints, data center demand, and industrial policy are all intertwined.
As for the lineage BESS, the public call for submissions in Peninsular Malaysia, "MyBeST," will be an important reference point.
This is a framework covering a total capacity of 400MW/1,600MWh (four applications for 100MW/400MWh each), with public submissions expected to begin in November 2024 and operation scheduled to begin in 2027 ( Suruhanjaya Tenaga (Malaysian Energy Commission) ).

When looking at BESS in Malaysia, it is necessary to consider its relationship to grid-based BESS, consumer-side BESS, solar-powered BESS, stable supply for data centers and industrial parks, and corporate renewable energy procurement schemes such as the Corporate Green Power Programme and CRESS (Corporate Renewable Energy Supply Scheme) separately.
In Malaysia in particular, the issues of "demanders who want to buy renewable energy" and "how far along the line can we accept renewable energy" exist simultaneously.
BESS may fill the gap, but institutionally, it is likely that who owns the electricity and which electricity is assessed as having delivered it to which customers will be important.

Singapore

Singapore is a market with strong land constraints and limited domestic renewable energy potential, while also experiencing high levels of debate in terms of power system reliability, electricity imports, data centers, and low-carbon power procurement.
BESS is likely to be positioned more as a system stabilization, frequency control, peak response, and a coordinating force supporting electricity imports and solar power introduction than simply as a facility with integrated renewable energy.
For Japanese companies, this may be a country where opportunities for control, EMS (Energy Management System), system stabilization, data, finance, insurance, and standardization are more readily apparent than opportunities for equipment sales.

Philippines

The Philippines is an island nation with increasing electricity demand, a high need for grid stabilization, and a relatively large presence of private power generators, retail, and market systems.
BESS is likely to be considered not only in the context of energy efficiency, but also in the context of system stabilization, frequency control, peak response, and backup.
From the operator's perspective, it seems that the market needs to consider specifically which revenue sources to link BESS to, taking into account the creditworthiness of the electricity market, ancillary services, PPAs, grid connections, and offtakers (buyers of electricity).

Vietnam

Vietnam has been a country that has attracted attention for its rapid adoption of solar and wind power.
Rapid adoption simultaneously raises challenges such as grid congestion, power control, grid expansion, PPA systems, and contract terms with state-owned power companies.
BESS could be an important flexibility resource to support this volatility, but to be viable as a business, there must be a revenue-generating system for BESS alone, whether it must be incorporated into a renewable energy PPA, whether it must be self-consumed by the demanders and recovered through peak cuts, and whether the government must.. We need to consider whether or not we should rely on procurement from the power company.
Because electricity system reform, direct PPAs, and grid investments are interrelated, I feel that looking at them solely as "additional renewable energy facilities" is an easy way to remove the important issues of contracts, licenses, and grid connections.

Indonesia and Thailand

Indonesia is a market where electricity demand, island status, the role of the state-owned power company PLN, reliance on coal, and nickel-battery industry policies overlap.
The IEA's 2026 report also highlights the importance of industrial policy, including in countries like Indonesia, as Southeast Asia's energy transition is closely linked to supply chains for critical minerals and clean energy technologies ( IEA "Southeast Asia Energy Outlook 2026" ).
The issue is not only the connection of large grid-connected BESSs, but also to remote islands, remote areas, mining and industrial parks, data centers, and battery supply chains, and it is essential to organize buyers to determine whether they are procuring PLNs or using their own.

Thailand is a market where renewable energy adoption, the EV industry, data centers, industrial parks, and decarbonization demand from consumers overlap.
BESS comes in the context of combined renewable energy, peak cuts for consumers, optimizing electricity costs for factories and commercial facilities, EV charging infrastructure, and grid stabilization.
At the consumer side of BESS, it is important to consider how peak demand charges and time-of-day charges are reflected in the electricity pricing structure.
When incorporating it into a renewable energy PPA, it is likely necessary to distinguish whether what consumers really want is cheap electricity, renewable electricity, reduced risk of blackouts, or explainability of Scope 2 reductions.

Key Issues in Contract and Operational Design

From here, we will organize the situations in which contract design is particularly questioned in BESS cases. The common thread is that what appears to be a cost story is actually a risk and expertise allocation story.

BESS-as-a-Service

BESS-as-a-Service is a model in which demanders and power generators do not own BESS themselves, but rather have it owned by a third party, and provide services such as charging and discharging, peak cutting, backup, and energy efficiency optimization.
Although often described as a means of curbing initial investment, its essence is thought to lie in the allocation of risk and expertise.
It is not easy for demanders to have to deal with specialized management such as degradation management, warranty conditions, charge/discharge optimization, fire safety, software updates, cybersecurity, insurance, removal, and recycling.

The minimum points to check when making a service a service are who owns the BESS, who has the authority to command charging and discharging, who bears the risk of deterioration, whether the service fee is fixed, performance-linked, or linked to the amount of power reduction, whether backup performance in the event of a power outage is guaranteed, and to whom the revenue from the electricity market belongs Points to consider include whether BESS will be removed or transferred at the end of the contract, and whether liability for fire, accidents, and third-party damages will be shared, as well as data ownership and usage rights.
BESS-as-a-Service is not just a finance product, but a contract product that combines equipment, operations, guarantees, data and revenue sharing, and I think it is an interesting area of legal practice.

PPA and BESS combination

When considering renewable energy projects in Southeast Asia, PPAs are unavoidable.
Solar PPAs alone involve many issues, including contract duration, unit price, power generation, output control, force majeure, legal changes, land, grid connection, environmental value, payment guarantees, termination, transfer, and loan acceptance, and this becomes even more complicated when BESS is included.

For example, when a solar power plant is equipped with a BESS to provide stable supply to customers, the electricity purchased by customers is either sunlight at the moment of generation, electricity generated via the BESS, or electricity charged from the grid. What amount of electricity corresponds to environmental value.
What is the explanation for renewable energy if the supply time is shifted by discharge.
Corporate demanders may use renewable energy procurement for Scope 2, RE100, or sustainability reporting, and how the renewable energy of electricity via BESS can be explained is important.
If these issues are left ambiguous and the PPA is still connected, it is likely that problems will arise later.
At the very least, it seems that the contract should define the owner of the BESS, the installation location and connection point, the type of charging power source, how to handle the amount of discharge power, the attribution of environmental value, whether or not there is a supply guarantee, performance standards in the event of deterioration, how to handle power output control, the supply range in the event of a grid outage, how to separate electricity charges from service charges, and the risk of legal changes.

Aggregators and Optimizers

BESS does not generate revenue simply by holding it.
The need to optimize charging and discharging while looking at electricity prices, demand forecasts, renewable energy generation forecasts, grid constraints, degradation management, and supply obligations on PPAs is where the role of aggregators, which bundle multiple distributed resources to participate in the market, and optimizers, which optimize charging and discharging based on data and forecasts, becomes greater.
While the names and licensing requirements vary depending on the country and system, it is believed that the more advanced the BESS business becomes, the more important these players will become.

Contractually, the following are important: responsibility for operational algorithms, burden of losses due to forecast errors, market participation eligibility, revenue allocation, operational restrictions taking into account battery degradation, emergency control authority, data acquisition, storage and use, cybersecurity, and handover in case of termination.
BESS is both an equipment and a software business, and because differences in operational logic directly translate into revenue differences, we believe it is necessary to carefully examine not only EPC and O&M contracts, but also EMS, aggregation, control, and software update contracts.

Second Life EV Battery

The idea of reusing batteries used in EVs as stationary storage batteries is attractive both in terms of cost and resource circulation.
However, this is not simply a matter of cost reduction.
With second-life batteries, issues include battery history, degradation status, remaining capacity, safety, warranty, cell variability, fire risk, and responsibility sharing.
While it's relatively easy to sort out manufacturer warranties and insurance terms for new batteries, these checks are more important for Second Life batteries.

Contractually, the issues are the origin and traceability of the battery, how to measure remaining capacity, the scope of performance assurance, liability if deterioration occurs sooner than expected, division of responsibility in the event of a fire or safety accident, whether or not to purchase insurance, disposal and recycling liability, import regulations, waste regulations, hazardous materials regulations, and the support period for BMS (Battery Management System) and software.
In other words, Second Life EV batteries are not considered "cheap batteries," but rather a matter of system and contract, "how to make history and warranty reliable."
In Southeast Asia, some countries are moving forward with EV adoption and battery industry policies, which may lead to increased use in the future. However, widespread adoption will likely require not only technical evaluation but also certification, insurance, contracts, responsibility sharing, and recycling systems.

Financial institutions look at the "grounds for cash flow" rather than "battery capacity"

When financing a BESS business, financial institutions want to see not equipment specifications, but which revenue can be obtained, under which contract, for which period, from which counterparty, and with which risk sharing.

In the solar FIT (Feed-in Tariff) case, electricity sales revenue at a fixed price and for a fixed period was the central factor in evaluating business performance.
In BESS, revenue is divided into multiple categories, making it easier to rely on institutions and markets.
Price difference trading means that past price differences will not continue into the future, ancillary services have market size, competition, and the risk of price decline, and peak cuts on the demand side depend on the demander's operating patterns and pricing structure.
Therefore, financial institutions need to organize the contractual basis for each revenue source, the basis for assumed prices, sensitivity analysis in the event of a decline, operational capacity incorporating deterioration, replacement and expansion costs, the scope of guarantees and insurance, the creditworthiness of offtakers and service users, certainty of grid connection, risk of legal changes, and removal and recycling costs.
While BESS is a facility that supports the adoption of renewable energy, in financial practice it may be seen as a facility with high revenue uncertainty, and it is contract design and risk allocation that fill this gap.

Opportunities for Japanese companies

The Southeast Asian BESS market also presents opportunities for Japanese companies.
However, if we limit the opportunities to just "selling batteries" and "selling PCS," it seems a bit narrow.
Rather, the areas of interest are spread to peripheral practices, including business performance evaluation of BESS-attached renewable energy projects, grid connection and power system surveys, design of PPA and BESS service contracts, composition of EPC, O&M and guarantees, EMS and control software, aggregation businesses, peak cut proposals for factories and data centers, evaluation and certification of Second Life batteries, fire safety, insurance and risk engineering, removal, recycling and resource circulation, Possible options include finance and BESS-as-a-service.

Japanese companies are more likely to excel in quality, safety, maintenance, finance, and contract management.
In Southeast Asia, there is likely to be a demand not only for inexpensive equipment, but also for reliable design, assurance, operation, accident response, and long-term maintenance.

However, there are some points to be aware of.
Firstly, we must not make too many assumptions about the Japanese system. The role of power companies, market systems, PPA practices, foreign investment regulations, land systems, tax systems, and licensing differ from country to country, so the model established in Japan may not always be usable as is.
Secondly, we need to divide the entry into different countries. In Malaysia, BESS differs from those in the Philippines and Indonesia in terms of buyers, institutions, risks, and the value to be proposed. Lumping them together with "BESS proposals for ASEAN" makes it less likely to be a digression.
Thirdly, it should include not only technical proposals, but also contracts, finance, and operations. Those who decide to implement the system are looking not only at battery performance but also at whether it will be a viable business, and it is expected that companies that can propose revenue models, guarantees, insurance, institutional support, and funding as a whole will become stronger.

summary

We believe that BESS will become an increasingly important topic in Southeast Asia's renewable energy transition.
The more solar and wind power is deployed, the more flexibility power systems need, and the IEA has concluded that flexibility resources, including transmission and distribution networks and battery storage, are essential for expanding renewable energy ( IEA "Southeast Asia Energy Outlook 2026" ).
The ASEAN Centre for Energy also states that energy storage technologies, including BESS, play a crucial role in grid stabilization and supporting the ASEAN Power Grid ( ACE "8th ASEAN Energy Outlook" ).

However, BESS should not be viewed solely as "a facility that naturally grows because it increases energy efficiency."
Which markets can participate, who owns them, who operates them, which electricity is stored, who discharges it, where the environmental value belongs, and who bears the risk of deterioration, accidents, institutional changes, and market price declines. If these decisions are not made, business viability will not become apparent.
We believe that what will be important in the Southeast Asian BESS market going forward is not just the battery spec competition, but also the business design power to read the system, enter into contracts, accumulate revenue, allocate risk, and make it explainable to financial institutions and demanders.
As systems are being developed in Malaysia and other countries, I believe there is ample room for companies and experts with design capabilities to be involved.
Southeast Asia's BESS sees it not just as a battery storage business, but as a design theory for an institutional, contractual and revenue model to integrate renewable energy into the power system.