Oman's power grid faces a cost-recovery test

Oman's electricity regulator approved a 10-year recovery period for planned battery storage assets, against about 35 years for conventional transmission equipment, Fitch Ratings said, bringing the timing of investment returns into focus as the grid prepares for a major expansion.
In its April 2026 assessment, Fitch said the Authority for Public Services Regulation (APSR) had approved the shorter asset recovery period for Oman Electricity Transmission Company (OETC). The company's planned 2026–2030 capital programme totals RO 1.285 billion, including RO 376 million for battery energy storage systems.
Fitch forecast OETC revenue growth averaging 24 per cent annually in 2026–2027, driven mainly by batteries. Regulatory cost recovery concerns the company's allowed revenue framework; it does not establish whether household electricity tariffs will change. That depends on wider system costs, regulation and subsidy decisions.
Battery storage accounts for about 29 per cent of the planned programme. The equipment can store electricity when supply is plentiful and release it when demand rises, helping the system accommodate variable solar and wind generation. Its financial case nevertheless depends on how often it is used, the costs it displaces and its useful operating life.
OETC's 2026–2030 transmission capability statement sets out a wider programme of network reinforcement, new connections and system integration. The scale of that programme reflects the challenge of serving new demand while accommodating renewable projects, but a forecast need for capacity is not the same as a measured return on each investment.
Preliminary figures from the National Centre for Statistics and Information show Oman generated 37,481.8 gigawatt hours of electricity during January–August 2026, up 4.3 per cent year on year. Production growth underlines the sector's expansion, although it cannot on its own determine how much new transmission or storage is required.
Financing creates a second test. Fitch forecast negative free cash flow averaging RO 271 million annually over 2026–2028 as capital spending accelerates. It also upgraded OETC to investment grade, citing stronger expectations of support. Negative free cash flow reflects financing requirements and should not be confused with an operating loss.
In Dhofar, the returns can be expressed in physical terms. OETC commissioned three 132-kilovolt substations at Mudhi, Shahbaa Asayb and Al Mazyunah in May, supported by 267 kilometres of transmission lines. The company expects the connections to displace about 30.5 million litres of diesel annually and avoid roughly 82,000 tonnes of carbon emissions.
Those estimates were attributed by the Oman News Agency to OETC's acting general manager of projects, Khalid bin Marhoon al Harmali. They offer a benchmark against which actual fuel use and operating costs can be measured after commissioning. The connections serve Dhofar and should not be confused with the separate 400-kilovolt Rabt interconnection programme.
Rabt offers a larger test of the same principle. OETC's 2023 sustainability report projected annual system savings exceeding RO 65 million, alongside reductions of more than 175 million litres of diesel and 474,000 tonnes of emissions, once both phases were complete. The first phase entered service in the fourth quarter of 2023. The report's figures describe projected benefits for the completed scheme, not independently audited savings already delivered.
At IEEE PowerTalks in Muscat on October 12, technical presentations also explored ways to extract more value from existing infrastructure. Oman Cables Industry discussed adjusting overhead-line ratings to actual weather conditions, while Petroleum Development Oman described remote analysis of protection-system faults using existing communications links.
Such techniques can reduce some operational constraints, but they cannot replace every new line or substation. Nor did the presentations establish monetary savings for OETC's national network. The economic comparison must be made project by project, weighing reliability, capital costs, operating savings and the alternatives available. For investors and policymakers, the distinction is especially important because an asset may strengthen security of supply without producing an immediate cash saving. The case for it should make that trade-off explicit.
Oman's 2026 state budget allocates RO 509 million to electricity-sector support. That is a sector-wide provision, not OETC's capital budget, and it does not show that the battery recovery period will increase consumer bills. It does, however, underline the public interest in understanding how electricity infrastructure costs and benefits flow through the system.
For the next phase of investment, the figures worth following are not just megawatts and kilometres commissioned. They are actual battery utilisation, fuel displaced, reliability achieved, electricity costs avoided and regulated revenue recovered against the original investment case.