As its expanding economy and rising population place greater demands on Saudi Arabia's energy infrastructure, the government has responded by announcing a series of projects to boost power generation capacity, in order to meet the increasing needs of millions of industrial, commercial and residential users. Already the largest power generator in the Middle East, Saudi Arabia is investing substantial sums in primary state-of-the-art infrastructure, including power plants and renewable energy projects, while optimizing private sector involvement to accelerate bringing the huge developments online.

The government has earmarked billions of dollars for these new energy projects, as it looks to take advantage of cutting-edge technologies in the renewables sector, particularly in the solar and wind power sectors. Japanese companies are being encouraged to participate in the tenders for these projects. And there is an additional opportunity for Japanese manufacturers to set up renewable component manufacturing companies in Saudi Arabia.

This is because, due to the government's aim of increasing localization in the country's manufacturing sector, specific targets will be set for the percentage of components that will have to be produced within Saudi Arabia. At least 10 GW of electricity created by next-generation renewable energy technology is expected to emerge in the next few years as the pace of privatization picks up, adding to the approximately 75 GW of production capacity that already exists. To give that figure some context, it represents around 70 percent of the energy creation capacity of the entire Gulf region. To complete the kingdom's energy system, there are nearly 70,000 kilometers of transmission lines and around 565,000 kilometers of distribution lines — networks that are continuously expanding as up to 4 GW of new production capacity is added every 12 months.

One of the main driving forces behind the power revolution is Saudi Electricity Company (SEC), the utility that currently has a monopoly over generation, transmission and distribution of electricity — although generation is soon to be privatized, to encourage competition. SEC is working with the government to redesign the domestic energy market and make it fit for purpose. Not such an easy task, when demand is increasing by 7 percent — around 500,000 customers — on an annual basis, although it certainly underlines just how rich and attractive the potential returns on investment could be.

Building bonds with Japan

The company already deals directly with the Japan Bank for International Cooperation (JBIC), with which it has a successful relationship and financing options. Meanwhile, memorandums of understanding between the two countries have been signed by the likes of Mitsubishi Corporation, Tokyo Electric Power Company, and JGC Corporation.

Over the long term, SEC is seeking to liaise with pension funds from Japan that wish to diversify their portfolios, in an effort to boost returns, by using some of their cash reserves to buy into investments like renewable energy projects. As well as the investment openings offered by the country's new energy projects, capital can also be invested in one of the operating and already profitable projects, in order to replace the early stage funding that got these projects started.

This strategy would be mutually beneficial, as pension funds prefer the guaranteed rate of returns they get from low-risk investments that involve governments or major enterprises. On top of investments, SEC also believes that many Japanese businesses would be ideal partners to help build the kingdom's new energy sector.

"When SEC scanned the globe to find technology companies we could partner or do business with, Japan stood out as a provider that would bring more efficiency to the company, as well as being a major help on the engineering side or on a revamp of our systems," comments Ziyad Bin Mohammed Al-Shiha, engineer, president and CEO of SEC. "Japanese companies also stand out on the manufacturing side, with the quality that we aspire to have and want to achieve on the operational side. We can utilize their technology, efficiency and vast experience in our facilities to improve operations. And with privatization coming, competition is the name of the game. I believe Japanese companies, coupled with Japanese financing options and structures, will provide a competitive advantage to the new private firms that will be emerging," he explains.

Whether joining one of SEC's projects as a contractor or investor, the chances of failure appear low. Japanese pension funds and mutual funds putting money into large-scale Saudi Arabian solar and wind projects will see good, dependable returns that they can count on. And by adding significant new pools of liquidity to the power generation sector, they will be supporting overseas business expansion, in line with Abenomics. Japanese companies, on the other hand, can be confident that the new projects will come with reliable long-term operating contracts.

Blend of skills and technology

Specific projects and skillsets SEC is seeking from private sector enterprises in Japan include those from emerging small and medium-sized enterprises offering renewable and solar technologies; services, transmission and distribution equipment; decarbonization know-how; energy security technologies; and energy efficiency products and services. It is also looking for skills in smart power and grid systems, as "we are introducing a smart grid and 12.5 million smart meters, so there is huge business potential," states Alshiha.

Some of the smart systems it needs to introduce this effectively are system monitoring and outage management, substation automation, network management systems, distribution automation, demand response technology platforms and software services, smart metering technologies and battery storage systems. SEC also has a strong focus on the recruitment of Japanese specialists to help the development of the Saudi Arabian workforce, which it sees as key.

"Japan is an island nation with no oil or gas resources, yet it is considered one of the world's most energy-efficient countries, driven primarily by the most important resource: human capital," he says. Engineers, consultants, service technicians for design and construction, and management specialists are all highly sought after by the utility. "The youth of Saudi are the true engine of development and prosperity," Alshiha believes, "and the government will strongly support young engineers by cooperating with Japanese firms for human capital development. Japanese firms, with their work ethic, culture, and advanced research and development assets, will be the base of cooperation for transfering knowledge and capabilities to our youth. Whether on consultation, engineering or adding value to renewable products, there are a lot opportunities for Japanese companies. Knowing the sector will be privatized presents a whole series of openings for businesses and they are welcome to participate in any of our tenders or to set up component manufacturing companies in the kingdom."

Energizing the global economy

In an attempt to convey the potential of what is on offer, Alshiha provides a reminder that "the Saudi economy and energy market are by far the largest in the Middle East and North Africa region, the opportunities are substantial and the model for future development is public-private partnerships.

"The regulation is in place, the capital markets are fully developed and the process of investing here is now opening up.

"Our cooperation with Japan can only become stronger and more robust, with both sides entering win-win relationships. Saudi Arabia is in a transition phase and the support it gets now will be reflected by strong relationships when the country has achieved its goals."

Some of those goals are very ambitious, he reveals: "We will provide interconnection both regionally and globally: power to Egypt and to Europe, and fiber optics to the region. In short, we will become one of the 20 economies that energizes the global economy."

As part of the new Saudi-Japan Vision 2030 alliance, public and private enterprises in the kingdom are being encouraged to utilize the latest advanced technologies from Japan to boost performance, maximize potential and generate revenue.

Among the industries set to benefit from more partnerships with Japanese companies are the defense and security sectors, with regional instability meaning the kingdom is investing huge sums in state-of-the-art systems for aerial, marine or land deployment, should the need arise. One organization that would like to collaborate with Japanese partners in this area, as it works to build modern defense capabilities as part of its mission to become a leading developer of intellectual property, is Prince Sultan Advanced Tech. Research Institute (PSATRI).

Based in the College of Engineering at King Saud University in Riyadh, PSATRI is an independent, scientific governmental organization, concentrated on technology transfer in the defense and security sectors to support the development of new products and services for the armed forces. The brainchild of King Saud University and the Royal Saudi Air Force, it performs advanced research in defense and security technologies. Its focus on intensive applied research, innovation and invention, with the aim of self-sufficiency, sets it apart from other technology-focused entities in the kingdom, as it strives to commercialize and industrialize its cutting-edge hardware and software.



Flying high with unmanned aircraft

PSATRI's most exciting creation to date is undoubtedly the Skyguard unmanned aerial vehicle (UAV) — Saudi Arabia's first indigenous unmanned aircraft, which was debuted at the International Defense Exhibition and Conference in Abu Dhabi this year. Developed by PSATRI's Autonomous Vehicles Laboratory, which also constructed the prototype and carried out successful flight trials, the flagship UAV is currently undergoing extensive rounds of testing, prior to manufacture by Military Industries Corporation (MIC). Boasting a wingspan of 7.5 meters, the Skyguard can fly for up to 12 hours at altitudes of 18,000 feet, powered by a two-stroke engine, and is able to receive datalink commands and transmit imagery back to a ground control station (GCS) at distances of up to 200 kilometers. It has autonomous takeoff and landing capability, but can also be controlled manually from its GCS. And it has a payload capacity of 50 kilograms and an L-3 Wescam MX-10 electro-optical turret in its nose, although it can also carry the larger MX-15 turret under its belly. The UAV is intended for a range of civilian missions, including security duties, but has the potential to be developed further for military roles.

"Skyguard is a great achievement and, by the end of this year, we hope MIC can start manufacturing units," PSATRI Managing Director, Dr. Sami Alhumaidi, says proudly, explaining that, "As it is a research institute, PSATRI does not have mass production capabilities, which is where MIC becomes involved."

Collaborating for hi-tech success

The institute specializes in a number of different areas — all of which it would be interested in working with Japanese partners on, in order to keep it at the forefront of selected scientific spheres. PSATRI has six fully fitted research labs, each dedicated to one of the institutes specialisms and each with its own staff and vision, tailored to its area of interest. For the Signal and Image Processing Laboratory, the goal is the implementation of a mission system capable of presenting fused data from radar, electronic warfare signal data and video sensors.

The Autonomous Vehicles Laboratory, which created Skyguard, aims to build indigenous capabilities in unmanned autonomous systems. Current activities include flight control units, communication systems, ground control systems and payloads such as gyro-stabilized platforms. The Communications and Networking Laboratory balances theory, modeling and performance analysis, with the implementation of advanced algorithms and networking architectures. Meanwhile, the Electro-Optics Laboratory designs, manufactures and tests infrared and electro-optical sensors, focal plane arrays and camera systems. The Microwave, Antenna and Radar System Laboratory fosters research in applied electromagnetics, antennas, radar and imaging by addressing the needs of industry, military, government and scientific communities. Finally, the Center for Applied Research in Electronic Warfare Armed Forces is dedicated to preparing the kingdom's armed forces with a high degree of operational readiness by providing scientific and technical evaluation, research and consultation that is related to electronic warfare.

The results being achieved by the institute have convinced Alhumaidi that "Saudi Arabia has the brainpower. My dream now is to see young Saudis take over research and development in the kingdom and be brave enough to design their own things." The country also wants this to happen and he stresses that his government is very committed to supporting the advancement of military research and development. To make sure his researchers are provided with everything they need to progress, he says, the institute is "open to collaboration with Japanese entities that would like to work with us and help develop capabilities in the kingdom in different fields of defense."

With so much scope for partnerships with Japanese universities and enterprises, it would appear PSATRI can move ever closer to reaching its objectives and reinforcing its reputation as a technology development organization recognized for innovation.