Quantum Materials Corp. (fka QTMM)

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Saudi Arabia: The New Solar Frontier

A Changing Energy Landscape

Saudi Arabia, as the world’s largest OPEC producer is most commonly associated with crude oil, not renewable energy. However, although the high export prices of oil have buoyed its economy and increased business confidence, the dilemma of economic diversification and sustainability is at the core of the Kingdom’s National Development Plans. Domestic demand for energy is increasing at a dramatic pace in line with exploding demographics. Electricity consumption is growing at 5% annually, whilst the demand for oil will more than double by 2028, to reach over 8.3 million barrels daily, having already grown by 27% in the last four years alone[1]. In turn, for an economy whose expenditure is dependent on oil revenues, increased domestic energy demand has already lead to a $US 40.3 billion lost income for 2011, with this expected to rise to $US 54.9 billion by 2015.[2] The widening gap between local and international oil prices combined are emitting significant pressure on Saudi Arabia to implement a new energy strategy that is aligned with its economic development goals. Whilst the gap between oil revenues and expenditure remains minimal, the Kingdom is set to invest heavily in developing new technologies and energy sources that respond to both increased domestic supply. Promoting the adoption and export of innovative solutions to a potential energy crisis, as well as ensuring that these contribute to developing the capacities of the private sector and national workforce is embedded within the building of the knowledge economy.

With these objectives in mind, Saudi Arabia announced that it would invest over US$ 100 billion in the development of renewable energy solutions. Whilst a third of this amount will be allocated to building nuclear power plants, the majority will be used to develop other sources, in particular solar power[3]. According to Saudi Aramco, the Kingdom experiences roughly 3000 hours of sunlight annually, and features “empty stretches of desert that can host solar arrays and vast deposits of clear sand that can be used in the manufacture of silicon photovoltaic cells[4]”. The drivers for the development of solar infrastructure and its monetarization are plentiful. Aside from having one of the highest solar radiation averages in the world, the Saudi Arabian private sector has the financial strength to launch solar power generation and manufacturing once the technologies reduce opportunity costs and supported by governmental incentives.

A Leader in Solar Research

Unbeknown to the majority of the international community, Saudi Arabia has long since been a pioneer of R&D in the solar energy field. In 1977, the Kingdom signed a joint Project Agreement with the United States to co-operate in the field of solar energy. The Solar Energy Research American-Saudi (SOLERAS) program was a joint five-year venture to which both governments committed $US 50 million to partake and benefit from joint research collaboration and experimentation[5]. One of the most ground-breaking experiments at the time was a US$ 16.5 million solar-power generation initiatives in the villages of al-Jubaila and al-‘Uyaina north of Riyadh, capable of delivering over one million megawatts of power by using photovoltaic cells. At the time, it was the world’s largest photovoltaic collector and the largest venture of its kind during the 1970’s. According to Dr. Khoshaim, then Program Director for the SOLERAS project, this joint-venture was a “model of cooperation between two nations in pursuit of technology that will benefit them both[6]”. In addition to other cooperation agreements in this field including Germany (HYSOLAR), Saudi Arabia systemized during the 1970’s major R&D work for the development of solar technologies in universities, with King Abdullah City for Science and Technology (KACST) paving the way in this field. By the end of that decade, there existed over 150 solar research projects in universities and research center’s across the Kingdom[7]. By 1981, even oil giant Saudi Aramco was reporting that in the drive towards modernization, Saudi Arabia’s motto was to become the “solar energy exporting nation of the world[8]”. Nearly three decades later, this vision was reiterated by Oil Minister Ali Al Naimi, stating that “Saudi Arabia, the world’s largest oil producer, has the potential by 2020 to produce enough solar power to meet more than four times the global demand for electricity[9]”.

By 1981, solar energy-generation was expected to roll-out across the power grid in less than ten years. However, there was a sudden loss in research impetus across centers, universities and the private sector. This decline in momentum was lead in majority by high oil prices and its availability as a superior energy product, particular in terms of the revenue it was generating (during the period which is often referred to as the Saudi Oil Boom). Solar energy was competing with oil, and policy-makers at the time believed that oil would be more suitable to finance socio-economic development. Today, policy-makers have reverted back to acknowledging that a diversified energy-mix is the only sustainable solution to the long-term economic viability, and to ‘creating and leveraging the competitive advantages of relevant technologies for the social and economic development of the Kingdom of Saudi Arabia[10]’. As part of a government-driven effort to once again become a global leader in research and manufacturing of renewable energy, a Royal Mandate established King Abdullah City for Renewable Energy (KA-CARE) in 2010. King Abdullah City for Science and Technology (KACST) was promoted to be the national science agency and laboratory, integrating the research and discoveries of other national universities such as KFUPM and KAUST.

A Blueprint for University Tech-Transfer

To position Saudi Arabia as a hub for solar technologies, the execution of this mandate demands an over-arching blueprint to ensure the adoption of technology-transfer, research and commercialization among domestic universities and the private sector. This includes empowering the private sector, enabling the development of human capabilities and knowledge spillovers which translates into the reduction of barriers to entry. Currently, the barriers that have hindered Saudi Arabia from capitalizing on this energy source include high opportunity-costs and expense of such projects, as well as the risks and uncertainties associated with investments in new technologies that have been exacerbated by a credit crunch within financial institutions. Earlier initiatives and market opportunities have been met with various degrees of commitment, and a viable supply-chain can only be fostered by incentivizing the adoption of renewable energy through a variety of policy measures including financial incentives, central procurement and feed-in tariffs. KA-CARE has outlined that for Saudi Arabia to meet its target of having 15% of its energy derived from solar power by 2020, the development of the regulatory regime depends not only committing to transparent incentives, off-taking and funding mechanisms, but fostering technological development and innovation[11].

The true ROI of solar technologies for Saudi Arabia is that it belongs to a technological and capital-intensive industry, capable of advancing several other industries, promoting SMEs and diversifying the economic base structure. As it is a field that relies heavily on R&D and new technological breakthroughs, it contributes to the development of a technical workforce, developing innovation capabilities primarily through universities and ‘centers of excellence’. True to form, Saudi Arabia has encountered in that last decade a revolution in university-led technology transfer, leveraging its infrastructure and knowledge to collaborate on joint projects with industry and other international universities. Universities such as KAUST, KSU and KFUPM act as innovation ecosystems by attracting investment flows that facilitate the development of specialized clusters, cross-industry collaboration, knowledge-flows and licensing deals. The solar energy market is entering a new era in which investments in R&D are crucial to guarantee its adoption and scalability, and Saudi Arabia is skillfully leveraging the knowledge assets of its universities and research centers to achieve future market dominance.

Solar Arabia and International Entrepreneurship

Saudi Arabia is not the only nation who is seeking to gain a competitive advantage through channeling the foreseen demand in solar energy. China and the United States have drastically scaled their incentives to promote initiatives lead by the private sector and universities. The United States announced today that it would be providing US$ 4.5 billion in unconditional loan guarantees for three photovoltaic power plants in California, and will be investing an addition $US 18 billion for solar manufacturing and generation[12]. However, the market opportunities in the United States are much less competitive than in Saudi Arabia. Although providing loan guarantees is an effective manner to boost private sector confidence in an uncertain industry, the very composition of this market is more likely to crowd out private sector investment, and further diminish venture capital confidence. This is most visible on the stock market, where solar companies, despite seeing a 70% global growth in this market, or being short-sold[13]. However, this very barrier in the United States is in fact an opportunity for Saudi Arabia, as it will attract companies and research labs that wish to commercialize their technologies in an environment that provides a more lucrative and competitive market, providing a knowledge-intensive environment for research and technological development.

Solar Frontier, a start-up company based in Tokyo is leading the curve in entering this promising emerging market by establishing an office in Khobar. The startup sees it as a strategic priority for long-term growth, playing “a key role in our overall presence in Middle Eastern growth markets”. Aside from establishing a presence in what may become one of the most competitive sectors of the Kingdom, Solar Frontier is part of a joint venture with Saudi Aramco for a 10MW solar park and a 10MW solar installation at King Abdullah University for Science and Technology (KAUST)[14]. A similar path is being followed by Solterra Renewable Technologies Inc., a solar stage and quantum dot manufacturing company whose technology was developed and licensed by Rice University. The technology offered by the startup is the first of its kind to develop low-cost, high efficiency solar cells that come at 50% of the normal manufacturing price of its silicon-based counterparts. A technological disruption that could drastically eliminate the costs of manufacturing and generating solar energy, Solterra Renewable Technologies primary objective is to become “the solar electricity solution in the Middle East[15]”, by locating its first production unit in Saudi Arabia, where the company’s Chief Scientific Officer, Dr. Ghassan Jabour, is a Department Head and Professor at KAUST.

Quantum Dot Solar Cells: The Global Solution to the Energy Conundrum?

Technologically speaking, the innovation of quantum dot solar cells as developed by Solterra and discovered by University of Toronto nanotechnology researcher Ted Sargent could propel Saudi Arabia to its goal of being the world’s largest solar energy provider. These types of solar cells are 42% efficient, whilst common solar cells are approximately 10% efficient[16]. However, the true economic breakthrough is that researchers believe that this technology could be integrated within five years on a widespread basis in building materials, mobile electronics and automotive parts. Already, the solar cell can be manufactured into inexpensive coatings that can be produced at a high volume and low costs[17]. This solar cell could turn building materials into generators that produce electricity[18], and simultaneously contribute to Saudi Arabia competing with Abu Dhabi’s Masdar in the most energy-efficient urban landscape. It is exactly the type of innovation that could indefinitely shift a whole industry and translate into a viable and highly scalable solar-solution, and indirectly generate new start-ups and employment creation.

Unsurprisingly, the brain-child behind this technology; Ted Sargent has already successfully commercialized other innovations through his venture InVisage Inc. A Silicon Valley-based startup, Invisage Inc has pioneered the mobile image sensor market, using the same technology of quantum dots to improve the image quality in Smartphone and mobile devices. By targeting one of the fastest growing markets, the startup has announced in February it had secured a series C of venture funding, led by Intel Capital, and joining over investors such as Rockport Capital and OnPoint Technologies[19]. In addition, Ted Sargent was named one of the world’s top innovators by MIT’s Technology Review in 2003, and research leader in the Scientific American 50.

Building Solar Success-Stories through University Incubation

This success story is the type that could await many university-incubated technologies in Saudi Arabia taking part in industry technology-transfer. The growing interest from multinational corporations to become the first in this new wave is already building a solid potential market for startups. Saudi Aramco is already partnering with Solar Frontier and Showa Shell to build a solar-powered plan on Farasan Island, with the intention to expand this project to other emerging countries[20]. General Electrics, who recently opened the GE Energy Manufacturing Technology Center in Dammam has recently awarded over US$ 63 million to ten companies developing solar and renewable energies through their ‘ecomagination’ program. GE’s commitment to supporting an innovation-led ecology in Saudi Arabia has already seen the corporation sign the first private sector MOU with KAUST and a collaboration with KFUPM to establish the GE Energy Fuel Research Center to promote collaborative research.

Although any investments made at present into solar-startups and projects are expected to achieve long-term returns, the potential profits are substantial. According to a presentation made by Passport Capital at the Third Saudi Solar Energy Forum in April, a US$ 1 billion investment could lead to a revenue potential of over $ 2 billion in 2013, and see a 72% return on investment. As it currently stands, the new quantum dot solar cell technology would see US$ 800 million revenue by 2013, and 7% ROI[21], as well as create 1,500 direct employment opportunities. One of the best comparisons to imagine the solar market potential in Saudi Arabia is to revert back to 1980, when McKinsey projected that the global cell phone market in 2000 would be worth US$ 900,000: In 2000 it was worth over US$ 108 million, and today over US$ 5 billion.

Aside from attracting technologically disruptive startups to operate and conduct research in Saudi Arabia, it is incremental that the Kingdom translates new scientific discoveries and technologies into domestic startups and commercializeable new business areas for existing companies. To achieve this, the development and facilitation of technological ownership, such as facilitating processes for intellectual property and patenting is key. The government and scientific-driven impetus put on solar technology provides an opportunity for the scientific community and businesses to develop technologies that respond to current industry needs and future market demands. In addition, it is highly probable that Europe and Western nations will support this incremental change in Saudi Arabia’s energy mix, as it will enable them to further pursue environmental targets, and most importantly, sell energy-related equipment.

Research centers and university-led technology transfer will be at the heart of the Arabian solar revolution. For the Kingdom to meet its target of becoming the premier exporter of solar energy worldwide, the formula lies in fostering solid research and commercialization ties with the private sector, and utilizing the university as a testing-ground for changing policies and reforms that will change the innovation landscape. University technology-transfers, which enable the sharing of knowledge, human capital and innovation, will regain the momentum achieved in the 1970’s. The large variety of institutions will attract international scholarship and offer an environment that is riper for the development of solar technologies. It goes without saying, that these institutions will become the engines for growth. For home-grown startups and existing companies, the true power will lie in licensing innovations, so that these solar technologies can have a global reach, become cost-effective and scalable. If Saudi Arabia continues to pursue this path, its energy challenge will transform it from being the world’s leading oil exporter to achieving its 1981 mandate of becoming the “solar energy exporting nation of the world.”

© Tatjana de Kerros | 2011

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[1] King Abdullah City for Atomic and Renewable Energy. (2011). Towards a Sustainable Energy Mix for Saudi Arabia. Third Saudi Solar Energy Forum (pp. 1-41). Riyadh: King Abdullah City for Atomic and Renewable Energy.

[2] Lovato, W. (2011). Six Solar Market Myths: An Investor Perspective. Third Saudi Solar Energy Forum (pp. 1-28). Riyadh: King Abdullah City for Atomic and Renewable Energy.

[3] http://www.bloomberg.com/news/2011-03-31/saudi-arabia-to-target-solar-power-in-100-billion-energy-plan.htm

[4] http://arabianomics.com/2011/04/18/why-saudi-arabia-is-serious-about-solar-energy/

[5] http://www.saudiaramcoworld.com/issue/198105/saudi.arabia.and.solar.energy.a.special.section.htm

[6] http://www.saudiaramcoworld.com/issue/198105/saudi.arabia.and.solar.energy.a.special.section.htm

[7] Ali, M. M. (2011). Renewable Energy in the Arab World. Arab Energy Club (pp. 1-30). Beirut: Arab Energy Club.

[8] http://www.saudiaramcoworld.com/issue/198105/saudi.arabia.and.solar.energy.a.special.section.htm

[9] http://gulfnews.com/business/opinion/saudis-go-full-steam-into-solar-energy-1.828438

[10] King Abdullah City for Atomic and Renewable Energy. (2011). Towards a Sustainable Energy Mix for Saudi Arabia. Third Saudi Solar Energy Forum (pp. 1-41). Riyadh: King Abdullah City for Atomic and Renewable Energy.

[11] King Abdullah City for Atomic and Renewable Energy. (2011). Towards a Sustainable Energy Mix for Saudi Arabia. Third Saudi Solar Energy Forum (pp. 1-41). Riyadh: King Abdullah City for Atomic and Renewable Energy.

[12] http://energy.aol.com/2011/06/30/solar-soars-on-federal-billions/?a_dgi=aolshare_linkedin

[13] http://www.msnbc.msn.com/id/43456793/ns/business-motley_fool/

[14] http://blogs.forbes.com/williampentland/2011/06/24/solar-heats-up-in-saudi-arabia/

[15] http://investorshub.advfn.com/boards/board.aspx?board_id=15185&NextStart=6928#

[16] http://www.azonano.com/news.aspx?newsID=22809

[17] http://www.inovacaotecnologica.com.br/noticias/noticia.php?artigo=celula-solar-amplo-espectro&id=010115110628

[18] http://www.theengineer.co.uk/sectors/energy-and-environment/news/solar-cell-could-turn-building-materials-into-generators/1009151.article

[19] http://www.marketwire.com/press-release/InVisage-Secures-Series-C-Venture-Funding-1395026.htm

[20] http://www.saudiaramco.com/en/home/our-vision/future-of-petroleum/solar-program-with-showa-shell.html?switchToDesktop=1#our-vision%257C%252Fen%252Fhome%252Four-vision%252Ffuture-of-petroleum%252Fsolar-program-with-showa-shell.baseajax.html

[21] Lovato, W. (2011). Six Solar Market Myths: An Investor Perspective. Third Saudi Solar Energy Forum (pp. 1-28). Riyadh: King Abdullah City for Atomic and Renewable Energy.