FY2018 Study on Business Opportunity of High-Quality Energy Infrastructure to Overseas

FY2018 Study on Business Opportunity of High-quality Energy Infrastructure to Overseas

Feasibility Study for the Introduction of Electricity Energy Supplying Infrastructure for Off-Grid Facilities with Solar Power Generation and Hybrid Control in the Kingdom of Saudi Arabia

Final Report

March 2019

Ministry of Economy, Trade and Industry of Japan

Oriental Consultants Global Co., Ltd. Marubeni Metals Corporation

Preface

We, Oriental Consultants Global Co., Ltd. and Marubeni Metals Corporation were given in trust by the Ministry of Economy, Trade, and Industy of Japan (METI) and conducted the Feasibility Study (“F/S”) in the Fiscal Year 2018 for “The Introduction of Energy Supplying Infrastructure for Off-Grid Facilities with Solar Power Generation and Hybrid Control in the Kingdom of Saudi Arabia” project in the Kingdom of Saudi Arabia. We summarized the result of the F/S in this report.

The F/S, “Feasibility Study for the Introduction of Electricity Energy Supplying Infrastructure for Off-Grid Facilities with Solar Power Generation and Hybrid Control in the Kingdom of Saudi Arabia” aimed to build an infrastructure project which can fully utilize Japanese advanced technique and know-how by developing the “energy” field ― which is estimated to grow in the Kingdom of Saudi Arabia ― based on Japanese Government’s policy “Infrastrucrure System Strategy”, and by differentiate by creation of new business model.

We hope this report will help to realize such projects, and will provide useful information to Japanese stakeholders.

March 2019

Oriental Consultants Global Co., Ltd.

Marubeni Metals Corporation

Abbreviation

Abbreviation Official Name AI Artificial Intelligence B/C Buyer’s Credit B/L Bank Loan CDM Clean Development Mechanism

CO2 Carbon Dioxide DEWA Dubai Electricity and Water Authority DG Diesel Generator DNA Clean Development Mechanism Designated National Authority (Under Ministry of Energy, Indsutry, & Mineral Resources) ECRA Electricity and Cogeneration Regulatory Authority EIA Environment Impact Assessment EMS Energy Management System EPC Engineering, Procurement and Construction F/S Feasibility Study GAMEP The General Authority of Meteorology and Environmental Protection GCC Gulf Cooperation Council GCF Green Climate Fund GDP Gross Domestic Product GE General Electric GEC Global Environment Centre Foundation GHG Green House Gases GTM Greentech Media HCIS High Commission for Industrial Security IEEJ The Institute of Electrical Engineers of Japan IPP Independent Power Producer IRR Internal Rate of Return ISO International Organization for Standardization IUCN International Union for Conservation of Nature and Natural Resources JBIC Japan Bank for International Cooperation JCM Joint Crediting Mechanism JICA Japan International Cooperation Agency JV Joint Venture K.A.CARE King Abdullah City for Atomic and Renewable Energy MCI Ministry of Commerce and Investment MEIM Ministry of Energy, Industry and Mineral Resources MEWA Ministry of Environment, Water & Agriculture MJ Mega Joule MoE Ministry of Education NDC Nationally Determined Contribution NEDO New Energy and Industrial Technology Development Organization NIDLP National Industrial Development and Logistics Programme NREP National Renewable Energy Program Abbreviation Official Name NTP2020 National Transformation Program 2020 ODA Official Development Assistance OECD Organization for Economic Co-operation and Development OPEC Organization of the Petroleum Exporting Countries PCS Power Conversion System/Primary Cut out Switch PIF Public Investment Fund PR Public Relations PV Photovoltaic RC Responsible Care REN21 Renewable Energy Policy Network for the 21st Century REPDO Renewable Energy Project Developent Office RFP Request for Proposals ROM dump Run of Mine dump station station SAGIA Saudi Arabian General Investment Authority SAR Saudi Arabia Riyal SEC Saudi Electricity Company SIDF Saudi Industrial Development Fund SPC Special Purpose Company UAE United Arab Emirates USD United States Dollar

Contents

Chapter 1. Outline of Target Country and Related Sectors ...... 11 1.1. Economy, Financial Status in the Target Country ...... 11 1.1.1. Economy ...... 11 1.1.2. Industrial Structure ...... 12 1.1.3. Population ...... 13 1.1.4. Investment from Overseas ...... 14 1.2. Outline of Object Sectors of the Project ...... 15 1.2.1. Power Sector ...... 15 1.2.2. Mining Sector ...... 16 1.2.3. Cement Sector ...... 17 1.3. Trends in Policies ...... 18 1.3.1. Saudi Vision 2030 ...... 18 1.4. Outline of Project Area ...... 20 Chapter 2. Survey Method ...... 21 2.1. Surey Contents ...... 21 2.2. Survey Method and Organization ...... 23 2.3. Survey Schedule ...... 24 Chapter 3. Contents of the Project and Examination of Technical Aspects ...... 28 3.1. Background and Necessity of the Project ...... 28 3.1.1. Renewable Energy Trends in the World ...... 28 3.1.2. Renewable Energy Trends in the Middle East ...... 29 3.1.3. Integrity of Renewable Energy Trends and Government Policy in Saudi Arabia ...... 30 3.2. Selection of Project Site and Examination for Implementation ...... 30 3.2.1. The Mine of the affiliated company of company A ...... 30 3.2.2. The Cement Factory of the company B ...... 31 3.2.3. Examination of Project Model ...... 31 3.2.4. Examination of Legislative System Related to the Project ...... 32 3.2.5. Examination of Project Implementation in the Potential Sites...... 33 3.2.6. Examination of Basic Design of Infrastructure system ...... 39 Chapter 4. Environmental and Social Considerations ...... 47 4.1. Policies, laws, and regulations related to environmental and social considerations ...... 47 4.1.1. Overview of policies, laws, and regulations related to environmental and social considerations ...... 47 4.1.2. Procedures relating to Environmental Impact Assesment implementation ...... 50 4.2. Analysis of current environmental and social conditions ...... 52 4.2.1. Current state of environment in the mine of the affiliated company of the company A ...... 52 4.2.2. Current state of environment in the factory of the company B ...... 53 4.3. Expected impact from the proposed project implementation ...... 53 4.4. Environmental Benefits from the project implementation ...... 57 Chapter 5. Economic Viability ...... 59 5.1. Project cost estimation ...... 59 5.2. Preliminary economic analysis ...... 59 Chapter 6. Implementation Schedule of the Project ...... 65 6.1. Implementation Schedule ...... 65 6.1.1. Presentation of Project Imprementation Period ...... 65 6.1.2. How the Project Period should be Set ...... 66 Chapter 7. Capacity of the Executing Agency in Saudi Arabia ...... 67 7.1. Organization for the Implementation in Saudi Arabia ...... 67 7.1.1. Company A ...... 67 7.1.2. Company B ...... 67 Chapter 8. The potential of Japanese companies including technology aspects ...... 69 8.1. The estimated structure of the Japanese companies in the project ...... 69 8.2. Potential of the Japanese companyies to implement the project ...... 69 8.3. Necessary measures to encourage Japanese companies to receive the order ...... 70 Chapter 9. Action Plan and Tasks for Realization of the Project ...... 72 9.1. Current Status for the Realization of the Project ...... 72 9.1.1. Promotion and Expansion of the Project ...... 72 9.1.2. Introduction of the storage battery ...... 72 9.2. Current Status of Government Offices Concerned and Executing Agencies in the Host Country for the Realization of the Project ...... 74 9.2.1. Response Status of Executing Agencies to Government Policy ...... 74 9.2.2. Current Status of Reserve Fund by Executing Agencies ...... 75 9.2.3. Current Statsus of Orgaization Preparation in Executing Agencies ...... 75 9.3. Envisioned Financial Scheme ...... 75 9.4. Activities and Tasks for Realization of the Project ...... 80 9.4.1. Examining of Measures to Foreseen/Not Foreseen Risks ...... 80 9.4.2. Future Activities and Tasks ...... 80

Figures

Figure 1.1 Position of Saudi Arabia...... 11 Figure 1.2 Age-specific ratio among the total population ...... 13 Figure 1.3 Spread Plan of Renewable Energy in Saudi Arabia ...... 16 Figure 1.4 Market Share in 2018 ...... 18 Figure 1.5 Saudi Vision 2030 and Targets of NTP2020 ...... 18 Figure 1.6 Main Off-grid Areas ...... 20 Figure 2.1 Implementation Organization ...... 24 Figure 3.1 Investments for Renewable Energy Power Generation / Fuel in the World ...... 28 Figure 3.2 Total Capacity and Annual Installation of Photovoltaic Power Generation in the World ...... 29 Figure 3.3 Daily Load Curve in the Mine of the affiliated company of company A (kW) (on Jul. 27th 2018 and Feb. 9th 2019) ...... 34 Figure 3.4 The demand of the every fedder in the mine ...... 35 Figure 3.5 System to Suggest (in the Mine of the affiliated company of the company A) ...... 39 Figure 3.6 Demand in July 2018 and PV Generation in the Mine ...... 41 Figure 3.7 Simulation Result of the Battery Capacity in the Mine (with 20% of DG Generation) ...... 41 Figure 3.8 Simulation Result of the Battery Capacity in the Mine (without Any DG Generation) ...... 42 Figure 3.9 Power Demand in February 2019 and PV Generation in the Mine ...... 42 Figure 3.10 One Kiln and PV20MW/40MW ...... 44 Figure 3.11 One kiln and PV20MW ...... 45 Figure 3.12 One Kiln and PV40MW ...... 46 Figure 3.13 The reduction rate of the fuel by introducing the PV and battery ...... 46 Figure 5.1 Reduction of fuel cost and cash flow through the project (Domestic Price case) . 61 Figure 5.2 Reduction of fuel cost and cash flow through the project (Price control case) ..... 61 Figure 5.3 Reduction of fuel cost and cash flow through the project (International Price case) ...... 62 Figure 5.4 Reduction of fuel cost and cash flow through the project (Domestic Price case) . 63 Figure 5.5 Reduction of fuel cost and cash flow through the project (Price control case) ..... 63 Figure 5.6 Reduction of fuel cost and cash flow through the project (International Price case) ...... 64 Figure 8.1 The image of the reduction of the life-cycle cost ...... 71 Figure 9.1 The appearance of the substation of the storage battery in Buzen of Kyushu Electric Power ...... 73 Figure 9.2 Outline of JCM Scheme ...... 77 Figure 9.3 Image of Buyer's Credit (B/C) and Bank-to-Bank Loan (B/L) of JBIC .. 78 Figure 9.4 Image of Green Climate Fund ...... 79

Tables

Table 1.1 Exports of Non-oil Products in Saudi Arabia (1995-2016) ...... 12 Table 1.2 Projects Related to Renewable Energy ...... 15 Table 2.1 Schedule ...... 25 Table 2.2 First Field Survey Schedule ...... 25 Table 2.3 Second Field Survey Schedule ...... 26 Table 2.4 Third Field Survey Schedule ...... 27 Table 3.1 Procedures for Installation of PV Generation ...... 32 Table 3.2 Electricity Usage of Each Feeder in the mine ...... 35 Table 3.3 Daily Power Consumptions in the Mine (from Feb. 2nd to 8th) ...... 36 Table 3.4 Comparison of Power Consumptions in the Mine ...... 36 Table 3.5 Functions Assumed for EMS ...... 43 Table 4.1 Outline of the General Environmental Law ...... 47 Table 4.2 Necessary contents of an environmental impact assessment study ...... 51 Table 5.1 Project cost estimation by project sites ...... 59 Table 5.2 Comparison of Fuel cost by type ...... 59 Table 5.3 Reduction of fuel cost ...... 60 Table 9.1 Approved methodologies ...... 76

Chapter 1. Outline of Target Country and Related Sectors

1.1. Economy, Financial Status in the Target Country

1.1.1. Economy

The Kingdom of Saudi Aragia (herein after referred to as “Saudi Arabia”) is the largest country in the Middle East, and it occupies about 80% of the Arabian Peninsula. The territory has geographical advantages as the center and the entrance of trades in the Middle East since it faces the main canals.

Also, Saudi Arabia is known as an oil producing country. Main exports are not only oil and oil products but also synthetic 0 3,600km resin, organic/inorganic chemicals, natural Source: Study Team gas, city gas, and transportation equipment Figure 1.1 Position of Saudi Arabia etc.The export value of oil and oil products in 2017 was of 169,400 million USD and it occupied 75% of the total export value. 60% of the revenue is also derived from the oil sector, and the oil has been the basis of economy of Saudi Arabia. Besides this situation, the Saudi Arabian economy went into the red for 4 consecutive years from 2014 to 2017 due to the fall of the oil prices. In 2018, the revenue increased about 28.6% compared to the previous year due to an income increase by rising of the oil prices, but the economy has not turned into normal yet.

Due to the agreement of reducing oil production among the Organization of the Petroleum Exporting Countries (herein after referred to as “OPEC”), the Saudi Arabia’s nominal gross domestic product (herein after referred to as “GDP”) in 2017 showed negative growth, but it improved and grew 2.3% in 2018. The period for reducing oil production was originally planned to finish by the end of 2018, however, it was decided to be prolonged for 6 months from January 2019 in the meeting by OPEC in December 2018. Though this aims to raise the oil price, the oil demand may decrease, thus it is uncertain that the oil price will be increased, and this uncertaintity would affect the GDP in Saudi Arabia. In addition, the GDP growth rate in 2019 was of 2.9% as of January 2019.

The whole unemployment rate is around 6%. When it is classified in navtive and non- native Saudi Arabian, the unemployment rates are about 12% and 1% respectively; the native has

higher rate compared to the non-natives.

1.1.2. Industrial Structure

The base industry in Saudi Arabia is the oil sector. After 2011, the produced oil is more than 5 million tons every year. The GDP in 2017 was of 635,100 million USD and 43.4% was represented by the oil sector. The rest 56.6% was occupied by the non-oil sector (gorvenment service: 13.9%, retail and whole sale: 9.1%, manufacturing industry (excludes petrochemistry): 8.5%, and telecommunication: 5.9% etc.). In addition, the export value of non-oil industry in 2016 grew about 6.5 times compared to 1995, and its ratio increased 9.2%. The continuous growth of non-oil industry is expected since Saudi Industrial Development Fund (herein after referred to as “SIDF”) found in 1974 supports industry by investment and counselling as a part of the SIDF’s purporse: promoting the export of the non-oil industry.

Especially in Riyadh, the Capital City of Saudi Arabia, the economic growth is shown in various fields as the population increase. The scale of Saudi Arabian economy is large and important for the Middle East. As of 2014, the employees in Riyadh were composed by the following industry type and ratio; public service: 24.5%, manufacturing: 17.7%, business and finance: 15.7%, mining including agriculture and oil-well drilling: 14.8%, transportation: 8.8%, construction: 8.8%, commercial and sightseeing: 7.3%, and public welfare: 2.5%. Table 1.1 Exports of Non-oil Products in Saudi Arabia (1995-2016) Industrial Exports Percentage of Percentage of Year (SAR’ Million) Total Exports Non-Oil GDP 1995 22,558 12% 6.6% 1996 21,364 9.4% 6% 1997 24,721 10.9% 6.4% 1998 21,131 14.5% 5.5% 1999 19,488 10.3% 4.9% 2000 22,920 7.9% 5.5% 2001 26,547 10.4% 6.2% 2002 27,691 10.2% 6.3% 2003 35,743 10.2% 7.6% 2004 47,566 10.1% 8.7% 2005 60,000 8.9% 9.8% 2006 70,044 8.9% 10.2% 2007 83,311 9.5% 10.9% 2008 98,710 8.4% 11.4% 2009 84,997 11.8% 9% 2010 113,924 12.1% 10.6% 2011 151,125 11.1% 12.4% 2012 162,428 11.2% 12% 2013 171,041 12.1% 11.6%

Industrial Exports Percentage of Percentage of Year (SAR’ Million) Total Exports Non-Oil GDP 2014 185,631 14.5% 11.6% 2015 156,423 20.4% 8.9% 2016 145,911 21.2% 8.1% Source: Saudi Industrial Development Fund “Industrial Development in Saudi Arabia”

1.1.3. Population

According to General Authority for Statistics, the total population in Saudi Arabia is about 33.41 million, and the number is growing every year. As shown in Figure 1.2, the ratio of the 0-14 year-olds is about 24.6%, 15-65 year-olds is about 72.2%. From this fact, the market expansion and economic growth is expected. However, about 38% of the total population and about 44% of the working age people is not native Saudi Arabian.

3.2%

0-14 year-olds 24.6%

15-64 year-olds

72.2% 65~ year-olds

Source: Created by the Study Team based on General Authority for Statistics Figure 1.2 Age-specific ratio among the total population

As a part of “Saudization”, an initiative which promotes the employment of the natives, the Ministry of Labor is carrying out “Nitaqat”. Nitaqat meaures the ratio of the natives in private companies based on the standard of the Ministry of Labor, and classifies in 6 categories (platinum, high green, mid green, low green, yellow and red) according to their attainment. Platinum is the highest ratio category and red is the lowest. When companies attainment was low, they were given some penaltites such as the prohibition to issue and renew the visa of non-native workers. Nitaqat became one of the causes of losing labor from overseas; more than 667,000 people left Saudi Arabia since 2017.

Despite this situation, the number of non-native workers has been growing after 2014 while the number of native workers is remaining constant, and as mentioned above, the unemployement rate of the non-natives is 1% and that of the natives is 12%. It can be said that increasing the native employees is a problem to solve in Saudi Arabia.

1.1.4. Investment from Overseas

Saudi Arabian General Investment Authority (herein after referred to as “SAGIA”) extended the validity of investment licence, which was issued to foreign investors from 1 year to 5 years in February 2018 (Only 1 year-licence is also available if the investor want). In addition, to simplify the required procedures, the online-application was introduced. Through the online-application, the duration to get the licence is expected to be reduced from 2 days to 4 hours. The deregulation related to the investment in Saudi Arabia has been promoted, and the number of commercial registration by foreign company increased; according to MCI e-Portal, the number was 201 in 2017, and 261 in 2018. Moreover, the installation of the green card system within 5 year was announced at the same time as the publication of “Saudi Vision 2030”. The system allows foreigners working and staying in Saudi Arabia for a long time. Those facts show that the investment climate for foreign companies has been established.

In the end of October 2017, the economic investment forum “Future Investment Initiative” was held in Saudi Arabia, and the development project of a new industrial city “NEOM” was announced. This project plans to develop a city with the latest technology such as renewable energy which can cover all the energy consumption in the city, and it will be operated by Saudi Arabian government fund “Public Investment Fund (herein after referred to as ‘PIF’)”. The project will need 500 billion USD. It is expected that the investment will come from the government, the PIF as well as from private investments (local and foreign).

In the end of October 2018, “Future Investment Initiative” was held again and contracts for a total of 56 billion USD were made. Some speakers and sponsors such as the top of the financial agency and high government official from European and American countries did not attend the forum due to the killing in the consulate of Saudi Arabia in Turkey of Saudi Arabian journalist. This issue increased the political risk in Saudi Arabia and frozen the investment to Saudi Arabia by foreign companies and foreign investment by PIF. Prince Mohammad bin Salman Al Saud announced that the policy reform of the economy and the society in Saudi Arabia will not be changed after the affair mentioned above.

In January 2019, the Ministry of Energy, Industry and Mineral Resources (herein after referred to as “MEIM”) disclosed the plan to accept 450 billion USD of private investment by 2030 under the National Industrial Development and Logistics Programme (herein after referred to as “NIDLP”). NIDLP is the industrial strategy which promotes the investment to the mining industry and energy sector. According to the plan, 27 billion USD will be spent in 2019 and 2020.

This industrial strategy has 42 projects related to mining industy, distribution, and renewable

energy. As for renewable energy projects, about 60 GW renewable power generation is planed to be installed by 2030. Some candidate sites to install the renewable energy plant include some parts of the future city “NEOM”, which was announced in October 2017. Table 1.2 shows the projects related to renewable energy. Table 1.2 Projects Related to Renewable Energy Investment Project Site Outline (SAR’ Million) Nacelle Housing NEOM, Yanbu Plant to assemble wind nacelle housing 400 NEOM, Yanbu, Wind turbine blades Plant to assemble wind turbine blades 937 Rabigh Cells and modules NEOM, Sudair Plant to manufacture solar PV units 13,000 NEOM, Yanbu, Wind tower Plant to manufacture wind turbine towers 1500 Rabigh Al-Faisaliah solar park Al-Faisaliah 600MW solar power plant 600 Jeddah solar production Jeddah 300MW solar power plant 1,000 Rabigh solar production Rabigh 300MW solar power plant 1,000 Madinah solar PV park Madinah 50MW solar power park 188 Rafha solar PV park Rafha 45MW solar power park 169 Qurayyat solar PV park Qurayyat 20MW solar power park 75 Mahd al-Dahab solar PV Mahd al-Dahab 200MW solar power park 750 park Source: National Industrial Development and Logistics Program

1.2. Outline of Object Sectors of the Project

1.2.1. Power Sector

In Saudi Arabia, the peak power demand is 60GW, and almost all of the annual power demand (274,502GWh in 2014) is covered by power generation which mainly uses gas and oil (heavy fuel oil and crude oil). Along with the rapit growth of economy and population, the demand of primary energy increased 6.6% of annual rate during 2008 - 2014. Accordingly, the energy consumption in Saudi Arabia is estimated to increase 3 times by 2030. Also, Saudi Arabian government aims to reduce the fossil fuel consumption in Saudi Arabia and increase the exports of heavy fuel oil and crude oil to overseas for acquisition of foreign currency. Saudi Arabia prioritises securing energy sources other than oil (heavy fuel oil and crude oil).

Source: K.A.CARE “Building the Renewable Energy Sector in Saudi Arabia” Figure 1.3 Spread Plan of Renewable Energy in Saudi Arabia

Due to the reasons mentioned above, King Abdullah City for Atomic and Renewable Energy (herein after referred to as “K.A.CARE”) announced the spread plan of renewable energy by 2032 in 2012. K.A.CARE decided to install 41GW of photovoltaic and solar heat power generation and 13GW of other renewable power generation sources by 2032 (As of January 2015, the target year was prolonged to 2040). In addition, in July 2017, the cabinet of Saudi Arabia approved “Saudi National Atomic Energy Project” which brings the plan to construct 2 large power reactors and some small power reactors into perspective for the purpose of the divergence of energy mix and increase the generation capacity.

Saudi Arabian government has policies to improve power infrastructure, and to secure alternative energies such as atomic and renewable power and to reduce the frequency of blackouts, and to promote self-manufacture of technology and materials related to renewable energy. To expand and diversify the competitiveness of the energy sector and the investment to the energy sources, the government of Saudi Arabia built a clear standard of the subsidy according to the demand.

In December 2018, Saudi Aramco, the national company which has the largest amount of oil production in the world opened composite facilities to promote investment to power, manufacturing, and chemistory sector. The facilities are called “King Salman Energy Park (SPARK)” and are located between Dammam and Al Ahsa, in the Eastern part of Saudi Arabia. Moreover, Saudi Electricity Company (herein after referred to as “SEC”) is planning to install 300MW of solar power generation in connection with the project. The plan to provide 30GW of thermal heat (gas turbine) by 2030 was also proposed.

1.2.2. Mining Sector

Saudi Arabia is one of the richest countries in minerals. There are various kinds of minerals

such as gold, silver, copper, zinc, etc. Some promising mineral deposits were discovered in the western side of the Arabian Peninsula by early 1980, and then the first gold mine called Mahd abh Dhahab was developed in 1988. The government of Saudi Arabia established a national mining company in 1997 to promote the development of mining mineral resources.

About 250,000 million people was engaged in the mining sector as of 2019. This sector bears the economy and is very important for Saudi Arabia, which is making effort to be independent on oil. Also, mining sector is one of the investment targets of NIDLP.

In February 2019, the government of Saudi Arabia announced that about 3,800 million USD will be invested through NIDLP. It aims to create employment and be independent on oil by making the mining industry grow for a decade as part of the industrial strategy to verify the economy and promote 426 billion USD of investment. This investment will go to the improvement of data quality which reduces the risks of investment to mine gold, zinc, and rare eath etc. In addition, the government has already started the preparation of the digital platform to reduce the duration to get the permission of exploration from 6 months to less than 60 days. Also, the government made public that 51 exploration projects including 14 projects to explore gold and copper are taken into consideration.

In Saudi Arabia, there are some off-grid areas such as Sharourah, Farasan islan, and Rafha that are in the control area of SEC, and there are many mines in those areas. Those areas tend to provide the power by diesel generators. Since the government intends to reduce the consumption of the fossil fuels in Saudi Arabia, installing renewable energy is estimated to be effective as a investment to the mining sector.

1.2.3. Cement Sector

Saudi Arabia has the largest capacity and demand of cement among the Middle Eastern neighbor countries, and its market occupies approximately 61% of the demand in the GCC countries.

While the production including export in 2018 (45.28 million tons) decreased 4.1% compared to the previous year (47.24 million tons), monthly national sales in December 2018 increased 16.8% compared to the previous month though annual national sales in 2018 decreased 9.9% compared to the previous year. There are 17 cement companies in Saudi Arabia and the domestic market share is shown in Figure 1.4.

According to the interview from the Cement Companies, Cement industries have a large amount of

CO2 emission as well as the glass industry and the steel industry. In addition, almost of all cement companies in Saudi Arabia uses heavy fuel oil which is cheap and

provided by the government. It is Source: Cement Dispatches for December 2018 (Al-Jazira Capital ) estimated that the construction of Figure 1.4 Market Share in 2018 factories that utilize clean energy will be the main trend in the Saudi Arabian cement market from 2018 to 2022. Also, large-scale infrastructure development based on Saudi Vision 2030 announced by the government will promote the expansion of construction market, and it may be the cause to affect the cement market.

1.3. Trends in Policies

1.3.1. Saudi Vision 2030

Since the oil is the base of Saudi Arabian economy, the economy tends to be easily influenced by the oil prices. Due to the fall of the oil prices, the economy showed a loss for 4 consecutive ears from 2014 to 2017. To get out of the red, the government increased the price of fuel, water,

and electricity from December 2015. At the same time, the large Source: Study Team amount of subsidies by the Figure 1.5 Saudi Vision 2030 and Targets of government also took drastic NTP2020 measures. Commodity tax and other taxes were increased after 2017, and the sources of revenue will be verified by phased installation of value added tax and new taxes in the future.

Due to this situation, the government of Saudi Arabia announced its policy “Saudi Vision 2030” and “National Transform Program 2020 (herein after referred to as “NTP2020”) to be

independent on the oil in the economic and environmental aspect, and to realize the comprehensive development. Moreover, the other policies and programs such as “Nationally Determined Contribution (herein after referred to as “NDC”), “National Renewable Energy Program (herein after referred to as “NREP”), and “King Salman Renewable Energy Initiative” were also announced and have been executed.

Saudi Vision 2030 was designed and announced by the Council of Economic and Development Affairs, where the Croun Prince Mohammad bin Salman bin Abdulaziz Al-Saud acts as chairperson since April 2016. The growth strategy is in the center of the government’s policy. This vision has 3 pillars: “a vibrant society”, “a thriving economy”, and “an ambitions nation”, and has many concrete numeric targets. One of the targets is to increase the capacity of renewable energy generation to 9.5GW by 2023, however, the new Saudi Arabia renewable energy strategy changed it into higher target to increase the capacity to 58.7GW by 2030 in January 2019.

To achieve the targets of Saudi Vision 2030, many reform programs such as “the government restructuring program”and “the strategic directions program”are in process. In 2018, 28 billion USD were donated as the budged for the execution of the main infrastructure projects in Saudi Vision 2030. The amount was more than twice thah the previous year, 10.4 billion USD. The budget was allocated for the improvement of public health services, the construction of dams, the mining of wells, the leak detection services, the development of renewable enegies, and so on. Most of the expenditure in 2019 will be allocated to the economic resources and infrastructure, like the mega project which will be featured in Saudi Vision 2030 and renewable energy projects as well.

NTP2020 was built in July 2016 as concrete interim goals in the economic aspect; to increase the power generation capacity of renewable energy from 0GW to 3.45GW (The ratio among the whole generation capacity from 0% to 4%) by 2020 as one of the goals, for example. The goals are based on 6 points: balanced finance, reduction of expenditure, raising non-oil sector, privatization and stimulation of the private sector, improvement of unemployment rate, and policy of energy and resources.

Both NREP and King Salman Renewable Energy Initiative were announced by MEIM. The contents of them support Saudi Vision 2030 and NTP2020. The revision of legal regulations frame, the participation to the renewable energy sector by private companies, and the adjustment of the investment process are planned with the announcement of King Salman Renewable Energy Initiative.

Furthermore, NDC was conducted by MEIM in November 2016. NDC aims to reduce the GHG

emission of 130 million tons by CO2 conversion by 2030 through the installation of renwable energy, and to invest to the technologies of renewable energy and saving energy for breaking away from an economy dominated by oil.

1.4. Outline of Project Area

This feasibility study (herein after referred to as “F/S”) is focused in the off-grid areas which have possibility to install the photovoltaic power generation. As mentioned above, the main off-grid areas in Saudi Arabia are Sharourah, which is 150 ~ 200 km away from Yemen, Rafha and Farasan island which are close to the National border between Iraq. In Rafha and Sharourah, the northern and southern part of the off-grid areas controlled by SEC, Solar IPP project by Renewable Energy Project Development Office (herein after referred to as “REPDO”) are planned. In addition, Al-Uwaiyqilah and Farasan island are also off-grid areas. The gold mine area is off-grid as well, and REPDO is planning a 20MW of another Solar IPP project in the gold mine area in Mahd Aldhab. Mahd Aldhab has a 40MW small power plant, and REPDO and SEC will replace it with renewable energy as a project.

Rafha

Farasan Sharorah island

Source: Created by the Study Team on the Google map Figure 1.6 Main Off-grid Areas

Company A is examining to install solar power generation and battery to its own off-grid mines. According to the company A, the power demand in each mine is 30MW. This demand is enough to organize the off-grid power infrastructure at a constant scale. Also, this company A has some mines in the off-grid area, and these mines were also the candidates for this study.

Chapter 2. Survey Method

2.1. Surey Contents

In this survey, we conducted the investigations in the mine or the factory owned by mine or cement company, to examine the possibility of introducing a independent power source (photovoltaic power generation + hybrid battery) with EMS (Energy Management System) at the off-grid mines.

(1) Benefits to the host country by the project

・ Estimation of the effects on economy and employment creation, and CO2 emission reduction by the project

・ Explanation of the benefits by the project to the concerned agencies, which will promote their sufficient understanding to the concept of the proposal and superiority and reliability of the technology

(2) Trends in policies of government municipalities

・ Collection and organization of the information related to the policies such as Saudi Vision 2030

・ Explanation of the project to the concerned government agencies to understand that the project will promote the policies of the government of Saudi Arabia.

(3) Basic design of infrastructure system

・ Selection of the right site from the candidates of the project planning process, and a basic design

・ Examination of phased business model beginning from the installation works to the operation and maintenance work

(4) Collection, survey, and analysis of information for the proposal

・ Collection and organization of the information related to regulation to the installation works (civil work, environmental and social considerations, and development application)

・ Collection and organization of the information related to the power demand, the power quality, the grid configuration, telecommunications infrastructure, etc.

・ Analysis of the detailed teaming and global supply chain of each organization related to the project

(5) Calculation of the project scale

・ Calculation of the project scale based on the information above

・ Discussion with related agencies about the appropriate project scale

・ Report to the related departments of the METI, and receive feedback from them

(6) Implementation organization and schedule

・ Discussion of the precise implementation organization with the concerned Japanese and local companies by making use of the network between those companies and the JV

・ Making the implementation preparation schedule including the applications (development application, financial application, etc.)

・ Making the implementation schedule building the business model through the life cycle of the project

(7) Examination and proposal of finance

・ Discussion with the concerned organizations keeping the Joint Crediting Mechanism (JCM) project and application of prospective new scheme in mind

・ Examination of the offset finance as the secondary purchase price of base metals for the EPC project

(8) Outlook of application for the policy supports

・ Examination of the application for ODA loan fund cooperation to Operation and Maintenance

・ Examination of the application for the supports related to “Japan Saudi Vision 2030”

(9) Survey of reduction of CO2 emission of energy origin, effect of environmental improvement, and influence on the environment and society

・ Estimation of the reduction of CO2 emission based on the project scale

・ Survey and organization of the environmental regulations and environmental guideline in the Saudi Vision 2030 to calculate the effect of environmental improvement

・ Making the environmental check list based on “Guideline for Environmental and Social Considerations” issued by JICA

(10) Confirmation of advantages of Japanese companies/survey for enhancement of the project

・ Confirmation of the advantages in the project and business development in Saudi Arabia through the interview to Japanese Companies

・ Thick discussion with the concerned agencies and examination of correspondence to the demand from the Client

・ Examination of correspondence to the foreseen/not foreseen risks

(11) Possibility of wide development and promotion measures of development

・ Examination of the off-grid electricity energy infrastructure keeping the future candidates of the project site and the business model for the site in mind

(12) Plan of cost competitiveness reinforcement when Japanese company joins the project

・ Definition of the infrastructure quality required to the project, and examination of application of the eliminated technology

・ Examination of the cooperation with the companies in the third country or local area regarding to the field which does not have high added value

2.2. Survey Method and Organization

(1) Field Survey

・ The field survey was conducted based on the results of the domestic survey about the outline and the background of the project. To define the challenges of participation of Japanese companies, the local demands and the situation of infrastructure improvement, we organized the field survey. Selection of the project site and verification of installation validity of energy supply infrastructure was also conducted.

・ The field survey was conducted three (3) times, and each survey was about for one (1) week. Each survey team consisted of three (2) or four (6) members. The future problems were defined by sharing the information gained through the visit to the host country’s government, the concerned agencies and companies, etc.

(2) Domestic Survey

・ Necessary information through the sources such as books, internet, news, and other survey reports to conduct the survey listed above were collected and analysed.

Oriental Consultants Global Co., Ltd. Project Manager, Photovoltaic Power Generation, Regulations/Policy Information Collection/Environmental and Social Considerations, Economics/Financial Analysis, Cost Estimation

Marueni Metals Corporation Feasibility Examination Recommission

Kyuden International Corporation Battery, EMS Recommission

Figure 2.1 Implementation Organization

2.3. Survey Schedule

(1) Schedule

Schedule is shown in Table 2.1 below.

Table 2.1 Schedule 2018 2019 Survey Items 11 12 1 2 3 Field Survey 【First Field Survey】 Proposal of the Project Information collection Interview with the concerned people 【Second Field Survey】 Visit/Selection of the candidate sites Confirmation of feasibility Discussion about the project implementation 【Third Field Survey】 Schedule adjustment for the project implementation Discussion for the agreement of the project implementation Holding of the reporting session Domestic Survey Analysis of existing materials / information Project design Meeting with the concerned people in Japan Discussion about the policies and measures of the field survey Report on the field survey Preparation of the report, and reporting

(2) Field Survey Schedule

We conducted the field survey 3 times in total. Each schedule is shown in Table 2.2 ~ Table 2.4 below. The survey team had meetings with main agencies such as company A (a mine company) and concerned government agencies, and discussed the project implementation with them. Table 2.2 First Field Survey Schedule Date Contents Place Marubeni The team planned to visit mines, and collected materials 12/3(Mon) Corporation related to the minerals and the mines in Saudi Arabia Riyadh branch Interviewed about materials which can be references of 12/4(Tue) MEWA regulations of environmental and social considerations in

Date Contents Place Saudi Arabia Visited the Mine, and interviewed Outline of the Mine of the affiliated company of company A The mine of the (number of workers, positional relation between towns and 12/5(Tue) affliated company cities around the mine) of company A Status of power supply, power plant and average power consumption, variation of power demand by seasons, etc. Marubeni Organization of survey results, and organization and design 12/6(Wed) Corporation of future survey plan Riyadh branch Interviewd about the installation of photovoltaic power The office of the 12/9(Sun) generation stake holders Interviewed about the situation and recognition of JCM in 12/10(Mon) DNA Saudi Arabia and situation of CDM Interviewed about the Environmental and social considerations when photovoltaic power generation is GAMEP installed 12/11(Tue) Interviewed about the Off-grid area in Saudi Arabia and the procurement of the Diesel Generator for the off-grid in a gold SEC mine Interview of the place where the meteorological data such as 12/12(Wed) solar radiation in Saudi Arabia is collected K.A.CARE

Table 2.3 Second Field Survey Schedule Date Contents Place 2/4(Mon) Interview about the power condition in the off grid area SEC 2/5(Tue) Interview about the project implementation and field survey Company B Interview about the policy for the renewable energy K.A.CARE Marubeni Interview about the plan of the introducing renewable energy Corporation 2/6(Wed) of the company G (agricultural products seller) Riyadh branch Interview about EPC business (mainly solar power generation) Company E with the company E (EPC company) The cement 2/7(Thu) Field survey factory of the company B SEC 10MW 2/8(Fri) Site visit of solar power generation Solar site 2/9(Sat) Movement - 2/10(Sun) Field survey the mine of the

Date Contents Place affiliated company of company A 2/11(Mon) Movement - 2/12(Tue) Interview about the installation of the battery in Saudi Arabia SEC Report about the progress of the F/S to Mr. Kobata from Marubeni 2/13(Wed) Embassy of Japan in Saudi Arabia Corporation Riyadh Branch 2/14(Thu) Interview about EPC of the solar power generation project TYPSA 2/17(Sun) Organization of collected information - 2/18(Mon) Movement - Report of the field survey in the mine the affiliated 2/19(Tue) company of company A

Table 2.4 Third Field Survey Schedule Date Contents Place 3/10(Sun) Presenting the result of the study Company B 3/11(Mon) Internal Meeting - 3/12(Tue) Movement - The affiliated 3/13(Wed) Presenting the result of the study company of company A

Chapter 3. Contents of the Project and Examination of Technical Aspects

3.1. Background and Necessity of the Project

3.1.1. Renewable Energy Trends in the World

The Paris Agreement launched in 2017 has a long-term goal which aims to balance the emission of GHG and its absorption by forests in the late 21st century through making efforts to reduce world’s GHG emission as soon as possible by keeping the rise of the world average temperature lower than 2°C, preventing it from surpass 1.5°C. The effect of shifting conventional energy sources to renewable energies contributes to reduce the GHG emission, and the installation of the renewable energy has been promoted in the world.

The total amount of renewable energy which was newly installed in the world in 2016 was of 161GW, and its ratio was increased about 9% compared to the previous year. Also, the amount of new investments for renewable energy was of 249,800 million USD. This amout has been twice as that for the thermal power generation for 5 consecutie years. The amount of the investment for renewable energy is gradually increasing; the amount in 2016 grew 2.5 times from 2006. In addition, the Renewables 2017 Global Status Report issued by REN21 said that 65% of renewable energy experts estimate that the ratio of renewable energy among the world will be more than twice as present by 2050.

(1 billion USD) 350

300

250

200

150

100

0 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Source: Created by the Study Member based on Renewables 2017 Global Status Report issued by REN21 Figure 3.1 Investments for Renewable Energy Power Generation / Fuel in the World

The total capacity and annual installation of the photovoltaic power generation in the world has been growing about 300 times in a decade, from 2006 to 2016, and the demand is estimated to continue increasing in the future.

(GW) 350

300

250

200

150

100

0 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Source: Created by the Study Members based on Renewables 2017 Global Status Report issued by REN21 Figure 3.2 Total Capacity and Annual Installation of Photovoltaic Power Generation in the World

3.1.2. Renewable Energy Trends in the Middle East

According to the GTM Research1, 8GW of photovoltaic power generation (herein after referred to as “PV”) will newly be installed in 2018, and the total PV installation is estimated to reach 22.4GW by 2023. The reason for the increase of PV installation in the Middle East, is in charge of government’s policies. The Institute of Electrical Engineers of Japan (herein after referred to as “IEEJ”) (2018)2 said that the countries in the Middle East are aiming to achieve an economy independent on the oil industry by promoting the installation of the renewable energy to save the oil as the precious export resource, diversification of industrial structure and expansion of employment. The second reason is their climate and geographic conditions; they have abundant solar radiations and large deserts. The third reason is that the companies which develop the PV can reduce extra costs since the governments in each country usually secure the land and the connection of the transmission lines in advance. The cost of power generation by large-scale PV in the Middle East is cheap among the world (IEEJ 2018), and UAE and Saudi Arabia had

1 GTM Research, “Global Solar Market Attractiveness Index” 2 Periodical reports by IEEJ, May 2018

renewed the world lowest price of the sales agreement of PV bidding3.

3.1.3. Integrity of Renewable Energy Trends and Government Policy in Saudi Arabia

Saudi Arabia is one of the leading countries among the Middle East countries which introduced renewable energy. In 2016, the government of Saudi Arabia aimed to install 9.5GW of renewable energy (5.5GW of PV is included) by 2023 as the national growth strategy for being independent on oil based on Saudi Vision 2030. However, it was changed in January 2019; the new goal aims to install 58.7GW of renewable energy by 2030. It includes 40GW of PV and 16GW of wind power generation. In addition, Saudi Arabian government and Softbank Group from Japan exchanged a memorandum in regard to the construction plan of mega solar in March 2018, and it is estimated that the facility capacity will be 200GW and the total investment will be 200 billion USD (approx. 21 trillion JPY). The news reports announced that the project suspend its operation in the past, but Mr. Khalid A. Al-Falih, the Minister of MEIM said that the project was resumed in December 20184. The reasons why Saudi Arabia is largely installing renewable energy are same as the other Middle East countries descrived above. Especially in Saudi Arabia, where the raising the domestic oil prices to the international markets were done in order to get more foreign currency incomes.

3.2. Selection of Project Site and Examination for Implementation

The off-grid areas mentioned above have possibility to be the project site. To install the energy infrastructure, easy access to information is important. Therefore, the study team chose the mine owned by the affiliated company of company A and the cement factory operated by company B, one of the 17 cement companies in Saudi Arabia as the candidate of the project sites. Their outlines are as follow:

3.2.1. The Mine of the affiliated company of company A

The mine is lolated in the off-grid apart from neighboring power supplies. There are 186 workers in the mine. About 50 of them commute from neighbouring area of the mine, and the

3 According to IEEJ (2018), the consortium of ACWA Power from Saudi Arabia and Spanish company’ s tender for the 200MW photovoltaic power generation project was accepted by 5.85 cents/kWh (the lowest price in the world at that time) in the bidding held by Dubai Electricity and Water Authority (DEWA) in UAE in January 2015. In addition, the 300MW Sakaka photovoltaic power generation project which executed by REPDO adopted the tender by ACWA Power by 2.34cents/kWh in February 2018. 4 URL: https://www.epochtimes.jp/2018/12/38822.html

others stay in the camp in the mine.

3.2.2. The Cement Factory of the company B

The cement, which is produced in the factory have two types,: Ordinaly Portland Cement which is used for modern buildings, repairing, and maintenance, and Sulphate-Resistant Cement which is used for dams and water desalination facilities.

The cement plants are composed of 2 kilns and diesel generators (herein after referred to as “DG (s)”). There are apartment-houses for family and residential area for the singles 2km away from the plants. The power in the apartment-house is supplied by rental DGs with 0.5MW of capacity, and the power in the residential area is supplied by the DGs in the plant. The heavy fuel oil which purchased from the government and chips of wasted tires which is purchased from the municipality of Riyadh is used as the fuel.

3.2.3. Examination of Project Model

As described above, Saudi Arabia has many independent grid areas which are not connected with any large-scale power grid, and the diesel generators are supplying the power there. The unit price of the power generation in those areas is high due to the transportation cost of the fuel for power generation and the maintenance. To solve the problem, the existing diesel generators will be substituted by the independent off-grid power source (PV + battey) and EMS will control the independent power source. Through this solution, the reduction of diesel fuels will be possible, and it will also contribute to the reduction of national oil consumption and GHG emission.

Keeping the demand and supply balance of the power is important but also it is important to keep its quality. When it is connected with a large-scale power system, the control system is equipped and keeps the balance, but, the off-grid areas are required to keep the balance by themselves. The reasons to break the demand and supply balance in the off-grid areas with PV systems are fluctuation of the power demand and fluctuation of the solar power generation along with changes of the weather. In order to keep the demand and supply balance under those conditions, the battery system has to charge and discharge according to the fluctuation and EMS will make hybrid control if necessary. Also, the efficiency of the existing diesel generator will be studied and their availability as the backup power source will be verified. A best organization of power sources and control methods as well as the power infrastructure in the off-grid areas will be examined.

3.2.4. Examination of Legislative System Related to the Project

There are some formalities and legislative systems for the installation of the Project’s main component, PV generation as follow. 1) Environmental Impact Assesment (herein after referred to as “EIA”) 2) Subsurface investigation 3) Grid impact study 4) Licence aquisiton from Electricity and Cogeneration Regulatory Authority (herein after referred to as “ECRA”) 5) Land aquisition 6) Acquisition of permission for construction from the municipality 7) High Commission for Industrial Security (herein after referred to as “HCIS”) In case of the IPP of PV generation by REPDO which is ongoing in Saudi Arabia, REPDO is in charge of 1), 2) and 3) above. The project company will be in charge of 4), and the EPC manufacturer ordered by the project company usually will be in charge of 6) and 7). The party which is in charge of 5) depends on the project. This project plans to install the PV generation to the off-grid areas, which are owned by the private companies. The procedures and the correspondences for this project are shown in Table 3.1. Table 3.1 Procedures for Installation of PV Generation Correspondence by the Correspondence by the Procedures/Legislative System Summary affiliated company of company B company A EIA Refer to “4.1 Policies, It will be carried out It will be carried out laws, and regulations according to the related according to the related related to law law environmental and social considerations4.1” Subsurface investigation Investigation of soil It will be carried out by It will be carried out by bearing capacity the EPC manufacturer the EPC manufacturer required by the structural design of the foundation and the frame for PV generation and battery Grid impact study Estimation of the Utilization of the PV Utilization of the PV influence to the generation in the generation in the large-scale grid by off-grid areas is off-grid areas is simulations when the excluded from the excluded from the

Correspondence by the Correspondence by the Procedures/Legislative System Summary affiliated company of company B company A renewable energy is procedures procedures connected with the large-scale grid Licence acquisition from ECRA Acquisition of the The affiliated company Company B will be in development licence of company A will be in charge of the power project charge along with the electricity law established by ECRA Land aquisition Land acquisition for It is excluded from the It is excluded from the the place to install the procedures since the procedures since the equipment mine area to install the area which is adjacent PV generation is to the cement factory is already owned by the already owned by the affiliated company of company B company A Acquisition of permission for Acquisition of Ditto Ditto construction from the permission for municipality construction from the municipality which owns the land to install the equipment HCIS Measures to remove It is excluded from the Safety ensuring by the effects on the procedures since the installing fences around safety of the mine area to install the the candidate sites neighboring areas PV generation is which is adjacent to the (regulations by the already owned by the the company B Ministry of Home affiliated company of Affairs) company A Source: Study Team

3.2.5. Examination of Project Implementation in the Potential Sites

(1) Current status of the equipment in the potential sites

a) The mine of the affiliated company of company A

・ Equipment Profile

The mine of the affiliated company of company A has 5 diesel generators and 3 generators are always under operation.

・ Power Demand and Operation Status

The daily maximum power generation and the daily power consumption (kWh) were confirmed based on the daily load curve of July 27th 2018 and February 9th 2019 shown in Figure 3.3. The daily mean of maximum power is 1.5MW ~ 2MW (the hourly output was 2,400kW at maximum and 824kW at minimum in February 9th 2019), and the daily mean of power consumption were 46MWh/day in July 2018 and 33MWh/day in February 2019 (from February 2nd to 8th). The difference of the power consumption between the data of the 2 days was 12MWh (refer to Table 3.3 and Table 3.4).

The major power demands comes by the crushing activities in the mine, by the diesel train load out, and by ROM dump station load as shown in Source: Study Team.

The data in July shows a decrease of power load at 6:30 and 19:30. The cause was the stop of the operation along with the shift of the operators. The 2 shifts system was adopted for the operators according to the diesel train load out in the morning and the evening.

The power load does not have any sharp fluctuations throughout a day, however, 3 diesel generators are always operated because 5 ~ 6MW of the sudden load at maximum occurs when the crusher is operated or the diesel train load out is done. Each sudden load period is very short but the diesel train load out takes 4 ~ 5 hours per once, and it is assumed that this makes the sudden loads occur intermittently.

Source: Study Team Figure 3.3 Daily Load Curve in the Mine of the affiliated company of company A (kW) (on Jul. 27th 2018 and Feb. 9th 2019)

Table 3.2 Electricity Usage of Each Feeder in the mine

TIME FEEDER 1 FEEDER 2 FEEDER 4 FEEDER 5 FEEDER 7 FEEDER 8 FEEDER 10 FEEDER 11 TOTAL

7:30 36 170 52 56 47 92 219 54 824

8:30 155 170 452 47 41 94 264 54 1361

9:30 172 179 555 48 48 108 249 57 1575

10:30 178 171 485 891 48 109 249 50 2470

11:30 178 170 455 907 50 102 253 56 2378

12:30 158 170 466 59 19 109 241 50 1281

13:30 163 171 430 59 21 103 216 55 1244

14:30 170 171 380 46 26 99 200 52 1224

15:30 145 170 563 849 18 97 317 54 2242

16:30 37 171 40 205 23 86 218 55 879

17:30 115 170 462 280 25 85 263 56 1519

18:30 154 171 270 273 37 94 254 54 1214

19:30 112 172 274 47 41 89 282 54 1146

20:30 108 172 468 352 37 92 278 54 1624

21:30 1163 180 492 46 38 91 242 54 1422

22:30 162 163 522 46 36 93 235 56 1392

23:30 170 163 483 46 38 39 228 54 1390

0:30 145 163 414 46 37 97 204 52 1251

1:30 146 163 416 46 41 97 227 55 1259

2:30 176 163 415 46 41 97 225 55 1250

3:30 177 163 509 46 39 90 223 52 1376

4:30 246 162 518 46 36 86 223 53 1366

5:30 175 164 509 46 37 94 219 55 1422

6:30 157 164 476 46 35 89 297 53 1422

Source: Study Team

*The total number and the total of the fedder doesn’t match because the data of every hour is checked by the visual

observation Source: Study Team Figure 3.4 The demand of the every fedder in the mine

Table 3.3 Daily Power Consumptions in the Mine (from Feb. 2nd to 8th) Date 2/2 2/3 2/4 2/5 2/6 2/7 2/8 kWh/day 35 33 34 35 29 31 31 Source: Study Team Table 3.4 Comparison of Power Consumptions in the Mine Power Difference July 27th (summer) February 9th (winter) Consumption (July/February) Average of power 1,924kW 1,439kW +485kW consumption Total power 46MWh 34MWh +12MWh consumption Source: Study Team

・ Problems on Operation

For the average demand 2MW, 3 DGs with 2.2MW rated capacity are always operated; the load factor of each DGs is 30%. Such operation causes the increase of the fuel cost derived from the degradation of the oil consumption and affects on the DG life span. By reconsidering the number of the DGs to operate will make possible to operate with a higher load factor.

Nevertheless, the crushing and the train load out to carry out the products from the storage takes 4 ~5 hours every day, and those works make the power load raise to 5 ~ 6 MW at maximum per once. To cope with this fluctuation, 3 DGs are needed to be constantly operated.

・ Fuel Cost and Consumption

The price of the gas oil procured by the government of Saudi Arabia is 48 halala/ ℓ by March 2019 and it is supplied from the city which is 200km away from the mine. According to interview from the worker in the mine, the total fuel cost including the transportation cost is estimated to be 49 halala/ ℓ.

According to the interview, annual fuel cost of the gas oil is 1 million SAR.

b) Cement Factory Operated by company B

・ Equipment Profile

As mentioned above, there are 17 cement companies in Saudi Arabia and company B is one of them. It has a middle class factory with 10,500t/day (5,000t/day + 5,500t/day) of the production capacity, and 3.8 million tons of the cement is usually produced every year.

The factory has 10 DGs, 1 steam turbine, and 1 DG for a black start in the whole area. All the power generators are made by Wartsila, a manufacturer in Finland. The DGs are divided into 2

sections; section 1 consists of 6 DGs with 7.5MW rated capacity (total 45MW), and section 2 consists of 4 DGs with 8.25MW rated capacity (total 33MW). The total rated capacity of the 10 DGs (excludes the DG for a black start) is 78MW. The steam turbine is made in China, and its capacity is 14.25MW utilizing the steam which is generated by the waste heat recovery. The total power capacity surpasses 90MW.

The fuel of the DGs is heavy fuel oil (both for gas oil and for heavy fuel oil are used to the tank names but the heavy fuel oil is actually used). It is transported from Western Yanbu Refinery which is 1,000km away from the factory by a tank lorry every day. The steam turbin power generator uses the toll waste tires as its fuel, and is used for kiln. The company B is the leading company which is trying to reduce the fuel consumption and effectively uses the industrial waste at the same time.

・ Power Demand and Operation Status

By checking the operation status, the power capacity keeps 35MW degree, and there is not any sharp fluctuation of the power load throughout a day and a week except for the holidays.

The main power loads are by the mills and the kilns.

There are some periods where the power capacity decreases in the daily record of the power load. It is assumed that the decrease is caused by stopping the kilns when the silo gets full, and about 8MW reduction. Its duration is about 4 ~ 5 hours. Moreover, the record of the power capacity for a week (from January 30th to February 7th) shows the periodic increase and decrease of the power capacity, and it continued for a few hours per once.

When the study team visited the site, only 1 series of rotary kiln were operated though there are 2 series of rotary kiln, and the power load was 35MW ~ 40MW. 2 of the 6 DGs of section 1 were operated (7.5MW x 2 = 15MW) and 2 of the 4 DGs of the section 2 were operated (8.2MW x 2 = 16.4MW): 32MW in total. Also, the steam turbine generator (HWR: 14.3MW) was operated and its total capacity was 46.3MW. Even if both series of rotary kilns were operated, the power load will be 60 ~ 70MW and always becomes less than 90MW. The maximum capacity is assumed to be about 90MW when the power loads suddenly rose due to the operation of the crushers and the mills.

・ Problems on Operation and Fuel Cost

There are 10 DGs in total and they use heavy fuel oil. The heavy fuel oil has a larger impact on the environment than the gas oil while the heavy fuel cost is estimated to be much cheaper. According to the fuel cost extimation based on the interview, the heavy fuel oil costs 9 halala/ℓ and the transportation cost is 9 halala/ℓ (assumption), so the total cost will be of 18 halala/ℓ.

Moreover, the power plant stops some DGs according to the power load status: the availability was kept high (80% per DG on the day which the study team visited).

Thus, the operation of the DGs was carried out very effectively when the impact on the environmental aspect is not considered.

(2) Operational Elements of Facilities in the Potential Sites

a) The Mine of the affiliated company of the company A

Daily mean of fuel usage : 10,920 ℓ/day (2/2 ~ 2/8) Daily mean of power usage : 34MWh/day (2/2 ~ 2/8) Annual fuel usage : 10,000ℓ/day × 300 days = 300 million ℓ/year Annual power usage : 34MWh/day × 300 days = 10,200,000MWh Fuel consumption of power : 0.32ℓ/kWh generator Efficiency of power generator : 29.5% = (34,000kWh × 3.6MJ/kWh)/(10,920ℓ×38MJ/ℓ) Heat capacity of diesel oil : 38MJ/ℓ (Standard Heat Capacity) Unit price of fuel (diesel oil) cost : 0.48SAR/ℓ≒0.5SAR/ℓ Annual fuel cost (assumption : 300 million ℓ/year × 0.5SAR/ℓ = 1.5 million SAR/year = basedon the usage) 45 million JPY/year Annual fuel cost (result from the : 1 million SAR = 30 million yen/year interview) Cost per kWh : 4.8 JPY/kWh (= 0.32ℓ/kWh × 0.5SAR/ℓ × 30 JPY/SAR)

b) Cement Factory Operated by company B Daily mean of fuel usage : 1 million ℓ/day (Consumption by both Kiln and DG is included. The allocation to the power is unclear.) Daily mean of power usage : Not identified Annual fuel usage : 300 million ℓ/year (Consumption by both Kiln and DG is included. The allocation to the power is unclear.) Fuel consumption of power : 0.24ℓ/kWh generator Efficiency of power generator : 38.7% (= 6,637kWh × 3.6MJ/kWh) / (1,584ℓ × 39MJ/ℓ) (Wartsila Catalog value: 44%) Heat capacity of heavy fuel oil : 39MJ/ℓ (Standard Heat Capacity) Unit price of fuel (heavy fuel oil) : 0.18SAR/ℓ (= 0.09SAR/ℓ + transportation cost cost (from the interview) (0.09SAR) ) Cost per kWh (from the interview) : = 1.30 JPY/kWh (= 0.18SAR/ℓ × 0.24ℓ/kWh × 30 JPY/SAR)

3.2.6. Examination of Basic Design of Infrastructure system

The proposed system for the off-grid area is comprised of: PV, the battery system, EMS and other peripheral devices.

Source: Study Team Figure 3.5 System to Suggest (in the Mine of the affiliated company of the company A)

Though the data of power demand and solar radiance for 1 year in the potential sites is needed to calculate the best capacity of PV and the battery, the data was not obtained in the F/S. The power demand data for 24 hours which was supplied in the sites and the PV capacity data on March 23rd 2017 in Cuba (24 degrees north), which is almost the same north latitude as Saudi Arabia were used to calculate and examine the best capacities.

(1) The mine of the affiliated company of the company A

・ Selection of PV Output, Battery Output and Capacity

In this F/S, the data of the power demand in the mine in July 2018 and February 2019 was obtained. There were some differences in the power load between those data. However, the interview in the mine provided information that the power load usually keeps almost 2MW (it sometimes sharply increase to 5 ~ 6MW for a short time during the crushing or the train load out, though). Unfortunatelly, this F/S could not get the annual data of the power load; the information from the interview that the power load keeps almost 2MW is assumed that it is accurate and proper to simulate.

Presently, 3 DGs with 2.2MW rated capacity are always operated although the power load is 2MW; the fuel cost is wasted. This examination aims to reduce the 1/3 of the whole fuel cost by introducing the PV and the battery system.

When the time zone where the PV can generate power is taken into the consideration, the operation during the night should be the same as the present. Instead, the number of DGs which are operated during the daytime should be decreased as much as possible to reduce 1/3 of the whole fuel cost; and the number of the DGs should be limited to only 1 at the maximum. On the other hand, since the project sites are located in the off-grid area, to make the source of the voltage and the synchronizing power from the rorary machines zero base is not profitable plan in terms of the securing the power of the Power Conversion System (herein after referred to as “PCS”) and EMS, and correspondence to the rush current occurs with the launch of DGs in case of considering the problems on distribution system.

This examination assumes that at least 1 DG is active while the PV is operated during the daytime.

Source: Study Team Figure 3.6 Demand in July 2018 and PV Generation in the Mine

When the condition mentioned above (the power demand is 2MW and 1 DG is operated) is put into the consideration, 2MW is estimated to be enough for the PV capacity since the DG capacity is expected to be 2.2MW at the maximum and 440kW (20% of the rated capacity) at the minimum.

First of all, the fuel cost reduction rate when the 2MW of PV is installed was simulated based on the assumption above and the power load data in July 2018. The fuel cost reduction rate became 32% and it almost achieved the target in this simulation.

Also, the battery capacity to store the surplus power generated by the PV was simulated at the same time. According to the result, the necessary capacity is 1.7MWh; it is estimated that 2MWh would be enough for a battery capacity with 20% tolerance.

月最低蓄電池容量制限なしケース 2,500

2,000

1,500

1,000

500

DG Generation Battery Discharge PV Direct Stored Energy PV Generation

Source: Study Team Figure 3.7 Simulation Result of the Battery Capacity in the Mine (with 20% of DG Generation)

DG全台停止許容ケース 2,500

2,000

1,500

1,000

500

DG Generation Battery Discharge PV Direct Stored Energy PV Generation

Source: Study Team Figure 3.8 Simulation Result of the Battery Capacity in the Mine (without Any DG Generation)

The case when all the DGs are stopped was also simulated for reference. In this case, 500kWh is enough for the battery capacity (to adopt this simulation result, some technical problems such as stopping all the DGs should be solved).

Following the first simulation, the fuel cost reduction when the 2MW of PV is installed based on the power load data in February. Though the battery capacity does not increase, the fuel cost reduction rate became 33%; in this case almost achieved the target as well.

Source: Study Team Figure 3.9 Power Demand in February 2019 and PV Generation in the Mine

However, the power demand data in February 2019 is extremely different from the result of the interview, and the average demand is about 1.5MW. As descrived above, this F/S could not

obtain the annual power load data and the annual mean of power demand was about 2MW according to the interview. From the viewpoint of those conditions, the credibility of this data is questionable if the operation was nomal. Therefore, it is assumed that the situation was special on that day and the result is used just for reference.

・ Functions Assumed for EMS

EMS is one of the technologies Japanese enterprises are in excellent position in the world. Functions shown in Table 3.5 will be necessary deriving from the past demonstration results and the commercialized products by Japanese manufactures. Table 3.5 Functions Assumed for EMS

Function Contents 1. Monitoring of PV Collect the total generation by each PV and calculate its short cycles generation fluctuation Control the charge/discharge to restrain the short cycles fluctuation 2. Monitoring of Monitor the deviation from the standard frequency and calculate the Frequency MW which is equivalent to the short cycles fluctuation Control the charge/discharge to restrain the short cycles fluctuation of the frequency fluctuation 3. Monitoring of the Monitor the charged power in the battery and calculate the amount of battery status and dischageable power control of the Control the charge/discharge of the battery based on the difference charge/discharge between the power generation and the demand 4. Monitoring of power Detect the power drop of the operating PV and DG drop Control the discharge of the battery to cover the power drop 5. Predict of PV Predict the fluctuation of power generation for several hours, and plan generation and control the power storage rate of the battery and/or the number of diesel generators to run to cover it 6. Restraint and control When the DG generation adjustment cannot cope with the surplus of PV generation supply to the demand, the PV generation will be restrained to the bare necessities according to the number of active DGs and their capacity, the capacity of each solar park, and their expectancy. 7. Control of system Since the quantity of the reactive power which can supply to adjust the voltage voltage decrease according to the decrease of parallel operation of DGs, the reactive power which restrains the voltage fluctuation will be controlled.

(2) Cement Factory

・ PV capacity

There are 2 series of rotary kilns. The power load when both series are operated is 60 ~ 70MW degree, and the power load when only 1 serie is operated is 35 ~ 40MW degree. According to

the interview, the 2 series are hardly operated at the same time; usually only 1 is operated. To supply for the power load, 1 steam turbine (14.25MW) and 5 DGs are usually operated. As the assumption of the examination, 1 steam turbine and 1 DG will be remained and the other 4 DGs will be replaced with PV to reduce the fuel consumption as much as possible.

The steam turbine will be constantly operated. When the capacity of the steam turbine is realistically taken into consideration, the capacity which will be replaced with PV is 20MW in case of this simulation.

Source: Study Team Figure 3.10 One Kiln and PV20MW/40MW

Figure 3.10 shows the power demand for 24 hours in the cement factory and 20MW and 40MW of PV generation. a) Installation of 20MW of PV

For the 35MW of power demand, the steam turbine (14.25MW) is assumed to perform the rated operation and 1 DG is assumed to have the lowest power load (3.5MW). When all the remained power demand is covered by PV, the minimum power capacity which can supply (equivalent to 2 DGs) becomes as shown in Figure 3.11.

Source: Study Team Figure 3.11 One kiln and PV20MW

・ Battery Capacity

As shown in Figure 3.10 and Figure 3.11, there is not any time zones which the 20MW of PV generation surpasses the demand unlike the mine of the affiliated company of company A; the battery is not needed since the surplus power will not be generated.

However, the active DGs do not have any reserved capacity and the PV capacity is minimal. If PV capacity decreased, the suspended DGs need to be activated.

Thus, to cover the demand for 20 minutes during the startup of the DGs, 20MW/6.7MWh of the battery capacity is necessary.

The reduction rate of the fuel cost will be about 21% (▲153MWh/day) (the orange zone of Figure 3.11). b) Installation of 40MW of PV

For the 35MW of the power demand, the steam turbine (14.25MW) is assumed to perform the rated operation and 1 DG is assumed to have the lowest power road (3.75MW). When all the remained power demand is covered by PV, the spare rate of the PV generation will be same as the usual operation (equivalent to 4DGs).

PV=40MW キルン1台

45,000

40,000

35,000

30,000

25,000

20,000

15,000

10,000

5,000

0 7:30 8:30 9:30 10:30 11:30 12:30 13:30 14:30 15:30 16:30 17:30 18:30 19:30 20:30 21:30 22:30 23:30 0:30 1:30 2:30 3:30 4:30 5:30 6:30 DG Generation B Discharge PV Direct PV Output

Source: Study Team Figure 3.12 One Kiln and PV40MW

・ Battery Capacity

Figure 3.12 and Figure 3.13 will show the power demand for 24 hours in the cement factory and the 40MW of PV generation. In this case, PV generation will surpass the power demand and there will be some surplus power. The battery stores them to discharge when the PV capacity decreased (the green zone of Figure 3.12). The battery will be installed to store the surplus power.

The necessary battery capacity will be 20MW/63.3MWh. In this case, the fuel cost reduction rate will be about 39% (▲287MWh/day) (the orange zone of Figure 3.12).

Source: Study Team Figure 3.13 The reduction rate of the fuel by introducing the PV and battery

Figure 3.13 shows the PV generation, the battery capacity, and the fuel cost reduction rates.

For the assumed function of EMS, the restraint and the control of PV generation is not needed since the situation which forces to restrain the PV generation since some DGs are constantly operated. Except for this point, the assumed function is the same as the mine case.

Chapter 4. Environmental and Social Considerations

4.1. Policies, laws, and regulations related to environmental and social considerations

4.1.1. Overview of policies, laws, and regulations related to environmental and social considerations

Article 32 of the Basic Rule of Governance for Saudi Arabia states says: the State shall endeavor to preserve, protect, develop the environment and prevent its pollution. The sustainable use of natural resources is under the 6th objective of Saudi Arabia’s 10th Development Plan, which aims at: Increasing the added value of natural resources in the national economy, diversifying their source, ensuring their sustainability, protecting the environment, and conserving wildlife.”

Accoring to the General Environment Law and Rules for Implementation, issued by Royal Decree 34/M on 28/07/1422H (15 October 2001), Environmental regulations including the Environmental Protection Standards and the procedures of Environmental Impact Assesments (EIA) were estableished. The outline of the General Environmental Law is shown in Table 4.1 below. Table 4.1 Outline of the General Environmental Law Article Contents Remarks related to the proposed project 1 Definitions and Goals 2 Goals 3 Duties and Obligations of the competent agency 4 Actions and responsibilities of Public agencies 5 Actions and responsibilities of licensing Licensing agencies must verify that the EIA agencies for EIA studies are conducted at the project FS stage. 6 Actions and responsibilities of the agency implementing new projects 7 Environmental education 8 Actions and responsibilities of public agencies and persons 9 Development of environmental disaster management plan 10 Environmental considerations for development projects, programs and developmental plans 11・12 Actions and responsibilities of project Conduct environmental studies proponents Install automated instruments and observe and monitor the environmental parameters Comply with the environmental

Article Contents Remarks related to the proposed project specifications 13 Actions and responsibilities of all persons commencing production, service 14 Hazardous waste Hazardous, poisonous or radioactive waste are prohibited. 15 Grace period for projects existing 16 Commitment to environmental protection regulations and standards for receiving loans 17 Violation and Penalties (Framework) 18 Violation and Penalties (Penalties) 19 Violation and Penalties (Violation procedures) 20 Violation and Penalties (Jurisdiction to the Penalties) 21 Violation and Penalties (Committee) 22 General provision, establishment of the rules for implementation 23 Relation between current regulations, rules, decisions and instructions related to the environment 24 Enforthement of the law Appendix 1 Environmental Protection Standards -Ambient Air Quality Standards -Air Pollution Source Standards -Receiving Water Guidelines -Performance Standards for Direct Discharge -Pretreatment Guidelines for Discharge to Central Treatment Facilities Appendix 2 Fundamentals and Standards for Guidelines For Classification of Industrial Environmental Impact Assessment of And Development Projects Industrial and Development Projects Environmental Assessment of Developmental Projects Information Form Appendix 3 Guide To Environmental Accreditation Procedures Appendix 4 Hazardous Waste Control Rules and Standards for Hazardous waste Procedures Appendix 5 The National Contingency Plan for Combating Marine Pollution by Oil and Other Harmful Substances in Emergency Cases Appendix 6 All Types of Violations and Penalties Source: Study Team

According to a Royal Decree issued on 30/07/1437H, the environmental protection responsibilities were assigned to the General Authority of Meteorology and Environmental Protection (GAMEP).

Duties and Obligations of GAMEP as the competent agency are descrived in the article three of the General Environmental Law and are shown below: 1. Review and evaluate condition of the environment, develop monitoring means and tools, collect information and conduct environmental studies. 2. Document and publish environmental information. 3. Prepare, issue, review, develop and interpret environmental protection standards. 4. Propose environmental regulations relevant to its area of jurisdiction. 5. Ensure that public agencies and individuals comply with environmental regulations, criteria and standards and undertake necessary procedures in coordination with the concerned and licensing agencies. 6. Keep abreast the latest developments in the field of environment and its management at the regional and global level. 7. Publicize environmental awareness at all levels.

Based on an interview with GAMEP, the General Environment Law and Rules for Implementation are revised. Major revision points are rules for conservation of ecosystem and biodiversity.

Based on the classification of the project which will be decided by “Appendix 2-1 Guidelines for Classification of Industrial and Development Projects”, environmental and social requirements and conditions will be decided. The projects classified as “Third Category” which are the projects with serious environmental impacts, so there are many requirements and conditions for implementing the project.

The proposed project will be classified as “Third Category” which includes the “Solar power villages and plants”and requires the project environmental impact assessment study.(See 4.1.2)

For implementing the “Solar power villages and plants”project, the consideration for wildlife is required. In addition, the disposal of the storage batteries will be categorized as “hazardous wastes” in accordance with the article 4 Wastes and hazardous wastes of “Hazardous Waste Control Rules and Procedures”. Depending on the law materials of the storage batteries, the standards for Hazardous waste disposal will be decided. If there are no domestic standards, international standars will be applied for the disposal.

4.1.2. Procedures relating to Environmental Impact Assesment implementation

Abovementioned in 4.1.1, there are standards for Environmental Impact Assessment (EIA), in accordance with the General Environment Law and Rules for Implementation. Based on “Appendix-2-1 Guidelines for Classification of Industrial and Development Projects”, there are three classification of the project shown below. First category: Projects with Limited Environmental Impacts Second Category: Projects with Significant Environmental Impacts Third Category: Projects with seriouse environmental impacts

Accoding to Appendix-2-1 of the General Environmental Law and Rules for Implementation, the proposed project will be classified as Third Category, Projects with Serious Environmental Impacts, which are included Solar power villages and plants.

It is necessary to take the following steps for the implementation of the project classified as Third Category. Classification The licensing agency shall classify the project. of the project Based on the classification of the project, the licensing agency shall inform the agency in-charge of implementing the project that the project is classified as a category three project which calls for a comprehensive project environmental impact assessment in triplicate by a qualified consulting office approved by the competent agency or licensing agency or any agency approved by competent agency or any research center.

Implementation The agency incharge of implementing the project shall employ a qualified of EIA study consulting office approved by the competent agency or any research center to conduct an environmental assessment study for the project in accordance with the guidelines for the development of an environmental impact assessment for industrial and development projects

Evaluation of The competent agency shall receive from the licensing agency or the agency EIA study in-charge of implementing the project details on the project environmental impact assessment study prepared by a qualified consulting office qualified by the competent agency or any agency approved by the competent agency or any research center.

In case of requesting additional information: The licensing agency or agency in-charge of implementing the project shall be

notified to make available the additional information or to conduct a comprehensive environmental impact assessment study that should focus on specific environmental components according to the project classification and related activities.

In case of approval of the environmental impact assessment study of the project: The agency in-charge of implementing the project shall issue necessary notification which should include the competent agency approval statement on the EIA of the project. The owner of the project shall give consent that he will implement all the required conditions attached, and be obliged when implementing the project with all environmental standards, criteria, and procedures issued by the competent agency.

In case of rejection of EIA study of the project: The agency in-charge or the licensing agency or the public agency shall be notified of the competent agency’s rejection of the EIA of the project or objecting the environmental remarks on the project.

Based on the EIA procedure, the agency in-charge of implementing the project will submit the application related to Environmental considerations to GAMEP located in Jeddah. Then the agency shall employ a qualified consulting office approved by the competent agency or any research center to conduct an environmental assessment study for the project. In case of approval of the environmental impact assessment study of the project, the approval statement on the EIA of the project will be issued around three months after. The application fee is around 2,000SAR.There is an Approved Consultant List in GAMEP website.

In accordance with the guidelines for the development of an environmental impact assessment for industrial and development projects, the study report will require the following items. Table 4.2 Necessary contents of an environmental impact assessment study 1. Presentation of the Project: 2. Description of the Project and its •Goals Objectives: •Need for the project •Components of the project (onsite facilities attached to the project such as water treatment plants, water desalination plants, electrical power plants housing etc.) •Project construction phases • The workforce required for implementation of the project (minimum and maximum) •The workforce required for operation of the project (minimum

and maximum) •Alternatives and options 3. Status of Surrounding •Air quality Environment including the •Soil and topography following: •Oceanography •Surface and ground water •Land environment (fauna/flora) •Marine environment (fauna/flora) •Land use of selected site and its surroundings •Land ownership (original owner) 4. The Environmental Assessment •Identification of the general potential impacts of the project and including the following: suggested alternatives. •Identification and analysis of key effects of the project on: Air quality The marine and coastal environment Surface and underground water Flora and fauna Land use and urban development Residential clusters General scenic view Others 5. Assessment of Significant •Quantify and rate the significant impacts on natural resources. Impacts: •Estimate the relative damage to the area and the extent of its potential. •Estimated lifespan of the facilities. •Studies on the possible mitigation of anticipated impacts. 6. Summary of Significant Impacts after Mitigation Processes: Source: Study Team

4.2. Analysis of current environmental and social conditions

4.2.1. Current state of environment in the mine of the affiliated company of the company A

(1) Current state of natural environment

Saudi Arabia has a semi arid to hyper arid climate, characterized by very low rainfall and extremely high evapo transpiration. One of the candidate project sites, the mine of the affiliated company of company A is located in the area of typical desert climate, with hot summers, mild winters and low humidity.

There is a protected area close from the mine. The protected area includes dune areas, shallow wadi valleys, and open, undulating steppe desert. According, to the IUCN redlist, some redlist species also exists in the area.

(2) Current state of the social environment

The Province of the mine is located in the center area of Saudi Arabia. Agriculture is an important industry in this area. In addition, this area is rich in heritage, nature, and its geographical location makes it the hub of diverse cultures and various festivals. Approximately 50 members of the mine are living in the surrounding vlilages and the remaining staff (approximately 130 people) is in the camp in the mine.

4.2.2. Current state of environment in the factory of the company B

(1) Current state of natural environment

The cement factory of the company B, another candidate project site has also a typical desert climate. In the surrounding area of the factory, limestone has been mined. The project site is not located in a protected area and there have not been identified species of protected fauna and flora by any national law or international regulation.

(2) Current state of the social environment

The polulation of the area of the factory is 31,523.

4.3. Expected impact from the proposed project implementation

The expected impact from this project implementation was considered. The preliminary environmental assessment form based on the Fundamentals and Standards for Environmental Impact Assessment of Industrial and Development Projects and JICA Environmental checklist based on the JICA Guidelines for Environmental and Social Considerations is shown in appendix.

(1) Pollution control measures and impact on the natural environment

a) During the construction

・ Air quality

There is a possibility of air pollution from the operation of construction machinery and the conveyance of materials through construction vehicles, etc. at the time of construction. Because the project site is located away from residencial areas, air pollution could mainly have an impact on construction workers, and sufficient countermeasures are necessary.

・ Noise and Vibration

There is a possibility of noises and vibrations from the operation of construction machinery and

the conveyance of materials through construction vehicles, etc. at the time of construction. Because the project site is located away from housing areas, noises and vibrations could mainly have an impact on construction workers, and sufficient countermeasures are necessary.

・ Water quality

There is a possibility that during the excavation of soil, the occurrence of turbid water from water erosion to embankments, fuel leaks during the operation of construction machinery, etc. happens at the time of construction causing pollutants to flow out into rivers and coastal areas. Appropriate treatment of the turbid water is necessary.

・ Soil Degradation

Excavation and land preparation will be conducted, and at that time, soil degradation could be caused by fuel leaks from construction machinery. In addition, soil degradation could advance from alterations to the ground surface.

・ Protected area

The project site is located in the private area (existing factory site), and is not located in a protected natural area. However, the site in the mine located near the protected area, so the design and the construction work must consider minimizing the negative environmental impacts.

・ Fauna & Flora

The project site is located in the private area (existing factory site), and is not located in a protected natural area and there have not been identified species of protected fauna and flora. However, the site in the mine is located near the protected area, so there is a possibility that the project will affect existing ecosystems (birds). So the design of PV panel setting and construction plan will be prepared in consideration to reduce the impacts on the ecosystem.

b) After implementation of the project

・ General environment management for the project operation

There is rare possibility that the proposed solar power system with storage battery will generate pollution such as air and water quality, soil contamination. Accoding to the article 11-14 of the General Environmental Law, a project proponent who causes environmental pollution or adverse environmental impacts shall take all necessary actions to immediately halt such pollution, remove the adverse impacts and restore the damaged environment in the manner determined by the Competent Agency (GAMEP) after coordination with the concerned agency

and in accordance with these Rules for Implementation.

・ Waste

Lifetime of the proposed facility is estimated to be of approximately 25 years. There is a possibility that used PV panels and storage battery will cause water and soil comtamination by inappropriate disposal or treatment. So, the appropriate disposal or treatment based on national or international standards are necessary. Accoridng to Basel Convention, there are technical guidelines for the control of Hazardous Wastes and their disposal.

Basel Convention on the Control of Transboundary Movements of Hazardous Wastes and Their Disposal (extract) *Used lead storage battery is classified as “Hazardous Wastes” in Basel Convention, the disposal procedures including the exportation should be followed this convention roules. For exportation, the party who will export must notice it to other party and receive the agreement in advance. Other rules are shown in below. ARTICLE 4 General Obligations 2. Each Party shall take the appropriate measures to: (b) Ensure the availability of adequate disposal facilities, for the environmentally sound management of hazardous wastes and other wastes, that shall be located, to the extent possible, within it, whatever the place of their disposal; (c) Ensure that persons involved in the management of hazardous wastes or other wastes within it take such steps as are necessary to prevent pollution due to hazardous wastes and other wastes arising from such management and, if such pollution occurs, to minimize the consequences thereof for human health and the environment; (d) Ensure that the transboundary movement of hazardous wastes and other wastes is reduced to the minimum consistent with the environmentally sound and efficient management of such wastes, and is conducted in a manner which will protect human health and the environment against the adverse effects which may result from such movement; ARTICLE 6 Transboundary Movement between Parties 9. The Parties shall require that each person who takes charge of a transboundary movement of hazardous wastes or other wastes sign the movement document either upon delivery or receipt of the wastes in question. They shall also require that the disposer inform both the exporter and the competent authority of the State of export of receipt by the disposer of the wastes in question and, in due course, of the completion of disposal as specified in the notification. 11. Any transboundary movement of hazardous wastes or other wastes shall be covered by insurance, bond or other guarantee as may be required by the State of import or any State of transit which is a Party. Source: Secretariat of the Basel Convention (Original document) 4th meeting of the Special committee for Basel Convention (Feb 2016, MOEJ)

・ Climate Change and other

It is expected that it will be possible to reduce CO2 emissions from energy use through the introduction of solar power and battery system, particularly during the day. The details are

described in 4.4.

(1) Impact on the social environment

・ Resettlement

The project site is an exisiting factory site, so there will be no new resettlement.

・ Employment

The employment of construction workers can be expected from the construction. The revitalization of the regional economy can be expected from the start of the project. In addition, Saudi Arabia’s National Industrial Development and Logistics Program was launched by the government on January 28th 2019, that includes the investment of 13 billion SAR (approximatelly 3.5 billion USD) for construction of PV panels plant. The expantion of the soloar power system by the proposed project will contribute to expand the production of PV panels made in Saudi Arabia, and will create new job opportunities.

・ Land use

The project sites are located in the private area (existing factory site), and the land use will not be changed from industry area.

・ Water resource

A certain amount of industrial water supply will be required along with construction and the start of the project. The average annual rainfall has been low and recorded in the range of 100 mm in most regions, the area surrounding the project site has typical desert climate with hot and dry summers. On the other hand, flash floods can occur in many locations in Saidi Arabia after heavy torrential rains. All “wadis (valleys)” are considered floodplains and vulnerable to flooding after severe rainstorm. So it is necessary that the project proponents will confirm the rainfall patern and flash floods in the project sites, and will consider the adequate water resource management.

・ Historical and Heritage Sites

There have not been identified archaeological sites, historical, cultural and religious heritage in the project sites.

・ Infectious diseases, etc. (HIV/AIDS)

With the influx of workers from other regions at the time of construction, there will be a possibility of the outbreak of infectious diseases. During the construction period, the

appropriate health management of construction workers will be necessary.

4.4. Environmental Benefits from the project implementation

It is assumed that power generated from a solar power system will be used in this project as a substitute to power generation from fossil fuels, so a reduction in greenhouse gas emissions can be expected.

The scale of the solar power generation system that introduction is being considered for the two project sites is of about 22MW. Based on the calculation formula for the annual expected electricity output indicated in the Solar Power Generation System Introduction Guidebook from the New Energy and Industrial Technology Development Organization (NEDO), an electricity output of approximately 36,743MWh from a 22MW solar power generation system is expected (reference formula 1). In addition, a reduction of greenhouse gas emissions by approximately

27,700 tCO2/year can be expected from the use of power gained through solar power generation.

[Reference formula 1] Ep ＝H×K×P×365÷1 Ep : annual expected electricity output (kWh/year) H : average amount of solar radiation per day on installed surface (kWh/m2/day) K : loss coefficient (approximately 73%) P : system capacity (kW) 365 : number of days per year 1 : solar radiation intensity in standard state (kW/m2)

Accordingly, the annual electricity output (Ep1) that can be gained from a 2MW solar power generation system in the mine is calculated as follows.

Ep1 ＝5.15* (kWh/m2/day)×73% ×2,000(kW) ×365 ÷1

＝3,277 (MWh)

Accordingly, the annual electricity output (Ep2) that can be gained from a 20MW solar power generation system in City Cement factory is calculated as follows.

Ep2 ＝6.28* (kWh/m2/day)×73% ×20,000(kW) ×365 ÷1 ＝33,466 (MWh) * Renewable Resource Atlas (https://rratlas.energy.gov.sa/RRMMPublicPortal/)

Because power generated from a solar power systems will be able to substitute power

generation from fossil fuels, the amount of reduction in greenhouse gas emissions can be calculated through [reference formula 2].

[Reference formula 2]

BEEN,y ＝BE elec,y＝EGｙ×EFelec

BE elec,y : baseline annual emissions from power generation (tCO2/year)

EGy : annual electricity output from solar power generation (MWh)

EFelec : power emission factor (tCO2/MWh)

Exisiting power generation in the mine utilizes diesel oil, and in the cement factory is heavy oil. Each emission factor for power generation is calculated by fuel consumption rate and emission factor by fuel type. Exisiting emission factor in the mine was 0.897 (tCO2/MWh)and that in the cement factory was 0.74 (tCO2/MWh). The amount of reduction in greenhouse gas emissions can be calculated and shown in below.

BEEN,y ＝BEelec1,y + BEelec2,y

= 3,277 (MWh)×0.897 (tCO2/MWh) + 33,466 (MWh)×0.74 (tCO2/MWh)

= 2,941(tCO2/ year) +24,765 (tCO2/ year)

= 27,705 (tCO2/ year)

Chapter 5. Economic Viability

5.1. Project cost estimation

In this project, solar power system with storage battery will be installed in two project sites. The project cost4 was estimated by using the unit cost of solar power facilities. Table 5.1 Project cost estimation by project sites Project site Facility size Project Inicial cost (USD) The mine of the affiliated Output 2MW 3,250,000 company of the company A Capacity 2MWh The Cement Factory of the Output 20 MW 28,842,500 company B Capacity 6.7MWh Source: Study Team

5.2. Preliminary economic analysis

In this project, solar power system with storage battery will be installed in two project sites (Total facility size: 22 MW). Preliminary economic analysis was conducted.

Benefit by the project will by the reduction of fuel cost. However, there is a gap between fuel price in Saudi Arabia and world average (See Table 5.2). Therefore, preliminary economic analysis was considered both fuel prices in Saudi Arabia and in the international market (See Table 5.3). Table 5.2 Comparison of Fuel cost by type International Rate of deviation Fuel type Domestic Price*1 Price*2 (Saudi：World average) Diesel 0.13 USD/L 1.03 USD/L 1：8 Heavy oil 0.05 USD/L 0.43 USD/L 1：9 Source: *1 Domestic Price was set by the interview with Counter part. *2International Price was set by Dubai crude oil price (2018) and Global petrol price.com (Feb 2019).

4 The cost is estimated with US dollar / kW by the interview from the stakeholders about the EPC cost of the solar IPP project, which is implemented in the middle east. Also, the cost of the battery is calculated based on the interview from the European engineering consultant.

Table 5.3 Reduction of fuel cost Reduction of fuel cost Domestic Price case International Price case Project total 518,114 USD /year 4,606,683USD /year (The mine:Deisel) (134,733 USD/year) (1,084,181USD/ year) (The cement Factory: Heavy oil) (383,380 USD/year) (3,522,502USD/ year) Source: Study Team

Preliminary economic analysis for the mine was conducted, considering the following conditions:

【Conditions】

- Inicial cost ：3,250,000USD

- O&M cost ：32,500USD/ year

- Project period：25 years

There are three cases for the analysis, based on the information that fuel price in Saudi Arabia will be rised at the same level of international market. Case1: Domestic price case that uses current fuel price in Saudi Arabia, Case2: Price control case that uses the assumption that fuel price will be rised in 15% every year, and Case3: Intenational price case that uses the world average price of fuel as a reference.

Three cases of comulative cash flow through the project are shown in Figure 5.1 ~ Figure 5.3.

In the Domestic price case, the revenue (reduction of fuel cost) is limited, comparing from expenditure (Initical cost and O&M cost), so it is difficult to collect that investment.

In the Price control case, comulative cash flow will show a proft 12-13 years after.

In the International price case as a reference, the fuel price is the same level of the world market, comulative cash flow will show a proft 5 years after and the IRR of the project is 32%.

Source: Study Team Figure 5.1 Reduction of fuel cost and cash flow through the project (Domestic Price case)

Source: Study Team Figure 5.2 Reduction of fuel cost and cash flow through the project (Price control case)

Source: Study Team Figure 5.3 Reduction of fuel cost and cash flow through the project (International Price case)

Preliminary economical analysis for the Cement Factory of company B was conducted, considering the following conditions:

【Conditions】

- Inicial cost ：28,842,500USD

- O&M cost ：288,425USD/ year

- Project period：25 years

In the Domestic price case, the revenue (reduction of fuel cost) is limited, comparing from expenditure (Initical cost and O&M cost), so it is difficult to collect that investment.

In the Price control case, comulative cash flow will show a proft 20-21 years after.

In the International price case as a reference, the fuel price is the same level of the world market, comulative cash flow will show a proft 9-10 years after and the IRR of the project is 7%.

Source: Study Team Figure 5.4 Reduction of fuel cost and cash flow through the project (Domestic Price case)

Source: Study Team Figure 5.5 Reduction of fuel cost and cash flow through the project (Price control case)

Source: Study Team Figure 5.6 Reduction of fuel cost and cash flow through the project (International Price case)

As a result of the analysis, it was found that because the impact of the fuel price on profitability is relatively high, the project viability is limited for private company. Therefore, governmental subsidies for renewable energy and international fund for climate change might be used for the installation of the facilities.

Chapter 6. Implementation Schedule of the Project

6.1. Implementation Schedule

6.1.1. Presentation of Project Imprementation Period

(1) Project Period and Role of Company B

2019 2020 2029 Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan~Jun Jul~Sep ~ Sep 1. Feasibility Study and Basic Design 2. Public Annoucement for JCM model Project 3. Dead line for submitting proposal 4. Proposal review by GEC 5. Selection of the model project 6. Preliminary selection of model project 7. Implementation of model project 7-1. Design Period 7-2. Procurement Period 7-3. Construction Period 7-4. Maintenance and Monitoring Period Source: Study Team

The company B wants to start the project soon. However, if it applies to a JCM project, it will have the subsidize half of the project cost (at maximum). To apply for it, submitting the implementation plan to Global Environment Centre Foundation (herein after referred to as “GEC”) after the F/S is considered. If the application is made, it will take 6 months to start the JCM model project after the adoption. The design and the construction works will be done within approximately 1 year, and the operation and maintenance including the monitoring of GHG emission reduction which corresponds to the cement industry will be continued for 9 years. The schedule above shows the case when the application was made for the earliest public offer in April 2019 and it was adoted in May. This case will be put first, but the second public offer in August 2019 is also considered according to the situation.

Procurement: Company C

Company C will be mainly in charge of procurement of the battery and EMS. The other equipment like PV will be procured by the EPC manufacturers in Saudi Arabia described below.

EPC manufacturer candidate 1: Company D

The company D is an EPC manufacturer in Saudi Arabia. Installation work of transformation units is its main business, however, they are focusing on the renewable energy projects.

EPC manufacturer candidate 2: Company E

Alfanar Construction has experiences of PV in Saudi Arabia

It is almost impossible to procure the products such as the battery and EMS, which are applied Japanese excellent technology in Saudi Arabia. On the other hand, the transformation units associated with them can be from a third country as long as its quality is ensured. When the transportation cost is taken in account, Japanese transformation units to lose price competitiveness. Thus, the transmission units shall be procured from the third country through company D and company E.

O&M and monitoring: Oriental Consultants Global Co., Ltd.

(2) Project Period and Role of the affiliate company of the company A 2020 2021 2030 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan~Jun Jul~Nov Dec ~ Dec 1. Feasibility Study and Basic Design 2. Public Annoucement for JCM model Project 3. Dead line for submitting proposal 4. Proposal review by GEC 5. Selection of the model project 6. Preliminary selection of model project 7. Implementation of model project 7-1. Design Period 7-2. Procurement Period 7-3. Construction Period 7-4. Maintenance and Monitoring Period Source: Study Team

The affiliate company of the company A will start internal discussions about the installation of the photovoltaic power generation sequentially. The study team will also start discussions with MAC for application for JCM project in 2020.

Companies in charge of procurement, EPC, O&M and monitoring will be the same as the the company B case.

6.1.2. How the Project Period should be Set

In case of the shortest schedule for the company B, the F/S and the basic design should be completed before the deadline of the application for the public offer of JCM project in May every year. In addition, the detailed design and the construction work should be done within 1 year after the application was adopted.

Chapter 7. Capacity of the Executing Agency in Saudi Arabia

7.1. Organization for the Implementation in Saudi Arabia

7.1.1. Company A

(1) Energy Policy

According to the annual report of the company A, the company A will follow the policy of the Saudi Vision 2030 including the energy sector. The company A has a person in charge of renewable energy and is examining the possibility of spreading renewable energy in mines in the future.

(2) Competency to Execute the Project

As descrived above, the company A has been continuously bulding and repairing equipment such as mining machines, crushers, diesel engines etc. Since photovoltaic power generation system do not require any special maintenance except for the periodic checks, the company A with abundant experiences of maintenance and repairing and have enough competencies to execute the project. In addition, the company A has enough assets and funds, which can budgeting of the periodic check, the exchange cost of the batteries and PCS.

The affiliated company of the company A had received the certification of ISO 9001. Regarding the quality management system; this company can make a plan, apply it, check the status periodically, and analyse and fix the defects, the so-called “PDCA cycle”. Also, MAC had certified ISO 14001, ISO 45001, and RC 14001.

7.1.2. Company B

(1) Energy Policy

Increasing the availability of renewable energies is one of company B objectives.

(2) Competency to Execute the Project

The cement factory has experience for the maintenance and repairing of the crushers, the kilns, the exhaust heat recovery device, and the diesel engines. Also, the photovoltaic power generation system does not need any special maintenance except for the periodic checks. It is expected that this cement factory has enough competency to execute the project. Moreover, the company B has enough assets and funds so the periodic maintenance and the exchange of the batteries and PCSs are possible.

The company B also received the certification of QMS ISO 9001 Quality Management System (2015) as well as company A

Chapter 8. The potential of Japanese companies including technology aspects

8.1. The estimated structure of the Japanese companies in the project

The company C (trading company in Japan) will receive the order from the company B or the affiliated company of the company A and will precede the procurement of the storage battery, the EMS, the PV Panel and the Panel cleaning robot. The company G (Japanese cosultant) will implement the owners consultant druing the project. System integration engineering will be covered by the Japanese SIer.

8.2. Potential of the Japanese companyies to implement the project

(1) The potential of the Japanese comany

Introducing the solar PV, storage battery (Hybrid), and EMS will contribute to the creation of a stable electric power supply in this project. Since Japanese companies have high competitiveness in the battery storage field, obtaining the international battery storage market is the goal for “Battery Storage Strategy” by the battery storage strategy team of Ministry of Economy, Trade and Industry. It requires the high technology to control the the storage battery, so EMS should also have high technology to make the balance depending on the power system also should have the know-how about the power system since introducing the EMS of the solar power generation and the storage battery. Furthermore, extremely advanced technology know-how to control the solar power generation and the storage battery at the appropriate time to grasp the situation of the power system in the real time manner (every second) and to keep the voltage and frequency inside of the approved range is required for the controlling technology inside of the EMS. Japan is in the top level in the field of the maintenance of the electric power quality, and has the advanced technology and know-how, so these technology and know-how will be able to utilize in this project. Japanese companies will dominate by the following concrete considerations.

【Storage Battery】

・ It is possible to propose the system, which control the fluctuation of short and long period in one storage battery if we adopt the battery, which has the fast input-output power ability and has the large capacity storage such as NAS battery. Thus the structure of the package can be simple.

・ It is necessary to keep the operating temperature high and this is one of the demerits of the NAS battery. But since the tempreture in Saudi Arabia is high, so the running cost to maintain the

tempreture can be low.

・ As lead storage battery, it has been considered the slow response of the input-output and short lifetime is one of the demerits, but because of the recent technological development by the Japanese companies, it is possible to provide the system which has the quick respose as same as IC level and has the long lifetime more than 20 years less than half price of the lithium cell battery. The merit is generous because it is easy to deal with compared with other batteries.

【EMS】

It is important to add value to EMS can provide countermeasures for the fluctuation of the frequency (short period) and the function for the hybrid controlling to the battery for the shift in demand. However, it is possible to add these additional functions below.

・ The function of prediction of the weather Since the power capacity of the renewable energy (solar power and wind) highly depend on the weather situation, it is possible to make a plan to start / stop each DG to maximize the reduction of the fuel consumption if it is possible to predict the weather precisely (The weather information is available in the internet if it is connected to the internet.)

・ Prevention of potential accidents of the equipment service It is a significant merit for the company if it is possible to share the countermeasures for potential manufacturer and accidents before it happens by sending the storage battery data to the Japanese manufacturer through the internet all time and recognize the sign of the accident by the Artificial intelligence (AI) or analysing the big data data.

8.3. Necessary measures to encourage Japanese companies to receive the order

It is effective to advertise and show the situation of the stable power supply with using the EMS by inviting the stakeholders to Japan to make them understand the reliability of the system. The “Iki islands” where NAS and lithium hybrid batteries are introduced and the equipment experiment area of the manufacturer are the one of the promising place to site visiting.

Not only focusing on the initial cost but life-cycle cost (initial cost and replacement cost) is important to make sure the accurate profit through the life-cycle in the implementation phase of the project. It is important to advertise the merit of the reduction of the life-cycle cost by the companies mainly with Japanese and encourage the participant of the market for Japanese company as the figure below.

Kyuden International has the experience of using the life-cycle cost when supercritical pressure steam power plant generation was introduced to SEC in Jeddah, Makkah Province in EPC

bidding in the form of evaluation. It is important to support Japanese companies for participating to the bidding by introducing the form of evaluating life-cycle cost continuingly. Also it is important to encourage the Japanese companies’ will to participate to the market by adding the Operation & Maintenance to the EPC scope.

Life-cycle cost

Initial Cost Replacement Cost

Procurement cost for the facilities Replacement cost by the operation and degradation

Construction cost The cost for the management and maintenance

Reducing the cost Reducing the cost

Procurement of the Solar PV from the third Effective operation of the equipment and reduction of the country trouble rate Construction by the local company

Preventive Maintenance by the local technician

Introducing the Japanese high efficient and quality facilities (Battery storage and EMS)

Technical corporation for the operation and maintenance by the Japanese government

M a n a g e m e n t o f t h e e n t i r e p r o j e c t b y J a p a n e s e c o mp a n i e s

Source: Study Team Figure 8.1 The image of the reduction of the life-cycle cost

Chapter 9. Action Plan and Tasks for Realization of the Project

9.1. Current Status for the Realization of the Project

This project plans to achieve the reduction of diesel consumption and CO2 emission by shifting the main power source in off-grid areas in Saudi Arabia from diesel power generation to the solar power. This project proposed PV, the battery, and EMS. The F/S in the 2 candidate sites found the possibility of expansion to the other off-grid areas in Saudi Arabia and the expectation from not only the affiliated company of the company A and the company B, but also others.

For further progress and expansion of the project, continuous discussion with Saudi Arabian organizations including the affiliated company of the company A abd the company B, and confirmation with the related organizations about the installation of equipment expecially the battery which is comparably new technology are indispensable.

The current status for the promotion and the expansion of the project and the installation of the battery is mentioned below.

9.1.1. Promotion and Expansion of the Project

The affiliated company of the company A and the company B which own the 2 candidates sites of the project surveyed by the F/S have their policy along with the policy of the Saudi Arabian government to be independend on fossil fuels and increase the use of renewable energy. This project maches their policies. Their intention for the project implementation was confirmed, but both companies are still careful to proceed since the installation of PV in Saudi Arabia has just begun recently. Due to this, discussions should continue and the discussions should include presentations to show that the technologies to be installed are well-established.

Additionaly, the F/S found that this project model can be applied to other organizations: the off-grid areas owned by SEC and the private factories in the off-grid areas operated by the company G (an agroindustrial manufacturer) and the company H (a food processor), for example. Further discussion with those organizations will make the project expand. NADEC and Almarai conditions are as follows.

9.1.2. Introduction of the storage battery

It makes the project more developed by utilizing the experience and knowledge from the Japanese existing utilization of the storage battery for the power system. Here, we show the information from the demonstration experiment which Kyusyu Electric Power Company, one of the electric power company in Japan deal with to promote the future project.

In the“The micro-grid demonstration experiment in the isolated island (the subsidized project by the Ministry of Economiy Trade and Industry)”, the compensation leveling for the power output variation and the shifting time of PV power output by establishing the solar power system, wind power system, and storage battery, etc in the small 6 islands in Kagoshima prefecture, which has the electric demand less than 200kW were possible. But, the fuel cost increased because of the electricity for the airconditioner for the lithium battery and EMS was more than the capacity of the renewable energy. The possibility of losing the profit by introducing the microgrid in the small power system was one of the finding from result of the experiment.

The demonstration experiment of introducing short period storage battery (the subsidized project by the Ministry of Economy Trade and Industry) was implemented to expand the introduction of solar power system and wind power system in big islands such as “Iki” and “Tsushima”. The major construction fee was subsidized and the expansion of the number of approved PV was realized and some company actually started the PV operation because the big effect for controlling the fluctuation of the frequency. But the cost allocation for the replacement is not decided after the service life (15 years) of the storage battery. The biggest scale NAS battery (50MW/ 300MWh) in the world was constructed by using the full amount subsidy in the demonstration experiment of the large scale storage battery (The subsidized project of the Ministry of Economy Trade and Industry) in Kyushu Island. It highly contributed to the prevention of surplus power by introducing huge renewable energy, which is one of the problems in Kyushu area in 2018. But it also makes the big economic burden for the company because average 100 million yen per year for the maintenance cost such as the sensor for the fire should be replaced every two years.

Source: Study Team Figure 9.1 The appearance of the substation of the storage battery in Buzen of Kyushu Electric Power

At the time of considering the replacement of the internal combustion power equipment in one of the island in 1997, Kyusyu Electric Power Company had once abandoned to introduce the storage battery because the service life of the battery is short such as about 15 years (internal combustion power is more than 30 years) when considering the economic efficiency.

Since the price of the storage battery is very high at this time as explained before, it was difficult to introduce the storage battery without the subsidy. It is possible that the price of the storage battery will decrease because of the technological innovation, but it takes extremely long time to solve the short service life problem and electricity loss (minimum 30%) problem.

In addition, the battery storage should be replaced even though the service life expired, once the construct the system and introduce the storage battery by using the subsidy. So it is important to discuss about the cost allocation in the future before introducing the battery.

In the current storage battery situation of Middle East, NAS battery was installed in the substation in Abu Dhabi, also the demonstration experiments of the NAS battery and Tesla battery are proceeding in Dubai. The bidding of the project of storage battery is already done by the developer in Jordan and the cost of the storage battery is estimated to be decreased because of the competition by the tariff open bidding.

9.2. Current Status of Government Offices Concerned and Executing Agencies in the Host Country for the Realization of the Project

9.2.1. Response Status of Executing Agencies to Government Policy

As mentioned in 3.1.3, the government in Saudi Arabia is aiming for the installation of 58.7GW renewable energy by 2030. Also, in regard to the GHG emission reduction, Saudi Arabia had agreed the Paris Agreement and set a goal to reduce 130 million tons of GHG emission by 2030.

K.A.CARE has already issued the request for proposals (RFP) of the demonstration plant using the battery cost allocation scheme. Saudi Aramco is also preceding the written inquiry of competency examination by “Solicitation of Interest” using EPC + O&M scheme for the battery for off-grid area. SEC appointed a German consultant and is examining the installation of the battery.

The company A is planning to install the PV in the future as well, and is along with the government policy for the spread of the renewable energy mentioned above. The reduction of GHG emission by shifting the energy source to PV power generation contributes NDC by Saudi Arabia as well.

9.2.2. Current Status of Reserve Fund by Executing Agencies

(1) Affiliated company of the company A

The company A is examining the utilization of JCM project application and how to prepare the remaining fund which will not subsidized by JCM has been discussed. The fund preparations utilizing the Buyer’s Credit (herein referred to as “B/C” and the detail will be mentioned later) finance scheme of Japan Bank for International Cooperation (herein after referred to as “JBIC”) has been examined as a possibility.

(2) Company B

The company B is examining the utilization of JCM project application, and how to prepare the remaining fund which will not subsidized by JCM has been discussed. Also, as well as the affiliated company of the company A, the company B has been examining the fund preparations utilizing the B/C finance scheme of JBIC as one of the possibility.

9.2.3. Current Statsus of Orgaization Preparation in Executing Agencies

(1) Affiliated company of the company A

The implementation organization and the scope sharing are going to be explained to Saudi Arabian and Japanese related companies and decided for the early project implementation.

(2) Company B

Same as the affiliated company of the company A.

9.3. Envisioned Financial Scheme

(1) Possibility of offset agreement

The company F deals with the company A on the mireral resource business. In this project, there is a possibility that the initial cost of the installation of the solar power system will be offset by the purchase of mineral resource. By using the existing trade between two companies, the proposed project can be implemented smoothly.

(2) Possibility of utilization of Joint Crediting Mechanism(JCM)

The government of Japan has proposed the Joint Crediting Mechanism (JCM) as a means to facilitate the diffusion of leading low-carbon technologies, systems, and so forth in developing countries. On 13th May 2015, the Kingdom of Saudi Arabia and the government of Japan had signed agreement on JCM. So there is a possibility that the proposed project will use this

scheme for installation of facilitates. Through the programme, Ministry of the Environment, Japan (MOEJ) financially supports part of the initial cost (up to half), on the premise of seeking to deliver at least half of the issued JCM credits to the government of Japan.

There is an approved methodology5 under the JCM between the Kingdom of Saudi Arabia and Japan, but it is not on Solar PV System. For development of a new methodology for this project, several methodologies on Solar PV System in other countries shown in the table below can be reffered. Table 9.1 Approved methodologies Methodologies Country Title Date of Developer No. approval MV_AM001 Maldives Displacement of Grid and 2015/3/25 Pacific Consultants Captive Genset Electricity Co., Ltd. by Solar PV System TH_AM001 Thailand Installation of Solar PV 2016/4/23 Pacific Consultants System Co., Ltd. MN_AM003 Mongolia Installation of Solar PV 2017/1/30 Institute for Global System Environmental Strategies KH_AM002 Cambodia Installation of Solar PV 2017/2/4 Institute for Global System Environmental Strategies ET_AM002 Ethiopia Electrification by 2017/3/21 NTT DATA photovoltaic power INSTITUTE OF generation in Ethiopia MANAGEMENT CONSULTING, Inc. KE_AM002 Kenya Installation of Solar PV 2017/3/23 Pacific Consultants System Co., Ltd. CR_AM001 Costa Rica Installation of Solar PV 2017/9/8 Institute for Global System Environmental Strategies BD_AM002 Bangladesh Installation of Solar PV 2017/10/16 Institute for Global System Environmental Strategies VN_AM007 Vietnam Installation of Solar PV 2017/10/10 Institute for Global System Environmental Strategies ID_AM013 Indonesia Installation of Solar PV 2017/12/4 Institute for Global System Environmental Strategies CL_AM001 Chile Installation of Solar PV 2017/12/19 Institute for Global System Environmental

5 SA_AM001 Introduction of High Efficiency Electrolyzer in Chlor-Alkali Processing Plant 2017/10/18

Methodologies Country Title Date of Developer No. approval Strategies MX_AM001 Mexico Installation of Solar PV 2017/12/29 Institute for Global System Environmental Strategies Source: Study Team

The outline and image of the JCM presented by Ministry of Environment, Japan is shown in Figure 9.2. This schme had started in 2013 and 127 projects has been conducted (Installing, Active or Terminated) under this scheme. The budget for projects starting from FY 2018 is 6.9 billion JPY (approx. USD 69 million) in total by FY2020.

Source: Joint Crediting Mechanism by the Ministry of Environment Japan Figure 9.2 Outline of JCM Scheme

(3) Possibility of utilization of Buyer's Credit (B/C) of JBIC

Japan Bank for International Cooperation (JBIC) has a buyer's credit (B/C) and a bank-to-bank loan (B/L) which are direct loans respectively provided to a foreign importer and a foreign financial institution for financing the import of Japanese machinery and equipment or the utilization of Japanese technical services. A direct loan to an importer is called buyer's credit and to a financial institution is called a bank-to-bank loan.

In this proposed project, The company B or MAC or SPC with both company will be an importer for financing. The loan amount is usually determined based on the OECD Arrangement. In principle, the loan amount should not exceed the value of an export contract or technical service contract and excludes down payment. While export loans, in principle, do not apply to local costs, such costs may be covered, fully or partially, provided that their amount does not exceed down payment (as well as 15% of the export contract value). Interest rates are also determined based on the provisions of the OECD Arrangement. In addition, the Renewable Energy, Climate Change Mitigation and Adaptation and Water Projects Sector Understanding (CCSU) provides more flexible terms and conditions for the provision of officially supported export credits relating to water projects, renewable energy projects, or climate change mitigation projects. There was a B/C agreement between JBIC and SEC in December 2013, which was up to 183 million USD for construction of the Ultra Super Critical thermal power plant (4ticalBIC anJeddah, Makkah Region. This is for financing Japanese machinery and equipments such as stream turbin generator and boiler from Mitsubishi Heavy Industries, Ltd. The B/C of JBIC is expected to contribute the improvement of the competitiveness of Japanese industries and their products/ technical services. In this project, there is a possibility that B/C of JBIC can be utilized for the initial cost of storage battery or Energy Management System (EMS).

Source: Japan Bank for International Cooperation website Figure 9.3 Image of Buyer's Credit (B/C) and Bank-to-Bank Loan (B/L) of JBIC

(4) Possibility of utilization of the international fund

Regarding solar power generation + storage battery system, it is also possible to utilize Green Climate Fund (GCF), the international fund that supports developing countries to implement efforts to reduce and absorb (mitigate) of greenhouse gas emissions, and cope with the effects of climate change (adaptation).

As of May 2018, 43 countries and cities (including 9 developing countries, Paris and the government of Flanders) had been expressed their contribusion, and total GCF financing expressed has reaced 10.3 billion USD. The government of Japan had diceided to contribute 1.5 billion USD to GCF. JICA and Mitsubishi UFJ bank has appointed as certification authority.

Source: Ministry of Environment Japan (Green Climate Fund website) Figure 9.4 Image of Green Climate Fund

(5) Possibility of JICA’s technical support under loan aid

Since the gross national income (herein after referred to as “GNI”) per capita in Saudi Arabia is high level (15,500 USD) and is the country with high income level, Japanese government decided to stop the suppot by ODA after 20119.

Also, it was revealed that Saudi Arabia cannot receive the Japan’s aid for technical support because it is not listed in the major country income classification for yen loan by JICA in FY 2018, and is not its subject.

(6) Examination of Utilization of Supports Related to Japan Saudi Vision 2030

Japan Saudi Vision 2030 has some subgroups according to its main themes: “Opportunity of Trades and Investment”, “Investment and Finance”, “Energy and Industry” and so on. This project is considered to be classified as “Energy and Industry” group. However, the necessity,

the possibility and the significance to register this project should be reconsidered since there are several obstacles to implement this project.

9.4. Activities and Tasks for Realization of the Project

9.4.1. Examining of Measures to Foreseen/Not Foreseen Risks

There are 3 main foreseen risks of the project. The first one is turning the status of fund preparation by the affiliated company of the company A and the company B, worse. In order to prevent this, detailed interviews about the fund status with the affiliated company of the company A and the company B should be done in advance to build the fund preparation plan without any impossibility. The next one is the delay of the implementation schedule. As its countermeasure, the detailed explanation of the implementation schedule to the affiliated company of the company A and the company B and local EPC manufacturers in advance and building the reasonable plan with proper understanding about the capacity of each company are considered. The last one is the nonfulfillment of the contract. The countermeasures are preventing from having a discrepancy by: asking the concrete needs from the affiliated company of the company A and the company B, proposing the plan according to them, explaining clearly about the contents of JCM project application and its procedures, implementation schedule, and monitoring by the JV beforehand. In regard to the not foreseen risks, it is important to share the imformation promptly in the implementation organization and correspond to the problem when it happened.

9.4.2. Future Activities and Tasks

The F/S could found that there are the possibilities of realizing the introduction of energy infrastructure to the off-grid areas in Saudi Arabia, and the 2 candidates as the project sites were found: the mine owned by the affiliate company of the company A and the cement factory operated by the company B. It seemed that the problems from the technical and institutional aspects are comparably easy to solve. However, the fund preparation is estimated to be the most important problem. Discussion with the affiliated company of the company A about securing the fund for design, construction, and operation of the equipment should continue. On the other hand, the company B intends to utilize the finance schemes of the governments and the agencies of Saudi Arabia and Japan. The possibility of the project realization will be higher by discussing and choosing the best finance scheme for the project implementation from the finance schemes listed above with the company B.

9 On the other hand, when the Saudi Arabian side asked to continue the technical assistance, it will be considered individually and concretely since there are needs of human resources development.

（様式２）

二次利用未承諾リスト

報告書の題名：サウジアラビア：太陽光発電及び蓄電池のハイブリッド制御を用いたオフグリッド電力エネルギーインフラ可能性調査報告書

委託事業名：平成30年度質の高いエネルギーインフラの海外展開に向けた事業実施可能性調査事業

受注事業者名：株式会社オリエンタルコンサルタンツグローバル

頁図表番号タイトル 11 Figure 1.1 Position of Saudi Arabia Exports of Non-oil Products in Saudi Arabia 12 Table 1.1 (1995-2016) 13 Figure 1.2 Age-specific ration among the total popoulation 15 Table 1.2 Projects Related to Renewable Energy 16 Figure 1.3 Spread Plan of Renewable Energy in Saudi Arabia 18 Figure 1.4 Market Share in 2018 20 Figure 1.6 Main Off-gid Areas Investments for Renewable Energy Power Generation 28 Figure 3.1 / Fuel in the World Total Capacity and Annual Installation of 29 Figure 3.2 Photovoltaic Power Generation in the World