WHAT IF... We built a gigafactory in the UAE?
The UAE is currently the most appealing destination for launching your industrial startup or large-scale factory. With extensive government support, flexibility, and significant investment opportunities, opting for the UAE is becoming an increasingly attractive decision. This growing interest within the industry regarding the UAE underscores the potential new opportunities that could arise.
In this article, I aim to share my thoughts on the potential benefits and challenges of constructing a gigafactory in the UAE. I will use a hypothetical example of a 1 GWh gigafactory from a new startup company. This factory will target green initiatives aligned with the UAE Energy Strategy 2050 and the European strategy (for more details, refer to my previous article )
I believe this makes for a more intriguing case study, particularly compared to companies with existing facilities, over 10,000 employees, and established products where the challenges are fewer.
As well as Statevolt Emirates , for location, I've chosen the Ras Al Khaimah Economic Zone (RAKEZ) industrial zone.
And yes, my goal is to create a profitable plant.
Let's start with the less favorable aspects, specifically the short-term and long-term challenges.
?Challenges:?
1.????? Labor Shortage.
For all advanced manufacturers, skilled labor is essential. We need a workforce that is both cost-effective and capable of making informed decisions. For low-skilled labor, the solution seems straightforward. Countries like India, Pakistan, and the Philippines offer service workers, maids, and drivers for as little as AED 500 to 1000 (USD 135-270) per month (Good article about it https://www.dhirubhai.net/pulse/curse-cheap-labour-andreas-ludwig/ ). However, this labor force is only suitable for the construction phase of the factory, not for operations.
Additionally, a hidden challenge lies in managing work shifts in mass production. Training individuals for months only to have them leave unexpectedly can disrupt operations. This issue is currently being faced by SK Innovation in Eastern Europe.
The plus in this situation that RAKEZ zone offers a significant advantage by providing on-site staff and labor accommodation.
Given that our hypothetical company is launching its first gigafactory, the initial phases will be extremely challenging. In other words, worse than hell.
My Thoughts and Possible Solutions:
The company must integrate deep IT capabilities and design the factory for Industry 5.0 automation (my previous article ).
How can we achieve this?
The key is to locate the R&D center and prototype line near the future plant, ideally based within a university. IT must also be a central part of the company, integrated deeply into the process, supplemented by IT outsourcing companies.
Recruiting young and ambitious individuals could be effectively managed through organizations like the Volta Foundation , which excels in connecting the right people. Although it may sound like advertising, it's not. They genuinely facilitate meaningful connections. Additionally, hiring more expensive professionals from various companies could ensure a successful launch and production phase. I will definitely delve deeper into this fascinating topic in a future article.
2.????? Raw Materials
Securing raw materials is a challenge not unique to the UAE but is a universal concern for manufacturers worldwide. A significant advantage for the UAE is its status as a global logistics hub and a neutral country with strong international relationships.
The pyramid of the cost in battery manufacture.
3.????? Construction Challenges
The principal challenge in factory construction is achieving speed, cost-effectiveness, and high quality simultaneously.
Production equipment.
This is a universal challenge, main production equipment coming from same China and South Korea based suppliers. To navigate these complexities, it is essential to employ smart and experienced workers, many of whom are expatriates. I recommend recruiting talent from advanced manufacturing sectors or highly competitive fields. There are inspiring examples of individuals from competitive markets, such as retail, who have significantly impacted the pharmaceutical industry by challenging existing paradigms.
General construction phase
Another significant hurdle is constructing the gigafactory itself, where the UAE demonstrates exemplary capabilities. General construction practices, such as those involving concrete and metalwork, are of exceptionally high quality, as evidenced by monumental projects like Burj Khalifa. Local engineers and construction firms are highly experienced, and the authorities expedite their processes efficiently.
Consequently, the general construction phase of a gigafactory poses minimal concern in the UAE.
However, the critical challenges arise during the construction of specialized sections of the factory, such as clean and dry rooms, dehumidifier systems, and production flows. For these intricate tasks, local companies may not be the best choice due to a lack of specific expertise, necessitating the recruitment of top-tier talent from abroad. This requirement represents another challenge but is crucial for ensuring the high standards needed in such a specialized facility.
4.????? Energy Consumption and Green Energy Possibilities
The topic of energy consumption is always pertinent, regardless of location, especially since it accounts for approximately 5% of cell production costs.
For our gigafactory scenario, I will consider a typical production process with significant heating and cooling demands, which is the standard for 99% of factories worldwide.
Challenges:
领英推荐
The cost of electricity in the UAE is comparable to that in China and India, at around $0.08 per kWh, versus $0.40 per kWh in Germany. Moreover, natural gas in the UAE is as cheap as water, if not cheaper. These factors could lead to a disregard for energy efficiency and sustainability measures.
For instance, Emirates Global Aluminium (EGA) , one of the largest aluminum producers globally, benefits significantly from cheap natural gas, making its operations highly profitable. The most important markets are the MENA region and Asia.
Why can't we just copy this brilliant idea?
The answer lies in the fundamentals.
-??????? Product Differences: Aluminum is a raw material, whereas battery cells are finished products. This fundamental difference affects the product's market dynamics and sales strategies.
-??????? Market Challenges: While Asia holds a significant potential market for lithium batteries, it already houses leading companies with advanced technologies. In Europe and America, markets are profitable, but there is a move towards banning "dirty" plants to protect domestic supply chains.
Attempting to sell our product primarily in the MENA region could be commercially unviable if we merely mimic existing factories without a strong R&D foundation. Competing against Asian companies that offer better and cheaper products would be challenging.
I firmly believe that all businesses must be profitable, as this is the primary reason for starting a new business.
?
Sustainability and Business Viability.
So, what is so special about the UAE, and how can we make our operations greener and more sustainable from a technical perspective?
The biggest water consumption in a typical gigafactory occurs during the cooling process and water purification. This presents a challenge for a country situated in the middle of the desert where temperatures can soar above 50°C. We must also consider the Water Security Strategy 2026, which mandates that all new factories comply with these norms. Solutions already exist and can be adapted to local conditions. A prime example is the semiconductor plant I mentioned in previous posts .
This poses a challenge because local suppliers for these materials may not exist. The solution is to produce and treat these chemicals on-site, which, although it may increase CAPEX costs, but it is not a critical issue.
?
?The UAE has numerous desalination plants, which could be a viable solution for us, especially if one is located near our future plant.
Desalination plants process tons of water, extracting cold water from the deep ocean. This presents an opportunity for us. Instead of constructing our own ocean pipeline, we could use a small fraction of seawater from a desalination plant to cool our systems and then return the water to the plant. This would result in significant reductions in cooling costs and sustain the process year-round.
?
For heating, we should utilize thermal panels to reach our production temperature targets.
A notable example is from aramco
?While I am a proponent of solar panels, they are not economically feasible for high electricity consumption plants like battery manufacturing. ?A more practical approach would be to contract with an external green energy supplier instead of building the solar panels ourselves.
?Our journey is coming to an end.
These are my initial thoughts on the subject, and perhaps I've only touched the tip of the iceberg.
However, I believe that building a profitable gigafactory in the UAE is challenging but feasible, and only possible with a comprehensive approach.
Thank you for reading! I'd love to hear your thoughts and feedback on this topic. Please share your views in the comments below or reach out directly. Your insights are invaluable as we continue to explore these exciting possibilities together ??
?
CEO at Beck & Pollitzer | Engineering Services | Batteries EV | E-Logistics
6 个月A great article, Evgeny Malyshev, As always, asking "What If" brings more questions than answers, but allow us to really think through what it takes to build a Battery plant. Being an expert on the construction side only, I can only support your view that having an experienced team to install the production equipment is critical. Most Korean and Chinese battery equipment manufacturers have very little experience in international (let alone Global) installations all the way from FAT to SAT. Having an Intergrated Delivery approach allows to reduce delivery risks, and focus on the numerous other challenges! Great read!
Senior Financial Analyst
6 个月Most of what you write can be attributed to any big manufacturing project. For battery production you should also consider sourcing financing for the project, possible ramp-up challenges and who would be your technology partner to share production know-how. But maybe most importantly you need to decide what market are you targetting - EV, BESS?