Middle East renewable energy projects seek investors

By Peter Feuilherade

The largely untapped potential of abundant solar resources in the Middle East and North Africa region is attracting increasing investment in several renewable energy projects.

 

 

Masdar "smart city" takes shape in Abu Dhabi

 

This article was first published in The Middle East magazine, March 2013

 

Oil producing states in particular are looking for ways of reducing their own dependence on diminishing fossil fuels. Another incentive is that they can earn far more by exporting their oil instead of using it domestically.

Energy consumption in the Middle East has grown rapidly in the last five years, increasing by 22% between 2007 and 2011. The International Energy Agency (IEA) forecasts that the region’s energy demands will quadruple by 2050.

One of the main factors behind the region’s ever-increasing consumption of electricity is population growth, which the IAE puts at around 1.5% a year. According to the World Energy Council, a UN-accredited organization, the Gulf region alone will require 100 gigawatts (GW) of additional power by 2020 to meet increased demand, running at 7.7% annually.

In 2011 global renewable energy investment reached a record $257 billion, although the MENA region accounted for only $5.5 billion, just over 2 per cent of the total.

Political and social turmoil led to investment across the MENA renewable energy sector plummeting by 18 per cent from 2010, despite constantly increasing demand for electricity fuelled by rising populations, growing urbanization and economic growth driven by industrialization.

However, as a 2012 report by Ernst & Young noted, “many countries in the region are seeking to increase the proportion of renewable energy in their generation mix as they seek to reduce local consumption of fossil fuels, meet ever-increasing local demand, and even start to diversify their economies away from hydrocarbons.”

At least 10 solar energy projects worth a combined $6.8 billion are currently under way in Egypt, Jordan, Morocco, the UAE, Kuwait and Oman, according to research specialists Ventures Middle East.

 

Morocco solar energy project (Photo: Global Arab Network)

 

Three years ago Morocco invested $9 billion in a national solar plan whose long-term aim is to provide nearly 40% of the country’s energy needs. It is now looking for another $1.25 billion in funding for a concentrated solar power (CSP) project, of which a quarter has been provided by the African Development Bank, with the World Bank and the European Investment Bank also participating.

Masdar, the renewable energy company backed by the government of Abu Dhabi, the UAE's richest emirate, invests in clean energy technologies either directly or through venture capital or private equity funds. As well as its 100-MW CSP plant in Abu Dhabi, Masdar runs solar power plants in Spain and a 1,000-MW offshore wind farm in the UK. And the UAE is developing a photovoltaic solar project in Dubai which will require investment of some $3.5 billion.

Oman, another front-runner in the Middle East renewable energy field, plans to produce 10% of its total electricity requirement from renewable energy resources by 2020 and is working with German investors to manufacture solar panels locally for domestic use and export.

Ambitious plans

Saudi Arabia and the UAE are forecast to lead the generation of renewable energy in MENA, but other countries have ambitious plans too.

Saudi Arabia is seeking investors for a $110 billion solar power programme over the next two decades to produce 41 GW by 2032, of which 25 GW would be produced from solar thermal plants and the rest generated from photovoltaic panels.

Qatar is building a $1.1 billion solar-grade polysilicon production plant intended to be the foundation of the country’s solar industry, providing materials for the manufacture of solar panels. The stadiums where Qatar will host the 2022 football World Cup in intense summer heat will use solar energy to power their climate control systems.

And Iraq, despite having the world’s fourth-largest oil reserves, is to spend up to $1.6 billion on solar and wind power plants over the next three years to add 400 MW to the national grid to help curb daily power cuts.

Setbacks

But the MENA renewable energy sector has suffered setbacks too. In late 2012, the German technology giants Siemens and Bosch pulled out of Desertec, a Munich-based $ 500 billion initiative which plans to produce electricity from huge solar thermal power plants in the Middle East and North Africa to supply some of the energy needs of the region and Europe too.

 

Desertec - mired after five years

The German multinationals cited economic factors for their withdrawal from the venture, which has achieved little on the ground since it was launched five years ago. And persistent political instability in parts of the region was also blamed for waning interest in Desertec by many European governments, some of them, like Spain, more concerned by the crises in their own ailing economies.

However, new private partners have expressed interest in joining the project, along with China's national grid corporation. If the project stays on course, by 2050 these solar power plants could supply up to 15% of Europe's electricity needs as well as a substantial portion of the power needs of the producer countries.

 “Highly attractive” for investors

The renewable targets set by some MENA countries are certainly ambitious. Egypt and Qatar say they will produce 20% of their energy from renewables by 2020 and 2024 respectively. Algeria has plans to produce 22 GW of power from renewables between now and 2030. Saudi Arabia has announced targets of 10% by 2020 and Kuwait 15% by 2030. Only time will tell if these targets are realistic, or rather a mirage.

And while the MENA region’s potential for renewable energy is huge, so too are the sums involved. A November 2012 conference paper by experts from Abu Dhabi’s Masdar Institute estimated that to create another 120 GW of new MENA power generation capacity by 2017 would require as much as $250 billion, when transmission and distribution costs were included.

Geopolitical analyst Jen Alic of Oilprice.com believes the situation in Europe, where some governments have cut renewable energy subsidies, particularly in the solar sector, and others are considering cuts, may boost funding for MENA renewable energy projects.

“Solar investors in Spain, German, Italy and the United Kingdom are increasingly open to seeking opportunities outside Europe in order to survive in a potentially zero-subsidy environment. On this level, the Middle East is highly attractive. North Africa is less so, due to regulatory ambiguities and stability concerns, but the potential is vast for anyone willing to take the risk,” Alic argues.

Foreign investments a vote of confidence in Middle East e-commerce

 By Peter Feuilherade

Continuing broadband penetration across most of the Middle East and North Africa has not only boosted the numbers of Facebook and Twitter users but is also a major factor in the steady growth of e-commerce.

This article was first published in The Middle East magazine, January 2013 issue.

Electronic commerce, or e-commerce, is the buying and selling of products and services over the internet and other electronic systems.

There are currently more than 72 million internet users in Arab countries, who spend an average of two hours online daily. Euromonitor International forecasts a 54.7 per cent increase in internet users in the MENA region from 2012 to 2020, as more content in Arabic becomes available. There are more than 250 million mobile subscriptions in the region, with Saudi Arabia leading mobile sector growth.

Estimates of the current value of the region’s e-commerce market vary considerably.

The Jordan-based Arab Advisors Group puts the value of e-commerce related transactions in the Middle East at about $11 billion a year. The global e-commerce business PayPal, which launched its Middle East operations in November 2012, is similarly optimistic, estimating e‑commerce in MENA to be worth $9 billion in 2012.

A study by Visa and Interactive Media reported much lower figures, albeit based on data from 2010. It said that the UAE led the way among the Gulf states in e-commerce spending, with sales reaching about $2 billion in 2010, accounting for 55 to 60 per cent of total GCC e‑commerce sales. Saudi Arabia was the second largest market, with an estimated $520 million, followed by Qatar ($375 million), Kuwait ($280 million), Bahrain ($175 million) and Oman ($70 million).

But according to Euromonitor, online shoppers in three key markets - the UAE, Saudi Arabia and Egypt - spent just over $1 billion on internet retail sites in 2011, a figure expected to double by 2016.

Since only 15 per cent of businesses in the region have an online presence (according to Google), the take-up of e-commerce has been slow. And with many consumers still wary of paying for goods online, 70 per cent of the region’s e-commerce deals are cash-on-delivery.

In the words of the New York Times, e-commerce in the Middle East “is still relatively young and fragmented, extremely capital intensive, and facing logistical hurdles that have led many sites to shut down… But success stories are now starting to emerge.”

Foreign investment

In recent months international investors have committed tens of millions of dollars to three of the Middle East’s largest online retailers.

Souq.com, the region’s largest online retailer with a customer base of eight million, secured $45 million from Naspers, a South African multinational company, and Tiger Global, a New York hedge fund. This marked the largest investment made in an e-commerce and internet business in the Middle East since the 2009 sale of Arabic-language internet venture Maktoob.com, the largest portal in the Arab world, which was sold for $165 million to Yahoo!, the second-most popular internet search engine.

JP Morgan Chase and Blakeney Management invested $20 million in Namshi, a UAE-based online retailer focusing on fashion and footwear.

And Marka VIP, a sales site focusing on luxury goods, raised $10 million from multiple international venture capital firms.

Market leaders

In the GCC, the UAE is the market leader in e-commerce spending. With more than three-quarters of UAE households having broadband-enabled computers, the growing number of middle- and high-income consumers online has driven the growth of internet retail sales.

Saudi Arabia not only leads social gaming consumption and mobile internet subscriptions in the MENA region, but also ranks second in e‑commerce sales in the GCC region, and represents the biggest retail sector in the region.

“Being able to capture the Saudi Arabian market is a critical success factor for e-commerce ventures in the Arab region,” according to Hassan Mikail, regional manager for e-commerce at Aramex, a global shipping firm based in Amman.

In Jordan, a survey by Arab Advisors in April 2012 showed “a significant growth” in e-commerce, with increases in both the number of people purchasing items online and the amount of money being spent, from $192 million in 2010 to $370 million in 2011.

In Egypt, according to Euromonitor, online expenditure is expected to more than triple in the next four years, with Egyptians spending as much as $447 million on e-commerce in 2016.

And in Morocco, again according to Euromonitor, internet retailing was one of the most dynamic retailing formats in 2011, with current value growth of 18 per cent, albeit from a low base.

 

Challenges

Customer aversion to online payments, logistics and curbs on regional trade, including complex and different customs, tax and border regimes are obstacles to MENA e-commerce companies trying to compete on price with traditional retailers.

In Egypt, for example, the Central Bank prohibits sending funds abroad until they are checked through the Central Bank itself, which usually takes around a week, impeding the operation of international e-payment services. And as The Economist notes, concerns about money laundering and financing of terrorist networks mean that new payment providers “not only have to deal with the usual red tape but also cope with layers of additional regulation”.

There is also a lot of work ahead to raise consumer awareness about e‑commerce. Historically, internet users in the Arab world have been more active on news and social media sites rather than transaction-based websites. Consumer mistrust in e-commerce is still widespread. A survey by the consultancy Booz & Company and Google found a general reluctance to buy goods online because of worries about fake websites or concerns over payment security and the delivery of purchases. Another study showed that 45 per cent of credit card holders in the UAE preferred not to use their cards online because they were afraid of fraud.

Mobile broadband access charges across most MENA are high by any global standards. In the Gulf states, Saudi Arabia and Lebanon, producers of apps, games and e-books are looking to cash in on the high ownership levels of web-connected mobile phones and tablets, but for this to happen, more books and content in Arabic must be made available.

In spite of these obstacles, the optimism of e-commerce advocates continues to grow. It is bolstered by regular forecasts of spectacular growth to come, such as the November 2012 report that online travel bookings in the Middle East are expected to account for 22 per cent of all travel bookings made in the region within the next two years, with a total value of $15.8 billion.

In the words of Elias Ghanem, managing director of PayPal Middle East and North Africa, “mobile and online commerce is very popular in North America and Europe, but it is still in its infancy in the Middle East…  However, mobile technology is hugely popular and people are gaining confidence in online retailing here, through exposure to daily deals, private sales, airlines websites etc.”

Smart cities rise from the Gulf’s deserts

With urbanization on the increase around the world, just over half of the planet’s population now live in cities. They also produce 75% of carbon emissions worldwide. As urban populations have mushroomed during the last 50 years, “smart” information and communication technologies (ICTs) have led efforts to improve the efficiency of urban systems and services.

 

 Masdar City, UAE

The quest for sustainable urban development has led to the loosely defined concept of the “smart city” (also called “digital” or “connected” city). Although Europe and North America led the way in the 1980s and 90s, attention is turning to Asia and the Middle East, where the concept is gaining momentum and smart cities are being built from scratch.

This article was first published in The Middle East magazine, July/August 2012 issue.

Smart cities use ICT to build new or adapt existing infrastructure, buildings and systems to make better use of energy and resources in meeting the challenges of climate change, population growth, demographic change, urbanization and resource depletion, and contribute to reducing emissions while increasing living standards.

A 2011 report from Pike Research, a US firm that analyses global clean technology markets, forecast that investment in smart city technology infrastructure would total $108 billion in the decade from 2010 to 2020.  By the end of that period, annual spending will reach nearly $16 billion, Pike Research anticipates.

Ali al-Khulaifi, market development manager at ictQATAR, the country’s telecoms regulator and technology advocate, defines a smart city as an “intelligent ecosystem employing integrated technology to provide public and private services”. They tend to be long-term projects, usually taking between 5-10 years, which require significant investments.

In the Middle East, Qatar, Saudi Arabia and the UAE have earmarked more than $63 billion over the next five years for development authorities, infrastructure companies, governmental and corporate entities to develop smart city projects.

At the Arab Future Cities Summit in Doha in April 2012, participants agreed on the importance of developing smart and sustainable cities in the Arab region, given that the majority of the population in the GCC region now live in cities.

While global corporate giants such as IBM, Cisco, Siemens and Orange look for their slice of the smart city pie, commentators also see social aspects such as investment in human and social capital and participatory governance as vital elements.

The GCC countries are leading the way in implementing smart infrastructure developments in the Middle East, lavishing vast sums in investment and funding for major projects such as Masdar City in Abu Dhabi, Lusail in Qatar and King Abdullah Economic City in Saudi Arabia.

Qatar, which currently has the highest per capita rate of CO2 emissions in the world, is investing billions in “green” building and solar technologies in a bid to reduce its carbon footprint.

Lusail, an extension to Doha, is intended to be Qatar’s biggest green field area once it is completed over the next 15 years. Extending across 38 sq. km, the new city includes four islands and 19 multi-purpose residential, mixed use, entertainment and commercial districts. As well as 200,000 permanent residents, it will have 170,000 employees and 80,000 daily commuters.  The promoters of the project describe Lusail as the “conscience of sustainable development”.

In Saudi Arabia, the ambition of Dubai property giant Emaar is to develop its $100 billion King Abdullah Economic City (KAEC) project, taking shape 100 km north of the Red Sea port of Jeddah, into one of the world's most advanced smart cities.

The KAEC website paints a picture of “seamless integration of state-of-the-art infrastructure and advanced technology with business and public services”.

KAEC will include one of the largest ports in the world. It forms part of a $400 billion plan announced by the Saudi government in 2008 to make the kingdom less dependent on the oil industry and provide jobs and housing for the 10 million Saudis under the age of 17.

But it is Masdar City, 17 km from Abu Dhabi, which stands out as the Gulf’s current landmark smart city. The aim of the developers of the $22 billion project was to create the world's first zero-carbon, zero-waste city, with the emphasis on energy efficiency. The 36 sq. km city, designed by British architects Foster + Partners, incorporated renewable energy and clean technologies as part of its design.

There is a strong emphasis on natural cooling, with streets aligned to provide daytime shading, parks located to channel prevailing winds into the city, and traditional Arabic building principles such as wind towers. Exterior materials and windows were chosen to provide maximum cooling and reduce heat gain in buildings.

Construction began in 2008, and when it is completed in 2025 the city is expected to accommodate 40,000 residents and 50,000 daily commuters. Conventional cars have been replaced by public transport using electric pod cars.

Masdar City treats wastewater for landscaping, to reduce the need for desalination, and uses 54% less water than the average UAE city.

Its 10MW solar-power plant, the largest grid-connected plant of its kind in the Middle East, is designed to produce more electricity overall than the city consumes, with excess transferred to the national grid. By 2020, Abu Dhabi aims to generate at least 7% of its power needs from renewable sources.

Every electrical outlet in the city is monitored, and smart meters collect and continuously analyse data about power usage to provide an accurate "live" model of energy use.

Smart energy grids are vital to smart cities. They can reduce peak demand for electricity by providing information and incentives to consumers, allowing them to shift consumption to other periods.

Smart metering is key to the effective operation of smart energy grids. The International Electrotechnical Commission (IEC), the Geneva-based global standards organization for all areas of electrotechnology, maintains that without accurate measurement it is not possible to demonstrate energy efficiency improvements credibly.

The UAE currently leads the smart meter market in the Middle East and North African region. A June 2012 report by Northeast Group, a Washington-based market intelligence firm, projected that MENA countries could save between $300 million and $1 billion every year by adopting smart grids to incorporate renewable energy sources, cope with rising demand and reduce energy losses on networks. The report predicted that capital spending in the MENA smart metering market would rise to $3.9 billion by 2022, with smart meters installed in 86% of homes in the Gulf.

But while conspicuous energy consumption remains a feature of Abu Dhabi, Masdar comes across more as a development project rather than an environmental one. And other regions of the world, such as Europe, are still ahead of the GCC in using real-time data systems to collect data on water and power usage and increase user awareness in environmentally friendly smart homes.

So, given the enormous financial resources of the Gulf states, why are there relatively few smart cities in development in the region?

Andrew Nusca, editor of the US-based website SmartPlanet, believes that while the Gulf states have considerable wealth, traditionally they have not been good at distributing it throughout the population or investing in public works projects that enable wealth generation. He told The Middle East: “By definition, the term ‘smart city’ denotes not just physical capital - infrastructure - but intellectual and social capital, too. That can't happen until the Gulf states begin to give their own people the tools to generate economic benefit for themselves and the state. That kind of progress takes generations to materialize, which is why we're only seeing the beginnings of this in the Middle East today.”

 

 

The Pentagon's "shadow wars" in Africa

By Peter Feuilherade

America's new and still-evolving defence strategy is strongly focused on Asia-Pacific and the Middle East, as well as heralding a new phase of restraint in military spending. Over the next 10 years the Pentagon faces budget cuts of 487 billion dollars.

On his first visit to Japan as Pentagon chief in October 2011, US Defense Secretary Leon Panetta said America would remain a global economic and military power despite the cuts, and the Asia-Pacific region would be central to US national security strategy. Washington's shift in focus towards Asia is in response to China's growing military power.

But the expanding US military presence in Africa suggests that Washington is also increasingly concerned about the expansion of transnational terrorism into sub-Saharan Africa.

This article was first published in Defence Management Journal – Summer 2012 issue

U.S. and Mozambican Marines train together in Maputo - Photo: U.S. Africa Command (Africom)

US forces or advisers are active in the Horn of Africa, East and Central Africa, while in at least 10 countries in the Maghreb, the Sahel and West Africa US personnel are providing counterterrorism training and building up national armies.

Countering extremists is the top military priority for the continent, says General Carter Ham, commander of the US Africa Command (Africom), which oversees US military operations across the continent but is based in Stuttgart, Germany.

Africom

Camp Lemonnier in Djibouti, the biggest US base in Africa, hosts the Combined Joint Task Force-Horn of Africa, set up a decade ago to counter Al-Qaeda's growth in East Africa. "By 2003, the CIA and the military’s Joint Special Operations Command were also establishing an operational presence in the Horn. Their mission was focused on killing or capturing senior members of Al-Qaeda in East Africa," recalls Sean D. Naylor, senior staff writer of the US website Army Times.

2008 saw the operational launch of Africom, responsible for US military relations with 54 African countries. With President George W. Bush facing almost unanimous opposition from African leaders to hosting it on the continent, its HQ was located in Germany instead. Africom's mission, its website notes, is to "protect and defend the national security interests of the United States by strengthening the defense capabilities of African states and regional organizations and, when directed, conduct military operations, in order to deter and defeat transnational threats and to provide a security environment conducive to good governance and development." Africom typically has fewer than 5,000 troops in Africa at any time.

Drones

The US media spotlight turned briefly to Africa in 2011 when the US sent 100 military advisers, mostly Army Special Forces, to help soldiers from four Central African countries - Uganda, Congo, South Sudan and the Central African Republic - fight the rebel Lord's Resistance Army (LRA) and capture its leader Joseph Kony. But for several years, the US Air Force has been flying drones over north-east Africa and Yemen from bases in Djibouti and more recently southern Ethiopia and the Seychelles.

In combating the Somalia-based Islamic insurgent group Al-Shabaab, only a handful of US troops are involved directly, usually special forces who enter the country on clandestine missions to kill militant targets. However, America has funded 9,000 African Union troops from Uganda and Burundi, and provided background support to invading  Kenyan and Ethiopian troops, all involved in military operations against Al-Shabaab.

In March 2012, the Africom chief told the US House of Representatives Armed Services Committee that Al-Qaeda affiliates in east and north-west Africa posed the greatest security threat to the US. Noting that Al-Qaeda and Al-Shabaab (which has recruited and trained dozens of American citizens) had publicly formalized their long-standing merger, he described the stated intention of the leaders of these extremist groups to work more closely together as "his greatest concern".

Unholy trinity

On the other side of the continent, the US is conducting counterterrorism training and equipping armies in Algeria, Burkina Faso, Chad, Mali, Mauritania, Morocco, Niger, Nigeria, Senegal and Tunisia. US involvement could escalate if events confirm reports that some members of Al-Qaeda's core leadership have moved to North Africa from Pakistan after suffering heavy losses in US drone attacks there.

US officials say there are "clear indications" that Al-Qaeda in the Islamic Maghreb (AQIM) is involved in trafficking arms from Libya, and that the upheavals in Libya and Tunisia have created opportunities for AQIM to establish new "safe havens". The US, along with several European countries, is concerned that AQIM and Boko Haram, the militant group from northern Nigeria formed in the 1990s, together with Al-Shabaab, are "attempting to share training and to collaborate in other ways in pursuit of their goal of attacking the US and other foreign targets", according to a September 2011 speech by General Ham. Some analysts dismiss such an alliance as unlikely, given the cultural and ethnic differences that separate the three groups.

Both AQIM and separatist Tuareg insurgents in northern Mali opposed to the Malian government received sophisticated weapons from Libya in 2011, allowing Tuareg rebels to resume armed operations inside Mali in January 2012.

In March, a group of Malian junior officers angered by the lack of government support to help the army fight the rebels seized control in a coup, before agreeing to the return of civilian rule in mid-April. At the time of writing, rebel groups remained in control of northern Mali, their ranks reportedly swelled by foreign Islamist militants. The whole country was also mired in a regional humanitarian crisis, with over 1.4 million Malians in need of emergency food assistance, according to EU estimates.

The New York Times recently described Mali as "an impoverished desert nation, an important American ally against the regional Al-Qaeda franchise". Mounting insecurity there, and fears that destabilization could spread to Niger and elsewhere in the Sahel region, suggest that the American military mission in Mali is likely to have its work cut out combating regional terrorism.

The US will share similar concerns to France, which has warned that the seizure of northern Mali by Tuareg separatists, in a loose alliance with Islamic militants, could turn the region into an AQIM stronghold.

Oil rush

US military operations in Africa face a range of difficulties, including a lack of bases and international agreements on flight paths, limited communications and the reluctance of many African countries to have any significant US force within their borders. One option for3the US is increasing the use of sea-based intelligence, surveillance and reconnaissance.

As the Pentagon cuts back on traditional military operations in the post-Iraq and Afghan war era and after defence budget cuts kick in, it will rely increasingly on smaller elite units to carry out targeted operations. US special operations forces (SOF) will expand to maintain a continuous presence around the globe. SOF will "begin to return to its roots as expert trainers of counter-terrorism forces in other countries", with a large portion of the worldwide SOF presence focusing on Africa and the Pacific, according to Pentagon officials.

However, public opinion and legislators in the US are concerned about the costs of military forays into Africa at a time of budget cuts, while the deployment of advisers has prompted comparisons with the escalation of US involvement in South Vietnam in the 1960s.

In Africa, the growing US presence is regarded with some suspicion too. "After the Libyan case of 2011 (the imposition of the no-fly zone) some African leaders, intellectuals and policy makers are advocating for change in the way international organizations or individual states intervene in African political crises. Some issues that make Africans suspicious about US involvement include the increased deployments of special forces, trainers and military contractors by the Pentagon, and the political objectives behind some of the interventions," Dr Petrus De Kock, Senior Researcher at the South African Institute of International Affairs, told Defence Management Journal.

America's critics, meanwhile, see Africa becoming a battleground where the US and its European allies are jostling for access to the continent's strategic oil and mineral resources with China, which has been striking commercial deals with governments across Africa for decades.

The last few years have seen significant new oil and natural gas discoveries reported across East Africa, from the Horn of Africa in the northeast, down to Tanzania and Mozambique in the south, and inland in Uganda and the Democratic Republic of Congo around Lake Albert.

As Africom chief General Ham said in March 2012: "With six of the world's fastest growing economies in the past decade, combined with democratic gains made in a number of African nations in 2011, Africa's strategic importance to the United States will continue to grow."

For all parties involved, the stakes are high and rising.

RAF warplanes keep 2012 Cosford Air Show crowds on their feet

Despite recent job cuts in the UK's armed forces, the RAF brings the past and the present together and puts on a great display at the 2012 Cosford air show on Sunday 17 June.

This story was first published on Suite101

Avro Lancaster bomber at Cosford - Photo: Peter Feuilherade

Frontline Royal Air Force (RAF) jets that recently saw service in Afghanistan and Libya as well as historic and iconic aircraft from earlier conflicts were in action again at the Cosford Air Show this week. The annual display, which was seen by some 40,000 people this year, is the biggest in the West Midlands and one of only three RAF officially endorsed shows.

The highlights included high speed displays by an RAF 6^th Squadron Eurofighter Typhoon and two Tornado attack aircraft. Eurofighter Typhoon FGR4s and Tornados both served in operations over Libya in 2011, and Tornados are currently deployed in Afghanistan to carry out reconnaissance missions and provide close air support for Coalition troops on the ground.

A fly-past by an Avro Lancaster bomber and a Spitfire from the Battle of Britain Memorial flight evoked thoughts of the UK’s aviation heritage, as spectators remembered all the RAF personnel who had served in previous conflicts, particularly World War Two.

As well as a display by the ever-popular Red Arrows aerobatics team, the Cosford air show was also one of the last chances to see a flypast by an RAF Vickers VC10 tanker/transport before the aircraft’s imminent retirement from service. In March 2013 the RAF will stop operating its VC10 fleet, which was first deployed in 1966.

Red Arrows at Cosford - Photo: Peter Feuilherade

But as RAF staff at Cosford celebrated the 2012 air show’s success, they also reflected sombrely on the impact of the latest round of redundancies in the UK armed forces announced just a few days previously.

Nine hundred posts are being cut from the RAF, as well as 2,900 from the Army and 300 from the Royal Navy. The job losses are part of the largest personnel cutbacks for more than two decades. Those affected include members of all three services with experience of fighting in two Gulf Wars, peacekeeping in Bosnia and Kosovo and counter-insurgency in Iraq and Afghanistan.

Online is a game changer for amusement machines

Gaming goes for the personal touch

 

By Peter Feuilherade

First published in the Geneva-based International Electrotechnical Commission magazine and website e-tech in June 2012

While the irresistible global rise of online entertainment is bringing rapid change to the market for commercial amusement machines, businesses are also readjusting to the combined pressures of economic recession and regulatory change. A number of IEC TCs (Technical Committees) and SCs (Subcommittees) prepare International Standards for the systems and devices used in amusement machines found in public places. These make a significant contribution to an industry with a global value projected to exceed USD 110 billion in 2016.

Multiple machines to meet multiple needs

         
Amusement machines are electro-mechanical appliances found in public places. They include gaming machines, arcade video games, driving simulators, laser shooting appliances, pinball machines, "kiddie rides" and billiard tables.

Modern pay-to-play machines are no longer confined to amusement arcades. Increasingly they are found in bars, clubs, hotels and sports centres as well as being available for domestic and corporate entertainment hire.

Electronic gaming is a globally popular pastime for many people. Electronic games can be defined as interactive games that are played on arcade machines, consoles, computers and mobile devices such as phones and tablets.

Video-based multiplayer digital terminals with touchscreen technology offer combinations of fun games, card games and skill games. The market for "skill with prizes" machines is one of the fastest growing.

There are also gaming machines without prizes, score game and touch-screen machines, video games, driving simulators, pinball machines and laser simulated systems for shooting and other sports such as basketball, golf and archery. Electronic machines offer sports such as billiards, darts and football or air hockey.

Games played in amusement arcades have been steadily losing their appeal since the appearance of home consoles in the mid-1980s started the trend towards more personalized gaming.

IEC work ensures safety

Several IEC TCs and SCs develop standards for the components used in amusement machines.

IEC TC 61: Safety of household and similar electrical appliances, plays a central role. It prepares product standards and safety requirements for electrical appliances primarily for household purposes, but also for other equipment and appliances in similar fields in which there is no dedicated IEC technical committee. Its responsibilities include drawing up specific requirements for the safety of electric commercial amusement machines whose rated voltage does not exceed 250 V for single-phase and 480 V for other appliances.

The usual safety standards for household electrical appliances apply to amusement machines. They include requirements and test criteria to cover hazards such as electric shock; thermal hazards (burns, overheated surrounds, insulation); mechanical hazards (cutting, crushing, explosion); appliances that catch fire owing to internal faults; radiation and toxicity (non-ionizing radiation and poisonous gases).

The growing use of electronic circuits (including programmable elements) for the provision of safety related functions and to enable remote control and remote servicing of electrical appliances through telecommunications networks is leading to improvements in design, construction and safety.

Cost is a major factor

The traditional arcade cabinets have been superseded by HD flat screen gaming platforms and simulator-style cockpit units that can cost from USD 10 000 to 25 000 or more. Many arcade owners are unwilling to invest such large sums in buying the latest top-range video arcade game machine that may only have a shelf life of a few seasons – not long enough to pay off its cost.

As the electronic content of amusement machines expands, other IEC TCs and SCs play a role in developing standards relevant to the industry, such as for the sensors used in amusement machines, the motion sensors in arcade video games and safety and overload sensors in kiddie rides.

IEC International Standards that cover sensors and their operation include the IEC 61508 series, Functional Safety, developed by SC 65A: Industrial-process measurement, control and automation, and IEC 61757, Fibre optic sensors, developed by SC 86C: Fibre optic systems and active devices. TC 76: Optical radiation safety and laser equipment and TC 47: Semiconductor devices, also deal with sensors used in amusement machines.

Not only has the home market for video games taken over, but consumers are now moving online as the costs of consoles and handheld gaming devices continue to rise, while downloading has become more accessible. The mobile market, particularly in terms of smartphones, has become a growth area for games.

Whither the pinball machine…

US firms dominated pinball machine manufacturing in the 1950 70s, when the popularity of this entertainment was at its peak. Now there are only a few US manufacturers in the global market, while some Chinese companies make generic pinball machines, largely for domestic sales and export to markets outside the US. Since the 1980s, pinball has become electronic, digitized and licensed. Modern pinball machines combine video graphics with mechanical action, often based on licensed themes associated with popular video games, films and toys.

Children first…

 

Coin-operated amusement rides for small children, known as kiddie rides, are usually located in amusement parks, shopping centres, supermarkets and fast-food restaurants. Most rides include sounds and music, sometimes with adjustable volume control; some feature flashing lights, pedals and buttons. Modern rides may have a solid state audio playback device similar to flash-based MP3 players.

         
The highest standards of safety are of the utmost importance in the design and construction of kiddie rides as children do not receive adequate prior training in the rides’ use. This involves looking for child-specific mechanical and other hazards that could result from operation of the appliances, such as crushing as a result of pinch points that may be encountered on the rides.

Precautions commonly found include a button that allows the ride to be paused, safety sensors that detect if anything obstructs the ride's movement and which cause it to stop, overload sensors that stop the ride if the weight limit is exceeded, and a slow start/stop action so that younger riders are not alarmed.

To ensure these machines are safe, TC 61 published IEC 60335-2-82, Household and similar electrical appliances - Safety, which deals specifically with Particular requirements for amusement machines and personal service machines.

Global but fragmented markets

In the words of the Euroslot World Market Report 2011-12, there is no "global" market for gaming and amusements, but rather "a motley assembly of national markets" shaped by national or regional characteristics. The economic downturn, however, is affecting nearly every corner of the industry, especially traditional parts of the amusement sector which are already in slow decline because of the rise of e gaming.


The industry, as well as the manufacturers of amusement machines and associated products, have to contend not only with "the many commercial advantages of using the internet as a platform for gambling and entertainment, but also with the increasing ubiquity of smartphones as the means of delivery", says the report's editor Barnaby Page.

A September 2011 report by US-based BCC Research put the global total value of the electronic gaming industry in 2011 at around USD 69,9 billion for games and software, hardware and accessories and services. The report forecast that the total would rise to USD 111,8 billion in 2016.

Italy is Europe’s biggest gaming market, with video lottery terminals (VLTs), Amusement Machines with Prizes (AWPs), casinos and online poker all creating vast profits for licence holders and increased revenue for the government. Since the regulation of VLTs in 2010 to bring in revenue for the Italian government's rebuilding efforts following the Abruzzo earthquake, VLTs have been at the forefront of a gaming revolution, with prizes of up to EUR 500 000 on offer.

In Germany, there is great concern about the threat posed by the first state legislation on amusement arcades, which manufacturers, distributors and arcade operators say will have ruinous consequences. Nevertheless, the coin-operated amusement devices market is projected to exceed USD 1,6 billion in Germany by 2015. AWPs represent the most popular coin-operated devices. New installations, however, are declining for Amusement Devices without Prizes, especially for score game and pinball devices, which have both dropped in popularity.

In the USA, coin-operated amusement devices were the staple of video arcades in the 1970s and 1980s. The growing popularity and advancing technology of home gaming systems has now led to the almost total demise of large arcades targeted at young customers. They have been replaced by family entertainment centres, offering casual dining facilities coupled with large game rooms geared to a range of ages, including younger and older children and adults, and gambling operations, including casinos, horse racing tracks and, in some states, slot machines which compete with casinos. Slot machines have become so popular that they provide 70% to 75% of casino revenues.

Asia has become the largest gambling region in the world, overtaking Europe and North America. Most of the profits are derived from casino operations, which are set to provide a lucrative export opportunity for manufacturers of the relevant kinds of amusement machines. The UK company, Global Betting and Gaming Consultants (GBGC), predicts that by 2015, Asia's casinos will account for 48% of the global market, thanks to continuing growth in Macau and Singapore as well as new operations in the Philippines and Vietnam.

PWC (PricewaterhouseCoopers) broadly concurs, predicting that by 2015, Asia Pacific will account for 43,4% of global spending on casino gaming, with the US accounting for 40,1%. This is on top of rising spending on online gaming. The big question is whether online gaming revenues will add to existing offline revenues, or will cannibalize them.

The popularity of gambling, and the spread of online betting, has been accompanied by a fall in demand across most of Asia for electronic coin-operated amusement centres and arcade-type amusement machines. In India, for example, this sector was estimated to be worth less than USD 200 million in 2011..

The future

          
More than 40 years have passed since the launch of the first coin-operated video game in 1971. Now the video game sector has evolved into a popular and diverse market that has outgrown its original amusement trade confines. The collapse of the traditional arcade business in many countries has sidelined video amusement machines to the role of generators of secondary revenue for larger entertainment complexes, especially in the US.

But manufacturers of amusement machines and video lottery terminals can still look forward to expanding markets in Asia, where casino gaming is set for huge growth as the affluent middle classes seek new forms of entertainment.

The newest innovations in video-based multiplayer digital terminals combine features of computer gaming, such as dynamic playing fields and gaming levels, with the social interaction and palpable playing pieces of conventional multiplayer board games, such as pawns and dice. This has led to a number of partnerships between electronics companies and games vendors and developers.


Manufacturers of these products cite the tangible and visual interaction among users, including the option to incorporate social networking elements, as one of their main features. More intuitive amusement machines offering greater "gestural experiences" are also in development.

All of these machines, which drive an industry with a global value expected to grow by nearly 60% between 2011 and 2016, rely on the work of several IEC TCs and their standards.