Why Saudi Arabia’s PIF should build battery storage factories in Indonesia

The future of energy security will depend less on who controls oil wells and more on who controls batteries, critical minerals and electricity storage systems.

That is why Saudi Arabia’s Public Investment Fund (PIF) should directly invest in battery storage factories in Indonesia.

The urgency has become clearer amid the Iran war and repeated instability around the Strait of Hormuz, one of the world’s most important energy chokepoints. The conflict exposed how vulnerable global supply chains remain to geopolitical shocks.

Governments are now realizing that energy security is no longer only about crude oil. It is also about securing battery materials, storage technology and industrial resilience.

Saudi Arabia and Indonesia have complementary strategic advantages. Saudi Arabia has capital, industrial ambition and rising demand for battery storage systems. Indonesia has the world’s largest nickel reserves and is rapidly building a downstream battery ecosystem.

Last year, Riyadh and Jakarta signed agreements on critical mineral cooperation covering nickel, cobalt and manganese. But these agreements should move beyond mining cooperation into full-scale battery manufacturing.

Under Vision 2030, Saudi Arabia is investing heavily in renewable energy, electric mobility and smart infrastructure. Projects such as NEOM and large-scale solar developments will require massive battery storage capacity to stabilize electricity supply. Solar generation alone cannot support industrial expansion without reliable storage systems.

Yet Saudi Arabia still lacks a fully integrated battery manufacturing base.

Indonesia already possesses much of the upstream supply chain Saudi Arabia needs. Jakarta’s nickel downstreaming policy transformed the country from a raw ore exporter into a major refining and processing hub. By banning exports of unprocessed nickel, Indonesia forced investors to build smelters and precursor plants domestically.

The policy worked. Tens of billions of dollars flowed into industrial zones in Sulawesi and Maluku. Chinese firms such as Contemporary Amperex Technology Co., Limited (CATL) and Huayou now play dominant roles in Indonesia’s nickel refining and battery ecosystem.

READ: Indonesia to deploy over 700 peacekeepers in southern Lebanon amid attacks, killings by Israel

But Indonesia remains concentrated in the lower and middle sections of the value chain. Much of the advanced battery technology, manufacturing expertise and intellectual property remains controlled by foreign firms.

This is where PIF could become strategically important.

Instead of investing only in mining or refining, Saudi Arabia should finance integrated battery storage factories in Indonesia. These facilities should include cathode manufacturing, nickel-metal hydride (NiMH) battery systems, battery assembly, recycling facilities and industrial research partnerships.

The focus on battery storage is critical because the fastest-growing long-term demand may not come from electric vehicles alone, but from grid-scale energy storage.

Countries transitioning toward renewable energy increasingly need storage systems capable of balancing electricity fluctuations from solar and wind power. Saudi Arabia’s own renewable expansion will require substantial storage capacity over the next two decades.

Building battery storage factories in Indonesia would therefore give Saudi Arabia secure access to both manufacturing capacity and raw materials.

NiMH batteries deserve particular attention. Although lithium-ion batteries dominate headlines, nickel-based chemistries still offer important advantages in thermal stability, reliability and hybrid storage applications. In a fragmented geopolitical environment, countries should avoid overdependence on a single battery chemistry or supply chain.

Indonesia’s nickel reserves make it uniquely positioned to support diversified battery manufacturing at industrial scale.

A PIF-backed investment strategy would also help Saudi Arabia reduce excessive dependence on existing battery supply chains dominated by China. Today, China controls much of the world’s refining, cathode production and battery manufacturing capacity. The United States and Europe are now aggressively trying to diversify supply chains because they view this concentration as a strategic vulnerability.

Saudi Arabia should think similarly.

An Indonesia-Saudi battery corridor would create an alternative industrial axis linking Southeast Asian mineral production with Middle Eastern energy demand and sovereign capital. It would strengthen Saudi Arabia’s industrial autonomy while helping Indonesia diversify foreign investment beyond Chinese financing.

The partnership could also position both countries as leaders in South-South industrial cooperation.

Historically, developing economies exported raw materials while advanced economies captured manufacturing and technological value. Indonesia and Saudi Arabia now have an opportunity to build an integrated industrial ecosystem themselves rather than remaining dependent on Western or Chinese industrial structures.

But such cooperation will only succeed if sustainability becomes central to the strategy.

Indonesia’s nickel industry faces mounting criticism over coal-powered smelters, deforestation and environmental damage. If Indonesian nickel becomes associated with high carbon intensity, future exports could face increasing regulatory barriers in Europe and North America.

Saudi Arabia’s investment could help solve this problem.

PIF has the financial capacity to support renewable-powered industrial parks, lower-emission refining systems, battery recycling facilities and cleaner manufacturing infrastructure. Rather than replicating older extractive models, Saudi investment could help Indonesia build a globally competitive lower-carbon battery ecosystem.

That would benefit both countries.

Indonesia would move further into advanced manufacturing instead of remaining primarily a mineral-processing economy. Saudi Arabia would secure long-term access to strategic battery supply chains essential for its post-oil transformation.

The twentieth century was shaped by oil alliances.

The twenty-first will increasingly be shaped by battery alliances.

OPINION: Instead of indirectly insulting Yemen, Prabowo should be building relations with it

The views expressed in this article belong to the author and do not necessarily reflect the editorial policy of Middle East Monitor.