Middle East pushes toward renewables to reduce dependency on oil-economy

Many Middle Eastern economies rely on fossil fuels to finance their budgets and sustain economic activity. The Middle East produces a third of the world’s oil. Saudi Arabia, Iran, Iraq, the United Arab Emirates, Kuwait, and Qatar are among the leading fossil fuel producers in the world.

The Gulf Cooperation Council (GCC) countries—Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, and the United Arab Emirates—control almost 30% of the world’s proven oil reserves and roughly 20% of its proven natural gas reserves. OPEC members generate over 39% of today’s crude oil, with Saudi Arabia, the organization’s founding member, generating over 12.2 million barrels per day.

Saudi Aramco, a state-owned company, is primarily responsible for these numbers. Saudi Aramco is one of the most valuable corporations in the world, with assets valued at over 510 billion US dollars.

Despite being the world’s biggest energy exporter, with over 1.36 billion tons of oil equivalent exported, the Middle East’s governments are keen to diversify their economy and decrease their reliance on oil. This is because global demand for fossil fuels has grown highly variable, as well as being susceptible to geopolitical and social events.

The current coronavirus (COVID-19) epidemic exemplifies how the Middle East’s economics are impacted by a decline in global oil demand and, as a result, a drop in oil prices on the world market. Progressive governments, particularly those in the Gulf Cooperation Council, have accelerated investments in renewable energy sources such as solar and waste into energy.

This could significantly reduce the region’s carbon footprint, and establish competitive rates for power-intensive businesses and manufacturing. This would also assure a sufficient supply of desalinated water, all of which would improve the region’s prospects.

Renewables play a critical role in the region’s sustainable energy transition, which must be considered in the context of the region’s broader socio-economic development. With the deployment of renewables, there is a ripple effect across society in terms of economic growth and diversification, job creation, improved trade balance, and increased water security.

The Renewable Push

They also have a lot of renewable energy resources like solar and wind. The Middle East renewable energy market has an installed capacity of 24,073 MW in 2020, and it is expected to grow to 59,656 MW by 2027, with a CAGR of about 13.43% between 2022 and 2027.

In the primary example, renewable capacity development in the Middle East and North Africa (MENA) is predicted to quadruple over the next five years, from 15 GW to over 32 GW. Over the following five years, the Middle East Renewable Energy Market is expected to increase at a CAGR of 13.43%. The United Arab Emirates, Saudi Arabia, Israel, Egypt, and Morocco account for more than three-quarters of the capacity increase.

The cost-effectiveness of solar PV in meeting climate goals and fossil fuel diversification demands is one prevalent motivator. Solar PV is responsible for more than two-thirds of the region’s new renewable capacity. As the region’s governments try to expand the number of renewables in their energy mix, the Middle East is on its way to becoming one of the world’s most important Renewable Energy hubs.

In the first semester of 2021, no contracts for oil- or gas-fueled power stations were issued in the Middle East and North Africa region, according to Middle East Energy Transition. Around $2.8 billion in renewable energy project contracts were awarded in the region during the same time period.

Over the next five years, the percentage of MENA’s solar PV growth that occurs in net fossil fuel exporting nations is predicted to expand from 40% to 67%. Solar PV is predicted to grow by over 6 GW in the United Arab Emirates, with CSP, biofuels, and hydropower following closely after.

Due to greater-than-expected PV capacity granted in the most recent independent power producer auction, new government-owned PV projects at data centers and landfills, and advances in the development of waste-to-energy projects, the prediction is somewhat higher than last year.

Bahrain

Bahrain’s Economic Vision 2030 is a comprehensive strategy based on three guiding principles: sustainability, justice, and competitiveness, that aims to shape the government’s, society’s, and economy’s visions. Bahrain is currently pursuing a number of solar energy projects, the largest of which being a 2 million square meter facility at Askar. A key goal is to make clean energy more affordable, with a national renewable energy target of 5% by 2025 and 10% by 2035.

Israel

The construction of 5.2 GW will more than quadruple Israel’s renewable capacity between 2021 and 2026. FITs, net metering, self-consumption with reimbursement for surplus energy, and competitive auctions account for more than half of the growth in distributed PV.

Due to an increase in 2030 renewable energy objectives (from 17% to 30%) and increased support for solar PV, the prediction is more hopeful than last year.

Egypt

Egypt’s renewable capacity will grow by 68% (4 GW), with onshore wind leading the way, followed by solar PV. Unsolicited bilateral contracts with the government utility account for the majority of the expansion. The renewable capacity of planned projects has been boosted as a result of recent advances under this initiative.

Saudi Arabia

Saudi Arabia’s renewable capacity is expected to increase by around 6 GW, owing to goals to diversify the power generating mix away from oil. Utility-scale solar PV accounts for more than 80% of the increase, with two procurement techniques used: competitive auctions for independent power producers and unsolicited bilateral contracts with utilities.

The National Renewable Energy Program (NREP) is a Vision 2030 strategic effort aimed at maximizing the Kingdom’s renewable energy potential. The Ministry of Energy’s Renewable Energy Project Development Office (REPDO) was created to carry out the NREP’s objectives.

Saudi Arabia, the Arab Peninsula’s largest country, has declared its intention to become carbon-neutral by 2030, with an aim of obtaining 50% of its electricity from renewables and nuclear power. Saudi Arabia aspires to be a leading diversified economy and a model for long-term development under its Vision 2030.

United Arab Emirates

The United Arab Emirates is the second GCC country to include nuclear energy in its long-term energy strategy. The Barakah nuclear power plant located in the Emirate of Abu Dhabi was the UAE’s first nuclear power plant. The UAE published its ‘Energy Strategy 2050’ in 2017, with the goal of increasing renewable energy’s contribution to the total energy mix from 25% to 50%.

To accomplish the UAE’s economic and environmental goals, the Energy Strategy blends renewable, nuclear, and clean energy sources. To address its expanding energy demand, the UAE expects to invest AED 600 billion by 2050.

Oman

In Duqm, Manah, and Dhofar, Oman is now working on a mix of wind and solar projects with completion deadlines ranging from 2021 to 2024. One of the goals of the Sultanate of Oman’s Vision 2040 is to generate 30% of its electricity from renewable sources by 2030, as part of its national energy strategy.

Renewables 2021 – Analysis and forecast to 2026

Renewable power targets in the Gulf states

Country	National level target	Actual share of generation in 2019
Bahrain	5% of generation by 2025 10% of generation by 2035	0.03%
Kuwait	15% of generation by 2030	0.22%
Oman	10% of generation by 2025 30% of generation by 2030	0.01%
Qatar	6% of generation by 2020 20% of generation by 2030	0.26%
Saudi Arabia	50% of generation by 2030	0.04%
UAE	Federal: 27% of generation mix by 2021, 44% of generation mix by 2050	3

Source: Renewables 2021 Global Status Report; MENA energy investment outlook 2021-2025