Gulf states on track to invest in renewable energy

Gulf states on track to invest in renewable energy

Gulf states interested in economic transformation are beginning to focus on diversification as they develop a solid infrastructure for renewable energy. As urban areas expand and the population grows in the Gulf region, demand for electricity is growing rapidly, and it is expected that the region will need another 100 gigawatts of power over the next decade to meet this demand. Moreover, several modes of economic diversification, such as artificial intelligence, smart cities and tourist attractions, require large amounts of electricity, which further increases the need for sufficient and sustainable energy sources.

At the same time, as population grows in a region that struggles with high temperatures for much of the year, increased demand for air conditioning will also put new pressures on electricity generation. Renewable energy is key to meeting this growing demand and will account for 35 percent of global energy production by 2025, according to the International Energy Agency.

The region has shown a positive trend in this field as Gulf countries have actively established cross-border, regional and international cooperation to develop renewable energy infrastructure. For example, on May 1, the UAE’s state-owned renewable energy company Masdar entered into a partnership with Bahrain’s energy and investment arm Bapco Energies to develop offshore and offshore wind farms in Bahrain.

In the same week, Omani green hydrogen producer Hydrom signed deals worth $11 billion with international companies, including French state-owned EDF. They will lead to the creation of two new green hydrogen projects in Dhofar. At the same time, Kuwait Oil Company signed a memorandum of understanding with Kuwait’s Ministry of Electricity, Water and Renewable Energy to coordinate efforts to generate 1 GW of electricity from solar energy.

They have established cross-border, regional and international cooperation to develop renewable energy infrastructure

Zaid M. Belbagi

With abundant sunlight and wind, and large areas of disused land, Gulf states are well-positioned to harness natural resources for sustainable energy. High exposure to sunlight allows solar power plants to operate longer. It is worth noting that in the Gulf Cooperation Council, solar power generation currently costs less than 2 cents per kilowatt hour and is therefore the cheapest power generation option.

Increasing renewable energy generation is also part of the Gulf states’ commitment to reduce greenhouse gas emissions and achieve their net-zero emissions targets. Through participation in high-profile international environmental summits such as the Meetings of the Parties to the United Nations Framework Convention on Climate Change, Saudi Arabia, Bahrain, Kuwait and the United Arab Emirates have committed to achieving net zero emissions by 2050. In addition, after ratifying the Paris Agreement and committing that they are highly dependent on fossil fuels, the Gulf states have actively established the necessary infrastructure and emission reduction plans.

This commitment is also reflected in the national vision statements of individual countries. As part of its Vision 2030, Saudi Arabia is working towards energy diversification and a circular carbon economy in which renewable sources will meet 50 percent of the kingdom’s energy needs by 2030. Total installed renewable energy capacity in Saudi Arabia tripled in 2023, and the country continues to invest significantly in solar and wind projects. Similarly, the UAE’s 2050 Energy Strategy aims to make the country carbon neutral by 2050.

Renewable energy is not just an option, but a necessity to improve the socio-economic changes taking place in the Persian Gulf

Zaid M. Belbagi

In addition to benefits related to energy security and sustainable development at home, their commitment to renewable energy has also enabled the Gulf states to strengthen international relations, as well as attract and secure foreign investment. In the first week of May alone, Saudi Arabia signed renewable energy partnerships with Azerbaijan, Mauritania and Uzbekistan. Notably, the Kingdom is also in talks with the EU to identify opportunities for cooperation on renewable energy and carbon capture. In March, it also hosted Saudi Arabia’s Green Energy Week, where local and international industry leaders gathered to discuss the opportunities and challenges facing the energy value chain.

The region is therefore well on its way to building a robust and sustainable renewable energy infrastructure that can not only meet domestic demand, but also potentially support international consumption. State-owned enterprises have actively provided the necessary financial and regulatory support for this endeavor, and while the private sector has also played a role, there are still opportunities for further private-public partnerships. For example, according to the UAE’s Nationally Determined Contribution to the Paris Agreement, the country needs a total investment of approximately $36 billion to meet its 2030 climate goals.

Currently, renewable energy is not just an option, but a necessity to improve the socio-economic changes taking place in the Persian Gulf. It increases the sustainability of economic development, provides significant opportunities for employment and skills development, and increases the confidence of international investors in the region.

  • Zaid M. Belbagi is a political commentator and advisor to private clients between London and the Gulf Cooperation Council region. X: @Moulay_Zaid

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