Gulf turning green: West Asia now is the world's biggest renewable energy market outside China

When the new year 2025 rolled in, the oil-rich United Arab Emirates (UAE) only had middling ambitions regarding renewable energy. The nation was only plannign to annually install about as many solar panels as UK does.

Then, the scenario changed quite swiftly.

A swift shift towards renewables

The country’s state-owned renewable energy company, Masdar, announced at a huge trade fair in Abu Dhabi that it would build a $6bn solar plant with a capacity of 5 gigawatt. It’d be backed with more than 19GWh of battery storage.

Just like that, the largest such project ever attempted was announced in front of the president of the UAE.

In two years’ time, when the project is set to be completed, it would give the Gulf country enough energy to power more than 700,000 homes, Financial Times reported.

The shift wasn’t just happening in the UAE. In neighbouring Saudi Arabia, the world’s largest oil company– Saudi Aramco– announced a joint venture that would start producing lithium, a key ingredient for batteries, as early as 2027.

This is not a coincidence. The UAE, Saudi Arabia, and their Gulf neighbours are rapidly increasing their use of renewable energy. They recognise an economic opportunity to harness cheap solar panels, wind turbines, and batteries for domestic electricity, which will allow them to free up more oil and gas for export.

Regional players like Masdar and Saudi Arabia’s Acwa Power, Asian companies such as South Korea’s Kepco, Japan’s Jera and China’s Jinko Power, and European firms EDF, TotalEnergies, and Engie are some of the most active here. They are aggressively bidding for contracts to build renewable projects in the Gulf.

Adding renewable energy generating capacity

That has resulted in an unexpected achievement for the West Asia region.

According to the International Renewable Energy Agency (Irena), West Asia– which comprises the Gulf region as well as countries like Iran, Iraq, Israel, Lebanon, Jordan and Syria– has less than 1 per cent of the world’s renewable capacity.

But despite that, this is the second fastest-growing region in terms of adding capacity in the world, next only to China.

That achievement is largely the courtesy of the Gulf.

According to data from Rystad, an energy consultancy, it is projected that in five years, renewable energy sources will account for 30 per cent of the total energy capacity across Bahrain, Iraq, Kuwait, Oman, Qatar, Saudi Arabia, and the UAE, Financial Times reported.

Several major projects have already been announced.

For instance, Saudi Arabia aims to generate 50 per cent of its electricity from renewable sources by 2030. To achieve this goal, the country needs to install 130 GW of renewable energy in the coming years, enough to power approximately 25 million homes.

In Kuwait, by the end of 2023, the renewable energy capacity was only sufficient to power a few thousand homes.

However, the country awarded a contract last July to the US engineering firm KBR to develop 17 GW of renewable energy capacity, which will be enough to supply power to about 500,000 homes. Additionally, Kuwait has plans for 25 GW of green hydrogen production by 2050.

Powered by AI ambitions and diversification bid

The drive for renewables is also being fed by ambitions to build AI data centres and fledgling plans to produce “green” hydrogen — a transition fuel that is electrolysed using renewable power — and export it to countries where higher power prices make its production uncompetitive.

Both the UAE and Saudi Arabia have long depended on their abundant fossil fuel reserves and are planning to significantly increase oil and gas production in the coming years.

But they are also seeking to diversify.

“They have a lot of capital now from oil and gas, and they are trying to become less reliant on any one source of energy,” said Vegard Wiik Vollset, head of renewables at Rystad.

“It is also an economic benefit because they already have the best conditions for solar of almost anywhere in the world, and if you can get cheaper electricity than it costs for gas, you can export the gas instead.”