The Middle East's Evolving Renewable Energy Landscape

Introduction

The Middle East, historically synonymous with vast oil reserves and fossil fuel-based energy sources, is experiencing a significant shift towards decarbonisation. Global environmental concerns, in addition to the growing economic competitiveness of energy powered by non-fossil fuel sources, have led to a drive towards renewable energy. In this regard, the figures speak for themselves. Renewable energy sources produced just over 30% of the world’s electricity in 2023,[1] with global annual renewable capacity additions increasing by almost 50% to nearly 510 gigawatts in 2023 – the fastest growth rate in the past two decades, and the 22^nd year in a row that renewable capacity additions set a new record.[2]

This upward trajectory is likely to continue. During 2023’s United Nations Climate Change Conference (COP 28), held in Dubai, negotiators from almost 200 signatories agreed during the world’s first ‘global stocktake’ to ratchet up climate action before the end of 2030, with the overarching aim of keeping to the agreed global temperature rise limit of 1.5 degrees Celsius (as agreed by 194 ratifying parties to the Paris Agreement).[3]

Key Renewable Energy Projects in the Middle East

To keep pace with these objectives, countries in the Middle East are increasingly investing in solar, wind, and other renewable projects to diversify their energy sources, reduce carbon emissions, and align with global sustainability goals. In addition, the cost-competitiveness of solar and onshore wind power, and their abundance in the Middle East, has led to government policy decisions across the region incentivising local and international investment in these sectors. As a result, some of the largest renewable energy projects in the world have been and are presently being implemented in the Middle East. By way of a few examples:

The Mohammed bin Rashid Al Maktoum Solar Park in the UAE is planned to be among the world’s largest single-site solar parks, with an estimated future capacity of more than 5,000 megawatts.[4]
The UAE is also home to the Al Dhafra Solar Power Project, with an estimated capacity of 2,000 megawatts.[5]
NEOM’s Green Hydrogen Project in Saudi Arabia, planned to be the world’s largest carbon-free green hydrogen plant, will integrate 4,000 megawatts of solar and wind energy to produce up to 600 tonnes of carbon-free hydrogen per day by 2026.[6]
Egypt’s Benban Solar Park, comprising 40 solar power plants (under construction), is one of the largest solar photovoltaic parks in the world, with a power generation capacity of between 1,400 and 1,800 megawatts.[7]
The Al Shuaibah Solar Project in Saudi Arabia, comprised of two separate power plants set across 55 kilometres of land, will have a generation capacity of 2,660 megawatts.[8]
The Gulf of Suez Wind Power Project in Egypt is one of the world’s largest onshore wind farms, with a planned generation capacity of 1,100 megawatts.[9]

This transition from oil and gas to renewable energy sources presents unique opportunities, as well as challenges. The renewables sector’s characteristics – uncertain political landscape, cross-border investment, changing prices and evolving technology – often coalesce to create the ‘perfect storm’ for a range of potential energy disputes.

Strategic Shift

The backdrop to the Middle East’s strategic shift towards renewable energy is made up of a number of factors.

Government Vision and Policy: In order to meet global targets, as well as to support the diversification of their own economies away from oil and gas, countries across the Middle East are rolling out environmentally-conscious sustainability policies such as Saudi Vision 2030,[10] Dubai Clean Energy Strategy 2050[11] and Egypt Vision 2030.[12] In a further commitment to sustainability, Saudi Arabia[13] and Kuwait[14] have both publicly stated aims to achieve net zero greenhouse gas emissions by 2060.

In general, the increase of production of energy from renewable sources is a key element to Middle Eastern government policies encouraging diversification and sustainability. This forms part of a broader strategy to create a diverse and sustainable economy in sectors such as tourism, technology and finance, in order to support the economy’s move away from oil and gas.

Economic Benefit: The renewables sector offers significant investment opportunities in its own right. The global renewable energy market size was estimated at USD 1.21 trillion in 2023 and is expected to grow at a compound annual growth rate of 17.2% from 2024 to 2030.[15] It may be that these figures are in actual fact conservative (given the need for further investment in renewables if the 1.5 degrees Celsius commitment of the Paris Agreement is to be met).

As such, renewable projects are seen as pillars for the sustainable economic growth of countries across the Middle East, attracting investments from across the globe and providing opportunities for investment in new industries. With increasing government support (in the form of subsidies) for renewables, various renewables sector initiatives can sometimes (whether rightly or wrongly) be seen as a ‘safe’ bet.

Technological Breakthroughs: Technological developments in the renewables sector take place on a rapid timescale. Whilst momentum will need to continue, if not increase, in order to meet global emissions targets, industry innovation to date has meant a vast increase in choice as regards clean technology, as well as a decrease in the cost of some renewable technologies, particularly solar and wind. The viability of projects is being enhanced year-on-year, with continued innovations in the fields of energy storage and smart grid technologies.[16]

Conclusion

The Middle East’s renewable energy sector will continue its substantial growth apace, driven by governmental policies, economic diversification, and rapid advances in technology. However, the complexity and scale of these projects, combined with the significant investment required, will inevitably lead to potential legal disputes.

[1] World passes 30% renewable electricity milestone | Ember (ember-climate.org).

[2] Executive summary – Renewables 2023 – Analysis – IEA.

[3] COP 28: What Was Achieved and What Happens Next? | UNFCCC.

[4] Mohammed bin Rashid Al Maktoum Solar Park (dewa.gov.ae).

[5] Masdar | Al Dhafra Solar PV.

[6] NEOM Green Hydrogen Company completes financial close at a total investment value of USD 8.4 billion in the world’s largest carbon-free green hydrogen plant.

[7] “Benban”, the Largest Solar Power Plant in Aswan (presidency.eg).

[8] Al Shuaibah Solar Power Plant – (vision2030.gov.sa).

[9] ACWA POWER | Suez Wind Energy – 1.1 GW.

[10] Saudi Vision 2030 –.

[11] https://u.ae/en/about-the-uae/strategies-initiatives-and-awards/strategies-plans-and-visions/environment-and-energy/dubai-clean-energy-strategy#:~:text=Dubai%20Clean%20Energy%20Strategy%20aims,clean%20energy%20and%20green%20economy.

[12] https://arabdevelopmentportal.com/sites/default/files/publication/sds_egypt_vision_2030.pdf.