This transformation is not just about meeting climate targets; it is a strategic necessity. Over 90% of the region’s electricity is still generated from hydrocarbons, one of the highest proportions globally. With rapid population growth, industrial expansion and rising temperatures driving an unprecedented surge in power demand – especially for cooling and water desalination – governments are keen to diversify their energy portfolios and reduce reliance on fossil fuels for domestic consumption.

Solar energy: a competitive advantage
The Middle East is ideally positioned for large-scale solar deployment, boasting some of the highest solar irradiation levels in the world, exceeding 2,000 kWh/m² annually, according to the Middle East Solar Industry Association. While natural gas remains the dominant energy source in regional power generation, solar power is set to play an increasingly larger role in the region’s renewable energy transition. Leading the charge are Saudi Arabia, the UAE, Morocco and Egypt, which are pushing the boundaries of solar efficiency and leveraging economies of scale to drive down costs.

Recent projects highlight the region’s progress. For instance, Saudi Arabia’s 600 MW Al Shuaiba solar plant boasts a record-breaking levelised cost of electricity (LCOE) of just 1.04 US cents per kWh – among the lowest rates globally, compared to the 4–6 cent average. Another key development is the Sudair solar PV project, a 1.5 GW solar plant commissioned in 2023, which plays a crucial role in Saudi Arabia’s goal of sourcing at least 50% of its power from renewables by 2030. This solar expansion, along with 40 GW from wind, will contribute a total of 58.7 GW of renewable capacity, reinforcing Saudi Arabia’s position as a global renewable energy leader.

The UAE has been at the forefront of large-scale solar development, with the Noor Abu Dhabi project, which claims to be the world’s largest single-site solar farm, with a generating capacity of 1.2 GW. The country is also home to the Al Dhafra Solar Park, which will have a 2 GW capacity, and the Mohammed Bin Rashid Solar Park, set to reach 5 GW upon completion.

While utility-scale solar projects dominate, distributed solar is gaining traction. Government incentives are encouraging businesses and households to integrate solar solutions, enhancing grid resilience and reducing dependence on fossil fuels. Israel is pioneering ‘energy islands’ – microgrids capable of operating independently from the national grid – that improve energy security, particularly in conflict-prone areas. By 2030, renewables are expected to generate 30% of Israel’s power, up from 13% in 2023, with the government waiving permits and subsidising installations to expedite adoption.

Wind power: scaling up
While solar has led the renewable energy transition, wind power is quickly gaining ground. The region’s onshore wind capacity is projected to grow ninefold by 2033, with Egypt and Saudi Arabia spearheading the development.

Egypt’s Gulf of Suez, with wind speeds exceeding 10 m/s, offers ideal conditions for large-scale wind farms. ENGIE, in partnership with Orascom, Toyota Tsusho and Eurus, is constructing the 500 MW Red Sea Wind Energy project. Meanwhile, Saudi Arabia is benefitting from China’s Belt and Road Initiative, with major turbine manufacturers like Envision Energy establishing local production facilities. In July 2024, Envision Energy partnered with Saudi Arabia’s Public Investment Fund and Vision Industries to manufacture wind turbine components domestically, reducing reliance on imports.

Integrating wind power into the energy mix presents key advantages – most notably, complementing solar energy by generating electricity at different times, which enhances grid stability. However, challenges persist. In 2023, wind power accounted for just 0.45% of Saudi Arabia’s total installed capacity according to analyst GlobalData, underscoring the sector’s early stages. Grid constraints in high-wind areas and inadequate transmission infrastructure remain significant barriers.

Egypt initially targeted renewables to make up 58% of its power generation by 2040, but has since reportedly revised this goal to 40% due to funding challenges for grid upgrades. Addressing these barriers will require strategic investment in cross-border grid connectivity and transmission expansion to support new wind projects.

Integrating wind power into the energy mix presents key advantages – most notably, complementing solar energy by generating electricity at different times, which enhances grid stability. 

Green hydrogen: the next frontier
Green hydrogen could play a pivotal role in the Middle East’s renewable energy strategy, potentially offering a low-carbon solution for hard-to-decarbonise industries such as steel, chemicals and heavy transport. With abundant solar and wind resources, the region is well-positioned to become a global hydrogen hub.

Saudi Arabia’s NEOM Green Hydrogen project is a flagship initiative. Located in Oxagon, this $8.4bn facility is promised to become the world’s largest green hydrogen plant when it begins operations in December 2026, producing 600 tonnes of hydrogen daily – primarily for export as green ammonia. Similarly, Oman plans to produce 1mn tonnes of renewable hydrogen annually by 2030, scaling up to 8.5mn tonnes by 2050 to supply Europe and Asia.

However, the sector faces challenges. High production costs – due to reliance on imported electrolysers – pose bottlenecks, while water scarcity is another major hurdle, as large-scale hydrogen production depends on desalination, requiring significant infrastructure investments.

To support growth, regulatory frameworks are being developed. Abu Dhabi introduced its Low-Carbon Hydrogen Regulatory Framework in 2022, creating standards to facilitate investment and trade. Meanwhile, ADNOC, John Cockerill Hydrogen and Strata Manufacturing have partnered to establish a UAE-based electrolyser production facility, aiming to lower costs and accelerate deployment.

Financing the energy transition
Financing remains one of the biggest obstacles to the Middle East’s renewable energy ambitions. While the region has secured substantial funding for conventional energy projects, it has captured only a small fraction of global green foreign direct investment – less than 5% of the $0.9tn announced worldwide. Europe continues to dominate, benefitting from well-established regulatory frameworks and hydrogen markets.

State-backed initiatives are working to bridge the gap. Saudi Arabia’s Public Investment Fund and the UAE’s Masdar have committed billions to renewables, both domestically and abroad. Masdar’s $10bn wind project in Egypt and $1.1bn solar investment in Morocco highlight how local capital is driving regional growth, according to a recent Atlantic Council report. Yet, attracting private investment remains challenging, requiring clearer regulatory frameworks and stronger incentives.

Modernising infrastructure for a renewable future
Existing grid networks, built to accommodate steady fossil fuel power (natural gas 73%; oil 22%), face challenges in integrating variable renewable sources. Smart grids, energy storage solutions and real-time demand management are critical to balancing supply and demand.

The UAE has been proactive in this regard, investing over $160bn in clean energy and deploying AI-driven grid management systems. In January 2025, Masdar announced plans for a new $6bn solar and battery facility capable of delivering 1 GW of uninterrupted clean power.

Egypt is also expanding its transmission capacity to enable renewable electricity exports to Europe and Africa. However, despite reportedly investing $2.42bn since 2014 in grid upgrades, less than 12% of its installed capacity comes from renewables due to grid limitations and public investment caps imposed to manage Egypt’s debt, which are slowing expansion.

Without coordinated efforts to modernise transmission infrastructure, the region risks capping its renewable energy potential. By 2050, renewables – including solar, wind and hydro – are projected to comprise 70% of the region’s power mix, making grid enhancement an urgent priority.

The road ahead
Despite the Middle East’s progress in renewable energy, oil and gas will continue to play a critical role in its economies. Both Saudi Arabia and the UAE are decarbonising their own energy use, but fossil fuel production is not expected to slow. Instead, they are focusing on producing lower-carbon intensity oil and gas by leveraging economies of scale, reducing carbon inefficiencies and enhancing carbon capture facilities.

This dual approach – scaling renewables while optimising fossil fuel production – demonstrates the region’s broader energy strategy: securing its position as a dominant energy supplier in both the conventional and clean energy markets. By investing in carbon capture, utilisation and storage (CCUS) technologies, the region aligns its fossil fuel production with global climate goals.

Saudi Arabia’s Circular Carbon Economy (CCE) framework prioritises emissions reduction through carbon capture and reuse. Similarly, the UAE’s ADNOC is investing heavily in carbon capture projects, including its Al Reyadah facility, which can reportedly capture 800,000 t/y of CO₂, making it one of the largest CCUS projects in the world.

In positioning itself at the intersection of fossil fuel production and renewable energy, the Middle East is ensuring that its energy future remains both diversified and sustainable.

• Further reading: ‘Middle East plays catch-up on road to net zero’. The Middle East and North Africa (MENA) region lags significantly in terms of renewable energy developments. But a raft of clean power initiatives are underway as COP28 beckons, hosted by the United Arab Emirates (UAE).
• The Middle East stands at a pivotal stage given its vast potential to move from reliance on oil wealth to become a powerhouse of solar energy. What hurdles does the region need to overcome in terms of significant systemic change, development of new regulatory frameworks and skill gaps?