Until this month, the oil-rich United Arab Emirates had modest ambitions when it came to renewable energy: to install roughly as many solar panels each year as the UK.
But then Masdar, the country’s state-owned renewable energy company, decided to make a splash at a huge trade fair in Abu Dhabi.
In front of the UAE president, it announced it would build a $6bn 5 gigawatt solar plant backed with more than 19GWh of battery storage — the largest such project ever attempted.
When it starts in two years’ time, its batteries will give the country a constant output of 1GW, enough to power more than 700,000 homes without having to rely on gas-fired plants when the sun is not shining.
“This will transform renewable energy into baseload energy,” said Sultan Al Jaber, the chair of Masdar. “It is a first step that could become a giant leap.”
As the UAE was revealing its new solar project, Saudi Aramco, the world’s largest oil company, announced a joint venture that would start producing lithium, a key ingredient for batteries, as early as 2027.
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The two countries, and their neighbours in the Gulf, have always been able to rely on their abundant reserves of fossil fuels, and both Saudi Arabia and the UAE plan to produce significantly more oil and gas in the years ahead.
But the Gulf is also accelerating its use of renewable energy, spying an economic opportunity to use cheap solar panels, wind turbines and batteries for its domestic electricity, and freeing up more oil and gas for export.
“The perfect recipe [for renewable energy] exists here,” said Mazin Khan, Masdar’s chief financial officer, adding that the cost of the new solar and battery plant would be, for the first time, “comparable, if not cheaper, than conventional gas”.
“We have abundant solar resources. We have relationships with manufacturers that we can leverage to get the best price possible. The regulatory market here in the UAE is very competitive and we have a line of commercial banks queueing up to be part of the project.”
The most active companies bidding for contracts to build renewable projects in the Gulf are regional players including Masdar and Saudi Arabia’s Acwa Power, Asian companies such as South Korea’s Kepco, Japan’s Jera and China’s Jinko Power, and Europe’s TotalEnergies, EDF and Engie.
The wider Middle East, including Iran, Iraq, Israel, Lebanon, Jordan and Syria, is far behind Europe, the US and China in using renewable energy.
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According to the International Renewable Energy Agency (Irena), the Middle East has less than 1 per cent of the world’s renewable capacity. But from a low base, it is also the fastest-growing region outside China, in terms of adding capacity.
With a series of huge projects, the Gulf is rapidly changing its energy mix. In five years’ time, renewables will make 30 per cent of the total capacity across Bahrain, Iraq, Kuwait, Oman, Qatar, Saudi Arabia and the UAE, according to data from Rystad, an energy consultancy.
“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.”
Rystad’s projections are based on multiple new project announcements across the region, but the energy consultancy also adjusts its forecast to take into account that the Gulf’s ambitions appear to be running ahead of reality.
Saudi Arabia, for example, targets to generate 50 per cent of its electricity from renewables by 2030, requiring it to install 130GW of renewables in just a few years, enough to power about 25mn homes. “They will have to ramp up their efforts quite substantially,” said Vollset.
“2030 is quite soon. Of course, in the Middle East the turnaround can be very quick, like the UAE project. That timeline would never happen in Europe and North America.”
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.
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Kuwait, which only had enough renewable capacity to power a few thousand homes at the end of 2023, according to Irena, awarded a contract in July last year to US engineering firm KBR to create 17GW of renewables, or enough energy for about 500,000 homes, and 25GW of green hydrogen capacity by 2050.
Most of the suppliers of green products are Chinese. At this month’s trade fair, dozens of the country’s leading manufacturers crammed into Abu Dhabi’s National Exhibition Centre, showing off a range of products customised for the local market, such as self-cleaning solar arrays, with robots that brush away dust and sand to keep panels running efficiently.
“Our batteries can withstand temperatures of over 60C, and they are sand, water and wind resistant,” said Yong Liu, a marketing executive at BYD, one of China’s leading battery and electric car companies.
BYD provided the batteries for Saudi Arabia’s Bisha plant, which until the UAE’s announcement, was the world’s largest solar and battery project.
“Business is growing very fast here and the projects are huge,” said Beijing Hyperstrong, a well-established Chinese battery company. “It is a new emerging market for us. While we already set up a presence in Europe and the US, the Middle East is equally important for us in the long run.”
However, the challenge will be for Gulf states to integrate a rapid rollout of renewables into their power grids, said Vollset. “What they do not currently have is the infrastructure, in terms of the grid, which is built for fossil fuels, not solar power. So there’s a question mark over how they overcome that obstacle.”
Data visualisation by Will Crofton in London
Climate Capital
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