Green energy will overtake fossil fuels in the Middle East by 2040

Green energy will overtake fossil fuels in the Middle East by 2040: Rystad

Rystad Energy’s latest research shows that the capacity of renewable energy sources in the Middle East will grow rapidly in the coming years, and by 2040 green energy sources will exceed the use of fossil fuels in the energy sector. Photovoltaics (PV) is expected to become a major energy source and account for more than half of the region’s energy supply by mid-century, up from 2% last year.

By 2050, renewable energy sources, including hydro as well as solar and wind power, are expected to make up a staggering 70% of the Middle East’s power generation mix. This represents a monumental jump from just 5% recorded at the end of 2023, signaling a transformational change in the region’s energy landscape. Despite the upcoming increase in clean energy installations, the region will continue to rely heavily on natural gas in the short term, and its consumption will continue to increase until it peaks around 2030.

The Rystad Energy Report also indicated that the energy sector in the Middle East is at a turning point. While the region has traditionally been an oil and gas powerhouse, the region is focusing on renewable energy sources in response to rapid industrial development, a growing population and a global drive to reduce greenhouse gas emissions. The region is inhabited by over 280 million people, and the population is one of the fastest growing in the world, increasing by over 60% since 2000. This has led to a rapid increase in energy demand, which has more than doubled in the last 20 years.

As the population continues to grow, the region’s economic prospects improve, predicts a report by Rystad Energy. By 2050, energy demand will reach approximately 2,000 terawatt-hours (TWh), up from 1,200 TWh today, due to strong industrial development, population growth, and the electrification of transport and other sectors. The residential sector in the region currently accounts for 40% of total energy demand, followed by the commercial sector at 26% and the industrial sector at 22%. The remaining 12% are sectors such as agriculture and transport.

Power generation in the Middle East is heavily dependent on fossil fuels, which accounted for 93% of total energy at the end of 2023. Renewable energy accounted for 3%, and nuclear and hydropower each accounted for 2%. Energy from natural gas accounted for almost three-quarters of the region’s total electricity production, accounting for 40% of total gas demand. By 2030, approximately 30% of the region’s installed capacity is expected to come from renewable energy sources, and this could increase to 75% by 2050.

Battery energy storage is expected to grow significantly in the 2030s, supporting the intermittency of solar and wind power and helping to achieve a smooth energy transition. Due to the relative lack of hydropower potential and low gas prices, the Middle East will continue to rely on gas power as its primary source and ultimately as a transition fuel in the long term. The share of gas in the electricity mix is ​​expected to drop from 74% at the end of 2023 to 46% in 2040 and 22% in 2050.

“The Middle East lags behind in the renewable energy transition, overshadowed by Asia and Africa, where renewable energy is expected to surpass fossil fuel energy production by 2032. As of 2019, renewable energy production exceeds fossil fuel consumption in Europe. With almost 40% of its power consumed by the growing residential sector, the Middle East is facing growing energy demand. This, combined with the need for economic and freshwater diversification through desalination, underscores the urgent need to transition to renewable energy sources. Moreover, the projected growth in the number of electric vehicles in the long term indicates a future increase in energy demand, which makes the transition to renewable sources not only necessary but inevitable for the long-term sustainable development of the region,” says Nishant Kumar, renewables analyst energy and energy at Rystad Energia.

Solar energy is becoming increasingly important in the energy policies of Middle Eastern countries. As the cheapest energy source, solar PV in Saudi Arabia has a record low levelized cost of electricity (LCOE) – an economic metric for assessing and comparing the life-cycle costs of generating energy from different energy sources – at $10.4 per megawatt hour (MWh ). This is due to factors such as low obstruction rates, large-scale projects, falling equipment prices, low labor costs, and high solar irradiance. In fact, the region has exceptional solar energy potential, receiving more than 2,000 kilowatt-hours (kWh) per square meter of solar radiation annually in countries such as Saudi Arabia, the United Arab Emirates and Oman.

Total solar capacity in the Middle East exceeded 16 gigawatts (GW) at the end of 2023 and is expected to reach 23 GW by the end of 2024. Forecasts show capacity to exceed 100 GW by 2030, with green hydrogen projects contributing to an annual growth rate of 30%. Saudi Arabia, the United Arab Emirates, Oman and Israel are on track to collectively account for almost two-thirds of the region’s total solar capacity by the end of the decade.