Middle East poised for major shift to renewable energy, projected to overtake fossil fuels by 2040, report finds

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

Renewable energy, including hydro, solar and wind, is forecast to make up 70% of the Middle East’s power generation mix by 2050, a significant increase from 5% at the end of 2023. However, the region will still heavily dependent on natural gas in the short term, with peak use around 2030.

Traditionally a stronghold of oil and gas, the Middle East is moving towards renewable energy sources due to rapid industrial development, growing population and global efforts to reduce carbon emissions. In a region of over 280 million people, the population has increased by 60% since 2000, leading to a doubling of energy demand in the last 20 years. Energy demand is expected to reach 2,000 terawatt hours (TWh) by 2050, up from 1,200 TWh today, driven by industrial development, population growth and electrification of various sectors.

Despite this shift, fossil fuels still dominate energy generation in the Middle East, accounting for 93% at the end of 2023. Renewables accounted for 3%, while nuclear and hydro power each accounted for 2%. Nearly three-quarters of the electricity produced in the region is provided by natural gas. By 2030, renewable energy is expected to account for 30% of installed capacity, potentially increasing to 75% by 2050. Battery energy storage will play a key role in the 2030s, supporting the transition by mitigating the intermittency of solar and wind power.

The Middle East lags behind Asia and Africa in the renewable energy transition, where renewable energy is expected to overtake fossil fuels by 2032. Europe has been leading this transformation since 2019. With 40% of its energy consumed by its growing residential sector, the Middle East is facing increasing energy demand, requiring a shift to renewable energy sources for long-term sustainability. The increase in electric vehicles also predicts future increases in energy demand.

Solar energy is becoming central to Middle East energy policy, with solar PV in Saudi Arabia achieving a record low global levelized cost of electricity (LCOE) of $10.4 per megawatt hour (MWh). The region has significant solar energy potential, receiving more than 2,000 kilowatt hours (kWh) per square meter annually in countries such as Saudi Arabia, the United Arab Emirates and Oman. 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. This capacity is expected to exceed 100 GW by 2030 thanks to green hydrogen projects and an annual growth rate of 30%.

Countries such as Saudi Arabia, the United Arab Emirates, Oman and Israel are leading this solar growth. Saudi Arabia’s 1.5 GW Sudair solar project is fully operational, bringing the country’s total installed solar capacity to over 2.7 GW. The UAE aims to increase its solar capacity from 6 GW to 14 GW by 2030, with a target of 44% of renewable energy in the energy mix by 2050. Oman plans to increase its renewable capacity from around 700 MW to almost 3 GW by 2025 and 4.5 GW by 2030, with the goal of becoming the largest exporter of green hydrogen by 2030.

These events highlight the Middle East’s strategic shift towards a greener and more sustainable energy future.

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