Analysis on the Current Situation, Trends and Market Opportunities of Energy Transition in the Middle East

Analysis on the Current Situation, Trends and Market Opportunities of Energy Transition in the Middle East

For a long time, the Middle East has dominated the global supply of fossil fuels with abundant oil and natural gas resources. Oil and gas tax revenue accounts for approximately 60% of Saudi Arabia’s total fiscal income and over 70% of Qatar’s, forming the economic cornerstone of countries across the region. Nevertheless, the global drive for low-carbon development has reshaped the landscape of energy demand, compounded by mounting domestic power consumption pressures. Reliance solely on fossil fuels has become increasingly risky. Saudi Arabia, the United Arab Emirates (UAE), Oman, Qatar and other regional nations have rolled out long-term low-carbon strategies to diversify their energy mix, aiming to transform from pure fossil fuel exporters into comprehensive clean energy hubs. Rather than phasing out oil and gas entirely, the Middle East’s energy transition advances along three parallel paths: decarbonizing traditional fossil fuel industries, scaling up renewable energy, and diversifying the overall economic structure. This shift is driven by both external constraints and internal practical needs.

Externally, the EU Carbon Border Adjustment Mechanism (CBAM) and net-zero policies adopted worldwide have put long-term downward pressure on crude oil demand. According to the World Energy Outlook 2025 released by the International Energy Agency (IEA), if the world stays on track to limit global temperature rise to 1.5°C, global oil demand will start to decline after 2035. Economies heavily dependent on oil and gas exports face growing fiscal instability, making it imperative to foster new export sectors such as renewable energy and hydrogen to hedge against risks.

Domestically, extreme summer heat in the Middle East leads to surging electricity demand for cooling. Per capita power consumption in Gulf countries is around three times the global average. In 2024, crude oil and natural gas generated roughly 90% of Saudi Arabia’s electricity. Massive volumes of fossil fuels were consumed for domestic power generation each year, substantially cutting into exportable supplies. Additionally, the region suffers from severe water scarcity, with more than 70% of its drinking water produced via desalination powered by fossil fuels. Replacing fossil fuels with renewables can free up vast quantities of oil and gas for export. Geographically, the annual horizontal solar irradiance across the Middle East’s desert areas reaches 2,200–2,600 kWh/m², far exceeding the 1,200–1,500 kWh/m² recorded in central and eastern China, granting the region a natural cost advantage for solar power development.

Leveraging their natural strengths, regional countries have set clear quantitative goals and adopted differentiated development routes. Saudi Arabia plans to invest over USD 200 billion in the hydrogen sector. Its NEOM green hydrogen project is designed to export 75% of its hydrogen products overseas. The second phase of the UAE’s Al Dhafra Solar Park secured a record-low winning tariff of 1.04 US cents per kWh. In 2024, nuclear power generated about 25% of the UAE’s total electricity, effectively offsetting the intermittency of solar power. As of the first half of 2025, the installed capacity of grid-connected distributed solar PV in Oman has exceeded 1.2 GW. Qatar has built a complete blue hydrogen industrial chain supported by Carbon Capture, Utilization and Storage (CCUS) facilities, supplying low-carbon hydrogen products globally.

Solar photovoltaic (PV) stands as the leading sector in the Middle East’s energy transition. Statistics from the International Renewable Energy Agency (IRENA) show that solar PV made up around 69% of all newly installed renewable energy capacity across the Middle East and North Africa (MENA) in 2024. The solar market falls into two major categories: large-scale ground-mounted solar farms in desert areas, which are mostly procured via government tenders at the gigawatt (GW) scale; and distributed solar systems, including rooftop and balcony solar setups, which have gained rapid popularity in urbanized Gulf nations. Energy storage demand has also risen steadily. The IEA estimates that installed energy storage capacity paired with solar PV in the Middle East will surpass 35 GW by 2030 to stabilize power output. CCUS and hydrogen industries have also attracted hundreds of billions of US dollars in investment as long-term export-oriented sectors.

In terms of investment, total energy investment across the MENA region hit approximately USD 175 billion in 2024, with clean energy accounting for only 15%, equivalent to USD 26.25 billion. Industry forecasts predict that annual clean energy investment in the region will more than triple by 2030, pointing to enormous market potential. However, the local industrial chain remains underdeveloped. The domestic production capacity for solar modules, metal mounting brackets and energy storage batteries is less than 5%, meaning the vast majority of equipment relies on imports from abroad, creating sustained business opportunities for foreign manufacturers. Given the local high temperature and heavy sand conditions, solar mounting brackets require enhanced anti-corrosion coatings and reinforced wind-resistant structures. Both ground-mount and residential balcony solar brackets enjoy steady import demand.

Despite promising prospects, multiple challenges hinder the pace of energy transition. First, the existing power grid infrastructure is outdated and originally designed for stable fossil fuel power generation. Massive investment is needed to upgrade power grids and peak regulation systems to accommodate large-scale solar integration. Second, there is a severe talent shortage. Workers traditionally employed in the oil and gas industry lack the professional skills required for renewable energy construction and operation. According to the Masdar Institute, the Gulf Cooperation Council (GCC) countries will face a shortage of over 120,000 renewable energy professionals before 2030. Third, harsh operating conditions raise stringent requirements for equipment. Persistent sand abrasion, long-term temperatures above 45°C, and salt corrosion in coastal areas demand higher standards for the materials and surface treatment of solar brackets, making standard products unfit for long-term local operation. Fourth, large-scale green hydrogen projects and GW-level solar farms involve extremely high upfront costs. Project approval, land acquisition and financing processes usually take 1 to 3 years, leading to slow implementation.

Overall, the energy transition in the Middle East represents a decades-long structural transformation. Oil and gas will remain vital industries, while renewable energy will gradually emerge as a new growth driver. Endowed with superior solar resources, regional countries keep launching large-scale solar and hydrogen projects, ensuring long-term growth for the renewable energy market. For foreign enterprises engaged in solar equipment trade, two core market segments stand out: bulk procurement of mounting brackets for utility-scale solar farms, and supporting products for rooftop and balcony distributed solar systems in cities. Companies that optimize product anti-corrosion performance and structural durability to adapt to local high-temperature and sandy environments, and comply with government tender rules and import standards, can fully tap into this booming blue ocean market. With the continuous implementation of national energy targets and expanding investment scales, the Middle East is poised to become one of the world’s most important growth markets for solar power and supporting equipment